Debt Ceiling

Fed Hike - Now Or Never

While Fisher, among others, believes that the recent fall in inflation is solely due to collapsing energy and crop prices, the issue of weakening economic data on a global scale, particularly that of China, may suggest much less transient nature. As we stated previously, we think the Fed realizes that we are likely closer to the next recession than not. While raising interest rates may accelerate the pace to the next recession, it is better than being caught with rates at zero when it does occur.

Is The Correction Over?

The question on everyone's mind now is simply whether the correction is over, or is there more to come? The sharp "reflexive" rally that will occur this week is likely the opportunity to review portfolio holdings and make adjustments before the next decline. History clearly suggests that reflexive rallies are prone to failing and a retest of lows is common.

German Production Is A Facade Built On Bad Loans...

Similar to the US banks who funded home owners that shouldn’t have received mortgages and made a fortune doing so – at least initially, the Germans funded the periphery nations in an effort to drive output growth domestically. However, financing a large portion of ones’ customer purchases is a high risk endeavour. And the Germans are in the midst of this hard lesson.

The Fed’s Fatal Flaw: Gold And The Predictable Endgame

When and what will break the chains on gold by those seemingly omnipotent forces that so assuredly keep its price in check? In essence, the belief is (and I expect for most honest and impartial analysts this is true) that because there is potentially significant downside risk to a global monetary system built upon a currency to which gold represents the proverbial kryptonite (we’ll discuss why), there are checks in place within the system, to ensure that kryptonite doesn’t become too potent. The architects of the existing system would have been foolish not to implement checks on gold.

5 Things To Ponder: Reading While Waiting List

"To critics who warn that pumping trillions of dollars into the economy in a short period is bound to drive up inflation, today's central bankers point to stagnant consumer prices and say, 'Look, Ma, no inflation.' But this ignores the fact that when money is nominally free, strange things happen, and today record-low rates are fueling an unprecedented bout of inflation across asset prices."

Bond Bloodbath? Putting The Jump In Rates Into Perspective

Some folks have been dumpingglobal bonds again today (after disappointing retail sales in the US). But, can we just put the recent bump in interest rates into some perspective? Will the "bond bull" market eventually come to an end?  Yes, eventually. However, the catalysts needed to create the type of economic growth required to drive interest rates substantially higher, as we saw previous to the 1960-70's, are simply not available today. This will likely be the case for many years to come as the Fed, and the administration, come to the inevitable conclusion that we are now caught within a "liquidity trap" along with the bulk of developed countries.

BofA "Explains" Why Optimistic Economist Forecasts Have Been So Wrong In The Past 5 Years

  • 2010: The first full year of the recovery was a growth recession with a collapse in inventories (after the restocking was complete), and continued private sector deleveraging.
  • 2011: There were a series of events, including the Japanese tsunami, spike in oil prices and US debt downgrade by S&P.
  • 2012: The crisis in the Eurozone intensified with concerns over a Greek exit and a breakup of the Eurozone. The policy response abroad was lackluster and there were concerns of another financial crisis.
  • 2013: The combination of the sequester, debt ceiling fight and government shutdown created an environment of heightened uncertainty and fiscal restraint.
  • 2014: The polar vortex delayed economic activity and led to a permanent loss of growth.
  • 2015: Rapid appreciation of the dollar and heightened uncertainty about the winners and losers from plunging oil prices has hurt growth. A small part of the weakness may be related to the weather and the dock strike.

The Two Most Important Numbers Of The First Quarter

Now that the Atlanta Fed has determined that the US economy did not grow in the first quarter of the year - because, well,  it snowed - even though said snow did not prevent the US from raking up $100 billion in public debt through March 30 (and likely much more, however since the US has again hit its debt ceiling we won't know the real level of US debt until some time in October), we can formally summarize the two most important changes in the US economy in the first three months of the year. Here they are.

Frontrunning: March 17

  • Israelis vote as 'King Bibi's' reign hangs in the balance (Reuters), Factbox: Main candidates in Israel's election (Reuters)
  • Iran Can Add Million Barrels a Day of Oil If Sanctions Halt (BBG)
  • Kremlin rules out handing back Crimea to Ukraine (Reuters)
  • Saudi Arabia Needs More Oil to Feed Local Refinery Expansion (BBG)
  • How Lafarge’s CEO Went From Holcim Merger Architect to Obstacle (BBG)
  • When Yellen Gets Less Predictable She’s Getting Back to Normal (BBG)
  • Iran nuclear talks intensify as sides face tough issues (Reuters)
  • Debunking $1.4 Trillion Europe Debt Myth in Post-Heta Age (BBG)

The Best "Democracy" Money Can Buy: For Every Dollar Spent Influencing US Politics, Corporations Get $760 Back

Between 2007 and 2012, 200 of America’s most politically active corporations spent a combined $5.8 Billion on federal lobbying and campaign contributions. What they gave pales compared to what those same corporations got: $4.4 Trillion in federal business and support. Here is the visual representation of this stunning finding: for every dollar spent on influencing politics, the nation’s most politically active corporations received $760 from the government.