Bank of England

There may be one great conspiracy dictating the course of the capital market, but if there is not, what is the near-term outlook for the dollar?  

To claim that this is the market at work makes no sense anymore. Today central banks, for all intents and purposes, are the market. Our overall impression is that the Fed has given up on the US economy, in the sense that it realizes – and mind you, this may go back quite a while - that without constant and ongoing life-support, the economy is down for the count. And eternal life-support is not an option, even Keynesian economists understand that. Add to this that the "real" economy was never a Fed priority in the first place, but a side-issue, and it becomes easier to understand why Yellen et al choose to do what they do, and when. When the full taper is finalized next month, and without rate rises and a higher dollar, the real US economy would start shining through, and what’s more important - for the Fed, Washington and Wall Street - the big banks would start 'suffering' again.

This is just too delightfully ironic to pass by.

In a world in which nobody has any faith in the capital markets because over $10 trillion in central bank liquidity has been injected to prop out a fragile house of risk asset cards the one place one should have faith (because let's face it: monetarism is the only religion that matters in today's world) is that money will be printed for the foreseeable future, certainly metaphorically and also quite literally. Alas, things did not quite work out that way for the company which, well, prints money (but sadly is not a central bank) when earlier this morning the shares of De La Rue, the company responsible for printing Bank of England banknotes, plunged a record 30% after it issued a profit warning.

* Where is Venezuela's 366 tonnes of gold?
* Does Venezuela still control and own unencumbered it’s own gold reserves?
* Is any of the country's gold encumbered, loaned or leased to Goldman Sachs or other banks?
 

With a 66% chance of default/devaluation implied by the Venezuelan credit market, BofA economist Francisco Roriguez sprung an unusual question on the struggling socialist nation's central bank during a routine visit - Can you show me your gold?

• A Month of Bombs Dropped in One Night of Strikes on Syria (BBG)
• Air strikes in Syria hit Islamic State-held areas near Turkey (Reuters)
• Pimco ETF Draws Probe by SEC (WSJ)
• Shadowy al Qaeda cell, hit by U.S. in Syria, seen as 'imminent' threat (Reuters)
• Yellen Warns on Market Calm Before ‘Considerable Time’ Up (BBG)
• Dudley Says Fed Needs U.S. Economy to Run ‘A Little Hot' (BBG)
• Websites Are Wary of Facebook Tracking Software (WSJ)
• Just a joke now: Barclays Fined Twice in One Day for Compliance Failures (BBG)
• Fired UPS worker kills two supervisors, self, in Alabama shooting (Reuters)

The London Bullion Market Association (LBMA) is quietly planning its new gold fix in a desperate attempt to maintain the status quo ... Queen Elizabeth Surveys Gold Bars in Bank of England Vaults

Given the scale of indebtedness in the UK and still very high current account deficit, the pound remains vulnerable to a currency crisis. George Soros and others may still be sizing up another opportunity to break the Bank of England. Another run on the pound has been postponed ... for now ...

• Scots spurn independence in historic vote but demand new powers (Reuters)
• Salmond’s Journey as Scotland’s Leader Ends Short of Destination (BBG)
• European Stocks Rally to 6 1/2-Year High on Scottish Vote (BBG)
• Jack Ma Planning Personal Roadshow With Clinton to Immelt (BBG)
• Some consumers say Apple is losing its 'cool' factor (Reuters)
• Gold IPhones at $3,600 as China Delay Fuels Black Market (BBG)
• This Man's Job: Make Bill Gates Richer (WSJ)
• Mom-and-Dad Banks Step Up Aid to First-Time Home Buyers (BBG)
• France says it launches first air strikes in Iraq (Reuters)

• House votes to arm Syrian rebels (Reuters).... aka ISIS
• Fed Plots Cautious Course on Rate Rises  (Hilsenrath)
• Scots vote in independence referendum to seal the United Kingdom's fate (Reuters)
• Yes or No, the Winner of the Referendum Is Brand Scotland (BBG)
• Draghi Loan Plan Missing Estimates Hampers ECB Stimulus (BBG) - get with the spin, it simply means "Moar QE"
• Obama Plans to Tightly Control Strikes on Syria (WSJ)
• IMF warns of risks from 'excessive' financial market bets (Reuters)
• Russia Praises Ukraine's Autonomy Law for Rebel Areas (WSJ)

• -0.07%: Germany Secures Record Low Funding Cost at Bond Auction (WSJ)
• Pentagon Sees Possible Role for U.S. Ground Forces Against Islamic State Militants (WSJ)
• China Joins ECB in Adding Stimulus as Fed Scales Back (BBG)
• Stealthy or Normal? Analysts Diverge on PBOC’s Action (BBG)
• Sony Forecasts Massive $2B Loss as Smartphones Lag (AP)
• Islamic State campaign tests Obama's commitment to Mideast allies (Reuters)
• Brent Crude Rebounds as Libya’s Sharara Oilfield Shut (BBG)
• Market calm over Scottish vote at odds with disaster warnings (Reuters)

It has been a story of central banks, as overnight Asian stocks reversed nearly two weeks of consecutive declines - the longest stretch since 2001 - and closed higher as the same catalysts that drove US equities higher buoyed the global tide: a combination of Chinese liquidity injection (for the paltry amount of just under $90 billion; "paltry" considering Chinese banks create over $1 trillion in inside money/loans every quarter) and Hilsenrath leaking that despite all the "recovery" rhetoric, the Fed will not be turning hawkish and there will be no change in the Fed language today (perhaps not on the redline but Yellen's news conference at 2:30pm will certainly be interesting), pushed risk higher, if not benefiting US equities much which remains largely unchanged.

As the Scotish independence vote draws near and remains too close to call, some analysts are suggesting Plan B for Scotland may be to choose to opportunistically default. This has done nothing to calm concerns of the aftermath of a "yes" vote - despite US asset managers proclaiming it irrelevant. Nowhere is that more clear than, as The Independent reports, Britain’s banks have been quietly moving millions of banknotes north of the border to cope with any surge in demand by Scots to withdraw cash in the event of a Yes vote in Thursday's independence referendum, it has emerged. Bankers stressed there has been no sign yet of any increase in the amount of withdrawals from deposit accounts or ATMs, but the moves have been taking place over the past week or so in order to make sure ATMs do not run out on Friday in the event of a panic reaction to a “yes” vote.

• Snow is coming: OECD Cuts Economic Growth Forecasts (WSJ)
• World waits for white smoke from U.S. Fed (Reuters) - Understandable error: they meant "green"
• Scots Breakaway at 45% Odds as Economists Warn of Capital Flight (BBG)
• Ukraine President Poroshenko Faces Backlash Over EU Trade Deal Delay (WSJ)
• German Anti-Euro Party Advances in Merkel Homeland Voting (BBG)
• Clinton Hints at 2016 Run as Super-PAC Packs Iowa Steak Fry (BBG)
• Air France, Lufthansa Hit by Strikes in Fight for Future (BBG)
• U.S. sees Middle East help fighting IS, Britain cautious after beheading (Reuters)
• Ex-Billionaire Charged by Brazil With Financial Crimes (BBG)

The US economy is dead. The Fed has known this for a long time, but pumped it up to where it is now to draw in all the greater fools, the so-called big investors who have made money like honey from QE and ZIRP. They are the greater fools. The American real economy ceased being a consideration long ago. We’re in for big surprises, and they won’t be pretty, they’ll be pretty nasty. There are far too many people who think of themselves as smart who don’t see the difference between a theater play and a reality show. The Fed will raise rates because that will make the biggest banks the most money. There’s nothing else that matters. The Fed can’t revive the US economy, that’s just a foolish notion. But it can suck a lot of wealth out of it.