Bank of Japan
The surreal nature of this world as we enter 2015 feels like being trapped in a Fellini movie. The .1% party like it’s 1999, central bankers not only don’t take away the punch bowl – they spike it with 200% grain alcohol, the purveyors of propaganda in the mainstream media encourage the party to reach Caligula orgy levels, the captured political class and their government apparatchiks propagate manipulated and massaged economic data to convince the masses their standard of living isn’t really deteriorating, and the entire façade is supposedly validated by all-time highs in the stock market. It’s nothing but mass delusion perpetuated by the issuance of prodigious amounts of debt by central bankers around the globe. But now, the year of consequences may have finally arrived.
2014 may go down as the year when gold and silver conspiracy “theories” became conspiracy “facts” as banks globally were found to have conspired to rig the prices of gold, silver, currency and many other markets.
Martin Armstrong, Max Keiser and High-Level Economists Weigh In
The Japanese stock market reached its all-time-high on December 29th 1998, and as The Wall Street Journal reports, analysts were still looking forward to another strong year for shares in 1990, despite some signs of danger. Reading through the headline on that day suggests, 25 years later, investors and talking-heads have learned absolutely nothing...
As noted earlier, following the failed vote Greek banks are cratering, with many entering a bear market as of the last price update, such as Eurobank Ergasias -23%, Piraeus Bank -21%, National Bank of Greece down 18%, Alpha Bank 17% lower. While in the past this would have been enough to send European shares limit down and peripheral bonds bidless, algos have forgotten their programmed kneejerk reaction since Greece has been off the front page for so long. As a result, Europe is down but not nearly where it would have been had today's vote taken place a couple of years ago. Then again, with the USDJPY far more important than what Greece may or may not do, all that will take for the Santa rally to resume, if only in the US, is for "someone" to buy a few yards of Dollar-Yen, push the pair to 121, and all shall be well once more.
After two years of economic torture and financial destruction, Abenomics has finally claimed the Keynesian prize: real wages crash 4.3%, the most in the 21st century, and Japan's legendary savings rate, which peaked at 23% in 1975, just turned negative for the first time ever. Game over Japan.
"The Fed Is Heading For Another Catastrophe... Central Banking Has Lost Its Way" Stephen Roach WarnsSubmitted by Tyler Durden on 12/24/2014 11:17 -0400
America’s Federal Reserve is headed down a familiar — and highly dangerous — path. Steeped in denial of its past mistakes, the Fed is pursuing the same incremental approach that helped set the stage for the financial crisis of 2008-2009. The consequences could be similarly catastrophic. The Fed’s incrementalism of 2004-2006 was a policy blunder of epic proportions. The Fed seems poised to make a similar — and possibly even more serious — misstep in the current environment. In these days of froth, the persistence of extraordinary policy accommodation in a financial system flooded with liquidity poses a great danger.
Bond Yields Set To Plunge In 2015: Next Year Global Treasury Supply Will Tumble By 20% As ECB Joins The PartySubmitted by Tyler Durden on 12/20/2014 17:15 -0400
According to Goldman's own calculations, the demand squeeze for the High Quality Collateral that is global "Developed Market" Treasurys is about to go through the roof mostly thanks to central banks which will - even in the Fed's temporary hiatus from the monetization scene - soak up an unprecedented amount of Treasury collateral from both the primary issuance and secondary private market in their scramble to push global equity prices to unseen bubble levels and achieve the kind of Keynes-vindicating, demand-pull inflation that Russia was delighted to enjoy in the past several weeks.
How much? The answer: a lot, as in a whopping 20% collapse in supply, once the ECB joins the fray!
Every year, David Collum writes a detailed "Year in Review" synopsis full of keen perspective and plenty of wit. This year's is no exception. "I have not seen a year in which so many risks - some truly existential - piled up so quickly. Each risk has its own, often unknown, probability of morphing into a destructive force. It feels like we’re in the final throes of a geopolitical Game of Tetris as financial and political authorities race to place the pieces correctly. But the acceleration is palpable. The proximate trigger for pain and ultimately a collapse can be small, as anyone who’s ever stepped barefoot on a Lego knows..."
A specter is haunting the world, the specter of two percent inflationism. Whether pronounced by the U.S. Federal Reserve or the European Central Bank, or from the Bank of Japan, many monetary central planners have declared their determination to impose a certain minimum of rising prices on their societies and economies. One of the oldest of economic fallacies continues to dominate and guide the thinking of monetary policy makers: that printing money is the magic elixir for the creating of sustainable prosperity. Once the inflationary monetary expansion ends or is slowed down, it is discovered that the artificially created supply and demand patterns and relative price and wage structure are inconsistent with non-inflationary market conditions. Governments and their monetary central planners, therefore, are the cause and not the solution to the instabilities and hardships of inflations and recessions.
Yesterday's epic market surge, the biggest Dow surge since December 2011 on the back of the most violent short squeeze in three years, highlighted just why being caught wrong side in an illiquid market can be terminal to one's asset management career (especially if on margin), and thus why hedge funds are so leery of dipping more than their toe in especially on the short side, resulting in a 6th consecutive year of underperformance relative to the confidence-boosting policy tool that is the S&P. And with today's session the last Friday before Christmas week, compounded by a quadruple witching option expiration, expect even less liquidity and even more violent moves as a few E-mini oddlots take out the entire stack on either the bid or ask side. Keep an eye on the USDJPY which, now that equities have decided to ignore both HY and energy prices, is the only driver for risk left: this means the usual pre-US open upward momentum ignition rigging will be rife to set a positive tone ahead of today's session.
The rank economic cheerleading in the guise of “news” printed by the Wall Street Journal, Reuters and the rest of the financial press never ceases to amaze. But on the heels of Congress’ pathetic capitulation to Wall Street over the weekend you have to wonder if even the robo-writers who compose the headlines are on the take. How could anyone in the right mind label this weekend’s CRomnibus abomination “A Rare Bipartisan Success for Congress”? Apparently, that unaccountable plaudit was bestowed upon Washington by the WSJ solely because it avoided another government shutdown.
- Sydney Siege Sparks Muslim Call for Calm Amid Backlash Fear (BBG)
- Oil Spilling Over Into Central Bank Policy as Fed Enters Fray (BBG)
- Biggest LBO of 2014: BC Partners to acquire PetSmart for $8.7 billion (Reuters)
- Tremble algos: the SEC has hired... "QUANTS" (WSJ)
- When the bubble just isn't bubbly enough: There’s $1.7 Trillion Locked Out of China’s Stock Rally (BBG)
- Oil price slide roils emerging markets, yen rises (Reuters) - may want to hit F5 on that
- Libya Imposes Force Majeure on 2 Oil Ports After Clashes (BBG) ... and will resume production in days
- Amid Crisis, Pimco Steadies Itself (WSJ)
The simple message: Quantitative Easing has failed to generate inflation. Stated alternatively: QE has not been able to overcome still extant deflationary pressures. Global central banker actions in printing over $13 trillion of new money over the last 6 years have been insufficient to surmount still existing deflationary forces. It tells us the probability of further global deflationary impulses are very real. This has direct implications for any sector of the economy or financial markets whose fundamentals are negatively leveraged to deflationary pressures (think banks, real estate, etc.) Be assured the central bankers are more than fully aware of this.
If there's one absolute truism we hear again and again, it's that central banks are desperately trying to create inflation. Perversely, their easy-money policies actually generation the exact opposite: deflation. Financial and risk bubbles don't pop in a vacuum--all the phantom collateral constructed with mal-invested free money for financiers will also implode.