Japan’s plan to raise taxes while expanding stimulus received “widespread skepticism” at the meeting of Group of 20 policy makers, according to Chinese Deputy Finance Minister Zhu Guangyao. "Japan, on the one hand, plans to raise consumption taxes next year," Zhu told reporters in Washington during the G-20 meetings. "On the other hand, it plans to unleash a fresh round of 5 trillion-yen economic stimulus to stem the economic slowdown. Such strategy received widespread skepticism."
The ongoing government shutdown will continue to affect the quality and/or the release schedule of official macro data. In the meantime, survey data is probably the best set of indicators to follow. The Empire (NY) and Philly Fed surveys are likely the highlight for this week. The US TIC data will get released as scheduled on Wednesday. Given the evidence of large capital outflows in recent months it will be interesting if this trend has abated. Data that will likely not be released this week includes September CPI, Housing Starts, and Industrial Production. It's ok: one can just draw a trendline and extrapolate. That's what the BLS does.
- Headline of the day: U.S. Risks Joining 1933 Germany in Pantheon of Deadbeat Defaults (BBG)
- As Senate wrestles over debt ceiling, Obama stays out of sight (Reuters)
- The "Truckers Ride for the Constitution" that threatened to gum up traffic in the capital was a dud as of Friday afternoon (WSJ)
- China New Yuan Loans Top Estimates as Money-Supply Growth Slows (BBG)
- Vegetable prices fuel Chinese inflation (FT)
- China Slowing Power Use Growth Points To Weaker Output Data (MNI)
- London Wealthy Leave for Country Life as Prices Rise (BBG)
- Gulf oil production hits record (FT)
- Every year like clockwork, analysts start out bizarrely optimistic about future results, then “walk down” their forecasts (WSJ)
- Weak Exports Show Limits of China’s Growth Model (WSJ)
Commodities are no longer on investors’ radar screens. Various signals, however, are pointing to a new rally within the commodities super cycle.
In a world devoid for the past two weeks and certainly for foreseeable future of most US economic data (this week we get no CPI, Industrial Production and New Home Sales among others), markets are now reliant on China for an indication of how the economy is doing, which is why this weekend's weaker than expected Chinese exports (ignoring the fact that China trade data is largely made up) and higher than expected consumer price inflation (driven by higher vegetable prices), even as new yuan loans soared to CNY787 billion, well above the CNY675 billion estimate despite broader M2 slowing from 14.7% in August to 14.2% in September, means the Chinese economy is once again in a vice and following the summer's liquidity driven boost, is set to roll over. Which in turn means that once again the PBOC is flying blind: unable to inject more liquidity without risking broader inflation, while most indicators are already rolling over. In short, ugly and certainly rolling over Chinese economic indicators for the market to mull over on Columbus day, even though all this will be promptly forgotten once the Washington debt ceiling song and dance resumes and the now traditional 10:30 am surge grips the algotrons as the latest set of "imminent deal" rumors is unleashed.
It’s a Myth that the U.S. Has Never Defaulted On Its Debt
There are two characteristics of a currency that make it useful in international trade: one, it is issued by a large trading nation itself, and, two, the currency holds its value vis-à-vis other commodities over time. These two factors create a demand for holding a currency in reserve. Of course, psychological factors entered the demand for dollars, too, since the US was seen as the military protector of all the Western nations against the communist countries for much of the post-war period. Today we are seeing the beginnings of a change. The Fed has been inflating the dollar massively, reducing its purchasing power in relation to other commodities, causing many of the world’s great trading nations to use other monies upon occasion. President Obama’s imminent appointment of career bureaucrat Janet Yellen as Chairman of the Federal Reserve Board is evidence that the US policy of continuing to cheapen the dollar via Quantitative Easing will continue. As we noted before, nothing lasts forever... (especially in light of China's earlier comments)
We assume it is a coincidence that on the day in which we demonstrate China's relentless appetite for gold, driven by what we and many others believe is the country's desire to have a call option on a gold-backed reserve currency when the time comes, just posted in China's official press agency, Xinhua, is an op-ed by writer Liu Chang in which he decries the "US fiscal failure which warrants a de-Americanized world" and flatly states that the world should consider a new reserve currency "that is to be created to replace the dominant U.S. dollar, so that the international community could permanently stay away from the spillover of the intensifying domestic political turmoil in the United States." Of course, if China were serious, and if the world were to voluntarily engage in such a (r)evolutionary reserve currency transition, then all Magic Money Tree theories that the only thing better than near infinite debt is beyond infinite debt, would promptly be relegated to the historic dust heap of idiotic theories where they belong.
In a world in which only the central banks' balance sheets matter, and everything, when stripped of its product complexity, is simply a derivation of a cheap money carry trade, as can be seen on the chart below showing the correlation between the the ES and the EURJPY which have become interchangeable then the futures open in 4 hours should be interesting following the early weakness in both EURJPY and USDJPY. Interesting because the implied 15 point ES drop in futures as of the early indications is hardly the large enough drop that is needed to once again the GOP in either the House or the Senate to scramble and get a deal done, following the recent two-day epic surge in the market on hopes that deal concerns would no longer be an issue.
China has just one thing to say to all those who engage in the now daily slamdowns of gold just around the time of the London fixing, after 8 am Eastern, which lately have gotten so vicious they have resulted in "stop logic" market halts not on one but at least two occasions, keeping the price of gold delightfully low for all those who instead of selling, are looking to buy: "thanks."
Measurements taken at 39 sporting venues earmarked to stage the 2020 Tokyo Olympic Games have elevated levels of radioactivity according to a citizen's group. The South China Morning Post reports that the group "found caesium-137 at almost every place [they] carried out tests, and there was no caesium here before the accident at Fukushima." Tests were made at the Olympic Village, Media Center, and the highest radiation reading, 0.484 microsieverts per hour, was detected in undergrowth close to Yumenoshima Stadium - significantly higher than the level of 0.23 microsieverts per hour set by the government as the standard for decontamination work going on in the exclusion zone around the nuclear plant. In response to a request, a spokesman for Tokyo 2020 insisted: "Radiation levels in the air and water of Tokyo are safe." So all good then...
Hong Kong's richest are busy offloading local assets which institutions are happy to buy. It's exhibit A why institutional money often represents dumb money.
U.S. Debt Limit To Be Raised For 18th Time In 20 Years - Gold Vulnerable Short Term But Real Record High LikelySubmitted by GoldCore on 10/11/2013 12:05 -0400
The dangerous habit of politicians and governments continually ‘kicking the can down the road’ cannot go on indefinitely. Eventually, the ramifications of this profligacy will be clear to all.
Yet another increase in the debt ceiling and the increasingly parabolic nature of the rise in U.S. government debt will be very supportive of gold in the medium and long term.
It was precisely a month ago when, in "Vicious Gold Slamdown Breaks Gold Market For 20 Seconds" we observed how a furious gold sale managed to not only send the price of fold plunging but in the process it halted all gold trading on the CME for a whopping 20 seconds! Moments ago it just happened again. As part of the already noted massive gold slamdown just before 9 am Eastern, when "someone" sold an epic 2 million ounces of gold in one trade, the CME just went dark for 10 seconds, blaming it on an appropriately named "stop logic" event.
- Dot Com part deux: Investors are showing increasing hunger for initial public offerings of unprofitable technology companies (WSJ)
- Poll Finds GOP Blamed More for Shutdown (WSJ)
- House, Senate Republicans Offer Competing Plans on Debt-Limit, Government Shutdown (WAPO)
- Obama, Republicans aim to end crisis after meeting, hurdles remain (Reuters)
- US Rethinks How to Release Sensitive Economic Data (WSJ)
- Chinese East Oil Fuels Fresh China-US Tensions (WSJ)
- ECB Agrees on Swap Line With PBOC as Trade Increases (BBG)
- China September Auto Sales Surge 21% on Japanese Rebound (BBG)
- JPMorgan Taps Taxpayer-Backed Banks for Basel Rules (BBG)