Quantitative Easing

Mario Draghi Takes The Wind Out Of Citi's "QE In December" Sails

With Yellen's speech a bit of a letdown for the doves - she did not go full-dovish - markets anxiously await Mario Draghi to promise whetever for ever and ever... While financial markets don’t expect bombshells, his speech is an opportunity to underscore that ECB policy will stay looser for longer than that of the Fed and the Bank of England.

DRAGHI SAYS HE'S 'CONFIDENT' JUNE STIMULUS WILL BOOST DEMAND, SEES 'REAL RISK' MONETARY POLICY LOSES EFFECTIVENESS

Why The Fed Is Being Forced To End QE

While the Federal Reserve presents itself as free to do whatever it pleases whenever it pleases, the reality is the Fed's own policies are constraining its choices. The Fed is being forced to end its bond-buying, cutting off the "free money for financiers" that has sustained a frothy stock market.

This Is Your Recovery, And This Is Your Recovery Without Drugs

The arrogance, hubris and contempt for morality displayed by the ruling class is breathtaking to behold. They think they are untouchable and impervious to norms followed by the rest of society. They may have won the opening battle, but will lose the war. Discontent among the masses grows by the day. The critical thinking citizens are growing restless and angry. They are beginning to grasp the true enemy. The system has been captured by a few malevolent men. When the stock, bond and housing bubbles all implode simultaneously, all hell will break loose in this country. It will make Ferguson, Missouri look like a walk in the park.

Are Capital Inflows Propping Up U.S. Markets?

Nobody really believes the official narrative that the "recovery" is powering the remarkable strength of U.S. stocks, bonds and real estate. The real Main Street economy is quite obviously struggling, outside the energy and Federal government sectors, and so many see the Federal Reserve's free money for financiers (a.k.a. quantitative easing) bond and mortgage-buying programs as the real reason bond yields have declined and stocks have soared. This leads us to wonder if capital inflows into the U.S. aren't a largely overlooked driver of rising U.S. markets.

Charting The Diminishing Effects Of QE

For each $1 of additional quantitative easing by The Fed, the S&P 500 adds $4 of market capitalization. This correlation-is-causation 'fact' has been remarkably constant since the Fed unleashed QE on the world, but, as Bloomberg's Chase Van Der Rhoer notes, still well below the $12 market cap gains pre-2008 and that it now takes $41 billion in additional stimulus to nudge High-Yield credit spreads 1bp tighter. However, the largest 'diminishing effect' of QE is seen in job creation (were one to believe there was any causal link). It now takes a record $37,400 of additional QE for each additional job created (5 times the pre-Lehman levels). It seems it is indeed time to retire QE...

Energy And The Economy – Twelve Basic Principles

There is a standard view of energy and the economy that can briefly be summarized as follows: Economic growth can continue forever; we will learn to use less energy supplies; energy prices will rise; and the world will adapt. The following view of how energy and the economy fit together is very different - it is based on the principle of reaching limits in a finite world.

As Chinese Credit Plummets US Stocks Soar On Hopes Of More PBOC Easing; But Is Conventional Wisdom Again Wrong?

Conventional wisdom, now so habituated to getting all the cheap credit it can get, did not anticipate such a dramatic collapse in Chinese credit last month, is eagerly expecting a proportional response from the PBOC, one which would potentially involve significant easing, which is precisely what US equities priced in today when they closed near the highs of the day, even as there was not a single piece of good macroeconomic news overnight. Pretty cut and dry right? Well not really. Recall that as we reported in the last week of July something odd was revealed: namely that China quietly unveiled and implemented its Pledge Supplementary Lending line, or as it is increasingly better known: China's QE.

If Goods Don't Cross Borders, Armies Will

While the conflict in Ukraine rages on, EU member states havedecided to impose (not so much more stringent)economic sanctions against Russia, which was predictably followed by Russian counter-measures. The question which isn't being asked often enough, is whether these sanctions will actually improve the situation. Here's an analysis following four concrete questions:

1. Can things get even worse in Russia?
2. Is the West able to guide Russia and Ukraine down the right path?
3. Can the West contribute to a sharpening of the crisis?
4. How can the West protect itself against this conflict?

How The Fed Creates Money

What does the future look like for fiat currencies? (e.g. the dollar, the euro, the yen, the pound...) In the case of the dollar (which operates similarly to the other major world currencies), we know that - since all are "loaned into existence" - all dollars are backed by an equivalent amount of debt. Debt upon which interest must be paid. As all outstanding debt must compound over time at the rate of its interest (at least), we come to this important conclusion: Our money system is designed to grow exponentially. And it requires ever more debt in order to do so.

Guest Post: How The Destruction Of The Dollar Threatens The Global Economy

The failure to understand money is shared by all nations and transcends politics and parties. The destructive monetary expansion undertaken during the Democratic administration of Barack Obama by then Federal Reserve chairman Ben Bernanke began in a Republican administration under Bernanke’s predecessor, Alan Greenspan. Republican Richard Nixon’s historic ending of the gold standard was a response to forces set in motion by the weak dollar policy of Democrat Lyndon Johnson. For more than 40 years, one policy mistake has followed the next.  Each one has made things worse. What they don’t understand is that money does not “create” economic activity.

How Big Would A 'Real Correction' Likely Be?

"If this is the beginning of a more important, intermediate term, correction; how large could it be?" There is one important truth that is indisputable, irrefutable, and absolutely undeniable: "mean reversions" are the only constant in the financial markets over time. The problem is that the next "mean reverting" event will remove most, if not all, of the gains investors have made over the last five years. Hopefully, this won't be you.

Making Sense Of The US Oil Story

We frequently see stories telling us how well the United States is doing at oil extraction. The fact that there are stories in the press about the US wanting to export crude oil adds to the hype. How much of these stories are really true? A major concern with falling per-capita energy consumption it that the financial system may soon reach limits where it is stretched beyond what it can stand. The economy needs energy growth to grow, but the economy is not getting it.