BIS

Borrowing in USD was risk-on; buying USD is risk-off. As the real global economy slips into recession, risk-on trades in USD-denominated debt are blowing up and those seeking risk-off liquidity and safe yields are scrambling for USD-denominated assets. Add all this up and we have to conclude that, in terms of demand for USD--you ain't seen nuthin' yet.

First it was Sam Zell, warning "it's very likely that something has to give here." Then George Soros upped his market hedge drastically, followed by Carl Icahn's "worry about excessive money printing," adding that he was "very nervous" about US equity markets. "Financial markets are euphoric," warned Stan Druckenmiller, warning that "market participants are pricing in hardly any risks," and Crispin Odey explained "there are consequences to CB actions," stating that "we have front-row seats to an imminent market shock." And now hedge fund manager Andy Redleaf (who predicted "there is going to be a panic in credit markets," in 2007) has come out with the most ominous of warnings yet among the billionaire crowd... "I think it is a truly scary time."

Money is getting tight in China where the PBoC finds itself stuck between easing to counter economic deceleration and exacerbating capital outflows. 

Unlike the Fed, the ECB's Q€ program is far more opaque, far more ad-hoc, and far more improvised (and at the rate it is soaking up already negligible collateral as JPM explained yesterday, soon to be far more abbreviated). In fact, without a daily POMO preview (such as what the Fed used to provide) nobody has any idea what is going or what the ECB will be buying until a week after the fact. Today, for the first time, the ECB provided the bare minimum data on its "Public sector purchase program" i.e., how much debt it had purchased in the first week of the ECB's QE. The answer: only €9.8 billion.

Yellen has created a narrative about the US economy, especially the (un)employment rate, and with the narrative is now firmly in place, Yellen and her stooges can claim they have no choice but to hike In short, Janet Yellen will go down into history as the person responsible for what may be the biggest economic crash ever, or at least delivering the final punch of the way into it, a crash that will make the rich banks even much richer. And there is not one iota of coincidence in there. Yellen works for those banks. The Fed only ever held investors’ hands because that worked out well for Wall Street. And now that’s over. Y’all are on the same side of the same trade, and there’s no profit for Wall Street that way.

Just as in the case of oil currently, the problem with gold (and countless other commodities) trading where it does, is that as we have shown repeatedly on previous occasions, it is at or below the marginal production cost of various gold producers.  And with miners losing money on every incremental ounce (or barrell) they pull out of the ground, there is only so much capital they can burn before they have not choice but to file for bankruptcy. Which is precisely what happened to Allied Nevada Gold, the operator of the gaming state’s Hycroft mine, which earlier today filed for bankruptcy in Delaware. The company blamed its deteriorating financial condition on the drop in gold and silver prices in recent years, an overleveraged capital structure, delays in a key expansion project, and currency swap exposure.

Last month the Deputy Managing Director of the IMF, Japan’s Naoyuki Shinohara, openly stated that emerging markets in Asia should begin the process of de-dollarisation “to mitigate against external shocks and constraining the central bank’s ability as lender of last resort.”

Something curious has emerged as a result of the divergent "Fed-vs-Everyone-Else" central bank policy: as JPM observed over the weekend while looking at the dollar fx basis, the dollar funding shortage is back with a vengeance, and is accelerating at pace not seen since the Lehman collapse.

Just as everyone supports "solutions" until the solutions crush their share of the swag, everybody supports innovation and transparency until it disrupts their share of the swag. Then they scramble to hide the ugly truths and suppress the spread of threatening innovation. This parallel rejection of swag-crushing solutions and innovation/transparency by vested interests is not coincidental: innovation and transparency are the heart of real solutions.

One of Chancellor George Osborne’s senior advisers on economic policy has been captured on video smoking crack cocaine in a drugs den. Prof Douglas McWilliams, who last year ­estimated we would all be £165 a year better off by the election, is seen inhaling it through a glass tube at a flat in North London. Red-faced and slurring his speech, he later told the dealer he had “too much” and that he had spent the day on a binge. Two rocks of the deadly drug can clearly been seen on a table beside the dazed professor. The grainy footage, seen by the Sunday Mirror, will heap embarrassment on the Chancellor and raise serious ­questions about his choice of adviser.

The best performing asset overall in 2015? Well, just tell Putin "spasibo"...

Janet Yellen is very alarmed that some members of Congress want to conduct a comprehensive audit of the Federal Reserve for the first time since it was created. During testimony this week, she made “central bank independence” sound like it was the holy grail. Even though every other government function is debated politically in this country, Janet Yellen insists that what the Federal Reserve does is “too important” to be influenced by the American people. Does any other government agency ever dare to make that claim? If the Fed is doing everything correctly, why should Yellen be alarmed? What does she have to hide?

According to the WSJ, "prosecutors in the Justice Department’s antitrust division are scrutinizing the price-setting process for gold, silver, platinum and palladium in London, while the Commodity Futures Trading Commission has opened a civil investigation, these people said. The agencies have made initial requests for information, including a subpoena from the CFTC to HSBC Holdings PLC related to precious-metals trading, the bank said in its annual report Monday. Who is involved in this latest gold-rigging scandal? Why everyone! ... which makes it immediately obvious why the European regulator had to promptly cover up the whole affair. Under scrutiny are Bank of Nova Scotia , Barclays PLC, Credit Suisse Group AG , Deutsche Bank AG , Goldman Sachs Group Inc., J.P. Morgan Chase & Co., Société Générale SA, Standard Bank Group Ltd. and UBS AG , according to one of the people close to the investigation.

We would do well to consider the possibility of war strategies when it comes to the global stockpiling of petroleum reserves. In the years leading up to the German invasion of Poland, the world witnessed dramatic decreases in the price of oil as well as massive increases in petroleum inventories, especially as the Texas fields began to produce. These shifts in the global oil markets ran parallel to the deflation which had begun in October, 1929, and as such, we can see the same pattern repeating today as oil prices collapse, inventories are growing, and world wide deflation is deepening.