Remember when Bitcoin and its digital currency cohorts were slammed by authorities and written off by the elite as worthless? Well now, as the war on cash escalates, officials from The IMF to China are seeing the opportunity to control the world's money through virtual (cash-less) currencies. Just as we warned most recent here, state wealth control is the goal and, as Bloomberg reports, The PBOC is targeting an early rollout of China's own digital currency to "boost control of money" and none other than The IMF's Christine Lagarde added that "virtual currencies are extremely beneficial."
The optimists have had things their own way in an almost unbroken line since March 2009. January 2016 so far would suggest that the pragmatists are now in charge.
"The events of 1929 taught us that the absence of any rise in prices did not prove that no crisis was pending. 1937 has taught us that an abundant supply of gold and a cheap money policy do not prevent prices from falling."
It must be China. Or the weather, which is usually either too cold or to warm – somehow the weather is just never right for economic growth. Surely it cannot be another Fed policy-induced boom that is on the verge of going bust? Sorry, we completely forgot – the Fed is never at fault when the economy suffers a boom-bust cycle. "[An] oversold market can easily become more oversold when it keeps being inundated with evidence that economic conditions are not what they were thought to be."
Decades of accumulated market distortions appear to be on the brink of a great unwind, most of which can be blamed on expansionary monetary policies. If so, the banking crisis of 2008 was a prelude, rather than the crisis itself. The Keynesians will blame the Fed for a complete policy failure. The reality is, that by implementing conventional policies on the recommendation of group-thinking macroeconomists, the central banks have dug a hole too deep to escape. Recognition of the merits of Austrian sound money theory will simply expose this reality sooner than later.
One of the Main Causes of Our Economic Problems
In the latest Chinese domestic financing report released by the PBOC last night, there were two divergent themes: on one hand bank loans grew far less than the expected 700Bn yuan; on the other hand total social financing soared to 1.82 trillion yuan, smashing forecasts of a 1.15 trillion increase, and the highest since June. As noted last night, this may have been the catalyst that spooked the markets, because as Bloomberg confirms, "the data shows companies are turning to alternative sources for credit given banks’ reluctance to lend."
Global Risk Off: China Reenters Bear Market, Oil Tumbles Under $30; Global Stocks, US Futures GuttedSubmitted by Tyler Durden on 01/15/2016 06:57 -0500
Yesterday, when looking at the market's "Bullard 2.0" moment, which in many ways was a carbon copy of the market's response to Bullard's "QE4" comments from October 17, 2014 until just a few minutes before the market close when suddenly selling pressure appeared, we said that either the S&P would soar - as it did in 2014 - hitting all time highs just a few months later, or the "Fed is now shooting VWAP blanks." Judging by what has happened since, in what may come as a very unpleasant surprise to the "the market is very oversold" bulls, it appears to have been the latter.
As the towering forces that are prevailing against failing global economic architecture and the pit of debt beneath that structure, as laid out below, it is clear that the 'Epocalypse' - encompassing the roots "economic, epoch, collapse" and "apocalypse" - is here, and it is everywhere. The Great Collapse has already begun. What follows are the megatrends that will increasingly gang up in the first part of 2016 to stomp the deeply flawed global economy down into its own hole of debt.
Is the U.S. economy in recession? Is it heading for recession? These questions can only be answered in hindsight, but it's worth looking for clues to what might be just ahead.
On Tuesday, it was announced that over seventeen million new vehicles were sold in 2015, the highest it’s ever been in United States history. While the media claims that this record has been reached because of drastic improvements to the US economy, they are once again failing to account for the central factor: credit expansion. The auto bubble has yet to burst, but its negative effects are already starting to gradually appear.
In principle, the BRRD, or “bail-in directive” as it is also known, is quite a good idea. The fact that lending money to fractionally reserved banks or even merely depositing it with them, involves risks needed to be firmly reestablished. One simply cannot expect that banks and their creditors will be bailed out by taxpayers at every opportunity. Besides, the admission that there are risks in banking that have hitherto been glossed over or have even been lied about was long overdue. However, Europe’s governments are now likely to find out that the current monetary system with its fractionally reserved banks is actually incompatible with this admission, so to speak.
All we can do is point out the risks, so that people can at least prepare on an individual level. A major lesson everybody should take to heart from the Cyprus experience is this: when the next crisis strikes, do not believe any of the promises uttered by government or central bank officials. You will be lied to in the critical moments, and you could stand to lose a lot if you believe the lies.
Fed policymakers seem to be of the view that the almost zero federal funds rate and their massive monetary pumping has cured the economy, which now seems to be approaching a path of stable economic growth and price stability, so it is held. Yet, manipulations by the Fed could not bring the economy onto a path of stability and prosperity but, on the contrary, set in motion the menace of the boom-bust cycle. This raises the likelihood that the elimination of bubbles as a result of a tighter stance while good in the long-term for wealth generators is likely to trigger a severe economic slump in the near to medium term.
Bill Dudley and the Federal Reserve (Fed), in their efforts to influence economic growth may have created a speculative and consumption driven environment that is crushing productivity growth. Ingenuity, not debt, made America an economic powerhouse. If we are to resume down that path we need the Fed to end their “self-defeating” policies and in its place we must demand ingenuity from them. The Fed, along with government, needs to properly incent productivity. The Fed should start this arduous task by removing excessive stimulus which will take the speculative fervor out of markets and allow asset bubbles to deflate.