• Sprott Money
    03/27/2015 - 04:54
    At first glance, the title to this commentary seems facile, especially to those readers in higher income brackets. The reality, however, is that “investing in food” is a risk-free means of generating...

People's Bank Of China

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Sweden Slides Further Into NIRP: Cuts To -0.25%; Expands QE





Ahead of The Fed's 'impatience' today, and amid a tumbling EUR, the oldest central bank in the world has decided it is time to go further into the illustrious ranks of NIRP/QE'ers:

*RIKSBANK CUTS KEY RATE TO -0.25%, TO BUY GOVT BONDS FOR SK30 BLN

So as opposed to Denamrk's roundabout QE, Sweden just jumps in and monetizes that debt direct by expanding their QE program and shifts from small NIRP to bigger NIRP. All this while suggesting the labor market is strengthening and inflation has bottomed out. The reaction - SEK is plunging and OMX surges.

 
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Russia Cuts Interest Rate From 15% To 14%, Ruble Rises





Following the dramatic December surge in Russian interest rates when the Bank of Russia scrambled to preserve confidence in the then-plummeting currency and sent the interest rate to a whopping 17%, now that the oil price crash has stabilized it has been walking down this dramatic move, and after reducing rates by 2% on January 30 to 15%, moments ago the Bank of Russia once again cut rates this time by the expected 100 bps to 14%. The bank also said that more rate cuts are in the pipeline.

 
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Bank Of Korea Unexpectedly Cuts Interest Rate To Record Low 1.75%, 24th Central Bank To Ease In 2015





The currency war salvos just keep on coming.  Moments ago the BOK unexpectedly (the move was predicted by just 2 of 17 economists polled by Bloomberg) cut its policy rate from 2.00% to a record low 1.75%, in what is clearly a full-blown retaliation against the collapse currency of its biggest export competitor, Japan, whose currency has cratered to a level that many in South Korea believe has become a direct subsidy for its competing exports. As such the only question is why the BOK didn't cut earlier. And following the surprise rate cut by Thailand earlier today, the "surprise" South Korean rate cut means there are now 24 easing policy actions by central banks in 2015 alone.

 
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Frontrunning: March 4





  • RBS to cut up to 14,000 jobs in investment banking unit (FT)
  • Doctors, patients scramble ahead of high court Obamacare decision (Reuters)
  • Rajan Cuts India Rates After Modi Agrees to Inflation Target (BBG)
  • Russia’s Putin Makes First Public Comments on Killing of Boris Nemtsov (WSJ)
  • House breaks impasse, passes security funding without provisions (Reuters)
  • How a 25-Year-Old Investor Spurred Lumber Liquidators’ Plunge (BBG)
  • Jeff Immelt’s Overhaul of GE Impeded by Falling Oil Prices (WSJ)
  • Sahara India Defaults on Luxury Hotel Loans From Bank of China (BBG)
 
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India Central Bank Cuts Interest Rate "Pre-Emptively" For Second Time In 2 Months





In a surprise move, the RBI just cut its main interest rates for the second time in two months, taking it from 6.75% to 6.50%, in what the central bank calls a “pre-emptive” policy move, but what is in reality merely a confirmation that so far in 2015 at least 20 central banks have lowered their interest rate.

 
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China Cuts Interest Rates, Takes Number Of Central Banks Easing In 2015 To 21





And then there were 21. Hours ago on Saturday, the country whose currency is largely pegged to the dollar which itself is now anticipating a rate hike in the coming months, surprised the world by confirming its economic slowdown yet again following a recent rate cut just this past November when it lowered its benchmark rate by 40 bps, after it again cut benchmark lending and deposit rates by 25 bps starting on March 1. Specifically, the PBOC will lower the one-year lending rate to 5.35% from 5.6% and its one-year deposit rate to 2.5% from 2.75%. It also said it would raise the maximum interest rate on bank deposits to 130% of the benchmark rate from 120%.

 
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PBOC Cuts Reserve Requirement By 0.5%, Joins 15 Other Central Banks Easing In 2015





Moments ago the number of central banks who have eased so far in 2015, most of them unexpeted, rose by one more from 15 to 16, when in addition to Singapore, Europe, Switzerland, Denmark, Canada, India, Turkey, Egypt, Romania, Peru, Albania, Uzbekistan and Pakistan, Russia and, most recently, Australia it was China's turn to do what so many banks had said was inevitable, even if meant backtracking on all its blustery talk about limiting bad debt expansion, and cut its reserve requirement ratio for bank by 0.5% effective Thursday, to boost liquidity and support the economy.

 
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What to Look for in the Week Ahead





Non-bombastic, non-insulting simply straight-forward look at next week's key events and data.  If you are so inclined...

 
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Frontrunning: January 23





  • Saudi Arabia’s New King Probably Will Not Change Current Oil Policy (BBG)
  • Saudi King’s Death Clouds Already Tense Relationship With U.S. (WSJ)
  • Oil Pares Gains as New Saudi King Says Policies Stable (BBG)
  • Kuroda Says BOJ to Mull Fresh Options in Case of More Easing (BBG)
  • U.S. pulls more staff from Yemen embassy amid deepening crisis (Reuters)
  • Putin Said to Shrink Inner Circle as Hawks Beat Billionaires (BBG)
  • A Few Savvy Investors Had Swiss Central Bank Figured Out (WSJ)
 
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China's Christmas Present To The World: Beijing Eases Again, Sets Non-Bank Deposit Reserve To Zero





In another Christmas surprise, China once again decided to adjust the cost of money, only this time instead of hiking, it eased, and in an effort to shore up the world's second-largest economy, China Business News reported that the PBOC will waive reserve requirements for non-bank deposits.  As the WSJ adds, at a meeting with big financial institutions on Wednesday, the People's Bank of China told participants that they will soon be able to add deposits from nonbank financial institutions to their calculations of their loan-to-deposit ratios, according to the executives. The move would add considerably to the banks' deposits and allow them to lend more. Chinese stocks, which had been pricing in further easing by the PBOC for the past 3 months, a period during which the Shanghai Composite soared over 50%, were delighted by the latest easing move and surged even more, surging higher by the most in the past three weeks.

 
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"Burning Money To Keep Warm" - China's New Normal





Worried about money-printing in China... don't! As China.org reports, an electricity generation plant in China's troubled Henan province is burning banknotes in what appears to be an effort to raise efficiency and reduce toxic emissions. One ton of scrapped banknotes can generate about 660 kWh of electricity, which means around 4,000 tonnes of coal can be saved in the province every year by using this process. Perhaps that is the solution to higher natural gas prices in winter for the US NorthEast... just transfer some banknotes up from The Eccles Building and heat the nation...

 
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Fear Of "Surge In Debt Defaults, Business Failures And Job Losses" Means Many More Chinese Rate Cuts





The PBOC, which cut rates for the first time in two years on Friday, will have its work cut out for it. And in the worst tradition of "developed world" banks, Beijing will now have no choice but to double down on the very same bad policies that got it into its current unstable equilibrium, and proceeds with a full-blown policy flip-flop, leading to a full easing cycle that reignites the bad-debt surge once more. And sure enough, today Reuters reports citing "unnamed sources involved in policy-making" (supposedly different sources than the unnamed sources Reuters uses to float trial balloons used by the ECB and the BOJ), that "China's leadership and central bank are ready to cut interest rates again and also loosen lending restrictions" due to concerns deflation "could trigger a surge in debt defaults, business failures and job losses, said sources involved in policy-making." In other words, China has once again looked into the abyss once... and decided to dig a little more.

 
Marc To Market's picture

Every One Wants Dollars (Again)





Contrary to the death of the dollar chatter, the US currency continues to appreciate.  Here's why there is still punch left in the bowl.  

 
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