An adviser to the Luxembourg-based European Court of Justice (ECJ) has delivered a tentative thumbs-up to an ECB bond plan unveiled in September 2012 that was aimed at countering euro break-up fears. Dow Jones explains the key five takeaways from the court's findings...
There is compelling evidence that 2015 will see a global slump in economic activity. This being the case, financial and systemic risks will increase as evidence of the slump accumulates. It can be expected to undermine global equities, property and finally bond markets, which are currently all priced for economic stability. Even though these markets are increasingly controlled by central bank intervention, it is dangerous to assume this will continue to be the case as financial and systemic risks accumulate. Precious metals are ultimately free from price management by the state. Furthermore, they are the only asset class notably under-priced today, given the enormous increase in the quantity of fiat money since the Lehman crisis. In short, 2015 is shaping up to be very bad for fiat currencies and very good for gold and silver.
It will be even more disruptive if some among them decide that the only reason for the failure of their collective delusion of grandeur is that they have not been deluded enough and that even more wild-eyed palliatives are therefore needed. Disruption on such a scale is not what the budding entrepreneur wants to contend with as he contemplates whether to risk both his capital and his reputation in launching or expanding a business, in ordering new equipment, or hiring new staff and so fostering a meaningful recovery. Disruption on such a scale is not something we should wish to inflict upon a system we have been both unable and unwilling to fully repair. Either way – damned if they do, damned if they don’t – disruption seems to be what we will get in the months ahead.
For those of you not familiar with the giant con, it is the idea that our economy is growing when, in fact, it hasn’t had growth in decades with the exception of the late 1990?s. The giant con is entirely a function of debt. The cost to the working class of falsify economic growth is beyond redemption. In the end, the path is set and there is no escaping from the debt trap in which we snagged ourselves. And so we bide our time until the weight of exponentially increasing debt collapses in on us. But then we rebuild.
If we review the events of 2014, it seems the situation has intensified: governments are still overwhelmed with debt, our fiat money system is unsupported, our central banks insist on accumulating debt and making money valueless. Will someone realize we have to pull the plug? And when we do, because it will happen whether we want it or not, how can we hedge against the damage that we will all be exposed to? Owning physical precious metals stored outside the banking system is a proven and essential form of monetary insurance against the uncertainties and negative surprises we see in our world today.
Commodities broke first because there was the direct link to actual rather than imagined activity; inflation breakevens next; followed by the yield curve in November 2013. Either stocks have permanently decoupled, continuing exclusively within the realm of central bank omniscience that has been rebuked time and again, or there will be a period soon where full harmony is restored; that is everyone’s greatest fear.
Martin Armstrong, Max Keiser and High-Level Economists Weigh In
We will readily admit that one cannot know with certainty whether the bubble in risk assets will become bigger. However, it seems to us that avoiding a big drawdown may actually be more important than gunning for whatever gains remain. We don’t think it is a good idea to simply “take the blue pill” and rely on the idea that the effects of the money illusion will last a lot longer. It is possible, but it becomes less and less likely the higher asset prices go and the more money supply growth slows down. If no-one can say when, then the “blue pill” strategy has a major weakness. It means that things could just as easily go haywire next week as next year.
The fate of countries like Japan is really in the hands of central bankers. However, central planners are not able to manipulate markets infinitely. At a certain point, something has to give. That is when the markets will give up and disbelief will replace trust. In such a bust scenario, people flee down the Golden Pyramid of asset classes to their safe haven, being gold.
China's Leading Index has fallen to its lowest since Feb 2009 this evening, down 4 straight months from credit-driven 18 month highs. This economic weakness has exaggerated the already weak tone in Yuan trading this evening pushing CNY to its weakest in almost 7 months (against the USD), its furthest on record from the CNY Fix (10-month highs), and very close to the PBOC's upper +2% band for CNY trading. At 6.23, USDCNY is over 1000 pips weaker than the CNY fix.
And thus the utter craziness of monetarism is on full display, in that after arguing that declining oil prices are good for American consumers, they are also suggesting that monetary policy is “too tight”, and thus oil prices are contradictorily “too low.” That betrays the central aspect of this orthodox embracing of lower energy prices as nothing more than a shaky rationalization – they still are not comfortable with low prices but accept them lest anyone get worried about what they really suggest. Orthodox monetary theory is, when stripped of its academic trappings, dedicated to high oil prices and low wages.
A specter is haunting the world, the specter of two percent inflationism. Whether pronounced by the U.S. Federal Reserve or the European Central Bank, or from the Bank of Japan, many monetary central planners have declared their determination to impose a certain minimum of rising prices on their societies and economies. One of the oldest of economic fallacies continues to dominate and guide the thinking of monetary policy makers: that printing money is the magic elixir for the creating of sustainable prosperity. Once the inflationary monetary expansion ends or is slowed down, it is discovered that the artificially created supply and demand patterns and relative price and wage structure are inconsistent with non-inflationary market conditions. Governments and their monetary central planners, therefore, are the cause and not the solution to the instabilities and hardships of inflations and recessions.
"Most investors go about their job trying to identify ‘winners’. But more often than not, investing is about avoiding losers. Like successful gamblers at the racing track, an investor’s starting point should be to eliminate the assets that do not stand a chance, and then spread the rest of one’s capital amongst the remainder." So as the year draws to a close, it may be helpful if we recap the main questions confronting investors and the themes we strongly believe in, region by region.
It feels like a good time to review what we can expect when our government and its agencies attempt to create wealth out of thin air. We can see the absurdity and hubris of our policymakers who believe they can circumvent economic laws in the following excerpt from the “The National Homeownership Strategy: Partners in the American Dream”. This little gem which we are suggesting is the document that led us to the economic devastation from which we are yet to crawl out. "For many potential homebuyers, the lack of cash available to accumulate the required downpayment and closing costs is the major impediment to purchasing a home. Other households do not have sufficient available income to to make the monthly payments on mortgages financed at market interest rates for standard loan terms. Financing strategies, fueled by the creativity and resources of the private and public sectors, should address both of these financial barriers to homeownership." So what lesson did we learn the hard way? Looking around today, absolutely nothing.
Just because Russia has managed to stabilize its currency, that certainly does not mean the soaring dollar tantrum-cum-crude crash episode is anywhere near over, nor that stability has returned to the rest of the oil-exporting countries. Case in point, crude-exporting powerhouse Nigeria, where things are going from worse to #REF! Bid and ask prices for the naira were quoted from 162 to 190 per dollar with only 16 trades by 1 p.m. in Lagos [yesterday], compared with more than 170 by the same time yesterday, according to data compiled by Bloomberg. The naira fell 12 percent against the dollar this quarter, the worst among 24 African currencies tracked by Bloomberg after Malawi’s kwacha. Investors dropped Nigerian assets as the outlook for Africa’s biggest oil producer worsened with Brent crude prices almost halving since late June. “The banks can’t stop trading because of the circular,” the Deputy Central Bank of Nigeria Governor Sarah Alade said. “It is not supposed to close the market. We have told them we’ll continue intervening in the market, so there is no need to panic.”