Real Interest Rates

Impact Of China 0.5% RRR Cut Is Equivalent To RMB 630 Billion Liquidity Injection, Goldman Finds

To say that the PBOC is confused at this moment is a very big understatement: on one hand, yesterday the PBOC moved its reference rate for the yuan outside the daily trading band for the first time in 21 months, forcing the currency to strengthen as authorities seek to limit volatility in capital flows. And then just hours later, as reported first thing this morning, the same PBOC announced its broad RRR cut - the first one since May 2012 -  an attempt to ease ongoing, and thus tightening, capital outflows, and pushing the currency lower in the process. In short: unlike other central banks who hope that institutional and retail investors figure out their FX intentions and help them out by "frontrunning" their moves (which may never come) in what is now a clear and global currency war, China is certainly not making it easy for FX traders to figure out what will happen next.

"It's A Man-Made Tragedy; And The Men Who Made It Won't Fix It"

"It's a man-made tragedy, and the men who made it won’t fix it." So it turns out Lenin wasn’t just right that the best way to destroy the capitalist system is to debauch the currency. It’s also the best way, as Venezuela can tell you, to destroy the socialist one.

"We Can't Do This Forever," Fed Admits "Market Will Overwhelm Us"

"It may work out just fine, but there’s a risk to that strategy... we’re in some sense distorting what might be the normal market outcomes at some point, we’re going to have to stop doing it. At some point the pressure is going to be too great. The market forces are going to overwhelm us. We’re not going to be able to hold the line anymore. And then you get that rapid snapback in premiums as the market realizes that central banks can’t do this forever. And that’s going to cause volatility and disruption." - Charles Plosser

Ron Paul On Gold & The Fed's Failed 'Utopian Dream'

Over the last 100 years the Fed has had many mandates and policy changes in its pursuit of becoming the chief central economic planner for the US. Not only has it pursued this utopian dream of planning the US economy and financing every boondoggle conceivable in the welfare/warfare state, it has become the manipulator of the premier world reserve currency. All this effort by thousands of planners in the Federal Reserve, Congress, and the bureaucracy to achieve a stable financial system and healthy economic growth has failed. It must be the case that it has all been misdirected. And just maybe a free market and a limited government philosophy are the answers for sorting it all out without the economic planners setting interest and CPI rate increases. A simpler solution to achieving a healthy economy would be to concentrate on providing a “SOUND DOLLAR” as the Founders of the country suggested.

Another Ex-Central Planner Speaks Up: Currency War Policy "Risks Major Downward Shock To Asset Prices"

Merv "The Swerv" King - former governor of The Bank of England - has joined the ranks of those ex-central-planners-who-feel-the-need-to-protect-their-legacy-by-rewriting-history-and-admitting-the-entire-thing-is-crazy. Speaking in Tokyo overnight, King said he’s concerned that financial markets believe real interest rates will remain very low for a very long time which has created "a significant disequilibrium in the world economy," adding that he does "not believe and expect a market economy to thrive on real interest rates that are close to zero." Warning that many nations realize "they have pushed monetary policy as far as it can go," King added that with the additional risk of currency wars, "markets will discover that they have been pushing asset prices to an excessively high level and there will be a major downward shock to asset prices."

Russell Napier: "Central Banks Are Now Powerless To Prevent A Steep Rise In Real Rates"

Central bank policy is creating liquidity.  Wrong --- the growth in broad money is slowing across the world.
Central bank policy is allowing a frictionless de-gearing.
Wrong --- debt to GDP levels of almost every country in the world are rising.
Central bank policy is creating inflation.   Wrong --- inflation in most jurisdictions is now back to, or below, the levels recorded in late 2009.
Central bank policy is fixing key exchange rates and securing growth.  Wrong --- in numerous jurisdictions this exchange rate intervention is slowing the growth in liquidity and thus the growth in the economy.
Central bank policy is keeping real interest rates low and stimulating demand. Wrong --- the decline in inflation from peak levels in 2011 means that real rates of interest are rising.
Central bank policy is driving up asset prices and creating a positive wealth impact which is bolstering consumption. Wrong --- savings rates have not declined materially.
Central bank policy is creating greater financial stability. Wrong --- whatever positives impact central banks are having on bank capital etc they have failed to prevent the biggest emerging market debt boom in history.

It Begins: IRS Launches International Data Exchange Service

Yesterday, the IRS announced the International Data Exchange Service. If you’ve not heard of it, it’s is an outgrowth of the Foreign Account Tax Compliance Act (FATCA), which requires every single bank in the world to get in bed with IRS to share information about customers. We’ve said this over and over, FATCA is probably the dumbest law in the history of the United States. And we don’t say that lightly, because there’s definitely stiff competition. Like any other bankrupt government, the US government has taken to intimidating its own citizens and the entire world in an attempt to make ends meet. But the fact is that tax revenues actually haven’t improved at all. It doesn’t take a rocket scientist to realize that the rest of the world is one day going to create its own alternative system. One that would no longer rely on the US dollar.

Empirical Proof Of The Giant Con

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.

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  • Global Debt Crisis II – Total Global Debt to GDP Ratio Over 300% - Risk of Bail-Ins in 2015 and Beyond - Currency and Gold Wars - $1 Quadrillion “Weapons of Mass Destruction” Derivatives - Cold War II and New World Order as China and Russia Flex Geopolitical Muscles - Enter The Dragon – Paradigm Shift of China Gold Demand - Forecast 2015: None. Forecast 2020: Gold $2,500/oz and Silver $150/oz

"U.S. And Them" - Russell Napier Asks If America Can Decouple From The Rest Of The World

Can the US economy ignore or even benefit from the winds of deflation blowing from offshore? With a current CAPE (Cyclically Adjusted PE) in excess of 27X, the US market is clearly answering this question in the affirmative. It is worth pausing to ponder just how much this optimism for a US de-coupling has already been reflected in prices. The Solid Ground was very bullish on global equities from 1Q 2009 to 1Q 2011, but then turned bearish, believing that QE was insufficient to prevent deflation. The failure of QE to generate ever higher inflation is now a matter of record, but very clearly US equities cheered this failure and the need for continual QE from 2011 to 2014.

Will 2015 Be A Year Of Economic Disaster? 11 Perspectives

Will 2015 be a year of financial crashes, economic chaos and the start of the next great worldwide depression? Over the past couple of years, we have all watched as global financial bubbles have gotten larger and larger. Despite predictions that they could burst at any time, they have just continued to expand. But just like we witnessed in 2001 and 2008, all financial bubbles come to an end at some point, and when they do implode the pain can be extreme.

Sayonara Global Economy

The surreal nature of this world as we enter 2015 feels like being trapped in a Fellini movie. The .1% party like it’s 1999, central bankers not only don’t take away the punch bowl – they spike it with 200% grain alcohol, the purveyors of propaganda in the mainstream media encourage the party to reach Caligula orgy levels, the captured political class and their government apparatchiks propagate manipulated and massaged economic data to convince the masses their standard of living isn’t really deteriorating, and the entire façade is supposedly validated by all-time highs in the stock market. It’s nothing but mass delusion perpetuated by the issuance of prodigious amounts of debt by central bankers around the globe. But now, the year of consequences may have finally arrived.

The Greater Abomination: Washington's Lies About TARP's "Success" Are Worse Than The Original Bailouts, Part I

The mainstream economics narrative is so far down the monetary rabbit hole that the blinding clarity of the chart below has no chance whatsoever of seeing the light of day. That’s because it dramatizes the real truth regarding all the Fed gibberish about “accommodation” and “stimulus”. Namely, that what lies beneath its “extraordinary measures”, such as ZIRP, QE, wealth effects and the rest of the litany, is a central banking regime that systematically destroy savers. Period. TARP wasn’t “repaid” with a profit. It was simply perpetuated and  morphed into a new form of destructive state subvention and malinvestment.

The Biggest Economic Story Going Into 2015 Is Not Oil

Once again oil is not even the biggest story today. It’s plenty big enough by itself to bring down large swaths of the economy, but in the background there’s an even bigger tale a-waiting. Not entirely unconnected, but by no means the exact same story either. It’s like them tsunami waves as they come rolling in. It’s exactly like that. That is, in the wake of the oil tsunami, which is a long way away from having finished washing down our shores, there’s the demise of emerging markets. And we're not talking Putin, he’ll be fine, as he showed again yesterday in his big press-op. It’s the other, smaller, emerging countries that will blow up in spectacular fashion, and then spread their mayhem around. And make no mistake: to be a contender for bigger story than oil going into 2015, you have to be major league large. This one is.