European Central Bank
The governments and central banks of the world are engaged in a futile effort to stimulate economic recovery through an expansion of fiat money credit. They will fail due to their ignorance or purposeful blindness to Say’s Law that tells us that money is the agent for exchanging goods that must already exist. New fiat money cannot conjure goods out of thin air, the way central banks conjure money out of thin air. This violation of Say’s Law is reflected in loan losses, which cannot be prevented by any array of regulation or higher capital requirements. In fact rather than stimulate the economy to greater output, bank credit expansion causes capital destruction and a lower standard of living in the future than would have been the case otherwise.
- U.S. sets new import duties on Chinese solar products (Reuters)
- U.S.-China Solar-Products Dispute Heats Up (WSJ)
- China Mulls Offshore Yuan Gold Trade in Free Trade Zone (BBG)
- Insider-Trading Probe Could Snarl a Deal for Icahn (WSJ)
- KCG Holdings Suspects Its Trading Code Was Stolen (WSJ)
- ‘Period. Full Stop’ Is the New ‘At the End of the Day’ (BBG)
- Draghi not so goof for bonds: Investors Flag Risk of ECB Disappointing After Europe Bond Rally (BBG)
- But great for stocks: Equity Traders See Draghi Turning Throttle Up on Rally (BBG)
We have long warned of the vulnerability of having all your investments and savings in electronic format. The nature of our modern financial and banking system exposes investors and savers to new risks that were not there a generation ago. Prudent diversification today, involves owning some actual physical gold and silver coins and bars in your possession or in allocated, segregated accounts that can be taken delivery of with a phone call.
Monetary policy is diverging in the two largest economies, a trend that is set to shape funding markets for years to come. Before long, these divergent fortunes are bound to lead to large differences in policy. One might expect that movements in financial markets would reflect these expectations. However, so far, by and large, they have not. To my mind, investors should prepare for more volatility this year. A tightening in US monetary policy always causes fallout. This time will be no different. In fact, it may be worse, since the tightening starts from extremely expansionary territory.
While we have historically noted the explosion of youth unemployment as a key factor for instability in Europe, there appears to be an ever more concerning indicator of the potential fragility of the European Union. As Bloomberg's Maxime Sbahi notes, the difference in economic performance (and mood) between France and Germany, often referred to as the European “engine,” is at a record high. This disparity is likely to weaken France and isolate Germany further, heightening political tensions and indecision in the euro area.
You can smell this one coming a mile away... the ECB is now energetically trying to revive the a market for asset-backed commercial paper (ABCP) - the very kind of “toxic-waste” that allegedly nearly took down the financial system during the panic of September 2008. The ECB would have you believe that getting more “liquidity” into the bank loan market for such things as credit card advances, auto paper and small business loans will somehow cause Europe’s debt-besotted businesses and consumers to start borrowing again - thereby reversing the mild (and constructive) trend toward debt reduction that has caused euro area bank loans to decline by about 3% over the past year. What they are really up to, however, is money-printing and snookering the German sound money camp.
Could the euro rally on a 10-15 bp cut in key rates? Technical indicators suggest this may be likely.
Easy money and the timing of the Fed’s policy shift continue to dominate across the globe. Recovery is widely assumed for the next two years; but as Abe Gulkowitz exposes in this week's The PunchLine chartapalooza, deep-seated weaknesses have also become more evident. Very obvious financial vulnerabilities, repercussions from various political stalemates and serious geopolitical concerns are aggravating the problems of clearly insufficient growth in the world economy. And let’s not forget that many of the challenges cannot be resolved easily...
One hundred and ten of Greece’s best beaches (70,000 lots) are on sale by Greece’s privatization agency, the Hellenic Republic Asset Development Fund (TAIPED) in the name of supposed 'development' and 'utilization of public assets' as the prerequisite for receiving more handouts from the Troika. "This sale of the land must happen," explains one Greek civil servant, "we need this now, quickly. Tell the Russians and the Qataris to hurry up!" But as KeepTalkingGreece notes, not everyone is so exuberant about a supposedly recovered Greece dumping assets in order to pay back its European bailout banker overlords. With SYRIZA taking the lead in elections, the euro-skeptic sentiment is likely only to rise.
The economic system in which we live today is a crony capitalist system or, we might say, a system of money socialism. And that’s Piketty’s greatest error: to blame capitalism for the negative effects of crony capitalism and money socialism. But perhaps it is no error. Perhaps, he only wants to be loved by politicians and the IMF. I think they love him already, though.
The ECB, the Swiss National Bank (SNB) and the Riksbank of Sweden announced a new gold agreement this morning. They announced they have no plans to sell significant quantities of gold and reaffirmed the importance of gold bullion as a monetary reserve asset.
- Bank of England sees 'no housing bubble' (Independent)
- ‘If the euro falls, Europe falls’ (FT)
- India's pro-business Modi storms to historic election win (Reuters)
- Global Growth Worries Climb (WSJ)
- Bitcoin Foundation hit by resignations over new director (Reuters)
- Blackstone Goes All In After the Flop (WSJ)
- SAC's Steinberg loses bid for insider trading acquittal (Reuters)
- Beats Satan: Republicans Paint Reid as Bogeyman in 2014 Senate Races (BBG)
- Tech Firms, Small Startups Object to Paying for Internet 'Fast Lanes' (WSJ) - but they just provide liquidity
- U.S. Warns Russia of Sanctions as Ukraine Troops Advance (BBG)
- Major U.S. hedge funds sold 'momentum' Internet names in first-quarter (Reuters)
When The Head Of The European Central Bank Lies To Zero Hedge On The Record: Presenting Europe's "Plan Z"Submitted by Tyler Durden on 05/15/2014 15:16 -0400
We are happy to report that Zero Hedge is the first media outlet that Mario Draghi has very publicly, officially, and on the record, lied to. Because as we learned overnight, Europe most certainly had a "plan in place so that the markets don't basically collapse." Only it wasn't as Margio Draghi called it, Plan B. It was a different letter of the alphabet. Thanks to the FT's Peter Spiegel we now know that just over a year ago, in order to preserve the myth that Europe's power echelons are so "confident" with the Eurozone staying together they did not even consider a break up as a potential outcome, Draghi explicitly and on the record lied.
Presenting Europe's Plan Z.
Thank god for Germany, whose Q1 GDP printed at 0.8%, above the expected 0.7%, and higher than Q4's 0.4%, or else the Eurozone's very disappointing Q1 GDP, which printed at 0.2% or half the expected 0.4%, could have been flat or negative.
The Wall Street Journal appears to be saving money by dispensing with journalists and using human drop boxes instead. Thus in the New York markets the “Hilsenramp” signal is already a well-known event which occurs at approximately 3pm on/during/after Fed meeting days, and is posted under the byline of “Jon Hilsenrath”. In simple packaged form it provides fast money speculators with a message from the B-Dud, otherwise known as William Dudley, President of the New York Fed, on why the Fed will back-up another run at still higher record highs. So today comes a drop box message with respect to ECB policy posted under the byline of “Brian Blackstone”.