Monetary Policy

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.

If "Everything Is Awesome", Why The Alarms Over A Slight Rate Hike?

The fact that there is a debate about a quarter-point rate hike tells us that extraordinarily low interest rates have mostly failed to deliver a robust recovery. That people opposed to even the tiniest increase in rates are resorting to hyperbole tells us that they too know this. The thinking seems to be that six years into near-zero policy, the only reason it hasn’t worked is because it hasn’t been tried long enough. Meanwhile, the dangerous side effects of year after year of artificially low rates continue to grow.

Stocks In Holding Pattern With All Eyes On Draghi And Whether ECB Will Pull Greek Liquidity

There was much confusion yesterday when algos went into a buying frenzy on news that Greece would submit a request for a 6 month loan extension, believing this means Greece has caved and will agree to a bailout programme extension as well. Nothing could have been further from the truth as we explained first moments after the headline struck, and also as Reuters validated moments ago when it said that "Greece will submit a request to the euro zone on Wednesday to extend a "loan agreement" for up to six months but EU paymaster Germany says no such deal is on offer and Athens must stick to the terms of its existing international bailout." But since the political nuances of diplomacy are lost on the math Ph.Ds who program the market-moving algos, the S&P did manage to roar above 2100 on what was another headfake and then forgot to sell off on the reality.

Stockman To Obama: Butt Out Of The Greek Crisis - You've Dispensed Enough Keynesian Poison At Home

Our clueless President observed, "You cannot keep on squeezing countries that are in the midst of depression. At some point there has to be a growth strategy in order for them to pay off their debts..." No, paying off their debts is exactly the wrong medicine. You do not kick the can and extend and pretend that Greece can service its crushing debt. Instead, you permit it to default, and then to rebuild it’s economy and credit the old fashioned way. In any event, its a problem for the Europeans and the Greeks to resolve. Obama should stop sending Keynesian witch doctors to spread more policy poison around Europe.

Turkey Central Bank Head Faces 2 Years In Jail For Not Lowering Interest Rates

Having questioned the need for an independent central bank a week ago, saying that if they can’t cope with their duties, they will be held accountable, Turkey's President Recep Tayyip Erdogan has filed a lawsuit against the head of Turkey’s central bank, Erdem Basci. As Trend reports, the prosecutor accuses Basci of serious material damage inflicted to Turkey’s citizens as a result of an erroneous interest rate policy of the central bank. One wonders if that gives any ambitious American prosecutors any ideas?

Two-Thirds Of Citi Survey Participants Say Central Banks Are Now Fully In Control

From a Citi global credit survey: "...over 65% of respondents said they believed action from central banks in Europe and the US would be the principal force driving credit index spreads [and] surprisingly, in a year with major political catalysts in Europe, and ongoing regional tensions in the Middle East and Russia, only 4% of respondents felt that geopolitical risk would be the major factor driving spreads.”

Futures Rebound On Collapse In Greek Negotiations, After Europe's Largest Derivatives Exchange Breaks

There was a brief period this morning when market prices were almost determined by non-central banks. Almost. Because shortly before the European market open, a technical failure on the Eurex exchange prevented trading in euro-area bond futures the day after Greek debt talks collapsed. And sure enough, after initially seeing significant downward pressure, which nobody could capitalize on of course courtesy of the broken Eurex, risk both in Europe and the US has since rebounded courtesy of the ECB, SNB and BIS, led by the EURUSD (because a Grexit threat which according to Commerzbank has been raised from 25% to 50% is bullish for the artificial currency), which is now at the level last seen just before yesterday's negotiations broke down, and US futures are about to go green.

Welcome To Eccles Island: Where Tulips Bloom In A Polar Vortex

The week just ended laid bare any pretensions that there is not something wrong (seriously wrong) within the natural world of both the macro underpinnings of business as well as finance. Unimaginable just a short 6 years ago, the U.S. equity markets closed at a height once again never before seen in human history highs, (it has more than tripled from the 2008 bottom!) but has done so solely on Keynesian fairy tales. The issue now is: does the fairytale end in a nightmare?

Goldman Warns Over-Supply Means Oil Prices Will Be Much Lower

In an effort to to disentangle demand from supply shifts, Goldman explores the drivers of the sharp drop in oil prices since last summer. They find that the vast majority of the decline in oil prices until November 2014 was driven by perceptions of improved supply. The continued sell-off in December and January was driven by perceptions of both improving supply and slowing demand. The latest rebound in oil--which started in late January--appears to be driven by a mix of demand and supply. However, Goldman concludes the new equilibrium price of oil will likely be much lower than over the past decade.

Goldman Asks If Negative Rates Are Coming To The US

Now that Europe has demonstrated that one can go NIRP and not crash the system, will the Fed - once its silly obsession with hiking rates in the summer only to launch even more easing and/or QE as the ECB did in 2008 and 2011 - follow suit and join a rising tide of "developed" world central banks in punishing savers for hoarding cash? In a note released last night titled "Revisiting Negative Interest Rates in the US", Goldman shares its thought on the matter. It goes without saying that Goldman is important, because whatever Goldman's econ team shares with Goldman's Bill Dudley over at the NY Fed, usually tends to become official policy with a 3-6 month lag.

"Independent" Fed Lobbies GOP Against Audit

Because nothing says "independence" like snuggling up to the newly Republican-controlled Congress. Having, in recent years, been accused of being too closely aligned with Democrats, WSJ reports that the Fed's "Liaison Office" - which lobbies for the bank's interest on Capitol Hill - has begun cultivatinmg relationships with the GOP in a desperate bid to evade Rand Paul's "Audit The Fed" Bill.

Audit The Fed - And Shackle It, Too

The monetary politburo has every reason to fear Rand Paul’s demand for a “policy audit” of the Fed. An honest one would show that its so-called “independence” has been monumentally abused in a manner which is deeply threatening to both political democracy and capitalist prosperity. Needless to say, we can’t have that audit soon enough. In short, what the nation really needs is not an “independent” Fed, but one that is shackled to a narrow and market-driven liquidity function. The rest of its current remit is nothing more than the self-serving aggrandizement of the apparatchiks who run it; and who have now managed to turn the nation’s vital money and capital markets into dangerous, unstable casinos, and the nations savers into indentured servants of a bloated and wasteful banking system.

Market Wrap: Whirlwind Manic-Depressive Session Sees Futures Slide Then Surge

So far it has been an overnight session which clearly forgot to take its lithium, with futures first tumbling after CNBC's "leak" that a Greek deal had been reached was refuted, only to surge subsequently on both the Riskbank's foray into NIRP and QE which crushed the Swedish currency and sent its stocks to recorder highs, and more importantly, on the latest ceasefire out of Minsk which has pushed Russian and European assets substantially higher. While only the most naive believe that any palpable end to Ukraine hostilities will emerge as a result of today's delay, expect for Greek headlines to return with a vengeance as today it is Tsipras' turn to speak at a summit of the 28 European Union leaders set to begin momentarily.