The concept we call gross domestic production (GDP) is highly distortive. It obfuscates intelligent debate in economics as the true underlying force for economic growth, capital accumulation, is seen as detrimental to prosperity
Some of us are old enough to remember when honor and truth mattered. Integrity and ethics drove behavior rather than “what can we get away with.” Unfortunately for society, that is no longer the case.
- An actual Bloomberg headline: Granny’s Gold Bars Are Key to Vietnam Push to Boost Dong (BBG)
- Gay delivers further body blow to troubled sport (Reuters)
- China Wealth Eludes Foreigners as Stocks Earn 1% in 20 Years (BBG)
- Bernanke Boom Signaled by Yield Surge as Market Recalculates (BBG)
- Portugal's Parties Set Deadline for Pact (WSJ)
- Corporate Spending Set to Surge in U.S. (BBG)... or not at all based on the actual corporate data
- Legal Fears Slowed Aid to Syrian Rebels (WSJ)
- A mega-camp adds to the Boy Scouts’ troubles (Reuters)
- GSK accused of being ‘ringleader’ in China probe (FT)
- 19 Hospitalized in US-Ukraine Army Exercise - Ministry (RIA)
- Egypt Islamists march as senior U.S. official visits (Reuters)
- German spies made use of U.S. surveillance data (Reuters)
It looks as if China’s days of double-digit economic growth are well and truly over (at least, for the moment). Data that will be released next week (second quarter figures) will show a quarter-on-quarter slowdown that is setting in now for China’s gross domestic product. The figures will be issued on Monda
One minute we hear that Quantitative Easing is going completely, then it’s going a bit and withdrawing in side-steps and little paces and then it’s going to carry on. Where do we stand?
By pursuing QE too long, the FOMC has engineered a repeat of the periods of market losses and negative accrual that nearly crushed the banking industry in the 1970s and 1980s, only worse.
As the EU agrees to fund another bailout deal to help Greece rise from the ashes, providing them with another $8.7 billion in financial aid, the question that begs an answer is: will this have any effect on the austerity that is being imposed on the country. Throwing good money after bad?
The U.S. economy weakened appreciably in the first quarter of 2013. But what if this weakness persists into the second quarter just completed, and worsens still in the second half of this year? Q1 GDP, as reported on June 26th, was revised lower to just 1.8%. And various indications suggest that Q2 could come in slightly lower still, at 1.6%. Might the U.S. economy be guiding to a long-term GDP of 1.5%? That’s the rate identified by such observers as Jeremy Grantham – the rate at which we combine aging demographics, lower fertility rates, high resource costs, and the burdensome legacy of debt. After a four-year reflationary rally in just about everything, and now with an emerging interest rate shock, the second half of 2013 appears to have more downside risk than upside. Have global stock markets started to discount this possibility?
It can't happen... It can't happen...It can't happen... It just happened.
In principle, holding gold is a form of insurance against war, financial Armageddon, and wholesale currency debasement. And, from the onset of the global financial crisis, the price of gold has often been portrayed as a barometer of global economic insecurity. In fact, the case for or against gold has not changed all that much since 2010 - it makes perfect sense to hold a small percentage of your assets in gold as a hedge against extreme events. As Ken Rogoff explains, the recent collapse of gold prices has not really changed the case for investing in it one way or the other. Yes, prices could easily fall below $1,000; but, then again, they might rise; but he warns, policymakers should be cautious in interpreting the plunge in gold prices as a vote of confidence in their performance.
When enough of us realize the extent of inflation, bond buyers will likely demand higher coupon rates; the government's cost of debt service could soar.
There has been much angst over Bernanke's recent comments regarding an "improving economic environment" and the need to begin reducing ("taper") the current monetary interventions in the future. What is interesting, however, is the mainstream analysis which continues to focus on one data point, to the next, to determine if the Fed is going to continue its interventions. Why is this so important? Because, as we have addressed in the past, the sole driver for the markets, and the majority of economic growth, has been derived solely from the Federal Reserve's programs. The reality is that such analysis is completely useless when considering the volatility that exists in the monthly data already but then compounding that issue with rather subjective "seasonal adjustments." The question, however, is whether such "QE" programs have actually sparked any type of substantive, organic, growth or simply inflated asset prices, and pulled forward future consumption, for a short term positive effect with negative long term consequences? The recent increases in interest rates, combined with still very weak wage growth, higher costs of living and still elevated unemployment is likely to keep the Fed engaged for the foreseeable future as any attempt to remove its "invisible hand" is likely to result in unexpected instability in the financial markets and economy.
Barry Ritholtz is convinced that once the current short-term bounce is over with, the recent cyclical bear market in gold will resume. The reality is of course that neither Mr. Ritholtz, nor anyone else actually knows the future. Therefore, he cannot know whether the bear market is or isn't over. However, judging from the remainder of his post, he actually seems to think that the secular bull market in gold is over. In our opinion there is no evidence for that, and we will explain below why we think that he and others in the long term bear camp are wrong. Further below is the evidence marshaled by Mr. Ritholtz (actually, apart from the technical analysis he provides, it isn't really evidence at all – it reads like an unsupported opinion). Sure enough, gold has no yield, no conference calls, and no income statements (paraphrasing Jim Grant). That is actually the beauty of it. But that does not mean it 'has no fundamentals', nor does it means that it 'cannot be an investment'. We comment on his article (and its errors) further below.
It should come as no surprise to most ZeroHedge readers but sometimes the facts and data need to be reiterated to ensure the message is not getting lost. As Michael Snyder rhetorically asks, did you know that U.S. banks have more than 1.8 trillion dollars parked at the Federal Reserve and that the Fed is actually paying them not to lend that money to us? We were always told that the goal of quantitative easing was to "help the economy", but the truth is that the vast majority of the money that the Fed has created through quantitative easing has not even gotten into the system. Instead, most of it is sitting at the Fed slowly earning interest for the bankers. Our financial system is a house of cards built on a foundation of risk, leverage and debt. When it all comes tumbling down, it should not be a surprise to any of us.
Barclays: "In the short run, such rebalancing and deleveraging point to further downside risks for both economic growth and asset prices, including the exchange rate. Based on an increasingly likely downside scenario, we think Chinese growth could experience a temporary ‘hard landing’, which we would define as quarterly growth dropping to 3% or below, within the next three years."