You can’t force people to spend, not if you’re a government, not if you’re a central bank. And if you try regardless, chances are you wind up scaring people into even less spending. That’s the perfect picture of Japan right there. There’s no such thing as central bank omnipotence, and this is where that shows maybe more than anywhere else. And if you can’t force people to spend, you can’t create growth either, so that myth is thrown out with the same bathwater in one fell swoop. Some may say and think deflation is a good thing, but I say deflation kills economies and societies. Deflation is not about lower prices, it’s about lower spending. Which will down the line lead to lower prices, but then the damage has already been done, it’s just that nobody noticed, because everyone thinks inflation and deflation are about prices, and therefore looks exclusively at prices.
Because nothing gives "Thanks" like Americans fighting over things they don't need...
I love the idea that prosperity can be decreed by a G20 communiqué. World leaders in Brisbane have airily committed themselves to two per cent growth. (Why only two per cent? Why not 20 per cent? Or 200 per cent? Who knew it was so easy?) Meanwhile, in the real world, the divergence between Continental Europe and the rest of the planet accelerates. David Cameron can hardly have failed to notice, as he looked around the G20 table, that his European colleagues are the ones with the worst problems. Britain is in the wrong place.
Did China just re-enter the currency wars? The Chinese Yuan dropped 0.29% overnight - its biggest drop since September and 2nd biggest devaluation since March - as the currency tumbles back in line with the PBOC's fixing for the first time in over 3 months. Despite 'hopes', S&P confirms the recent (and reconfirmed) rate cut doesn’t signal renewed government intentions to resort to aggressive stimulus to prop up economy. More troubling is the fact that China's huge corporate debt market appears to be freezing as over $1.2 billion in bond sales were scrapped or delayed last week suggesting wall of maturing debt will find it increasingly difficult to roll-over and keep the dream alive (especially in light of Haixin's bankruptcy last week).
- Grand jury expected to resume Ferguson police shooting deliberations (Reuters)
- PBOC Bounce Seen Short Lived as History Defies Bulls (BBG)
- Home prices dropped in September for the first time since January (HousingWire)
- UPS Teaches Holiday Recruits to Fend Off Dogs, Dodge NYC Taxis (BBG)
- US oil imports from Opec at 30-year low (FT)
- Hedge Funds Bet on Coal-Mining Failures (WSJ)
- Putin Woos Pakistan as Cold War Friend India Buys U.S. Arms (BBG)
- How the EU Plans to Turn $26 Billion Into $390 Billion (BBG)
- The $31 Billion Bet Against Brazil’s New Finance Minister (BBG)
Another day, another case of central banks, not one but two this time, dictating "price" action.
Russia finds itself in familiar territory after a controversial half-year, highlighted by the bloody and still unresolved situation in Ukraine. Nonetheless, the prospect of further sanctions looms low and Russia’s stores of oil and gas remain high. Shortsighted? Maybe, but Russia has proven before – the 2008 financial crisis for example– that it can ride its resource rents through a prolonged economic slump. Higher oil price volatility and sanctions separate the current downturn from that of 2008, but Russia’s economic fundamentals remain the same – bolstered by low government debt and a large amount of foreign reserves.
Gold Repatriation Stunner: Dutch Central Bank Secretly Withdrew 122 Tons Of Gold From The New York FedSubmitted by Tyler Durden on 11/21/2014 08:25 -0500
A week ago, we penned "The Real Reason Why Germany Halted Its Gold Repatriation From The NY Fed", in which we got, for the first time ever, an admission by an official source, namely the bank that knows everything that takes place in Germany - Deutsche Bank - what the real reason was for Germany's gold repatriation halt after procuring a meager 5 tons from the NY Fed. Some took offense with this pointing out, correctly, that the gold held at the NY Fed in deposit form for foreign institutions had continued to decline into 2014 even despite the alleged German halt. Well, today we finally know the answer: it wasn't Germany who was secretly withdrawing gold from the NYFed, contrary to what it had publicly disclosed. It was the Netherlands. Why did the DNB decided it was time to cut its gold held at the NY Fed by 122 tons? "It is no longer wise to keep half of our gold in one part of the world," a DNB spokesman said.
Are you waiting for the next major wave of the global economic collapse to strike? Well, you might want to start paying attention again. Three of the ten largest economies on the planet have already fallen into recession, and there are very serious warning signs coming from several other global economic powerhouses.
- Yellen Inherits Greenspan’s Conundrum as Long Rates Sink (BBG)
- West African Mining Projects Take Hit From Ebola Crisis (WSJ)
- Saudi oil policy uncertainty unleashes the conspiracy theorists (Reuters)
- Senate Rejection of Keystone XL Measure Sets Up 2015 Showdown (BBG)
- Ferguson, Missouri, remains on edge ahead of grand jury report (Reuters)
- Putin Said to Stun Advisers by Backing Corruption Crackdown (BBG)
- Italian ‘Invasion’ Has Swiss Fuming as Immigration Vote Looms (BBG)
- Apple and Others Encrypt Phones, Fueling Government Standoff (WSJ)
After weeks of relentless flashing red headline barrage whose only purpose was to force snap algo buying of the USDJPY pair time after time after time, Japan is once again out of FX algo danging carrots after moments ago Abe confirmed what everyone had known already: he called a snap election to seek a mandate for his decision to delay by 18 months a further sales-tax increase that had been planned for next year; he also said he would dissolve the lower house of parliament on Nov. 21 in preparation for an election in December, without specifying a date. Cited by the WSJ, Abe said "To ensure the success of Abenomics, I’ve concluded that it shouldn’t be carried out next October and instead be postponed by 18 months,” the prime minister told a nationally televised news conference, stressing that the additional tax burden would risk putting the economy back into deflation. “I will seek the people’s judgment over our economic policy."
Four years ago, bankers, politicians, and traders were patting themselves on the back after Petroleo Brasiliero (Petrobras) raised a stunning $70 billion in the world's largest share sale, as Bloomberg reported at the time, investors bet on its plans to double output within a decade by tapping offshore fields. Things haven't worked out so well...
Perhaps the biggest shock following last night's completely expected and very predictable (previewed here over a month ago) Japanese slide into triple- (actually make that quadruple) dip recession, is that it took the BTFTripleDip recession algos as long as they did to recover most of the overnight futures losses. Because after surging to 107 on a confused short squeeze kneejerk reaction, the USDJPY subsequently tumbled 150 pips to 105.50 as rationality briefly emerged, and the market wondered for a few brief hours if rewaring the destruction of one's economy is actually a prudent thing. Then, however, when European traders started walking into work, the now default USDJPY levitation on no volume came right back, and with that the correlation algo buying of E-mini futures, no doubt helped by the Bank of Japan itself taking advantage of the CME's ES liquidity rebate program. Because without confidence as expressed by the lowest and only common denominator left - global equities - there is nothing else.
If there were no puppet masters in Washington DC or the Kremlin, what would happen next week?
Having been 'guest-of-honor' at the APEC Summit the previous week, it appears Russian President Vladimir Putin is getting the 'Obama-at-APEC' treatment at the G-20 meeting in Brisbane. Following his 'odd' shaped convoy of protection last week, The Independent reports Putin chose a different type of entourage this week as he headed to meet the world's leaders. Putin has stationed four warships close to Australian waters as he arrived in Australia. Having drawn ridicule from no lesser wit than Britain's David Cameron who sarcastically bleeted, "I didn't feel it necessary to bring a warship myself to keep myself safe at this G20, and I’m sure that Putin won’t be in any danger," when it came time for the team photo, it was clear what 'message' was being sent...