Following yesterday's OPEC "production freeze" meeting in Doha which ended in total failure, where in a seemingly last minute change of heart Saudi Arabia and specifically its deputy crown prince bin Salman revised the terms of the agreement demanding Iran participate in the freeze after all knowing well it won't, oil crashed and with it so did the strategy of jawboning for the past 2 months had been exposed for what it was: a desperate attempt to keep oil prices stable and "crush shorts" while global demand slowly picked up. And whether it is central banks, or chronic BTFDers, just 12 hours after oil opened for trading with a loud crash, the commodity has nearly wiped out all losses, and both brent and WTI were down barely 2%, leading to both European stocks and US equity futures virtually unchanged on the session.
Frequently one can tell by the title of an opinion piece whether it is going to consist of quality arguments or just meretricious mudslinging. Professor Charles Postel of San Francisco State University boldly announces the latter in choosing to title his recent tirade against sound money, "Why Conservatives Spin Fairytales About the Gold Standard". As this article is so typical of what we seek to rebut, we publish it here, and now.
"A “successful” helicopter drop may therefore be easier said than done given the non-linearities involved: it needs to be big enough for nominal growth expectations to shift higher and small enough to prevent an irreversible dis-anchoring of inflation expectations above the central bank’s target. Either way, the behavior of the latter is the key defining variable both for the policy’s success as well as the asset market reaction.... under the assumption of policy “success” without fears of hyperinflation, we would conclude that bond yields rise."
“If you don’t own gold, you know neither history nor economics.” – Ray Dalio, Founder Bridgewater Associates
To challenge the US dollar hegemony and increase its power in the global realm of finance, China has a potent gold strategy. Whilst the State Council is preparing itself for the inevitable decay of the current international monetary system, it has firmly embraced gold in its economy. With a staggering pace the government has developed the Chinese domestic gold market, stimulated private gold accumulation and increased its official gold reserves in order to ensure financial stability and support the internationalisation of the renminbi.
The Eccles Building and its Washington/Wall Street acolytes have become a House of Keynesian Denial because the assumption that capitalism is an 80 pound recessionary weakling without the constant ministrations of the state is dead wrong.
Investigating Deutsche Bank’s €21 Trillion Derivative Casino In Wake Of Admission It Rigged Gold And SilverSubmitted by Tyler Durden on 04/15/2016 21:29 -0400
The total size of Deutsche Bank’s derivatives casino is €21.39 trillion, notional. Inquiring minds may be asking: How much risk is there on €21.39 trillion?
"At one extreme, if the market perceives the policy as a failure, credit risk and demand/supply imbalances are likely to dominate, putting even further downward pressure on yields. At the other extreme, if the policy is perceived as a loss of monetary discipline, inflation expectations would spike, leading to an aggressive re-pricing of yields higher."
Good news is still bad news after all. After last night's China 6.7% GDP print which while the lowest since Q1 2009, was in line with expectations, coupled with beats in IP, Fixed Asset Investment and Retail Sales (on the back of $1 trillion in total financing in Q1) the sentiment this morning is that China has turned the corner (if only for the time being). And that's the problem, because while China was a good excuse for the Fed to interrupt its rate hike cycle as the biggest "global" threat, that is no longer the case if China has indeed resumed growing. As such Yellen no longer has a ready excuse to delay. This is precisely why futures are lower as of this moment, because suddenly the "scapegoat" narrative has evaporated.
Heading into tonight's datagasm from China, SHCOMP tumbled and Yuan was strengthening (while money-market rates were ticking higher). Then it began... Retail Sales BEAT (+10.5% vs. +10.4% exp), Industrial Production BEAT (+6.8% vs. +5.9% exp), Fixed Asset Investment BEAT (+10.7 vs. +10.4% exp) and last - but not least - GDP MEET (+6.7 vs. +6.7% exp) - though still the weakest since Q1 2009. The post-data reaction was initially opsitive but then faded fast as reality hit on the lack of stimulus coming. Now The Fed has a problem - solid inflation, solid wages, solid jobs, and no global turmoil - we are going to need some turmoil soon or rates are going up.
In 1977, the total indebtedness of U.S. government, corporate and household borrowers was $323 billion. By 1985, that figure had grown to $7 trillion. Volcker left the Fed in August of 1987 after handing the reins over to Alan Greenspan. By year’s end 2015, U.S. indebtedness had swelled to $45.2 trillion. Tack on financials, which few do, and it’s $64.5 trillion and unabashedly growing. We are a nation transformed. What has today’s vast store of debt purchased? Certainly not freedom.
The "most transparent administration ever" appears to be making no friends in the tech industry. Following its debacle with Apple, the Obama administration now faces a suit from Microsoft that, in their words, stands up for "customers’ constitutional and fundamental rights – rights that help protect privacy and promote free expression." As Microsoft's Brad Smith notes, with rare exceptions consumers and businesses have a right to know when the government accesses their emails or records, and the suit centers around the fact that since cloud storage accelerated, it’s becoming routine for the U.S. government to issue orders that require email providers to keep these types of legal demands secret. Microsoft believe that this goes too far.
A certificate for sound money, and quite a bit of it too. Our benevolent modern-day social engineers would be appalled: not only is this a certificate for gold, it is one for 10,000 smackers worth of the stuff! Only über-turrsts could possibly have use for such a thing... it clearly embodies way too much freedom and responsibility for the average tax serf. If you’re not convinced, ask Larry Summers, and if that doesn’t help, think about the children!