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Ignore the Rumors… Central Banks Are Pulling Back… Guess What Comes Next?
Talk of QE and rumors of coming Central Bank Intervention pushed stocks and Gold higher on Monday. It’s odd to hear these rumors when every major Central Bank has in fact been clearly stating NO new stimulus is coming any time soon.
Indeed, as the Fed has proved now for eight consecutive FOMC meetings, it is not going to announce more QE unless another systemic Crisis erupts. Instead the Fed continues to reiterate its talk of maintaining low interest rates, which is largely a symbolic gesture as it changes nothing
From the April 27 FOMC minutes
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.
http://www.federalreserve.gov/newsevents/press/monetary/20120425a.htm
The Bank of Japan is joining this strategy of pulling back on its liquidity measures…
BOJ eased to ensure recovery, won't act "automatically"
Bank of Japan policymakers agreed to ease monetary policy in April to ensure the economy resumes a recovery, but signaled a pause by complaining of "misunderstanding" in markets that they will keep offering monetary stimulus automatically until 1 percent inflation was in sight, minutes of the meeting showed.
At the April 27 meeting, the BOJ boosted asset purchases by 10 trillion yen ($126 billion), offering its second stimulus in just over two months in a show of its determination to achieve its 1 percent inflation target set in February.
Central bank policymakers agreed that Japan's economy was gradually heading for a recovery with consumer prices expected to rise as a trend, minutes of the meeting showed on Monday.
But they decided to act to ensure that such positive momentum in the economy is sustained given various uncertainties over the outlook, such as the chance of tensions over Europe's sovereign debt crisis triggering a renewed yen rise, it showed.
http://www.reuters.com/article/2012/05/28/us-japan-economy-boj-minutes-idUSBRE84R01020120528
So has the ECB...
Nowotny Says ECB Not Discussing Reviving Bond Purchases
European Central Bank Governing Council member Ewald Nowotny said the bank isn’t considering restarting its bond-purchase program to stem rising borrowing costs for governments in the euro area.
“This for the time being is not a matter of discussion,” Nowotny told reporters in Belgrade today, when asked if bond purchases are something the ECB is contemplating. “The ECB has done a number of measures that were very helpful and efficient for the economy. We are now in a situation where we have to see how these measures have worked in the economy, especially in long-term operations.”
Stocks lose shine as ECB signals no new stimulus
Stocks turned lower on Thursday after the European Central Bank indicated it would not, for now, ease its monetary policies further to fight the debt crisis and a U.S. services survey disappointed expectations.
Though the ECB's decision to keep its main interest rate unchanged at 1 percent was expected, there was disappointment in the markets that the bank's president Mario Draghi gave no indication it might offer more long-term super-cheap loans to banks or that monetary policy could be made more accommodative.
http://www.businessweek.com/ap/2012-05/D9UHB7381.htm
Even China, which has shown itself to be one of the biggest proponents of economic intervention of the last four years is curbing its stimulus efforts and signaling a slowdown.
China Has No Plan For Large Stimulus To Counter Slowdown
China has no plan to introduce stimulus measures to support growth on the scale unleashed during the depths of the global credit crisis in 2008, according to the nation’s state-run Xinhua News Agency.
“The Chinese government’s intention is very clear: It will not roll out another massive stimulus plan to seek high economic growth,” Xinhua said yesterday in the seventh paragraph of an article on economic policy, without attributing the information. “Current efforts for stabilizing growth will not repeat the old way of three years ago.” In 2008, policy makers unveiled a fiscal stimulus of 4 trillion yuan ($586 billion at the time).
Thus we have the world’s three most important Central banks as well as the global economy’s “economic miracle” retreating from aggressive monetary intervention.
The reality is that Central Banks are all realizing that:
- Their interventions thus far (QE in the US and LTRO in the EU) have failed to solve the global banking crisis.
- The consequences of their interventions (namely inflation) are now outweighing the benefits (heck Bernanke was admitting this as far back as May 2011… and now even uber-dove New York Fed President Bill Dudley is admitting it).
This is an extremely dangerous environment: one in which the primary prop for the markets (central bank intervention) is becoming both less effective and politically toxic. Indeed, it’s clear at this point that the EU is beyond intervention since neither the ECB, IMF, nor the ESM have the firepower to hold things together.
Indeed, the one and only entity that might possibly hold up the EU would be Germany. However, if Germany were to go for this it would lose its AAA rating. The EU without a AAA rated Germany is not a pretty sight.
And it’s not even clear Germany could prop up the EU’s banking system. After all, when you include unfunded liabilities, Germany’s sporting a REAL debt to GDP north of 200%.
In plain terms, the EU is fast approaching its End Game. Germany and the other political leaders will stall for time and engage in verbal intervention, but in the end, there simply isn’t enough capital in the world to hold up the over leveraged (26 to 1) toxic sewer that is the EU banking system.
On that note, if you’re not preparing for the collapsing of the EU, you need to do so now. I recently published a report showing investors how to prepare for this. It’s called How to Play the Collapse of the European Banking System and it explains exactly how the coming Crisis will unfold as well as which investment (both direct and backdoor) you can make to profit from it.
This report is 100% FREE. You can pick up a copy today at: http://www.gainspainscapital.com
Good Investing!
Graham Summers
PS. We also feature numerous other reports ALL devoted to helping you protect yourself, your portfolio, and your loved ones from the Second Round of the Great Crisis. Whether it’s a US Debt Default, runaway inflation, or even food shortages and bank holidays, our reports cover how to get through these situations safely and profitably.
And ALL of this is available for FREE under the OUR FREE REPORTS tab at: http://www.gainspainscapital.com
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The ECB has infinite firepower. It has a printing press. The only question is what threshhold needs to be crossed before Mario Draghi brings out his heavy artillery.
central anything, the first tool in the box
is the word. (that would be a lie).
front run the lie then proceed to tool number
two. then cash in on the lie.
would they coordinate a lie for some reason?
BLINDMAN!
I'm missed ya, mi hermano!
now i'm just missing a couple dozen others....but, man, i think i owe you some lyrics.
i'm a whole lot closer to ny these days.
now let's get busy changing the world, and radically so.
janus
si mi hermano.
give up the word as it was and we will
make the muse!
i have been watching the rise, return
of the light of janus!
.
well done.
p
ps. i have links and need to be
in boston. period. beginning of
next sentence.
The central banks intervene to save the banking system and support government spending. They will continue to be forced to prop up the banking system. They have never done anything for the economy. they never will. But they will contine to hyperinflate the currency supply. They have no choice.
Not till August at least. Expect Obama to order massive QE to get one last bubble. By then the metals will have bottomed for good and the shaky bullion banks will become bulls to save their sorry asses.
Obama already anounced direct cash transfer to voters - keep scanning horizon for next qe.
Central banks are coordinating movements to balance currency - works great until one day it doesn't maybe - should be entertaining in the highest. Think maybe Germany is not playing along - they are not ready to trash the euro yet it seems. When it does fail they will be ready - damn they really are smarter and understand self discipline.
+1
http://www.zerohedge.com/news/spain-caves-admits-it-needs-european-bailout
So when do we get the debt jubilee? This is old news that seems to keep repeating, going 30+ years now.
Graham - just keep crying "Wolf!" every hour, every day, ignore your "miss" of the biggest equity rally of the decade (October 2011-March 2012), keep forecasting Armegeddon, sell a TON of subscriptions, and then when the markets wind up unchanged in four years, claim you "called it". I'll save myself the subscription fee and focus on the mining shares currently cheaper than at any time since record-keeping began. But thanks anyway...
Graham the Sham
Seriously Tylers - does this guy really add any value to ZH?
Just askin...
God, please let it be the end of these posts by Phoenix Capital
you don't have to read them
graham has taken perma bear to a new extreme...its somewhat amusing
Curiously what is the Fed's dual mandate? Keep the banker bonuses rolling while putting the rest of the country out of work?
As far as Germany.......im sure that cunt disorderment would have no problem bankrupting her country in order to remain in the spotlight if she could get away with it. I wonder if she's telling everyone that deficits don't matter? LOL. Sorry, we already tried that.
and the masses believed it, both times...................
Do they use the Goldman-Sachs school of reverse psychology? Yes is no?
Don't bet the farm on it.
These elitist fucks will keep printing until an average family can barely afford a loaf of bread.
Charity for the rich banking class, who need things like mansions and fast cars to survive. QE till it all breaks apart and chaos reigns.
Lots of ZH posters miss the point. Do rich folks want to improve their lot? Absoutely as we all do. Do they sit around thinking of complicated schemes to bilk others out of a few bucks? Of course not. It is impossible to have a rich class when everyone is dirt poor and without markets. If history has shown us anything it is that markets produce better than any system known so far and they percolate from the ground up.
A few decades ago India, China and Russia were poor and stagnant - no millionaire or billionaires. Even confiscating the wealth of the populace and keeping them pure never created a rich class as we know it. When markets came, folks could buy fans, cell phones and exotic foods and the rest is/was history.,
"Do they sit around thinking of complicated schemes to bilk others out of a few bucks? Of course not."
If you mean the average well-to-do upper middle class family you're probably right. If you're referring to the parasitic gangster class (aka insanely rich) that owns the banking system and our government, then I'm afraid you haven't been paying attention. Their entire existence is predicated on the development of slick new ways to part suckers from their money. And since they own the government, they no longer care if their ideas actually work or not, because their puppets in congress will make sure they remain whole no matter what.
Markets only produce when they are allowed to do so free of intervention. I couldn't even hazard a guess as to when the last time that environment existed in the 'land of the free'.
No, it is you who is missing the point. There is one stimulant, after money, which is desired the most. That is power. The power to decide if someone lives or dies is the most intoxicating. The elites have decided there are too many people on the planet. Ever heard of "brown wars?"
The audacity to decide that they will get rich supplying arms to 3rd world nations and reduce the world's excess population at the same time. Two birds with one stone in the minds of the oligarchs. That nasty little freedom we call the 2nd Amendment now stands squarely in their way of reducing the US population. Well, we'll just have to do away with that obstacle via something innocent-sounding like a Small Arms Treaty.
Get ready.
Yep. They have no choice in the matter. It is either print to save the banking system or let it all collapse along with currency.
The driver of CB printing has never been to help the economy. And that is not why they are going to keep on doing it.
The can hit the Ice Wall. They can kick it in the air but the game is over. The smart ones know it. The new reality show may be Debt Collectors, making house calls, heavily armed and arriving with moving vans for your stuff.
If they don't print but rather let bondholders take their lumps the currency would not collapse, it would strengthen.
You might want to look at who the largest buyer of Tresuries. Then ask yourself, "What would happen if the "Fed" stopped buying?"
indeed: consummate salespersons at the fed...expert at managing everyones expectations in this (their) confidence game
I just saw Bernake waving a white flag in Zuccotti Park. It's over.
Indeed, as the Fed has proved now for eight consecutive FOMC meetings, it is not going to announce more QE unless another systemic Crisis erupts
When did it stop "erupting?"
The CBs said it so it must be true.