Archive - Dec 2015

After September's record surge in total consumer credit, when non-revolving credit soared by $22 billion while credit card jumped by a whopping $6.7 billion, something appears to have snapped in October when according to the Fed, just $16 billion of new credit was created, almost half the prior month, and far below the consensus estimate of a $20 billion increase. And yet there is little risk that debt-fuelled spending on the two staples that have kept the US credit machine chugging along, namely student and car loans, both of which have just surpassed a total of $1 trillion in notional debt outstanding.

“A ban on assault weapons and large-capacity magazines might not prevent shootings in Highland Park (where they are already rare), but it may reduce the carnage if a mass shooting occurs. If a ban on semiautomatic guns and large-capacity magazines reduces the perceived risk from a mass shooting, and makes the public feel safer as a result, that’s a substantial benefit.”

Actions – including the state’s best-intentioned ones (giving them the benefit of the doubt) - have consequences, not all of them foreseen and some of them contrary to what was (we assume) intended.

Things must be going well in the "war on terror," as the US Air Force just admitted that it is fast running out of bombs to drop on ISIS after "B-1s have dropped bombs in record numbers." As ZeeNews reports, Air Force chief of staff General Mark Welsh said as America ramps up its military campaign against the Islamist terror group, the Air Force is now "expending munitions faster than we can replenish them."

Here's What Will REALLY Kill You ...

“If the attorney general is trying to suggest that the Justice Department will generally prosecute people for speech that ‘edges towards violence,’ or for ‘anti-Muslim hatred, including rhetoric,’ that’s bad.” It appears she’s trying to instill fear in the American populace so that it thinks twice before speaking. This is completely and totally unacceptable behavior from the Attorney General of these United States. So former Congressman Joe Walsh took to video and dared her to sue him.

Confidence in central bankers is now hanging by a thread. Mario Draghi (and his fellow Goldman Sachs alum Mark Carney at the Bank of England, for that matter) might want to adopt a little humility before that thread snaps completely. It is always tragic when we filthy peasants stop banging rocks together momentarily to listen to the awe-inspiring intellects at the central banks, only to misunderstand them. Perhaps the real problem is one of overconfidence. Not our overconfidence. Theirs.

While we were the first to mock co-workers' contention that Farook's radicalization could be confirmed by the size of his beard, we would note that although you cannot judge a book by its cover, it does indeed appear as though some manner of transformation might have taken place in or around Farook's two visits to Saudi Arabia.

"Where is the bubble today? Perhaps central banks are the bubble."

Paul Volcker and Alan Greenspan were the Elvis and Beatles of this movement – the first to see widespread fame for their efforts. Then came Ben Bernanke, perhaps the Jimi Hendrix or Led Zeppelin of his day, taking existing tools and pushing them in new, previously unconsidered, directions.  Now, we have Janet Yellen and Mario Draghi, whose legacies are as yet undefined. They may end up like the next generation of rock stars from the 1970s – something like Bruce Springsteen, with a deep focus on common people in his music. Or, they could be the Bee Gees, who focused simply on commercial success. Only time will tell.

· Central bank rate decisions take focus this week, with the Bank of England, Swiss National Bank, Reserve Bank of New Zealand Central Bank of Russia all set to announce their latest decision on interest rates

China burned through some $40 billion in FX reserves in November in support of the yuan while the headline drawdown came in at a whopping $87 billion inclusive of valuation effects. It was the third largest decline in history and suggests that despite a misleading $11 billion increase in October, capital flight continues unabated.

This won't end well...

A terrible deterioration.