Japan’s aging population needs rising prices like a hole in the head. The more “successful” Mr. Kuroda becomes in forcing prices up, the less money people will have to spend and invest. The economy will weaken, not strengthen, as a result. The advantages the export sector currently enjoys are paid for by the entire rest of the economy. moreover, even this advantage is fleeting. It only exists as long as domestic prices have not yet fully adjusted to the fall in the currency’s value. If one could indeed debase oneself to prosperity, it would long ago have been demonstrated by someone. While money supply growth in Japan has remained tame so far, the “something for nothing” trick implied by the BoJ’s massive debt monetization scheme is destined to end in a catastrophe unless it is stopped in time. Once confidence actually falters, it will be too late.
"Remember, the Fed has injected into the market nearly 4 Trillion dollars. That’s $4,000,000,000,000.00. To put this into perspective... the equivalent in dollar amounts to have purchased 510 B-2 Stealth Bombers, 72 Nimitz Class Air Craft Carriers, 120 Ohio Class Submarines. and still have Two TRILLION or so left in my pocket left to spend." As far as what we have to show for all this spending at the end of QE this month? Who knows, but I do know – we didn’t even get a lousy T-shirt.
What’s the true risk for the global economy? Its pronounced: /d??fl?SH(?)n/
"Cavalry Won't Be Coming From The East" - China New Loans Jump But Not Nearly Enough, FX Reserves Drop Most On RecordSubmitted by Tyler Durden on 10/16/2014 09:50 -0500
"Higher credit aggregates can temporarily plug the monetary gaps, but ultimately this can only mean slower growth, less rapid price rises, ever more illiquid balance sheets (more 'revenues' tied up in receivables and a bigger gap between 'profits' and actual cash), and more recourse to financial trickery to stay afloat. Looks like lots more 'gold' exports to HK will be needed unless today's announcement that SAFE is to conduct an audit of 'trade finance' in Shenzhen manages to bung up that particular loophole! One other salient feature to note in China: QIII-14 non-household power consumption was only 2.5% ahead of QIII-13, just more than half of QII's relatively tardy 4.9% YOY rate. Just like the money numbers, not exactly consistent with 7.x% GDP and 8.x% IP Growth, one might think. If markets are awaiting the Cavalry, they won't be coming from the east - whatever the official data release tries to pretend."
Moments ago, the Goldmanite in charge of the European Central Bank delivered yet another speech, this time seeking to offset some of the hawkish comments over the weekend from his comrades, all of which suggested that no more easing, or public QE, was coming any time soon. It was, as usual, full of the same lies that have pushed European stocks to highs not seen since Lehman even as Europe's economy is now slumping into a triple-dip recession. Here is a choice selection of his comments, properly annotated.
Why The Collapse Of Abenomics Is Important: It's A Large-Scale Failure Of Keynesian Stimulus In Real TimeSubmitted by Tyler Durden on 09/14/2014 20:07 -0500
We have frequently discussed the nonsensical attempt by Japanese prime minister Shinzo Abe and BoJ governor Haruhiko Kuroda to print and spend Japan back to prosperity. By now it is well known that devaluing the yen has not achieved the desired effect, but rather the opposite. Not only have exports not really received the expected boost, but Japan’s trade and current account surplus have decreased markedly, even posting negative numbers for the first time in decades. Of course, currency debasement never works: it cannot work. This is Keynesian logic and brilliance in all it splendor.
Under the imposition of StealthFlation, the Velocity of Money lies dormant while increasing Inflationary risks build below the surface.
As many have observed since Obama launched his own personal Iraq war, there is something rather farcical about the latest US intervention in the middile east, namely that US weapons are being used to destroy US weapons, captured by and in possession of ISIS jihadists. As Reuters summarizes the situation, rather poetically, "Islamic State’s captured an enormous amount of U.S. weaponry, originally intended for the rebuilt Iraqi Army. You know — the one that collapsed in terror in front of the Islamic State, back when they were just ISIL?" In other words US taxpayers are now paying for military missions, in which US taxpayer paid-for warplans and missiles are used to blow up other US taxpayer paid-for tanks, artillery, MRAPs, and various other weapons of death. How much? Here is the answer...
China PMI Jumps To 2 Year Highs (Jobs Contract For 27 Months), Japan PMI Slips (Jobs Worst In 11 Months)Submitted by Tyler Durden on 07/31/2014 20:51 -0500
China's official manufacturing PMI beat expectations by the most since Nov 2013 and jumped to its highest since April 2012 - sure it did after all the forget-the-reforms liquidity, QE-lite, and local government spending dragged forward. Perhaps worryingly the steel industry saw domestic and export new orders crater (from 55.7 to 48.2 in July). The employment sub-index fell once again (now in contraction since May 2012) as large enterprises dominated the upbeat report (medium and small clinging to 50.1 PMIs). Japan's PMI dropped for the first time in 3 months from 50.8 to 50.5 with output contracting and payrolls only marginally positive (slowest since August 2013). And then to end the night, Markit/HSBC's China Manufacturing PMI drops from its Flash 52.0 to 51.7 - perfectly in line with the government's data.
In an odd admission of the possible fallibility of a centrally-planned economy, none other than Chinese Premier Li recently noted, "we should never assume that we few at the top have more insight or power but should try to mobilize the intelligence and creativity of the many thousands of our people so as to create unrivaled value." Perhaps the Federal Reserve would do well to listen. However, Li did not excuse himself from the need to spin how well things were going. On the heels of our 11 awkward Chinese fact charts, Li explains "the Chinese market is booming, the economy strong [sic]. Enterprises are the mainstay of the market." However, as Diapason Commodities' Sean Corrigan, when trying to confirm this 'fact', "discrepancies abound."
"The system we have now is one in which the Fed decides, through a Politburo of planners sitting in Washington, how much liquidity is necessary, what the interest rate should be, what the unemployment rate should be, and what economic growth should be. There is no honest pricing left at all anywhere in the world because central banks everywhere manipulate and rig the price of all financial assets. We can’t even analyze the economy in the traditional sense anymore because so much of it depends not on market forces, but on the whims of people at the Fed."
These Fake Rallies Will End In Tears: "If People Stop Believing In Central Banks, All Hell Will Break Loose"Submitted by Tyler Durden on 06/24/2014 14:11 -0500
Investors and speculators face some profound challenges today: How to deal with politicized markets, continuously “guided” by central bankers and regulators? In this environment it may ultimately pay to be a speculator rather than an investor. Speculators wait for opportunities to make money on price moves. They do not look for “income” or “yield” but for changes in prices, and some of the more interesting price swings may soon potentially come on the downside. They should know that their capital cannot be employed profitably at all times. They are happy (or should be happy) to sit on cash for a long while, and maybe let even some of the suckers’ rally pass them by. As Sir Michael at CQS said: "Maybe they [the central bankers] can keep control, but if people stop believing in them, all hell will break loose." We couldn't agree more.
This week’s news certainly WASN’T BORING. Big events and small add up to unfolding CHAOS around the WORLD. This week’s subjects: American Empire on FIRE!, Out on a LIMB: Credit Unions facing INSOLVECY, Is rising indebtedness a sign of economic strength?, Bond YIELDS continue to collapse as the race for yield INTENSIFIES, George Orwell in Action, Showdown looming at the OK corral!, Simply UNBELIEVABLE SOVEREIGN credit market action, PHANTOM GDP, Rare INDEED, Must watch video interview with Charles Nenner,European BANKING SYSTEM INSOLVECY
Snow may have "crushed" the world's biggest economy by 1% in Q1, but in the last 6 years, the Fed has goosed its 20% higher than it otherwise would be.
Draghi Reveals More: Will Do Targeted LTRO, Suspends Sterilization, Prepares ABS Purchases; No QE RevealedSubmitted by Tyler Durden on 06/05/2014 07:39 -0500
The much anticipated additional measures have been revealed:
- DRAGHI UNVEILS PACKAGE OF TARGETED LTROS, WORK TO PREPARE QE
- DRAGHI SAYS INITIAL SIZE OF TARGETED LTRO PLAN IS 400BLN EUROS
- ECB EXTENDS FIXED RATE FULL ALLOTMENT, SUSPENDS SMP STERILIZING
- DRAGHI SAYS PACKAGE INCLUDES PREPARATIONS FOR ABS PURCHASES
In other words, even more actions along what was expected: keep in mind the last time the ECB did €1 trillion in LTROs it did exactly nothing to boost inflation or the "real economy." Furthermore, the ABS purchases aren't activated: just being "prepared." However, what was not revealed was the biggest wildcard: European QE, which as we said repeatedly, won't happen until Europe's deflation is far worse, if ever.