Archive - Mar 22, 2015

"The Obama administration, facing defiance by allies that have signed up to support a new Chinese-led infrastructure fund, is proposing the bank work in a partnership with Washington-backed development institutions such as the World Bank." And with that, one giant shift towards de-dollarization is now in the books.

The divide between the rich and the poor is not only getting wider thanks to the central bank's efforts to inflate the value of the very types of assets that the poor are unlikely to own, but is in fact now destroying the American family.

"The web has enabled virtually anyone with Internet access to create a nearly-free global distribution network. Critics of this democratization feel that this has unleashed an avalanche of mediocrity that is judged on "likes" and pages views. The other side of the debate sees the demise of the gatekeepers, who could enforce their own view of what was valuable culturally and economically, as freeing all those who could never get past the gatekeepers.

Just as The Fed folded this week on ending the nation's booming income inequality problem (by reinforcing the Yellen put for longer), so Starbucks has folded in its effort to fix the other growing divide in America - racism. Careful not to admit that it was due to pressure from the avalanche of less-than-positive social media reactions, AP reports Starbucks baristas will no longer write "Race Together" on customers' cups. "Nothing is changing," Starbucks claims it was all part "of the cadence" of the plan - hhmm. "Most people come to Starbucks for coffee," concludes one young African-American, adding "race is an uncomfortable thing to bring up, especially in a Starbucks."

Presented with no comment...

It appears clear that the war reparations 'issue' will not go away anymore. Either Berlin pays what legal experts determine should be paid, or it risks becoming a pariah in its own neighborhood. That the Germans in the 1950s and 1960s, at home and in schools, chose not to tell their children anything about their crimes cannot serve as an excuse to silence the children of its victims. It seems the only way to save the European Union, that Germany has made its economy so dependent on, is for Germany to pay up.

We hate to spoil the surprise, but the answer, as clearly shown by the first blue bar on the chart below, is "Energy"...

QE makes sense only from a Keynesian/socialist perspective and ignores the long-term cost of low interest rate policies to individual investors and financial institutions.

What happens in the event a Fed rate hike triggers widening corporate credit spreads in a corporate bond market devoid of liquidity? Could it indeed be the case that the Fed’s highly anticipated “lift-off” will serve as the catalyst for credit market carnage? Some traders think so.

At the current rate of record oil production, storage will be exhausted in under two months, some time in mid-May. At that point, with no more storage to buffer the record oil production, the open market dumping begins and prices of WTI will crater as every barrel will have to be sold at any clearing price, since the producers will have no other choice than to, literally, dump the oil. In other words, a perfect storm is shaping up for oil some time in late May, early June. And then we learned something even more startling.

A study shows industrial robots' impact on economic growth is comparable to the impact of railroads, highways, and IT and given gains in labor productivity and aggregate growth, low- and middle-skilled workers could end up displaced.

"Yes, Alexis, the time has run out"

"... there is a case that policy should first and foremost constrain the build-up of financial booms – especially in the form of strong joint credit and property price increases – as these are the main cause of the subsequent bust. And once the financial bust occurs, after the financial system is stabilised, the priority should be to address the nexus of debt and poor asset quality head-on, rather than relying on overly aggressive and prolonged macroeconomic accommodation through traditional policies. This would pave the way for a sustainable recovery."

- Bank of Interenational Settlements

China and Russia have taken the lead in establishing the Asian Infrastructure Investment Bank, seen as a rival organization to the World Bank and the Asian Development Bank, which are dominated by the United States with Europe and Japan. These banks do business at the behest of the old Bretton Woods order. The AIIB will dance to China and Russia's tune instead.

In response to questions posed by Santelli, former Dallas Fed president Richard Fisher made two points which were both salient if not downright prophetic. The first: “Well, what worries me is how totally lazy investors have gotten, totally dependent on the Federal Reserve and I find this to be a precarious situation.” The second: “Are we vulnerable in my opinion to a significant equity market correction? I believe we are. Not only has the Fed painted themselves into an even tighter corner – they’ve left no clear path as to now kick the empty can.