Global Economy

What Janet Yellen Could Say Tomorrow To Unleash A Market Surge

"The dovish surprise is if she explicitly removes March from the hiking calendar (which would be Draghi-esque in front running the FOMC), broadly hints at a delay or expresses concern on downside risk to long term inflation or structural stagnation. The intention would be to show US households, business and investors that the Fed has their back... It is unlikely, however, that pointing to negative rates or QE4 would work, as investors are increasingly skeptical that more of the same policy mix would be effective in hitting final goals."

Australia Admits Recent Stellar Job Numbers Were Cooked

John Fraser, the nation’s top economic bureaucrat, told a parliamentary panel in Canberra Wednesday that he held discussions on the employment figures with the chief statistician this week. There were some “technical issues” in October and November that may have made the employment figures “look a little bit better than otherwise would be the case,” he said. The technical issues relate to “rolling off” of participants in the labor survey.

 

The Return Of Crisis

Let me be blunt: this next crash will be far worse and more dramatic than any that has come before. Literally, the world has never seen anything like the situation we collectively find ourselves in today. The so-called Great Depression happened for purely monetary reasons. Before, during and after the Great Depression, abundant resources, spare capacity and willing workers existed in sufficient quantities to get things moving along smartly again once the financial system had been reset. This time there’s something different in the story line...

Race To Bottom Enters Final Lap: ECB Will Cut To -0.7% In June, JPM Predicts

We now expect the March package to include a larger deposit rate cut of 20bp, taking it to -0.5%
We now expect another package after that, possibly as early as June
We expect this second package to take the deposit rate to -0.7% and to extent QE until end-2017
Our forecast change is motivated by risk management amidst low inflation, rather than a macro forecast change

Frontrunning: February 9

  • Investors dump stocks (Reuters)
  • Global Bond Rally Near `Panic' Level With Japan Yield Below Zero (BBG)
  • Global Growth Fears Hit Bank Stocks (WSJ)
  • GOP Race for Second in New Hampshire Intensifies (WSJ)
  • N.H. Primary: Where Each 2016 Candidate Needs to Place to Build Momentum (WSJ)

The Financial (Under)World Is Catching Down To The "Economy Of Actual Stuff"

In the USA, that economy has bled out like a hapless bystander with a sucking chest wound for the last eight years. Despite all the patriotic sanctimony on view at the Superbowl, the nation appears to be visibly cracking up, along with the fantasy of a permanent global economy. None of the desperate work-arounds since 2008 have worked around the predicaments of our time.

Futures, Global Stocks Tumble As Europe Bank, Periphery Carnage Unfolds

Everything went from bad to worse once Europe opened, and things started going "bump in the morning" across the European banking sector, where not only has it been more of the same with CDS spreads for major banks - most notably Deutsche Bank - continuing their surge wider, but also EM spreads to Bunds all following, with the Portugal-Germany Yield spread blowing out above 300 bps for the first time since 2014, and other peripheral nations following.

Steve Keen Exposes Our Dysfunctional Monetary System

We are hostage to a dysfunctional monetary system, run by people who don’t understand how it works in the first place. No wonder the global economy is in the doldrums, and finance markets are having dyspeptic attacks.

"Few Are Yet Willing To Admit The Harsh Reality..."

A multi-decade Credit Bubble is coming to an end. The past seven years has amounted to an incredible blow-off top and the ongoing worldwide collapse in financial stocks provides powerful support for the bursting global Bubble thesis. Few are yet willing to accept the harsh reality that the world has sunk back into crisis as mal-investment, over-investment and associated wealth destruction remain largely concealed so long as financial asset inflation persists. This is true as well for wealth redistribution. The unfolding adjustment process will deflate asset prices so as to converge more closely with deteriorating underlying economic fundamentals.

Crunch Time?

It seems monetary policy is exhausted and the next exogenous lever to pull would be political fiscal initiatives. If/when they fail to stimulate demand, there would be only one avenue left – currency devaluation. If/when confidence in the mightiest currency wanes, we would expect the US dollar to be devalued too - not against other fiat currencies, but against a relatively scarce Fed asset.