European Central Bank
Since this is the season for giving thanks in the US, we might give some consideration to the unsung heroes who have been underwriting a big chunk of our economic recovery of late. Actually, we literally owe our future to them - in more ways than one. Since there are no free lunches in economics (that we all must agree on), somebody has to pay for this. And it should be obvious by now who that will be: our children and grandchildren (and at this rate, probably their children and grandchildren too).
Meanwhile, in politics and economics we live in a fantasy world. The feds claim to improve our economy. We pretend to believe it. Did a central bank ever add one single centime, one peseta, one zloty or one fraction of a mill to the world’s wealth? Not that we are aware of. But all over the world, central bankers pretend to sweat and toil on behalf of mankind – correcting… adjusting… nullifying the decisions of honest men and women going about their daily business. Interest rates are too high! Inflation is too low! Not enough demand! Too much savings! They are omniscient as well as all-powerful.
A “YES” vote for the gold referendum is a first step towards redressing the imbalance that exists between the SNB and the people of Switzerland. A “YES” vote will begin a process to restore restraint, accountability, and transparency on an institution that took advantage of the removal of its previous gold holding constraint already once before to explode its balance sheet, reinvent itself as a hedge fund, and significantly expand into areas of policy far beyond its original remit. Central banks should be lenders of last resort and systemic regulators. In a direct democracy, decisions regarding taxation, membership in trade / political unions, and the autonomy of the national currency should be determined by popular vote not decreed or circumvented by central bank edict.
Long ago, Keynes himself pointed out, perhaps inadvertently, the profound difference between GDP and wealth. If we merely want a higher GDP print - which measures spending, not wealth - governments should handout spoons so that millions of citizens can dig holes and millions more refill them. It would appear that the statesmen of Brussels are fixing to try the modern day equivalent of just that.
Central bankers reached a new low overnight when Swiss National Bank President Thomas Jordan warned of "disastrous consequences" from a pulpit in a church on a historic hill in the town of Uster, Switzerland, which Bloomberg dubbed the 'sermon on the hill.' "Hungry people don't stay hungry for long, they get hope from fire and smoke as they reach for the dawn..."
More of the same blather from Europe as following Weidmann's earlier comments with regard the high-hurdles that the ECB still faces over sovereign QE, Coeure has come out to counter that by noting that the ECB does not have to see deflation to act and that they want to have a discussion of asset-purchases next week. EUR faded the Weidmann gains and Gold and silver are sliding as USD strengthens.
Why is Bitcoin dangerous and of little intrinsic value? Because my local Central Banker Told Me So! - OR - The lasting message from the highly Centralized, Centrally Planned, Central Banks of the World? "We think, so you don't have to!"
As the debate regarding whether or not Switzerland should keep the bulk of its gold reserves at home on Swiss soil reaches it's climax - the referendum takes place on Sunday - it is telling that the Dutch announced on Friday that they have just secretly repatriated 122 tonnes of their sovereign gold reserves from New York back to Amsterdam.
Goosing stocks ever higher will eventually push wealth inequality to the point that it unleashes social instability.
"Even if economic conditions continue improving, equity prices are bound to fall sharply at some point, inflicting painful losses on investors. This is what happened in 1987, roughly five years into the last structural bull market. Boom-bust cycles are inevitable because improving economic conditions encourage speculative excesses, which are then blown away as greed gives way to fear."
November 21 - Gold $1197.50 up $6.80 – Silver $16.40 up 26 cents
Bill Cosby And GATA
Recent polls show pro-default parties growing popular in peripheral euro-area countries such as Greece, Italy and Spain. As Bloomberg Brief's Maxime Sbaihi notes, in a depressed economic environment, their promises to restructure public debt might soon bring them to power and tempt traditional parties to adopt their ideas. This return of political risk in the euro area doesn’t appear to be priced in by market participants. As Italy's Beppe Grillo recently exclaimed, "we will leave the Euro and bring down this system of bankers, of scum."
"QE is a necessary condition for recovery in Europe, but is not sufficient in itself. The question is where does this bridge take us? The eurozone can survive a couple more years of miserable growth, but it can’t go on forever like this before people lose hope. There is political risk almost everywhere."
The financial system is lurching towards the next round of the Great Crisis that began in 2007.
Can beggars be choosers again? Judging by the drop in Greek bond prices, the answer is no. As Bloomberg reports, Greek PM Samaras is pushing back against Troika demands for up to $3 billion more savings (i.e. cuts to spending) in 2015. "It's crucial that Greek authorities work with the troika to complete the current review,” but with the government in Athens refusing to concede there is a funding hole, the standoff means Greece may miss a Dec. 8 deadline for agreement on the steps required to unlock the 'aid' tranche.