Central Banks

While the fear and loathing of gold by the "smart money" and central banks has been extensively documented in recent years, another asset class is emerging as the "most hated" within the speculator community: treasurys, or rather, duration.

So there you have it: a riskless "profit" handout for foreign banks, subsidized by the most famous US "public" institution - the Federal Reserves - amounting to approximately $11 billion in just one year.

If a person is unable to earn enough to save, and is unable to compete with financiers and corporations for productive assets, that person is a modern-day serf, a debt-serf indentured to banks and stripped of opportunities to own the sort of assets the Financial Nobility use to accumulate ever-greater wealth and income. The injustice of this central-bank enforced neofeudalism cannot be suppressed like interest rates.

The Fed seems to have been operating on the theory that their own views on the economy determine its path. But recently the Fed has taken the principle to an extreme never seen. Yellen may well have just hiked rates expecting, hoping, that the mere act of showing confidence in the economy would produce an economy worthy of confidence. The Fed has dominated the narrative for years now, investors and traders hanging on every word. Last week that started to change, the market repudiating the Fed’s outlook over a 48 hour period that must have produced some second guessing at the Fed.

I would imagine any ancient Roman wise enough to make this same prediction back before the Empire collapsed as the great city fell from a population of one million down to 12,000, would have sounded like a real KOOK.

"Rather than the economy driving markets, as is supposed to be the case, the risk is that central banks have now created a monster such that markets drive the economy, if not on the way up, then certainly on the way down."

“To the intelligent man or woman, life appears infinitely mysterious, but the stupid have an answer for everything.” ~Edward Abbey

"Since the risk of Quantitative Failure brings with it the risk of more extreme policies/politics in 2016, the natural hedges are gold & volatility. Gold in particular will be interesting to watch in coming months. The Fed’s determination to raise rates means gold prices should fall. If in contrast gold rises with Fed hikes that’s a clear sign of a “policy mistake” and investors anticipating the need for more inflationary policies next year."

In the short term, increases in interest rates can be negative for gold. But, in the medium to long term rising interest rates are positive for gold as they were in the 1970s and the 2003 to 2006 period.

What happens the next time global GDP takes a nosedive when Central Banks have already used up all of their ammunition?

One would think that the Criminals, themselves, would not have the audacity to use the same Script (with just minor plot variations) every eight years. But here we go, again.

Yellen and her cohort have no clue, however, that all of their massive money printing never really left the canyons of Wall Street, but instead inflated the mother of all financial bubbles. So they are fixing to blow-up the joint for the third time this century. That was plain as day when our Keynesian school marm insisted that the Third Avenue credit fund failure this past week was a one-off event - a lone rotten apple in the barrel. Now that is the ultimate in cluelessness.

Weak earnings performance in marketing operations below the current EBIT guidance of $2.4-$2.7 billion could place negative pressure on the Baa3 ratings in the absence of any mitigating measures. A weakening of the company's liquidity position, delays with the planned divestments in 2016 or a material reduction in its working capital funding capacities by the banks, as well as sustained high leverage with adjusted debt/EBITDA exceeding 4x, will also put negative pressure on the Baa3 ratings."

Following the latest BOJ statement, the market found itself wrongfooted assuming the BOJ was actually launching another episode of easing, sending the USDJPY soaring, until suddenly the realization swept the market that not only was the incremental action not really material, but even Kuroda spoke shortly after the announcement, confirming that "today's decision wasn't additional easing." The result was one of the biggest FX headfakes in recent days, perhaps on par with that from December 4 when EUR shorts were crushed, as the biggest carry pair first soared then tumbled and since the Yen correlation drives so many risk assets, also pulled down not only Japanese stocks but US equity futures.

Economic warfare aims to capture or otherwise control the supply of critical economic resources or destroying a country’s currency.  The US understands better than anybody else that a country can sometimes be hurt more by doing this than by bombing its infrastructure. The tool of exclusion from the dollar-denominated global financial system is described as a 'neutron bomb' constituting a more potent bomb than any military weapon. But recent developments signal the first stages of the US dollar’s decay.