American banks have largely gained from low interest rates, British banks have suffered losses as a result and in the Eurozone they have been hugely detrimental to banks’ profitability. The ones who have undoubtedly lost out were those quintessential Keynesian villains: the savers. The medicine prescribed by the central banks to correct their “bad” ways has cost them billions. And given that yields have continued to go down since McKinsey's report was published, their misery has only increased. More high fives from Keynes! And yet, even within those groups the impact has been uneven. Who in the household segment is suffering the most because of ultra-low interest rates? The retirees, of course.
What do retail investors do on volatile days like Friday’s jolt lower on the S&P 500? Thanks to one very large online broker’s publicly available order flow, we now know...
With Abenomics seemingly a total failure (aside from managing to collapse the currency and living standards of the population - worst Misery Index in 33 years) the demographic crisis that Japan faces just got more crisis-er. As NHKWorld reports, Japan's population continues to fall (4th year in a row) but what is worse, there are now 33 million people over the age of 65 (a record 26%), more than double the number under the age of 14 (16.2 million). The ministry says the population will likely continue declining for some time as fewer babies are born and society ages. The implications are catastrophic...
Can't Wait To Read Bernanke's Memoirs? Here Are All The Timeless Statements By The Former Fed ChairmanSubmitted by Tyler Durden on 04/09/2015 16:13 -0400
We know it will be next to impossible to wait until October when this book of toner repair and printer cartridge replacement wisdom comes out, here is a sampling of timeless soundbites by the former Fed Chairman and current blogger, that should be enough to hold readers over.
In a new study, the IMF asks whether there's a global slump in real private investment (spoiler alert: yes there is and it's broad-based and endemic in advanced economies) and also suggests that productivity growth across the globe is likely to remain constrained for the foreseeable future.
Russia possesses tremendous opportunity for growth and with no lack of suitors – east or west – Putin is in no hurry to pander to the US or EU hardliners.
Is it possible that capitalism’s underlying focus on profits, and the necessity for endless purchases of goods and services, has a practical limit?
China’s economy is slowing, and the debate is raging over whether the country is headed for an abrupt hard landing or whether the slowdown will stabilize into a soft landing that may already be underway. However it plays out, Schwab's Jeff Kleintop notes, one thing is clear: A return to the double-digit growth rates of years past seems unlikely. Demographics are destiny.. and China faces two unstoppable trajectories.
The current set of dominant market narratives are so well known as to be cliché. Invest where central banks are pumping liquidity, and short the currency of those countries or regions. Look for growth, and pay any valuation multiple that seems half way reasonable in today’s market. Expect any spike in volatility to wilt like cut flowers in the hot sun, and the Fed to care intensely about stock prices. And maybe that will continue to work in this last month of the first quarter… But it always pays to question the foundations of market assumptions...
Sometime next year Social Security’s $150 billion disability-insurance program will become insolvent. Congressional loosening of benefit requirements, and more-importantly allowing people to remain on disability effectively for life once they gain it (less than 1% of the people on disability return to the workforce in any given year) make the problem one that is utterly intractable without major changes. And so Congress' bipartisan Social Security Advisory Board has urged change...like shifting funds to the Social Security disability fund from the Social Security retirement fund.
The politicians of Europe are plunging into a form of ideological fratricide as they battle over Greece. Accordingly, all the combatants - the German, Greek and other national politicians and the apparatchiks of Brussels and Frankfurt - are fundamentally on the wrong path, albeit for different reasons. Yet by collectively indulging in the sum of all statist errors they may ultimately do a service. Namely, discredit and destroy the whole bailout state and central bank driven financialization model that threatens political democracy and capitalist prosperity in Europe - and the rest of the world, too.
Today's obvious mispricing of sovereign bonds is a bonanza for spending politicians and allows over-leveraged banks to build up their capital. This mispricing has gone so far that negative interest rates have become increasingly common. Macroeconomists will probably claim that so long as central banks can continue to manage the quantity of money sloshing about in financial markets they can keep bond prices up. But this is valid only so long as markets believe this to be true. Put another way central banks have to continue fooling all of the people all of the time, which as we all know is impossible.
Deflation remains the enemy thanks to debt, deleveraging, demographics, tech disruption & default risks. US aggregate debt is today a staggering $58.0 trillion (327% of GDP); the number of people unemployed in the European Union is 23.6 million; Greece has spent 90 of the past 192 years in default or debt restructuring. 7 years on from the GFC... The massive policy response continues. Central bank victory means that lower rates, currencies, oil successfully boosts global GDP & PMI’s in Q2/Q3, allowing Fed hikes in Q4. Bond yields would soar in H1 on this outcome. Defeat, no recovery, and currency wars, debt default and deficit financing become macro realities.
The grand central banking experiment being conducted around the globe right now will not end well. With little more than a lever to ham-fistedly move interest rates, the central planners are trying to keep the world's debt-addiction well-fed while simultaneously kick-starting economic growth and managing the price levels of everything from stocks to housing to fine art. The complexity of the system, the questionable credentials of the decision-makers, and the universe's proclivity towards unintended consequences all combine to give great confidence that things will not play out in the way the Fed and its brethren are counting on.