To challenge the US dollar hegemony and increase its power in the global realm of finance, China has a potent gold strategy. Whilst the State Council is preparing itself for the inevitable decay of the current international monetary system, it has firmly embraced gold in its economy. With a staggering pace the government has developed the Chinese domestic gold market, stimulated private gold accumulation and increased its official gold reserves in order to ensure financial stability and support the internationalisation of the renminbi.
With the world's attention about to focus on Qatar where in just a few hours the Doha OPEC "freeze" meeting is supposed to start (without the presence of Iran which has made it clear it won't freeze production but "supports the decision for other OPEC and non-OPEC countries to freeze crude oil production" so everyone except Iran), moments ago Tass presented a glimpse of what will be announced.
It must be tempting for the believers to again revel in the brute power of the “perpetual money machine.” Yet the costs associated with the latest round of monetary inflation are steep. Not many months ago it appeared that China was determined to rein in excess, while the U.S. was ready to lead the world toward policy normalization. Today it’s become rather obvious that China is out of control and global policymakers are trapped at near zero or negative rates and perpetual QE monetary inflation. What was always sold as temporary extraordinary measures is increasingly recognized as desperate “whatever it takes” indefinitely.
The middle class in America forgot all about the importance of savings and frugality and instead bought into the lie that one’s future would be “taken care of” if only it threw its money into the stock market.
"Unless a miracle happens and the European and Japanese economic cadavers suddenly sit up and rub their eyes, central banks will eventually have to give up and admit defeat. The hope will be that not too much damage has been inflicted.... But that is central banking for you, in the era of leverage: take from the savers and give to the borrowers in the hope that they will "do something".Not so far, they’re not … they’re just punting it on real estate."
Something big happened in the gold market. It was a stunning trend change in mainstream gold demand during the first quarter of the year.
So what do you do? Play the short-term chase the market game or the longer-term wealth devastation game. The choice is yours to make, the consequences will be for all to share. “I will tell you my secret: I never buy at the bottom and I always sell too soon.” – Baron Nathan Rothschild
"How do you know this is just a short squeeze, and not the beginning of something much more substantial? While equities are trying to send a bullish tune, the 200 day moving average is now trending down for S&P, Dax and the Nikkei. This is not bullish. Furthermore, yield curves in the US, Japan and Europe have flattened. This is not bullish. Yen is rallying. This is not bullish. We have seen substantial covering by the market. This is not bullish."
"Central bankers may have their hearts in the right place, but no matter how much more they do, they end up with more debt and no progress," rages CNBC's Santelli which, as Vine Street's Yra Harris notes, "is enabled by a potemkin village of counterfactuals," before embarking on the most vitriolic take-down of the "atavistic remnant of a colonial past" - The IMF. Simply put, as Santelli exclaims, "the world has really lost its way," and Harris is in full agreement, concluding with a simple message to the world's central banks - "Stop!"
Less than six months after we pointed out that the BoJ owns 52% of the entire Japanese ETF market, Reuters reports that the Kuroda's Peter Pan fairy tale, aka the Bank of Japan, is thinking about buying even more. The BoJ is said to be currently buying $30 billion of ETF's a year under its current policy, however since the Nikkei is down over 10% this year, that figure is apparently not enough to keep the market propped up.
Elections have entered the world of the weird because America itself is on the edge of something that will shake its very core. What that event will be is hard to say because there are so many possibilities, but tensions of this caliber usually escalate to crisis before they deescalate, and tensions today are surely escalating. The elections only serve as a gauge for how close to the bottom of the abyss we actually are.
"If the money market dries up, if there is an event like the Lehman crisis, there won’t be the infrastructure for banks to raise capital... Every day is like being Alice in Wonderland... interest-rates levels are having no effect on credit demand, the market function is declining. You can’t expect everything to go according to plan."
What is clear is that the Federal Reserve has gained control of asset markets by gaining control over investor behavior. “Are you afraid of a market crash? Yes. Are you doing anything about it? No.” Again, it’s back to fundamentals versus expectations. Someone is going to be very wrong.
Bernanke has been a charlatan and intellectual lightweight all along but the gist is that the US economy is wanting for some non-existent ether called “aggregate demand”. And that this ether is something the Fed can easily create by handing an open-ended spending account to politicians, and one that would never have to be repaid or even serviced with interest! It puts you in mind of the medieval theologians who endlessly debated as to the number of angels which could fit on the head of a pin. The trouble is, there is not such thing as angels. Nor is there any such thing as economic growth or wealth that can be conjured by politicians spending Bernanke’s utterly counterfeit money.
The final auction of the week confirms that something is seriously amiss with the market. On one hand, there remains a substantial (short covering) bid to risk assets; on the other buyers just can't get enough of safe paper issued by the government: we saw it in the strong 3Y, the stronger 10Y and now we just got a blistering 30Y which not only priced 2 bps through the When Issued, not only saw a jump in the Bid to Cover from 2.327 to 2.402, the highest since December, but also had an Indirect takedown of 65.1%, the second highest on record and just shy of the 66.0% in September of 2015.