Monetary Policy

Update: PSPP extended to March 2017 "or beyond", regional debt added to QE-eligible asset pool

Having just let everyone down with a less-than-spectacular 10 bps depo rate cut, Mario Draghi will now try to appease a spoiled market by announcing an expansion and/or an extension of PSPP. 

If you just lost a ton of money, here's why.

Mario Draghi is on deck Thursday morning and market expectations could scarcely be higher. In fact, Draghi is widely expected to execute the Keynesian trifecta, i) a rate cut, ii) expansion of QE, and iii) extension of QE duration. The ECB has indeed gained a reputation for over-delivering, but as SocGen puts it, "with high expectations comes a high risk of disappointment." 

Again, the globalists at the BIS and the IMF require a diminished U.S. dollar, greatly reduced U.S. living standards and a much smaller U.S. geopolitical footprint before they can establish and finalize a single publicly accepted global elitist oligarchy. If you cannot understand why it seems that the Federal Reserve and U.S. government appear hell-bent on self-destruction, then perhaps you should consider the facts and motivations at hand. Then, you’ll realize it is THEIR JOB to destroy America, not save America. When you are finally willing to accept this reality, every disastrous development since the inception of the Fed a century ago, as well as all that is about to happen in the next few years, makes perfect sense. As the U.S. destabilizes, we are not escaping the clutches of the Federal Reserve system, only trading out one totalitarian management model for another.

We are talking of course, about the infamous RRR-hike of 1936-1937, which took place smack in the middle of the Great Recession.

Great news right? Or is the entire rest of the world exporting deflation to America... and The Fed waving it in?

The lack of fear in risky assets is another way of saying that risk premia have been low, or as we also like to put it, that complacency has been high. Not fully appreciative of this inherent risk, it seems many investors have refrained from rebalancing their portfolios, and bought the dips instead. We believe the Fed’s efforts to engineer an exit from its ultra-low monetary policy should get risk premia to rise once again, that if fear should come back to the market, volatility should rise, creating headwinds to ‘risky’ assets, including equities. That said, this isn’t an overnight process, as the ‘buy the dip’ mentality has taken years to be established. Conversely, it may take months, if not years, for investors to shift focus to capital preservation, i.e. to sell into rallies instead.

With 15 days left until the day that will live in monetary policy infamy, it appears investors are beginning to lose faith...

If rising prices are good for the economy, how come everyone was so unhappy in Germany's Weimar Republic in 1923, or in Zimbabwe fifteen years ago? Surely, as inflation accelerates the happiness level should rise...

There was something for everyone in last night's much anticipated Chinese PMI data, with the official number sliding to the lowest in over 3 years, suggesting the PBOC will need to do more stimulus and is thus bullish, while the unoffocial Caixin print rising to the highest since June, suggesting whatever the PBOC is doing is working, and is also bullish. Not unexpectedly, global stocks decided to take the bullish way out, and have risen across the globe led by Asia, where stocks rose as much as 1.8%, Europe also green and US equity futures up 10 points as of this writing.

Scott Sumner said he had a “modest” proposal: there should be a highly liquid futures market in Nominal Gross Domestic Product. Let's look at that.

It is Pedro's "courage to write" what Bernanke conveniently forgot to add in his memoir, that makes this review so much more memorable than the generic sycophantic tripe written by his "access journalism" peers.

The IMF’s Executive Board decision today means that the yuan will be included in the SDR basket from Oct. 1, 2016, effectively anointing the yuan as a major reserve currency and represents recognition that the yuan’s status is rising along with China’s place in global finance. The weight in the basket will be 10.92%, larger than JPY and GBP. However, as politically-motivated as this decision may have been, now comes the hard part for China.

"The idea of lettting an asset bubble run is literally one of the most foolish things a central bank can do... they always end badly;"

"All global events have been reduced to monetary policy events, i.e., buy the dip opportunities. France’s CAC-40 sold off the two trading days before the recent horror. It was a solid buy the following Monday. By always protecting risk-takers, the authorities are complicit in trivializing issues that need an all hands on-deck response. Bad news is good news has metastasized into an even baser concept"