If you thought the utter insanity of the new-normal's central-planner-driven "bad news is great news" inflate-a-thon was reserved for The Fed, think again... This week Australia has had the dubious honour of seeing a huge 'surprise' surge in its unemployment rate to a 13-year high at 6.4% (from 6.1%) - which was largely ignored by the cognoscenti as anomalous data, but really just shows the utter farce that seasonal adjustments have become on government data. Tonight something else happened... the Australian stock market has soared 11% in the last 2 weeks to its highest sincee May 2008. Welcome to the farcical world of modern finance...
After significant buying in recent years, some may have questioned if this would continue in 2014. The answer was loud and clear: central bank net purchases amounted to 477t over the year, 17% above 2013’s impressive 409t. This represents the second highest year of central bank net purchases for 50 years, after the 544t addition to global gold reserves reported in 2012. Russia had by far the greatest appetite amongst those who raised gold reserves. The country accumulated an additional 173t (36% of total central bank demand in 2014) over a turbulent 12 months. 2014 was bookended by tension and uncertainty for the country: geopolitical antagonism with the Ukraine, and the resulting international sanctions, at the beginning of the year was followed by severe economic distress towards the end.
We have been living in a new era of “fantasy finance” since the Fed officially intervened massively, in 2009, and since the non-official control of the gold price, in 2013. Investors are now thinking that everything is possible: stocks rising into infinity, oil being given to us by producers and refiners almost for free (it sells cheaper than mineral water), countries that can borrow at historically ri-di-cu-lous rates, and, no later than just a few days ago, a bank in Denmark that pays people to contract a real estate loan (negative rates) ! The financial world, with its lies and immoral management, has been transformed into a Pinocchio’s Enchanted Island... for adults !
For the last few years, the mantra of central planners around the world has been "if at first you don't succeed... buy a bigger printing press." However, as Citi's Matt King notes, the following four charts show the monetary experiments are having less and less impact (on the real economy and the pretend stock-market-based one) as peak debt overhangs swamp anything but financial asset inflation.
"...I believe that the Fed understands that we are closer to the next economic recession than not. For the Federal Reserve, the worst case scenario is being caught with rates at the 'zero bound' when that occurs. For this reason, while raising rates will likely spark a potential recession and market correction, from the Fed’s perspective this might be the 'lesser of two evils.'"
Just over an hour ago, what appears to have been a strawman now was issued by Bloomberg via leaked sources from Greek and German officials that proclaimed talk of a "compromise" deal that makes everyone happy in Europe. However, as the leaders exited today's summit, the tone of their responses did not exactly sound compromise-prone:
*DIJSSELBLOEM SAYS GREECE PROCESS GOING TO BE V. DIFFICULT, "DON'T GET YOUR HOPES UP YET" ON GREECE
*MERKEL URGES GREECE TO MAKE UP ITS MIND SOON ON FINANCING
Hardly the resoundingly positive spin we saw earlier. Poland's Tusk, Finland's Stubb, and good old Juncker also chimed in with the latter commenting on Greece's "anti-social" behavior. Tsipras made some neutral statements, then came out swinging, "The MoU as we knew it is over. The same goes for the troika. All these years, the burden fell on the poorest. Our aim is to restore the sense of justice."
The bond market may have gotten so fragmented in recent months that even Bloomberg was amazed at how little trading volume it necessary to make a price impact, the amount of bond traders (and certainly salesmen), and certainly their bonuses, appeared to only go up. "Appeared" being the key word, however, because as Bloomberg reports, "the average number of dealers providing prices for European corporate bonds dropped to a low of 3.2 per trade last month, down from 8.8 in 2009, according to data compiled by Morgan Stanley."
As America continues to drift toward totalitarianism, it is only a matter of time before political speech on the Internet is regulated. It is already happening in other countries all around the globe, and control freak politicians in the US have begun a renewed push to regulate independent news websites. People are hungry for the truth, and an increasing number of Americans are waking up to the fact that they are not getting the truth from the corporate-controlled media. But as the alternative media has grown, it was only going to be a matter of time before the establishment started cracking down on it.
With tax receipts tumbling and ELA funding hitting its limit, the Greeks are up against it. On the other side, the Greek strength in the face of EU's demands (and Eurogroup's realization of the uncertainty this could lead to) has apparently led to the start of compromise. As Bloomberg reports,
*GERMAN, GREEK OFFICIALS SIGNAL COMMON GROUND ON AID DEAL
*GERMANY SAID NOT TO INSIST ALL PARTS OF CURRENT BAILOUT STAY, GREECE SAID TO BE OPEN TO SURPLUS, PRIVATIZATION DEBATE
As Merkel noted earlier, "Europe is always about finding a compromise," and it appears they are getting closer - as long as a 'program' continues. Bundesbank's Weidmann has noted that Grexit would not solve either side's longer-term problems.
The new cease-fire agreement is based largely on the original one that went into effect Sept. 5. It focuses on the withdrawal of heavy artillery systems, which have been prominent throughout the conflict, within 14 days of the cease-fire's implementation. The new cease-fire requires these artillery systems to be withdrawn far beyond their maximum effective ranges, a move that will create a buffer to prevent escalation and heavy artillery fire on the demarcation line.
The usual bag of tricks no longer works. And the subject Varoufakis brings to the table, that the EU and ECB economical policies have been an abject failure is no longer an extreme notion. The contagion from Syriza success can be considerable, and though it pretends otherwise, the EU has no idea what it would mean down the line. Every single option they look at that is NOT Varoufakis surrendering, must scare them out of their socks. Anything they give up will be seen as a sign of weakness, and it will encourage parties for which Syriza ‘carries the torch’, and likely raise their support and votes.