Monetary Policy

The Ultimate "Easy Money Paradox": How The ECB's Previous Actions Are Assuring The Failure Of Its Current Actions

The problem, as several sources told Reuters last week, is that there simply aren’t a lot of willing sellers. Ironically, the ECB’s own policy maneuvers are ultimately responsible for creating this situation. That is, the fallout from previous forays into ultra accommodative monetary policy is now hampering the implementation of quantitative easing - call it the ultimate easy money paradox.

Why Does Fiat Money Seemingly Work?

Government mandated fiat currency simply does not work in the long run. We have empirical evidence galore – every fiat currency system in history has failed, except the current one, which has not failed yet. The modern fiat money system is more ingeniously designed than its historical predecessors and has a far greater amount of accumulated real wealth to draw sustenance from, so it seems likely that it will be relatively long-lived as far as fiat money systems go. In a truly free market, fiat money would never come into existence though. Greenspan was wrong – government bureaucrats cannot create something “as good as gold” by decree.

There's No Way Out Now: "That Choice Was Yours"

The overwhelming mainstream media message continues to be everything is strong and the future is absolutely as bright as ever, as measured by the all time high markets; but the facts and the data clearly tell a different story. While memories are short, 2008/9 (and 199/2000) taught us that pundits will always tout the ‘everything is great’ story until it is too late. They laugh and ostracize anyone who attempts to rock the boat with a message of reality. And they do it to deter others from delivering such a message. That message is that there exists no catalyst mechanism to pull us out of this economic slumber. So you can listen to and laugh along with the ‘all knowing’ pundits or you can take heed of history and protect yourself now. But do remember the choice was yours. You will have nobody to blame but yourself when and if it all comes tumbling down and you were too busy laughing.

Why European Bondholders Refuse To Sell To The ECB

Just weeks before Mario Draghi's "whatever it takes" trillion-euro Q€ bond-buying-fest is set to come true, The ECB faces a problem they likely never expected - unwilling sellers. On the heels of our analysis showing central banks will monetize over 100% of government bond issuance this year, Reuters reports that mere weeks before the ECB begins their program, banks, pension funds and insurers across the continent are hoarding them for regulatory or accounting reasons. "We prefer to hold on to them," said Antoine Lissowski, deputy CEO at French insurer CNP Assurances. "The ECB's policy ... is reaching its limits now."

Why The "1%" Hates The Gold Standard

The following chart should clarify just why to the "1%", including their protectors in the "developed market" central banking system, their tenured economist lackeys, their purchased politicians and their captured media outlets, the topic of a return to a gold standard is the biggest threat conceivable.

Moody's "Junks" Russia, Expects Deep Recession In 2015

Having put Russia on review in mid-January, Moody's has decided (somewhat unsurprisingly) to downgrade Russia's sovereign debt rating to Ba1 (from Baa3) with continuing negative outlook. The reasons:

*MOODY'S SAYS RUSSIA EXPECTED TO HAVE DEEP RECESSION IN '15, CONTINUED CONTRACTION IN '16
*MOODY'S SEE RUSSIA DEBT METRICS LIKELY DETERIORATING COMING YRS

We assume the low external debt, considerable reserves, lack of exposure to US Treasuries, and major gold backing were not considered useful? Moody's concludes the full statement (below) by noting that they are unlikely to raise Russian sovereign debt rating in the near-term.

Citigroup: "We Almost Hope Those Forecasts Are Proven Wrong"

"... we almost hope those forecasts are proven wrong. They imply a widening gap between valuations and traditional fundamental relationships. They imply a dearth of yields and spreads that will almost invariably push more and more investors into positions they would ultimately rather not take. But if the old adage that markets move in the direction that causes the most pain to the largest number of people is anything to go by, then we suspect that this is what will happen. Depressingly, our instinct is that those new forecasts are more likely too conservative than too aggressive. Longer-term, sweet dreams really aren't made of this."

Stocks Coiled To Soar On Any Positive Greek News

With the new and revised (until it is re-revised again to some future date), Greek D-Day set for today's third in the past 2 weeks Eurogroup meeting, every favorable headline serves as a springboard for ES-buying algos, while every negative headline is promptly ignored. And since this is Europe's style trial ballooning, there have been many of both with just these two hitting in the last hour:

  • GREECE, EURO ZONE NEAR DEAL ON PACKAGE, REUTERS CITES UNIDENTIFIED GREEK OFFICIAL
  • GREECE DID NOT GO FAR ENOUGH IN THEIR LATEST PROPOSAL: GREEK GVOERNMENT SPOKESMAN

Guess which one pushed ES into the green?

No Economy Is An Island

"Is it possible, in a global economy in which the United States' principal competitors are experiencing slow growth, disinflation or deflation, wage stagnation or slowing of wage growth, and slumping currencies relative to the US$, that the U.S. economy can be an island of relative prosperity unto itself?" (Spoiler Alert: No!)

Stocks Rebound On Hopes Of Resolution To Greek Impasse

After yesterday's FOMC Minutes, despite a huge dovish reversal by the Fed - one which increasingly puts its "credibility" and reputation at risk - stocks were unable to close green, or even above 2100, for one simple reason: uncertainty with the fate of Greece. Overnight there has not been much more clarity, when as previously reported Greece submitted a 6 month extension request to its master loan agreement but not to its bailout extension, a nuance lost in the annals of diplomacy. But is this the much-awaited Greek capitulation? Or will the Eurogroup reject this too? The answer may be available in a few hours after an emergency Eurogroup meeting due later today. However, as usual stocks are ready to "price in" yet another Greek conflict resolution, and after futures were lower by 7 points overnight, were up 4 points at last check: a rebound which will not correct if the latest Greek "compromise" fails to deliver.

Central Banks Have Lost Control Of The World

With the world's oldest central bank - Sweden's Riksbank - taking the plunge into negative rates, there have been 19 'eases' by central banks this year, Morgan Stanley warns of "ghosts of the 1930s." With competitive 'easing' stoking fears of international currency wars, The Telegraph notes however that looser monetary policy is not the order of the day everywhere in the world, and herein lies potential danger for the world economy.