Rates to remain low for longer. Tapering exit strategy is high. Sorry, folks,it was never QE-infinity despite its open-ended nature.
Now that Ben Bernanke has handed over the keys of the Federal Reserve, there are all sorts of theoretical arguments, pro and con, concerning his bold quantitative easing (QE) programs, in which the Fed massively expanded its balance sheet. Many critics have worried that this will disrupt the proper functioning of credit markets, and threatens to severely debase the US dollar. The defenders of Bernanke have argued that he spared the US (and indeed the world) from a second Great Depression. One of the odd (more farcical) points that people raise in Bernanke’s defense is the case of Japan... We do have historical examples of central banks ruining their economies/currencies through massive expansions of their balance sheets (Weimar Germany, Zimbabwe, etc.). To our knowledge, this has never actually worked anywhere in history...
Annual global investment in bars and coins reached 1,654 tonnes, up from 1,289 tonnes in 2012, a rise of 28%. Check out GoldCore's webinar with Gerald Celente, this Thursday, February 20th.
Since 1998, the markets have been in serial bubbles and busts, each one bigger than the last. A long-term chart of the S&P 500 shows us just how obvious this is (and yet the Fed argues it cannot see bubbles in advance?).
Last week, Federal Reserve Chairman Janet Yellen testified before Congress for the first time since replacing Ben Bernanke at the beginning of the month. Her testimony confirmed what many of us suspected, that interventionist Keynesian policies at the Federal Reserve are well-entrenched and far from over. Isn't it amazing that the same people who failed to see the real estate bubble developing, the same people who were so confident about economic recovery that they were talking about “green shoots” five years ago, the same people who have presided over the continued destruction of the dollar's purchasing power never suffer any repercussions for the failures they have caused?
Nearly two months ago, when we commented on the recent string of unprecedented failures by the ECB to sterilize its legacy bond buying operation, the SMP, we commented that "judging by the feverish pace of purchases of every peripheral bond available, is this merely just another indication how little the ECB cares about sterilization, and is just a hint at an upcoming full-blown and unsterilized bond monetization about to be launched by Mario Draghi?" Sure enough at the subsequent February 6 ECB meeting Mario Draghi hinted as much when he said that among the things the ECB was looking at was precisely the "de"sterilizing of the SMP program. However, one stumbling block was getting the Bundebsbank's tacit approval to proceed with this plan which would make the ECB's bond monetization mirror that of the Fed where bonds are purchased on an unsterilized basis. And, as expected, overnight the Bundesbank threw in the towel on sterilization, meaning that the SMP will no longer be sterilized with an announcement divulging just this likely as soon as the next ECB meeting.
The key event overnight was the monetary policy announcement by the BOJ in which its kept it QE unchanged while the Board decided by unanimous vote to double the scale of two funding facilities, namely the Stimulating Bank Lending Facility and Growth-Supporting Funding Facility and to extend the application period for these facilities by a year. Both facilities are designed to stimulate the provision of funding to Japanese banks, allowing them to borrow from the BoJ at a fixed rate of 0.1%pa, for a period 4 years now, instead of 1-3 years previous. Some are arguing that by expanding its funding programmes but not changing its asset purchase targets, the BoJ has signalled its intention to ease policy whilst preserving firepower for extra stimulus in coming months when a sales-tax hike is due to kick-in. The result was a surge in both the Nikkei and USDJPY. The problem, and confirmation that once again the market is now a bunch of cluless automatons unable to analyze even one sentence below the headline level, is that as Goldman explained overnight, the "surprise" announcement was already fully factored in.
Spoos Rise To Within Inches Of All Time High As Overnight Bad News Is Respun As Great News By Levitation AlgosSubmitted by Tyler Durden on 02/17/2014 07:26 -0500
After tumbling as low as the 101.30 level overnight on atrocious GDP data, it was the same atrocious GDP data that slowly became the spin needed to push the USDJPY higher as the market became convinced that like everywhere else, bad news is great news and a relapse in the Japanese economy simply means more QE is coming from the BOJ despite the numerous articles here, and elsewhere, explaining why this very well may not be the case. Furthermore, as we noted last night, comments by the chairman of the GPIF panel Takatoshi Ito that the largest Japanese bond pension fund should cut its bond holdings to 40% were used as further "support" to weaken the Yen, and what was completely ignored was the rebuttal by the very head of the GPIF who told the FT that demands were unfair on an institution that has been functionally independent from government since 2006. The FSA “should be doing what they are supposed to be doing, without asking too much from us,” he said, adding that the calls for trillions of yen of bond sales from panel chairman Takatoshi Ito showed he "lacks understanding of the practical issues of this portfolio.” What he understands, however, is that in the failing Japanese mega ponzi scheme, every lie to prop up support in its fading stock market is now critical as all it would take for the second reign of Abe to end is another 10% drop in the Nikkei 225.
Overview of the events and data that will be of interest to investors.
The Inteligencia Financiera Global blog (Global Financial Intelligence Blog) is honored to present another exclusive interview now with GATA’s Bill Murphy.
Today’s economic model was best summed up by dictator Benito Mussolini in one short sentence: “Fascism … is the perfect merger of power between the corporations and the state”. But tyranny also has its life-cycle within the balance between the past and the future. Once the past becomes far too much of a millstone for the future generations to carry any longer, governments fall and debt and servitude recede. Empires can fall largely without violence and allow a new, freer system to emerge, as most of the satellite states of the Soviet Union achieved. Or the legacy of fallen empire becomes violent chaos followed by renewed oppression, like the French Revolution. This bottom-up style revolution is happening to nations across our 21st Century. The future lies in the balance. The bell tolls for all Western nations, too. So, in the United States, it seems, liberty will have its chance again before too long.
They have promised more than they can possibly deliver, so a lot of their promises are going to be broken before we see the end of this current bust that began in 2000. And that outcome of broken promises describes the huge task that we all face. There will be a day of reckoning. There always is when an economy and governments take on more debt than is prudent, and the world is far beyond that point. So everyone needs to plan and prepare for that day of reckoning. We can't predict when it is coming, but we know from monetary history that busts follow booms, and more to the point, that currencies collapse when governments make promises that they cannot possibly fulfill. Their central banks print the currency the government wants to spend until the currency eventually collapses, which is a key point of The Money Bubble. The world has lost sight of what money What today is considered to be money is only a money substitute circulating in place of money. J.P. Morgan had it right when in testimony before the US Congress in 1912 he said: "Money is gold, nothing else." Because we have lost sight of this wisdom, a "money bubble" has been created. And it will pop. Bubbles always do.
If you have been waiting for the "global economic crisis" to begin, just open up your eyes and look around. I know that most Americans tend to ignore what happens in the rest of the world because they consider it to be "irrelevant" to their daily lives, but the truth is that the massive economic problems that are currently sweeping across Europe, Asia and South America are going to be affecting all of us here in the U.S. very soon. Sadly, most of the big news organizations in this country seem to be more concerned about the fate of Justin Bieber's wax statue in Times Square than about the horrible financial nightmare that is gripping emerging markets all over the planet. After a brief period of relative calm, we are beginning to see signs of global financial instability that are unlike anything that we have witnessed since the financial crisis of 2008. As you will see below, the problems are not just isolated to a few countries. This is truly a global phenomenon.
There is a very good chance that the crisis that began in 2008 is actually not over by any stretch – it is merely moving from one place to the next. After all, the developments discussed below are a direct result of the reaction of the world's monetary authorities to the initial crisis. China's credit bubble and ZIRP in the US and Europe are all children of the crisis and have evidently sown the seeds for the next crisis. As we always stress, we expect that the next major crisis will eventually lead to a crisis of confidence in said monetary authorities. At some point, faith in central banks is bound to crumble and then we will really experience 'interesting times'.
The winner of a currency war is the country that ends up with the most gold.