Excess Reserves

The Serfs Have Rebelled - Europe Next?

Hayek’s The Road to Serfdom described how personal freedoms are progressively eroded by the state in the name of the common good. In the main, the serfs are patient and tolerant of their masters, but in a democracy, the establishment behind the state risks being challenged. And that has happened twice this year, first with Brexit and now with Trump in America... but remember the serfs never win, as Hayek recognised.

"Fiat Money Quantity" & $11,000 Gold

If gold (priced in dollars today) bore the same relationship to the quantity of dollars in existence some eighty years ago, the price range in today’s dollars would be between $4,000 and $11,640...

The Bank Of Japan Unleashes Chaos

"...even if we have the press release listing exactly what the BoJ was going to do, the market response to various policy mixes is such a coin-flip that it’s nearly impossible to prognosticate."

Step Aside London Whale: Goldman Is Now Using Retail Deposits To Fund Investments

Goldman has been using the proceeds from the new deposits to directly fund speculative activity such as trading and investments, as well as more conventional activity such as creating looans. Goldman Sachs built up its consumer bank, led by 40-year-old Goldman partner and credit trading veteran Gerald Ouderkirk, whose job is to use consumer deposits and other types of funding for trades, investments and loans.

Incompetent But Not Weak: "The Fed Doesn't Know Whether To Shit Or Go Blind"

The outlook for the US economy is deteriorating, yet the Fed is trying to raise overnight rates to keep unseen inflation from rising. Success in its strategy could force consumption lower, unemployment higher, and exacerbate real output contraction. The market, however, should not underestimate the Fed’s power based on its apparent incompetence.

Negative Interest Rates & The War On Cash, Part 3: "Beware The Promoters"

The main promoters of cash elimination in favour of electronic currency are Willem Buiter, Kenneth Rogoff, and Miles Kimball... in order to implement substantially negative interest rates..."If all central bank liabilities were electronic, paying a negative interest on reserves (basically charging a fee) would be trivial. But as long as central banks stand ready to convert electronic deposits to zero-interest paper currency in unlimited amounts, it suddenly becomes very hard to push interest rates below levels of, say, -0.25 to -0.50 percent, certainly not on a sustained basis. Hoarding cash may be inconvenient and risky, but if rates become too negative, it becomes worth it."

Negative Rates & The War On Cash, Part 1: "There Is Nowhere To Go But Down"

As momentum builds in the developing deflationary spiral, we are seeing increasingly desperate measures to keep the global credit ponzi scheme from its inevitable conclusion. Credit bubbles are dynamic - they must grow continually or implode - hence they require ever more money to be lent into existence. As the peak of a credit bubble is reached, all these necessary factors first become problematic and then cease to be available at all. Past a certain point, there are hard limits to financial expansions, and the global economy is set to hit one imminently.

How Does It All End?

[T]he long run meets the present [where] systems that no longer pay their way exhaust their credit and go broke. The Breaking Point is a nonlinear departure on the road to nowhere. It occurs when collateral collapses, burying the public’s faith in fiat money and the institutions that create and regulate it.”

Why The Fed Will Never Reduce Its $4.5 Trillion Balance Sheet Again

While policymakers have maintained the Fed should eventually reduce its bond holdings, Lockhart said some officials were closer to accepting that they needed to learn to live with them. "I suspect there are colleagues who are contemplating at least maybe a statically large balance sheet is just going to be a fact of life and be central to the toolkit," he said. Most now agree with him.

33,000 Americans Have Deposited $1.8 Billion In Savings With Goldman Sachs

Since the closing of Goldman's acquisition of GE Capital's banking unit this April, Goldman has netted $1.8 billion in new deposits thanks to its overly generous 1.05% interest rate which as noted above is among the highest on offer anywhere. Some 33,000 people who’ve opened accounts,

Previewing The BOJ's Decision: What Wall Street Expects Will Happen

As BBG's Vincent Cingarella says, nothing short of a Herculean effort is likely to weaken the Yen over the long-term amid speculation about what the BOJ and government stimulus will look like. Over the short-term it is a different story. Here is what Wall Street thinks The Bank of Japan will announce today.