Monetary Policy

Fed Congressional Testimony Preview: Janet Yellen's Shot At Redemption

Google "The Fed" and the search engine will offer to autofill your query with "surrenders," reflecting market concerns that The Fed has abandoned its recently more upbeat take on the domestic economy. During this week's semiannual monetary policy report to Congress, the success/failure of this appearance will hinge on the tone she chooses to strike and the conviction investors hear in her testimony and in Q&A. With so much chatter about the Fed “Losing credibility” with markets, this will be an important chance for Chair Yellen to set the record straight.

Morgan Stanley Asks If This Is Just A "1937 Redux"

"Premature tightening of macro policies means risks of a relapse. In 1936, the Fed doubled the reserve requirements for banks and the Treasury began to sterilise gold inflows, slowing the growth of high-powered money. Fiscal policy was tightened, with the fiscal deficit narrowing significantly from 5.1% of GDP in 1936 to 0.1% in 1938. The premature and sharp pace of tightening of policies led to a double-dip in the economy, resulting in a relapse into recession and deflation in 1938."

Global Stocks Soar, Pound Surges Most Since 2008 As Brexit Odds Tumble

Global equities rallied and the pound strengthened the most since 2008, soaring by 300 pips since the Friday close as polls signaled the campaign for the U.K to stay in the European Union was gaining momentum. Haven assets including the yen, U.S. Treasuries and gold slumped. The Stoxx Europe 600 Index surged by the most since February as the MSCI Asia Pacific Index advanced with S&P 500 futures.  Haven assets including the yen, U.S. Treasuries and gold slumped.

"We Have Reached The Point That Keynes Warned Of In His General Theory"

"We have arguably reached the point that Keynes warned of in his General Theory where demand for money and credit to satisfy what he labeled “non-speculative” motives has been more than satisfied...  At this point it is likely central bankers are “pushing on a string,” positively affecting prices for the financial markets’ flavor of the month but doing nothing for actual economic activity."

Head Of India Central Bank Unexpectedly Announces Intention To Leave

The worst case outcome for many Indian investors came true this morning when head of the RBI said he would return to academia when his term ends on Sept. 4.  Rajan was generous in his parting words, saying government reforms, together with steps by regulators will lead to greater job growth, prosperity for our people. Rajan said that “I will, of course, always be available to serve my country when needed" and added that “I am confident my successor will take us to new heights with your help."

"The Fed Has Failed" - A Disturbing New Warning From Bank Of America

"Central banks have lost the “War against Deflation”. They have failed to stimulate animal spirits depressed by the 4D’s of excess Debt, financial Deleveraging, aging Demographics and technological Disruption. This changes if Quantitative Failure spreads from Europe & Japan to the US. A rise in US bank CDS and/or a dive in assets related to consumer & housing credit would be very negative for global asset prices in our view. Note the new whispers of a peak in the US consumer credit cycle which, if true, at a time of zero rates in an $18 trillion, consumer-led economy would be concerning."

In Furious Tirade, Citi Lashes Out At "Utterly Misguided" Central Bankers, Invokes Weimar Republic's Von Havenstein

"If ever there was a time to invoke the Havenstein experience, it is now.... We should be invoking Havenstein to identify the present flaw in institutional thinking around current monetary policy, specifically negative rates. In other words, the lesson here is that, unfortunately, people believed in the efficacy of a completely irrational policy because it was put in place by a qualified and experienced policymaker- this instead of questioning the common sense merit of its possible outcome."

Austerity Kills! Bank Of Greece Admits "Greeks' Health Deteriorating, Life Expectancy Shrinks"

The economic crisis and the strict austerity bound to the Greek bailout agreement kills... according to The Bank of Greece's Monetary Policy Report, noting that that "while it takes longer to record the exact effect, trends show a deterioration of the health of Greeks in the years of loan agreements and austerity cuts." Finally, and quite stunningly, The BoG report warns that the economic crisis and the devaluation of the health sector threaten to shrink the life-expectancy.

The Fed Has Brought Back "Taxation Without Representation"

So, Wall Street banks control the boards of directors at the Fed banks. The Fed bank boards of directors appoint the committee members who set monetary policy. And the monetary policy they set ends up being a gigantic tax... a transfer of wealth from the middle class to a tiny group of beneficiaries, including the US government and the banks themselves. This is an unbelievable scam... and it truly is taxation without representation. Unelected bureaucrats impose their will over the entire financial system in a way that benefits a handful of people at the expense of everyone else.

Fed Finds "The End Of The Road"

The big risk for the Fed has always been the market would “call their bluff”  be unwilling to buy into the “forward guidance.”  It is currently too soon to know for certain but reactions following yesterday’s announcement are not promising.

Janet Whiffs Again - Take Cover Now!

If Donald Trump has even a partial clue about the nation’s monumental economic mess one of his first acts will be to demand Janet Yellen’s resignation. And for sheer incompetence among countless other failings. She was out there again yesterday talking in completely incoherent circles. On the one hand, Yellen robotically insisted that the U.S. economy is moving steadily toward the Keynesian nirvana of full employment. At the same time, she struck a profile in cowardice that was downright pathetic.

Global Stocks Continue To Plunge As Central Banks Disappoint, Brexit Looms

Futures on the S&P 500 slipped 0.3%, as U.S. equities are on track to extend losses for a sixth day.  Europe's Stoxx 600 fell to a four-month low, sliding 1% for its sixth decline in seven days, and U.S. crude retreated for a sixth day in the longest losing streak since February. Bond yields sank to records in Germany, Australia after Japan as Federal Reserve Chair Janet Yellen said next week’s U.K. vote on European Union membership was a factor in the decision to hold interest rates steady. The Yen surged more than 2% as the Bank of Japan refrained from adding any new stimulus,