One of the recurring explanations given why the Fed is eager to hike rates is so it has some dry powder ahead of the next recession which, some 6 years after the last one ended is overdue (especially with a negative GDP Q1). Which, incidentally, is just the topic of the next Economist cover titled simply "Watch out" adding that the world is not ready for the next recession...
It's over! Starting June 15th and ending September 30th, the Zimbabwe Central bank will begin its process of "demonetization" of the old Zimbabwe Dollar. The Zimbabwe dollar will be removed as legal tender after the currency’s use was abandoned in 2009 following a surge in inflation to 500 billion percent. For bank accounts containing up to 175 quadrillion Zimbabwe dollars they will be paid $5, the country’s central bank said. The people remain angry slamming this as "abusing one's rights in the banking system," and claiming this is being done to enrich a chosen few.
Retail sales bounced back once again from the April dip after March's miracle recovery. Up 1.2% (against 1.2% expectations) this is the highest MoM gain since March 2014. Ex-Autos rose more than expected (as did the control group) but the biggest drivers of the gains MoM was gas prices rising - so that's a positive? YoY the biggest drivers of retail sales gains were Autos (+8.2% thanks to shoddy credit) and Food Servce (+8.2%). Crucially this 'good' news brings forward the chances of a September (or even July) rate hike.
As unemployment rises to near 27%, a new poll shows more than half of Greeks support giving in to creditors "if they insist on it." Meanwhile, anti-austerity protests are back, with communist-affiliated union members demonstrating at the finance ministry in Athens.
The current bubbles are so large and fragile that air is already coming out with rates still locked at zero. However, unlike prior bubbles that pricked in response to Fed rate hikes, the current bubble may be the first to burst without a pin. It appears the Fed fears this and will do everything it can to avoid any possible stress. That is why Fed officials will talk about raising rates, but keep coming up with excuses why they can’t. Larry Lindsey will be right that the markets will eventually force the Fed to raise rates even more abruptly if it waits too long to raise them on its own. But he grossly underestimates the magnitude of the rise and the severity of the crisis when that happens. It won’t just be the end of a raging party, but the beginning of the worst economic hangover this nation has yet experienced.
When forecasting how much oil will be available in future years, most agencies, including EIA, IEA and BP appear to adopt a similar 'work-backwards from GDPO growth expectations' method. It seems that this approach has a fundamental flaw. It doesn’t consider the possibility of continued low oil prices and the impact that these low oil prices are likely to have on future oil production. Hoped-for future GDP growth may not be possible if oil prices, as well as other commodity prices, remain low.
We should not even want to rebuild the world as it was in the decade of the 2000’s because it was so unbelievably unstable, a fact revealed persistently in the nearly eight years since that peak. Economists and central bankers treated the Panic of 2008 and the Great Recession as if it were a temporary interruption in an otherwise healthy system, a cyclical problem that over time heals on its own. Most of them still, to this day, hold the same view and the world’s economy and financial system is paying the costs of doing so. The eurodollar economy is falling apart and no amount of orthodoxy can reverse it because the eurodollar economy is orthodoxy.
The highly regarded former chairman of the Federal Reserve, Paul Volcker, has severely criticized the State Governments in the U.S. over “faulty practices” used to devise budgets which mask the true financial position of those states.
Just days after JPMorgan revealed it would fire another 5,000 by the end of the year in a "scalpel" headcount reduction, overnight the world's favorite drug money laundering bank HSBC unleashed the "machete" and announced it would cut almost 50,000 workers, or one in five bankers, a move which would shrink the investment bank division by one-third. The reason: the same why US corporations are laying off tens of thousands so they can fund record stock buybacks and enrich their shareholders - to boost profits so that more money can be channeled in the form of dividends.
"Kansas is in trouble. After slashing income taxes in 2012, the state faces a revenue gap of more than $400 million. Republican Governor Sam Brownback and state legislators are debating how to make up the shortfall. So far they’ve agreed on one way to control how state money is spent. Starting in July, people on the dole will be limited to a single ATM withdrawal of no more than $25 per day," Bloomberg says, adding that "Kansas is among several Republican-controlled states that have recently cut or limited public-assistance funds."
Overnight it was none other than the White House itself which finally admitted that the entire brilliant idea of collapsing the Russian economy by way of sanctions across the western world, ended up hurting European nations (i.e., US partners) who had no choice but to "sacrifice their own economies."
"In the United States, it took 18 quarters (4.5 years) before fixed business investment regained its pre-recession peak, in chain-volume terms. That compares with an average of just five quarters before business investment recovered to its peak level prior to the onset of previous post-War recessions; previously, it had never taken longer than three years for that milestone to be attained."