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.”
Frenzied Chinese Stock Buyers Soak Up So Much Liquidity, Central Bank Forced To Intervene, Prevent SeizureSubmitted by Tyler Durden on 12/18/2014 22:18 -0500
China's seven-day repurchase rate, a gauge of interbank funding availability in the banking system, surged 139 basis points, to a 10-month high of 5.28% in Shanghai, the biggest since Jan. 20. The reason for the sudden cash crunch, according to Bloomberg, is that subscriptions for the biggest new share sales of the year lock up funds. Twelve initial public offerings from today through Dec. 25 will draw orders of as much as 3 trillion yuan ($483 billion), Shenyin & Wanguo Securities Co. estimated. In other words, the scramble to allocate capital into China's surest way of making money, IPOs, has led to a drying out of general liquidity in the entire market. This in turn forced the PBOC to intervene and inject short-term money loans to commercial lenders in order to prevent the kind of interbank liquidity lock up that emerged in China in June 2013 in the aftermath of the first Taper Tantrum (and which before all is said and done, will likely take place again) and which sent global capital markets around the globe reeling before China resumed its massive liquidity injections which are at the heart of China's debt-fuelled bubble in the first place.
Yeah, that's right! Don't feel bad if you didn't know that banks were some of the world's larget data companies. Hell, Bank managment doesn't even know this! Likely why they are getting hacked so much, no?
Underneath the Propaganda, the Economy Is In BAD SHAPE …
The attention being brought to bear upon Greece highlights once again the hollow nature of the “recovery” in Greece, Europe and the western world. The crisis is far from resolved - merely to use the very true cliche - kicked down the road. Well we appear to be coming towards the end of the road in Greece and this could set the stage for the next stage of the Eurozone debt crisis.
Without doubt, the most memorable line from the latest quarterly report by the BIS, one which shows how shocked even the central banks' central bank is with how perverted and broken the "market" has become is the following: "The highly abnormal is becoming uncomfortably normal.... There is something vaguely troubling when the unthinkable becomes routine." Overnight, "markets" did all in their (central banks') power to justify the BIS' amazement, when first the Nikkei closed green following another shocker of Japanese econ data, when it was revealed that the quadruple-dip recession was even worse than expected, and then the Shanghai composite soaring over 3000 or up 2.8% for the session, following news of the worst trade data - whether completely fabricated or not - out of China in over half a year.
When no lesser establishmentarian than Obama's former chief economist Jared Bernstein called for an end to the US Dollar's reserve status, it raised a few eyebrows, but as the WSJ recently noted, the voices discussing how the burden of being the world's reserve currency harms America, more than just Vladimir Putin is paying attention. While some argue that “no other global currency is ready to replace the U.S. dollar.” That is true of other paper and credit currencies, but the world’s monetary authorities still hold nearly 900 million ounces of gold, which is enough to restore, at the appropriate parity, the classical gold standard: the least imperfect monetary system of history.
"The nation was leery of a national bank with seemingly endless power to manipulate the money supply and the Second National Bank of the United States was attacked by both the expansionists and the sound money opponents. It was during this period that future President Andrew Jackson shaped his anti-Bank views in Tennessee while his future hard-money arm in the Senate, Thomas Hart Benton (Old Bullion), shaped his views in Missouri, two of the hardest-hit states. The debate over central banking, and the concern over deflation and inflation, continue two hundred years later."
Following last week's holiday-shortened week, which was supposed to be quiet and peaceful and was anything but thanks to OPEC's shocking announcement and a historic plunge in crude prices, we have yet another busy week of macroeconomic reports to look forward to.
Western dominance was born from a distrust in the dominant reserve currency at the time. Its decline will be because they followed the same route. And the canary in the coal mine is what’s happening in Switzerland this weekend.