Is Everyone Wrong On The "Causation" Of The Commodity Bubble? While it appeared 'retail' was responsible for the panic-buying chaotic volume surge in Chinese commodities, Axiom Capital Management's Gordon L Johnson points out that in fact... China Bank Special Interest Vehicles' "Bold" Commodity Speculation Is The Real Budding Black Swan
James Rickards, economic and monetary expert, joined Bloomberg’s Francine Lacqua on Tuesday to discuss the gold “chart of the decade”, his new book “The New Case for Gold,” why gold is money and why gold is going to $10,000/oz in the coming years.
The banquet of consequences is about to be served.
With Japan closed, and unable for now to do more damage (or damage control), China stepped in with some modest turmoil of its own by strengthening the Yuan fix by the most since 2005, pressuring the USD weaker for the 5th day in a row. Commodities have tended to push higher on the back of this with Crude above $46.50 but Gold and Silver have surged to fresh 15 month highs (over $1275 and near $18 respectively).
Following yesterday's Yen surge in the aftermath of the disappointing BOJ announcement, the pain for USDJPY long continued, with the key carry pair tumbling as low as 106, the lowest level since October 2014 before stabilizing around 107, and is now headed for its biggest weekly gain since 2008, which in turn has pushed the US dollar to to its lowest close in almost a year as signs of slowing growth in the U.S. dimmed prospects for a Federal Reserve interest-rate increase. As a result, global stocks fell and commodities extended gains in their best month since 2010.
The mysterious ZARJPY indicator of global turmoil is flashing red once again as BofAML's Michael Hartnett warns of soaring sentiment into a potential "summer of shocks." Wall Street/Fed continues to play "cat and mouse" and (hedge fund) redemption, (central bank) repression, (market) regulation risks remain very high as the flash crash/pain trade era to continue.
Low interest rates attempt to buy time. The idea is to bring consumption forward until the economy heals on its own as capital projects are completed. But those projects never began this time. The end result is ever-higher debt that borrows more and more from the future. Unfortunately, it borrows from the future without making the future any brighter through solutions to root causes of economic ailments. At some point, the “future” becomes “today”.
The United States is the number one trading partner for 56 countries, with important relationships throughout North America, South America, and Western Europe. Meanwhile, China is the top partner for 124 countries, dominating trade in Asia, Eastern Europe, Africa, and Australia.
Everything that the classical economists saw and argued for – public investment, bringing costs in line with the actual cost of production – that’s all rejected in favor of a rentier class evolving into an oligarchy. Financiers in the 1% are going to pry away the public domain from the government and privatize it so that they get all of the revenue for themselves. It’s all sucked up to the top of the pyramid, impoverishing the 99%. “As long as you can avoid studying economics, you know what’s happened. Once you take an economics course you step into the brainwashing of an Orwellian world.”
While BofA's base-case calls for "no crisis," the soaring levels of bond-sale cancellations hitting the non-government credit markets is starting to make Asia strategist David Cui nervous...
Students of Austrian business cycle theory are familiar with the term malinvestment. A malinvestment is any poor use of resources or capital, commonly made in response to bad policy (usually artificially low interest rates and/or unsustainable increases in the monetary supply). Here, we introduce a related term: malincentive. While not part of the official economic lexicon, I consider a 'malincentive' a useful word to describe any promise of short-term gain whose long-term costs outweigh any immediate benefits enjoyed. Malincetives and malinvestment go hand-in-hand. In my opinion, the former causes the latter. As humans, we respond remarkably well to incentives. And dumb incentives encourage us to make dumb investments.
We have been warning about China's speculative commodity trading bubble - spewing false signals around the world about the strength of the real economy - and now, as we suggested previously, Chinese authorities have decided to burst yet another bubble they created.Reuters reports that China's Securities regulator has ordered three major commodity exchanges to "control intraday speculation in commodity markets," ordering them to "curb trading for investors with no commodity industry background." Volume has crashed... and just as it did in the equity markets, price will follow.
Less than one week after the BOJ floated a trial balloon using Bloomberg, that it would reduce the rate it charged some banks which set off the biggest USDJPY rally since October 2014, we are back where we started following last night's "completely unexpected" (for everyone else: we wrote "What If The BOJ Disappoints Tonight: How To Trade It" hours before said "shock") shocking announcement out of the BOJ which did absolutely... nothing. "It’s a total shock,” Nader Naeimi, Sydney- based head of dynamic markets at AMP Capital Investors told Bloomberg. "From currencies to equities to everything -- you can see the reaction in the markets. I can’t believe this. It’s very disappointing."
It now appears that we've reached the point in the China speculative frenzy game where instead of waiting around to be arrested, those running shady ponzi schemes are now pulling the ripcord, clearing out as many bank accounts as possible, and just disappearing.