• Steve H. Hanke
    05/04/2016 - 08:00
    Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke. A few weeks ago, the Monetary Authority of Singapore (MAS) sprang a surprise. It announced that a...

Consumer Prices

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Austrian Central Bank Warns Fed, "Rate Hikes Will Slow Global Growth"





Market participants, be they lenders or borrowers, know that “easy money” has an expiry date. If The FOMC raises rates, "we foresee negative effects on world GDP in the medium term, not only for emerging markets but also for industrialized economies." In other words, though emerging markets – through their dependence on capital inflows – will be at risk when America’s monetary policy eventually returns to “normal,” the same will be true for advanced economies.

 
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Futures Surge Overnight As Deteriorating Economic Data Unleashes Blur Of Central Bank Interventions And QE Rumors





It has become virtually impossible to differentiate between actual central bank intervention, hopes of central bank intervention, and how the two interplay on what was once the "market" but is now merely the place where money printers duke it out every day in some pretense of price discovery set by those who literally print money.

 
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More "Seller Strikes"? ECB Monetizes Fewest Bonds In August Since Start Of Q€





What is the reason for the drop? Well, one can believe the ECB's stated explanation which is that due to European summer vacations, activity in Europe has ground to a halt. Of course, this would suggest that monetization in the Eurozone is continent on managers' summer vacation plans, which is probably an even more troubling explanation of ECB activity bottlenecks than what may be really going on in Europe. The alternative? As we noted over the weekend when we reported that now even the IMF is discussing the upcoming limits to BOJ QE as a result of sellers running out of BOJs to hand over to the BOJ, the same may be taking place in Europe

 
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Peter Schiff Warns: Meet QT - QE's Evil Twin





The arrival of Quantitative Tightening will provide years' worth of monetary headwinds. Of course the only tool that the Fed will be able to use to combat international QT will be a fresh dose of domestic QE. That means the Fed will not only have to shelve its plan to allow its balance sheet to run down (a plan I never thought remotely feasible from the moment it was announced), but to launch QE4, and watch its balance sheet swell towards $10 trillion. Of course, these monetary crosscurrents should finally be enough to capsize the U.S. dollar.
 
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Why China Liquidations May Not Spike US Treasury Yields





There is no doubt that the Chinese economy is in a material economic slowdown. Policy officials’ aggressive actions and scare tactics against equity short sellers could continue to cause capital flight. However, this does not mean that China is going to sell large quantities of Treasuries. There is too much co-dependency between the US consumer and Chinese exporter. Destabilizing the US Treasury market with large sales would be tantamount to shooting themselves in the foot.

 
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Is It Over Yet?





The REAL RISK currently is not missing some of the upside if the bull market does begin to resume, but rather catching the downside if this correction turns into a full-fledged bear.

 
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Guest Post: Stanley Fischer Speaks - More Drivel From A Dangerous Academic Fool





With every passing week that money markets rates remain pinned to the zero bound by the Fed, the magnitude of the financial catastrophe hurtling toward main street America intensifies. When the next financial bubble crashes it can only be hoped that this time the people will grab their torches and pitchforks. Stanley Fischer ought to be among the first tarred and feathered for the calamity that he has so arrogantly helped enable.

 
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Three Drivers of the Capital Markets in the Week Ahead





The stability of global capital markets, the ECB meeting and US employment data are highlights.   Risk seems to be greater than discounted that Sept rate hike is still a distinct possibility.

 
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Yuan Strengthens Most Since March, China Unveils New Bailout Source After Rescue Fund Runs Out Of Fire-Power





Update: China readies new bailout mechanism - pooling CNY2 Trillion of Pension funds for "investment"

A busy night in AsiaPac before China even opens. Vietnam had a failed bond auction, Japanese data was mixed (retail sales good, household spending bad, CPI just right), Moody's downgrades China growth (surprise!), China re-blames US for global market rout, and then the big one hits - China's bailout fund needs more money (applies for more loans from banks) - in other words - The PBOC just got a margin call. China margin debt balance fell for 8th straight day (although the short-selling balance picked up to 1-week highs). China unveiled some economic reforms - lifting tax exemption and foreign real estate investment rules. PBOC fixesds the Yuan 0.15% stronger - most since March, but even with last night's epic intervention, SHCOMP looks set for its worst week since Lehman.

 
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Dollar Depeg Du Jour: 32-Year Old Hong Kong FX Regime In The Crosshairs





Because no discussion of global dollar pegs and entrenched FX regimes would be complete without mentioning the Hong Kong dollar...

 
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Bloodbath: Emerging Market Assets Collapse As China Selloff Triggers Panic





On the heels of China's "failure" to send the PBoC to the rescue with an RRR cut over the weekend, battered EM assets were hit hard again on Monday as stocks, bonds, and currencies all went into panic mode as the global meltdown gathers pace.

 
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Consumer Prices Rise At Slowest Pace Since 2014 As Airfares Plunge, Car Costs Slide, But 'Rents' Jump





US Consumer Prices (CPI) missed expectations MoM with a mere 0.1% rise (half the expected 0.2% rise). Core CPI (ex food and energy) rose just 0.1% - its weakest growth since Dec 2014 with the biggest drivers being a 5.6% plunge in airfares - the biggest drop since 1995 and a 0.3% surge in 'owner equivalent rents' driven by lodging. Gas prices rose for the 3rd consecutive month (unequivocally good?) but new and used car prices tumbled.

 
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Chinese Intervention Rescues Market From 2-Day Plunge, Futures Red Ahead Of Inflation Data, FOMC Minutes





With China's currency devaluation having shifted to the backburner if only for the time being, all attention was once again on the Chinese stock market roller coaster, which did not disappoint: starting off with yesterday's dramatic 6.2% plunge, the Shanghai Composite crashed in early trading, plunging as much as 5% in early trading and bringing the two-day drop to a correction-inducing 11%, and just 51.2 points away from the July 8 low (when China unleashed the biggest ad hoc market bailout in capital markets history) . And then the cavalry came in, and virtually the entire afternoon session was one big BTFD orgy, leading to a 1.2% gain in the Shanghai Composite closing price, while Shenzhen and ChiNext closed up 2.2% and 2.7%, respectively.

 
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Futures Flat As Oil Drops To Fresh 6 Year Low; EM Currencies Crumble Under Continuing FX War





It was a relatively quiet weekend out of China, where FX warfare has taken a back seat to evaluating the full damage from the Tianjin explosion which as we reported on Saturday has prompted the evacuation of a 3 km radius around the blast zone, and instead it was Japan that featured prominently in Sunday's headlines after its Q2 GDP tumbled by 1.6% (a number which would have been far worse had Japan used a correct deflator), and is now halfway to its fifth recession in the past 6 year, underscoring Abenomics complete success in desrtoying Japan's economy just to get a few rich people richer. Of course, economic disintegration is great news for stocks, and courtesy of the latest Yen collapse driven by the bad GDP data which has raised the likelihood of even more Japanese QE, the Nikkei closed 100 points, or 0.5% higher. 

 
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Peter Schiff: The Shot Not Heard Around The World





While making its devaluation announcement, Beijing said that it wanted its currency "to reflect fundamentals" and to no longer simply mirror the movement of the dollar. It acknowledged the fact that its peg to the dollar was problematic and that it wanted a better, more natural mechanism. This is the key to understanding the announcement: The Chinese are preparing for a time in which the financial world does not spin in orbit around the dollar. Such a reality must make us think about the future.

 
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