Monetary Policy

QE Infinity Calls Continue: "QE4 Will Be Their Next Move"

"What we have had is a jobless recovery in the US and so the Fed could not afford to cause another depression by raising interest rates. QE4 will be their next move, which is now much more likely than a rate hike."

Reflexivity Wrecks Fed Credibility, Crushes 2016 Rate Hike Hopes

With Janet Yellen choking back the vomit as she shifted The Fed's stance to a "hawkish hold," markets remain just as confused (and disconnected) as they were after The FOMC's "dovish hold." The problem, as Deutsche explains, is The Fed's reliance on 'conventional' inflation dynamics (and its mean-reversion - higher in this case) as opposed to actual market expectations (which are collapsing), leaving them open to a major Type II policy error -  the risk of rejecting something that is, in actuality, true. The Fed's credibility is teetering on the brink as inflation 'reflexivity' - that is, Fed expectations strengthen the dollar, depress risk in general and commodities in particular, with lower commodities driving headline inflation lower - raises the prospect that the Fed fails to raise rates at all in 2016.

The Table Is Set For The Next Financial Crisis

Some people will never learn... ever. What is happening today is nothing more than rearranging the deck chairs on the Titanic. The iceberg has been struck, we’re taking on water, and this sucker is going to sink. Game Over.

From ZIRP To NIRP - Accelerating The End Of Fiat Currencies

In considering NIRP, Central bankers are failing to address an even greater potential problem, which could easily become cataclysmic. By forcing people into paying to maintain cash and bank deposits, central bankers are playing fast-and-loose with the public’s patient acceptance that state-issued money actually has any value at all. There is a tension between this cavalier macroeconomic attitude and what amounts to a prospective tax on personal liquidity. Furthermore, NIRP makes the hidden tax of monetary inflation, of which the public is generally unaware, suddenly very visible. We should be in no doubt that increasing public awareness of the true cost to ordinary people of monetary policies, by way of the debate that would be created by the introduction of NIRP, could have very dangerous consequences for the currency.

Shorting The Federal Reserve

Holding gold is simply recognition that the Fed’s actions over the last 30 years have potentially severe consequences that pose threats to the value of most financial assets, the almighty dollar and ultimately your clients’ purchasing power. Owning gold is in effect not only a short on the dollar and on the credibility of the Federal Reserve, but most importantly a one of a kind asset that protects wealth.

Who Calls The Shots In China

As documented here and elsewhere, in addition to the Pope and Putin, the third world leader US president Obama is "historically" meeting this week is China's President, and General Secretary of the Chinese Communist party, Xi Jinping. But just like everywhere else, the president is mostly a figurehead for far greater political and primarily financial interests backing him. So who calls the shots in China? The following infographc lays out the key power divisions of political, economic and financial power in China at this moment.

Goodbye $100 Bill? Ex-Central Banker Demands All High-Denomination Banknotes Should Be Abolished

Earlier today yet another "very serious policy maker" confirmed that cash as we know it, may be on the endangered species list - again, a necessary precondition to make global NIRP effective - when overnight former Bank of England central banker, Charles Goodhart, told a London audience that bills such as the Swiss National Bank’s 1,000-franc note and the European Central Bank’s 500-euro note should be abolished, adding this "move that might also prove beneficial by trimming interest rates."

Did Janet Yellen Just Shoot Herself In The Foot, Again

Yellen just reset the market's expectations, and in fact set the bar for disappointment even higher. As FTN rates strategist Jim Vogel very correctly notes, "financial market risk is calmer this morning, but Yellen actually elevated the stakes with her detailed speech yesterday afternoon."  What does that mean? He explains: "Yellen could be spot on this year but until the hike actually occurs, risk asset volatility veers once again to the upside with respect to US monetary policy."

Frontrunning: September 25

  • Global Markets Rebound on Yellen Speech (WSJ)
  • Obama and Putin to meet; Syria and Ukraine vie for attention (Reuters)
  • Obama to host China's President Xi amid simmering tensions (Reuters)
  • Don't Fall for It, Xi! Chinese Take to Web to Scorn U.S.—and China, Too (BBG)
  • Yellen Confirms Fed Still on Track to Raise Rates This Year (BBG)... but is still China dependent?
  • Abe's New Economic Plan Confounds Analysts (BBG)
  • It's All `Perverted' Now as U.S. Swap Spreads Tumble Below Zero (BBG)

Futures Surge On Renewed "Hopes" Of Fed Rate Hike, Sliding Yen

The market, which clearly ignored the glaring contradictions in Yellen's speech which said that overseas events should not affect the Fed's policy path just a week after the Fed statement admitted it is "monitoring developments abroad", and also ignored Yellen explicit hint that NIRP is coming (only the size is unclear), and focused on the one thing it wanted to hear: a call to buy the all-critical USDJPY carry pair - because more dollar strength apparently is what the revenue and earnings recessioning S&P500 needs - which after trading around 120 in the past few days, had a 100 pip breakout overnight, hitting 121 just around 5am, in the process pushing US equity futures some 25 points higher at last check.