European Central Bank
Monetary policy may seem technical as clever people debate among themselves whether the optimal policy rule should be one part inflation and one part output gap or one part inflation and two part output gap with various degree of flexibility in its interpretation. In reality it is just a bunch of academics looking at an extremely simplified mathematical representation of the world under the pretense of knowing the consequences of their actions. They do not. It is all made up as they go along and the repercussion for their hubris will be borne by all of us. It is glaringly obvious to us that the extraordinary decisions made by our money masters over the last decade will end in an extraordinary correction of malinvested capital. Applying the scientific method of natural science on a social system is the gravest error of them all.
It wasn't just Japan's PMI which overnight printed at a disappointing 47.6, missing expectations and signaling the sharpest decline in operating conditions since December 2012. Overnight Markit showed that the Chinese credit-induced global slowdown is coming far faster than most (if not Morgan Stanley) expected, when the Eurozone flash PMI printed at 52.9, the lowest level in 16 months. As Reuters put it, this offers "the latest evidence that a strong acceleration in growth in the first three months of the year was only temporary" and likely
Saxo Bank chief economist Steen Jakobsen said that zero rates, zero growth, zero productivity, and zero reforms have left a great many countries adrift in a “new nothingness”. The products of this nothingness, said Jakobsen, include apathy, stagnation and “an economic outlook based more in peoples’ heads than in reality”.
Since the beginning of the year, the greenback has shown it's not almighty after all; and gold - the barbarous relic as some have called it - may be en vogue again? Where are we going from here and what are the implications for investors?
The self-described "magic people" who "give to the markets" are facing a mutiny this morning as Raghuram Rajan, the head of the Indian central bank, admits central banks and governments of rich countries are running out of ammunition for stimulating their economies... but they can never admit as much. Crushing the dreams of "extreme monetary policy"-setters, Rajan goes on to discuss the sanity of 'helicopter money' warning that people will not be 'stimulated' to spend but will question: "What kind of world are we in when the central bank prints money and throws it out of the window?"
"As we continue to search the world for changes in trend, we must objectively report that there have been no changes to trends in economic growth. Around the world, growth continues to GRIND lower. Countries that were once high fliers, have now become low fliers. Countries that were once Steady-Eddies, have now become Wobbly Willies. And Countries that were once Nervous-Nancies have become Panicking Patty’s."
The confidence in the eurosystem is evaporating...
On March 10, 2016 when the ECB announced the biggest expansion to quantitative easing in European history, when it shocked the market by announcing not only a reduction in its negative rate and expansion in the TLTRO program, but also the launch of a corporate bond monetization program.Well maybe not "shocked" the market, because as Bloomberg writes, ECB board members met with representatives of banks and investment managers including Goldman Sachs, BlackRock, Credit Suisse and Moore Europe Capital Management in February, just days before the ECB's March 10 announcement.
"They’re going to have to stop people from taking out cash... I would argue that it’s not going to be able to be dealt with, and it creates enormous social and political pressures… What we’re going to see is a period of financial repression, which is very, very dangerous... I honestly don’t know how it’s going to end. In the 1920s and 1930 when similar pressures built up, it didn’t actually have a very good ending."
Lawmakers in the European Parliament have sharply condemned the latest Greek bailout deal - reached after weeks of negotiations - which they say will lead to "Social Armageddon" and "too high a price to pay." As SputnikNews reports, heated exchanges over the state of play of the Greek macro-economic adjustment program were seen in the European Parliament this week, and divisions are also very evident within the Troika itself as obvious need for debt relief (IMF) is scuttled by Germany and the Eurogroup.
Veritaseum Blockchain-based Bank Research Hits Another Home Run - Banco Popular Shown to be Bear Stearns Redux!Submitted by Reggie Middleton on 05/11/2016 10:16 -0400
Witness true research that reveals true facts, that unlocks true alpha, aka VALUE! Banco Popular is walking down the same path as Bear Stearns. We should know, we called out Bear in January 2008, and we called out BP months ago.
The share rebound triggered by the hasty creation last month of the fund intended to inject capital into weaker lenders and buy their bad loans proved short-lived. Banco Popolare is dragging the rest of the Italian banking system drastically lower today after a "susprise" Q1 loss driven by soaring bad loan writedowns. Banco Popolare is down 14% on the day (25% in a week) to a record low, as Reuters reports the bank was forced to admit the reality of its bad loans by the European Central Bank as a condition for approving a planned merger with Banca Popolare di Milano that will create Italy's third-biggest banking group.
Ever since the U.S. Federal Reserve (Fed) began to consider raising the federal funds rate, which it eventually did in December 2015, a cottage industry has grown up around taper talk. Will the Fed raise rates, or won’t it? Each time a consensus congeals around the answer to that question, all the world’s markets either soar or dive.
This Is What The "Main Street Serving" Fed's Wall Street Advisors Told It To Do About Future Rate HikesSubmitted by Tyler Durden on 05/10/2016 15:57 -0400
"U.S. economic recovery remains fragile, and downside risks to the economy are still present. Provided the data improve, the Council believes one or two well-timed and well-communicated increases in the federal funds rate between now and year-end would be prudent to accomplish the Fed’s mandates, enhance central bank credibility, and create policy latitude in the event of an unexpected economic downturn."
The current financial market volatility increasingly reflects loss of faith in policy makers. Celebrity central bankers are learning that they must constantly produce new miracles for their followers. For the moment, the volatility is confined to financial markets and the effect on the real economy is limited. The ever present risk is of a doom loop where financial market problems lead to banking system weakness which, in turn, feeds a credit crunch and a contraction in economic activity. That familiar movie does not have a happy ending.