Archive - Nov 23, 2014

A central bank was (and still is officially) supposed to be independent of politics, to be a buffer between a society’s long term interests and a politician’s short-term ones. In particular, no-one should issue huge amounts of money to make it look like they were just awesome leaders that make everyone rich, while sinking the future of a society in the process. Today’s central banks do nothing BUT engage in short term policies that keep incumbents as happy as they can be in bad economic circumstances. Central banks have become political instruments that pamper to the tastes of whoever may be in charge on any given day, which is the exact 180º opposite of why they exist in the first place. What drives central bankers in November 2014 is fear, pure and simple, if not absolute screaming panic.

While technicals remain largely meaningless in the global centrally-planned "USSR market" (as penned by Russell Napier, who asked "Which World Has No Volume, No Volatility And Rising Prices?", his answer: the USSR), pattern-seeking carbon-based traders still find refuge in the comfort provided by technical analysis. So for all those who believe past performance is indicative of future results, here according to BofA's MacNeil Curry is how various asset classes perform during Thanksgiving week compared to all other weeks during the year.

All that the Fed, BoJ (Bank of Japan), the Bank of England etc. have been concerned with is the preservation of private banks and the continued propping up of stock markets. None of these institutions really care about the real-world economy, real-world inflation or the ability of individuals to maintain their lives in a prolonged period of economic contraction. When you couple high real inflation with stagnation or reduction in wages over the years since the 2008 crash then real-world buying power of most individuals is drastically reduced. This doesn’t just make people depressed, it makes them angry – hardworking people do not expect or deserve to be thrust into poverty.

The PBOC, which cut rates for the first time in two years on Friday, will have its work cut out for it. And in the worst tradition of "developed world" banks, Beijing will now have no choice but to double down on the very same bad policies that got it into its current unstable equilibrium, and proceeds with a full-blown policy flip-flop, leading to a full easing cycle that reignites the bad-debt surge once more. And sure enough, today Reuters reports citing "unnamed sources involved in policy-making" (supposedly different sources than the unnamed sources Reuters uses to float trial balloons used by the ECB and the BOJ), that "China's leadership and central bank are ready to cut interest rates again and also loosen lending restrictions" due to concerns deflation "could trigger a surge in debt defaults, business failures and job losses, said sources involved in policy-making." In other words, China has once again looked into the abyss once... and decided to dig a little more.

The look at the drivers of next week, without using the word manipulation or conspiracy, or referring to how stupid or evil some people may or may not be. 

Why all of a sudden this quick 'gold fix'?

Sporadic confrontations and violence between protesters and police continued to occur overnight in Ferguson as multiple news agencies report grand jury considering whether to indict the Ferguson police officer who shot and killed teenager Michael Brown is unlikely to meet and render a decision this weekend. The fear, as we have previously noted, is a major uprising as one sign protested, "if the killer cop walks, AmeriKKKa Halts," and as Fox reports, Brown family attorney is managing expectations, "99% of the time the police officer is not held accountable for killing a young black boy," Crump said. "The police officer gets all the consideration." There is, however, another potential reason for delaying the decision's reporting, as VICE reports, business owners in the St. Louis, Missouri area have hired private military contractors to transport guns and gold, fearing their shops will be targeted by looters if a grand jury does not indict.