Global markets face three risks, according to Edwards: bearishness in the U.S. government bond market, a flawed confidence that the U.S. is in a self-sustaining recovery and undue faith in the relationship between quantitative easing (QE) and the equity markets. “It doesn’t matter how much QE is spewing out of the US,” he said. “The markets will lose confidence that the policymakers are in control of events, just as they did in 90's Japan. They lost faith that the policymakers were in control. This is the biggest risk out there.”
Having saved the world markets from a 10% correction fate worse than death (or recession) in October with 'hints' of reigniting QE4, The Fed's Jim Bullard is back to his jawboning best. Blaming The ECB's looming unconventional policy move for the global bond market rally (as opposed to collapsing growth and disinflation), Bullard proclaims the domestic US economy is doing well with tailwinds from low rates and oil prices (just don't tell the 7,000 Baker Hughes workers this morning) and tells WSJ's Jon Hilsenrath that he wants to “get going” with rate increases warning that the funds rate is 400bps below normal.
Another day, another unambiguously bad announcement from America's bettered energy sector which are bolting down ahead of the crude storm, and firing thousands. Last week it was Schlumberger which announced it would fire 9000, today it is Baker Hughes which just warned it too will hand out about 7000 pink slips in the first quarter. And as a reminder, when it comes to comp: each Baker Hughes job is equivalent to about 10 waiter and bartender jobs, which have been the basis of this "recovery." To wit: BAKER HUGHES SEES WORKFORCE REDUCTION OF 7,000 WORKERS
During his State of the Union speech on Tuesday evening, Barack Obama is going to promise to make life better for middle class families. Each January, he gets up there and tells us how the economy is “turning around” and to believe that much brighter days are right around the corner. And yet things just continue to get even worse for the middle class. The numbers that you are about to see will not be included in Obama’s State of the Union speech. They don’t fit the “narrative” that Obama is trying to sell to the American people. But all of these statistics are accurate. They paint a picture of a middle class that is dying.
As 2015 begins, policymakers around the world are faced with three fundamental choices: to strive for economic growth or accept stagnation; to work to improve stability or risk succumbing to fragility; and to cooperate or go it alone. The stakes could not be higher; 2015 promises to be a make-or-break year for the global community. The new networks of influence should be embraced and given space in the twenty-first century architecture of global governance. This is what I have called the “new multilateralism.”
The Fed's own favorite mouthpiece Jon Hilsenrath (for more see "On The New York Fed's Editorial Influence Over The WSJ"), just released a piece in which he claims, or rather his sources tell him, that the Fed is "on track to start raising short-term interest rates later this year, even though long-term rates are going in the other direction amid new investor worries about weak global growth, falling oil prices and slowing consumer price inflation." In other words, just like the ECB in 2011, the Fed which has hinted previously that it will hike rates just so it has "dry powder" to ease once the US economy falls into recession, will accelerate a full-blown recession in the US when it does - if indeed Hilsenrath's source is correct and not merely trying to push the USDJPY higher (for reference, see Reuters "exclusive" report on the Samsung takeover of Blackberry, denied by both parties within hours - hike some time this summer.
The rumors of Russia selling its gold reserves, it is now clear, were greatly exaggerated as not only did Putin not sell, Russian gold reserves rose by their largest amount in six months in December to just over $46 billion (near the highest since April 2013). There is another trend that also continues for the Russians - that of reducing their exposure to US Treasury debt.
What a way to start the year. The crash in oil prices is no small matter. The previous down sweep in energy prices occurred in the midst of the financial crash 0f 2008 and Great Recession. Oil prices soon reversed afterwards and climbed back to dizzying heights, even as world economic and financial recovery remained fragile. However, as Abe Gulkowitz explains in his usual 'all-the-charts-that-are-fit-to-print' letter, this time it would be foolish to bet solely on such a similarly quick snapback..."The various repercussions will be extensive..."
The 30 Year U.S. Treasury bond yield hit 2.35% yesterday. Long term interest rates are not controlled by Yellen. They reflect the economic prospects of the country. When they are rising it means the economy is doing well. When they are plummeting to all time lows, the economy is either in recession or headed into recession. Take your pick. No amount of government data manipulation, feel good propaganda spewed by the captured mainstream media, or Ivy League educated Wall Street economist doublespeak, can change the fact this economy is in the dumper and headed much lower. The Greater Depression is resuming its downward march toward inevitable war.
The majority of the jobs "created" since the financial crisis have been lower wage paying jobs in retail, healthcare and other service sectors of the economy. Conversely, the jobs created within the energy space are some of the highest wage paying opportunities available in engineering, technology, accounting, legal, etc. In fact, each job created in energy related areas has had a "ripple effect" of creating 2.8 jobs elsewhere in the economy from piping to coatings, trucking and transportation, restaurants and retail. Simply put, lower oil and gasoline prices may have a bigger detraction on the economy that the "savings" provided to consumers.
Anyone who continues to believes in the all powerful CB after today is a fool.
It's Different This Time... (for now)...
For all the hype about jobs and the booming (GDP) economy, the major portion of the retailer calendar around Christmas was a total bust. In many ways it was worse than last year, which emphasizes simply how the business “cycle” as it was understood in textbook economics no longer applies. In other words, the dichotomy between growing pessimism in credit/funding and economists is due to the continued failure of the economy to produce what economists expect.
At the very least, the ‘great recession’ seems likely to continue. A serious recession or depression will likely collapse the already fragile banking system, especially in Europe, and the savings of ordinary people and companies will become exposed to bail-ins.