"Paper and digital markets levitate, central banks pull out all the stops of their magical reality-tweaking machine to manipulate everything, accounting fraud pervades public and private enterprise, everything is mis-priced, all official statistics are lies of one kind or another, the regulating authorities sit on their hands, lost in raptures of online pornography (or dreams of future employment at Goldman Sachs), the news media sprinkles wishful-thinking propaganda about a mythical “recovery” and the “shale gas miracle” on a credulous public desperate to believe, the routine swindles of medicine get more cruel and blatant each month, a tiny cohort of financial vampire squids suck in all the nominal wealth of society, and everybody else is left whirling down the drain of posterity in a vortex of diminishing returns and scuttled expectations."
- 'Life-threatening' cold bites Midwest, heads east (Reuters)
- Gold Analysts Get Most Bullish in a Year After Rout (BBG)
- Asian Stocks Fall Most in Three Weeks on China Services (BBG)
- Angela Merkel in skiing accident, cancels visits (Reuters)
- High-Speed Traders Form Trade Group to Press Case (WSJ)
- Toyota and Honda post record China sales (FT)
- China Shadow Banking Risks Exposed by Local Debt Audit (BBG)
- J.P. Morgan to Pay Over $2 Billion to U.S. in Penalties in Madoff Case (WSJ)
- Corruption trial of Trenton, N.J., mayor starts Monday (Reuters)
- Car Makers at Consumer Electronics Show Tout Ways to Plug Autos Into the Web (WSJ)
All signs point to serious trouble for the Chinese economy. The best ways to play a China downturn: short-selling Australian banks, China property and the yuan.
The world has depended on Chinese and American stimulus for years, and, as Caixin's Andy Xie notes, one implication of their tightening is a slowing global economy in 2014.
Do we need a banking sector dominated by politically untouchable "Too Big to Fail" (TBTF) banks? Thanks to fast-advancing technology, the answer is a resounding no. Not only do we not need a banking sector, we would be immensely better off were the banking sector to wither and vanish from the face of the Earth, along with its parasitic class of political enablers, toadies and Federal Reserve apparatchiks.... An automated banking utility has no need for parasitic bankers or politicos or indeed, a central bank. The only legitimate regulatory function of the state is to enforce transparency; beyond that, its actions are all subsidies of one sort or another of politically powerful constituencies at the expense of the real economy's productive people, communities and enterprises.
We think not as increasing signs of corporate distress in China will weigh on emerging market growth.
Many investors argue that Gold has no intrinsic value. I disagree with this assessment as it does not consider the nature of the financial system.
As we showed very vividly yesterday, while the world is comfortably distracted with mundane questions of whether the Fed will taper this, the BOJ will untaper that, or if the ECB will finally rebel against an "oppressive" German regime - with $3.5 trillion in asset (and debt) creation per year, is China. China, however, is increasingly aware that in the grand scheme of things, its credit spigot is the marginal driver of global liquidity, which is great of the rest of the world, but with an epic accumulation of bad debt and NPLs, all the downside is left for China while the upside is shared with the world. Which is why it was not surprising to learn that China has drafted rules banning banks from evading lending limits by structuring loans to other financial institutions so that they can be recorded as asset sales. And while we are confident Chinese financial geniuses will find ways to bypass this attempt to curb breakneck credit expansion in due course, in the meantime, Chinese liquidity conditions are certain to get far tighter. This is precisely the WSJ reported overnight, when it observed that yields on Chinese government debt have soared to their highest levels in nearly nine years amid Beijing's relentless drive to tighten the monetary spigots in the world's second-largest economy.
The Fed's Catch 22 just got catchier. While most attention in the recently released FOMC minutes fell on the return of the taper as a possibility even as soon as December (making the November payrolls report the most important ever, ever, until the next one at least), a less discussed issue was the Fed's comment that it would consider lowering the Interest on Excess Reserves to zero as a means to offset the implied tightening that would result from the reduction in the monthly flow once QE entered its terminal phase (for however briefly before the plunge in the S&P led to the Untaper). After all, the Fed's policy book goes, if IOER is raised to tighten conditions, easing it to zero, or negative, should offset "tightening financial conditions", right? Wrong. As the FT reports leading US banks have warned the Fed that should it lower IOER, they would be forced to start charging depositors.
China has unveiled its most sweeping reform agenda in more than 30 years, but the market impact is likely to be net-negative.
The Unspoken, Festering Secret At The Heart Of Shadow Banking: "Self-Securitization" ... With Central BanksSubmitted by Tyler Durden on 11/15/2013 17:45 -0400
The implication of this particular and quite unprecedented shadow banking circle jerk, which could very easily make even the direct wealth transfer resulting from trillions in QE pale by comparison, is so stunning that we leave it up to the reader to come to their own conclusion.
Today the FSB was kind enough to explain in two short paragraphs and one even simpler chart, just how the aggregate leverage for the participants in even the simplest repo chain promptly becomes exponential, far above the "sum of the parts", and approaches infinity in virtually no time.
Ben Bernanke is participating in an IMF panel with Larry Summers, Ken Rogoff, and fromer Bank of Israel chief Stan Fischer... Full speech below...
The philosophical roots of Janet Yellen's economics voodoo, it seems, are in many ways even more appalling than the Bernanke paradigm (which in turn is based on Bernanke's erroneous interpretation of what caused the Great Depression, which he obtained in essence from Milton Friedman). The following excerpt perfectly encapsulates her philosophy (which is thoroughly Keynesian and downright scary): Fed Vice Chairman Yellen laid out what she called the 'Yale macroeconomics paradigm' in a speech to a reunion of the economics department in April 1999. "Will capitalist economies operate at full employment in the absence of routine intervention? Certainly not," said Yellen, then chairman of President Bill Clinton's Council of Economic Advisers. "Do policy makers have the knowledge and ability to improve macroeconomic outcomes rather than make matters worse? Yes," although there is "uncertainty with which to contend." She couldn't be more wrong if she tried. We cannot even call someone like that an 'economist', because the above is in our opinion an example of utter economic illiteracy.