Bank of England
The last few months have seen a steady drip-drip-drip increase in US, European, and Chinese bank credit risks, even as stock prices rose (aside from the latter). The turning point appears to have been the downturn in oil prices as traders began to hedge their counterparty risk in massive levered derivative positions tied to commodities. But it is not just banks... COMEX counterparty risk mut sbe on the rise, as Jesse's Cafe Americain notes, the 'claims per ounce of gold' deliverable at current prices has spiked higher once again, to a record 126:1.
One of the best ways for the general public to take power back is to develop alternative currencies - both local and global - that allow people to trade outside of the corporate-government banking systems and central bank notes. In London, an interesting alternative currency bearing the face of pop singer David Bowie has recently come into circulation. It is officially called the “Brixton Pound.” The Bank of England has been forced to respond to these local currencies because of their popularity, deeming them “voucher schemes” and warning the public that they are unprotected when using them.
"China is imposing fresh controls to prevent too much money from leaving the country, in an effort to keep badly needed funds at home to battle a deepening slowdown in the world’s No. 2 economy." This is undsiputedly bad news for China, but Blythe Masters would be the first to admit, escalating Chinese capital controls would be just the thing bitcoin needs to surge, and surpass, it previous all time highs...
- Hilsenrath: Fed Appears to Hold Line on Rate Plan (WSJ)
- Europe, Asia stocks set for worst monthly drop in three years on China, Fed (Reuters)
- Beijing abandons large-scale share purchases (FT), if only for a few hours
- China’s Next Problem: Paying for Its Stock-Market Bailout (WSJ)
- Crises Put First Dents in Xi Jinping’s Power (WSJ)
- Man Group’s China Chief Said to Assist Police in Probe (BBG)
During the last crisis period, starting in March 2007 and lasting through November 2008, foreign central banks withdrew gold for a total of 20 out of 21 consecutive months, repatriating a grand total of 409 tons of gold. The last period of peak redemption culminated with the failure of Lehman in September 2008, the near failure of AIG in October and November 2008, coupled with the Fed's bailout of the western financial system. If past is prologue, one should ask: what current or future event is driving the ongoing redemption of 246 tons of gold (and rising) from the NY Fed this time?
Over the past several years, the two-day Jackson Hole symposium had garnered a particular prominence among economists and market watchers as this is where various key inflection points by the Fed were hinted, leaked or announced, including QE2, QE3 and the taper. This year, however, the gathering of central bankers in Teton County, will be less exciting due to the absense of the most important central banker in the world: Janet Yellen, which means the highlighter will be Vice-Chairman Stanley Fischer when he speaks tomorrow at 10:25pm which will be a key event given the recent market turmoil.
A half-century ago, America - and then the world - was rocked by a mighty stock-market crash that soon turned into the steepest and longest-lasting depression of all time. Those who ignore the lessons of history are doomed to repeat it - except that now, with gold abandoned and each nation able to print currency ad lib, we are likely to wind up, not with a repeat of 1929, but with something far worse...
It's a case of economic policy run amuck. Real estate development can boost the economy, under the right conditions: lots of jobs and economic activity get generated when homes are built or refurbished. And there is the wealth effect when home prices rise. But when taken to extremes - as it is today and was in the previous economic cycle consumer spending gets squeezed out in order to pay mortgages and rent. It becomes an incredibly unproductive use of capital. Simply put, we have a surge in college-age prostitution and it's the Fed's fault. It gives new meaning to the term "perverse monetary policies"
- Crude prices fall towards $40 on global glut (Reuters)
- China Central Bank Injects Most Funds Since February as Money Rates Increase (BBG)
- Divided Fed Puts Yellen on Hot Seat (Hilsenrath)
- So Long September: Bond Traders Defer Their Date With the Fed (BBG)
- More Foods Boast Non-GMO Labels—Even Those Without GMO Varieties (WSJ)
- UN to let Iran inspect alleged nuke work site (AP)
- IAEA says access to Iran's Parchin military site meets demands (Reuters)
- Time to End Quarterly Reports, Law Firm Says (WSJ)
At the risk of sounding like a broken record we'd like to say a bit more about economists' tendency to get their monetary history wrong; in particular, the common myths about the gold standard. If there's one monetary history topic that tends to get handled especially sloppily by monetary economists, not to mention other sorts, this is it. Sure, the gold standard was hardly perfect, and gold bugs themselves sometimes make silly claims about their favorite former monetary standard. But these things don't excuse the errors many economists commit in their eagerness to find fault with that "barbarous relic." The point, in other words, isn't to make a pitch for gold. It's to make a pitch for something - anything - that's better than our present, lousy money.
Druckenmiller’s fund recently bought $300 million worth of SPDR Gold Trust (GLD), an ETF that tracks the price of gold. It’s a huge bet, even for a big-time trader like Druckenmiller. He put 20% of his fund’s money into this trade, and it’s his largest position.
- $1 trillion in Emerging Market outflows in the past 13 months (FT)
- German lawmakers back third Greek bailout (Reuters)
- Dutch government faces test in "junkie" Greece debate (Reuters)
- China c.bank offers selected banks medium term lending facility (Reuters)
- Another "expert network" busted: Promontory settles over StanChart probe (FT)
- Angola to Ship Most Crude in Four Years to Meet Asian Demand (BBG)
- Hackers dump data online from cheating website Ashley Madison (Reuters)
- Yuan’s Devaluation Brings Losses for Some (WSJ)
- China stocks slump 6 percent on fears of further yuan depreciation (Reuters)
- U.S. Lacks Ammo for Next Economic Crisis (Hilsenrath)
- Emerging Markets Extend Slide as Commodities Fall; Pound Jumps (BBG)
- China yuan to move both ways, more 'adjustments' unlikely: central bank economist (Reuters)
- Playing Chinese markets is as simple as 'follow the leader' (Reuters)
- PBOC Injection Shows China Worries About Outflows (WSJ)
- Russia Fails to Soothe Oil Concerns as Citi Joins Ruble Bears (BBG)
Alas, by ignoring Keynes in 1925, Churchill triggered a calamity so severe that it not only inspired one man to kill himself beneath the British statesman’s very window but, more insidiously, also provided the impetus for the economics profession’s rejection of the “classical” axioms.