Now we can see the real tragedy of negative interest rates: they not only have the perverse effect of reversing the flow of time, but they demonstrate that borrowers are not acting with the good faith incentives normally associated with someone who needs money. Rather than paying forward, borrowers are paying backwards because they are effectively trying to return something they don’t want. Such an arrangement renders it impossible for an economy to grow. By destroying the temporal and moral structure of money, negative interest rates destroy the economy. When tomorrow cannot be paid, the current regime must fail. The only question to be determined is the form that failure will assume. This may sound like philosophy but it is cold, hard reality.
Blogger Ben’s work is already done. In his very first substantive post as a civilian he gave away all the secrets of the monetary temple. The Bernank actually refuted the case for modern central banking in one blog. The truth is the real world of capitalism is far, far too complex and dynamic to be measured and assessed with the exactitude implied by Bernanke’s gobbledygook. In fact, what his purported necessity for choosing a rate “somewhere” actually involves is the age old problem of socialist calculation.
A combination of Greek default fears rising (safety reach) and considerably weaker than expected data (moar easing) has sparked a $20 surge in gold prices this morning, back above $1200...
Update: GREECE GOVT DENIES PLAN TO DELAY APRIL 9 IMF PAYMENT: REUTERS
For now the algos can't decide if Greece is joking about making the payment or joking about not making the payment.
While we wait to see which “well capitalized” bank will be the next to crumble under the weight of mountainous writedowns occasioned by the sudden souring of “riskless” assets, we get to read the DuesselHyp post-mortem, which shows that the bank was effectively AIG’d by Eurex.
- Iran, powers push for nuclear deal as clock ticks toward deadline (Reuters)
- How DIY Bond Traders Displaced Wall Street’s Hot Shots (BBG)
- MillerCoors Caught in a Downdraft (WSJ)
- Saudi-led strikes again hit Yemen overnight (Reuters)
- Even With Free Money, Merkel Still Reluctant to Spend (BBG)
- Britain Uses Tax Breaks to Lure Digital-Game Developers (WSJ)
- China to Insure Deposits in Move Toward Scrapping Rate Curbs (BBG)
- As China Expands Its Navy, the U.S. Grows Wary (WSJ)
Like many of our prevailing social constructs, this education system is on the way out...
Make no mistake, the international central banking cartel of our times are on a mission to dismantle the sovereignty of all people.
“The new normal for the Chinese economy and banking sector includes sluggish growth and persistent credit deterioration,” one analyst tells Bloomberg. China's largest banks are seeing loans tied to manufacturing and other sectors sour which is cutting into profitability just as rate cuts squeeze NIM margins.
"A relatively low-profile entity in Austria – Pfandbriefbank Oesterreich AG (Pfandbriefbank) – is becoming the next critical chapter in the Austrian banking system story." - Daiwa
Just days after Greek FinMin Yanis Varoufakis' comments about hoping the Greek people will continue to back the government "after the rift," were played down by Syriza; ekathimerini reports that Alternate Finance Minister Euclid Tsakalotos on Friday made waves by seeming to confirm that the Greek government was "always prepared for a rift" with its European creditors - "If you don't entertain the possibility of a rift in the back of your mind then obviously the creditors will pass the same measures as they did with the previous [government]," (which perhaps explains why default risks are soaring back to post-crisis highs).
While the euro itself has recovered a bit from its worst levels in recent sessions, euro basis swaps have fallen deeper into negative territory on par with the epic nosedive of 2011. We are not quite sure what the move means this time around, since there is no obvious crisis situation – not yet, anyway. A negative FX basis usually indicates some sort of concern over the banking system’s creditworthiness and has historically been associated with euro area banks experiencing problems in obtaining dollar funding. This time, the move in basis swaps is happening “quietly”, as there are no reports in the media indicating that anything might be amiss. Still, something is apparently amiss...
Default Risk Soars After Ukraine's 'American' FinMin Suggests Severe Haircuts For Creditors (Including Russia)Submitted by Tyler Durden on 03/27/2015 08:18 -0400
Ukraine’s American Finance Minister has announced a broad restructuring plan with a wide range of severe haircuts for creditors, and she – well, obviously – wishes to include Russia in the group of creditors who are about to get their heads shaved. Russia sees the world as one in which multiple major powers can govern together. The US sees Russia as a power that must be defeated by any means necessary, and subdued. One of these worldviews must prevail in the end. Perhaps we won’t know which one that will be until the third power, China, raises its voice. What we do know is that Russia will back down only so far, and then it will no more.
- Google's new CFO to make $70 million (WSJ)
- Senate passes Republican budget with deep safety net cuts (Reuters)
- With Yemen strikes, Saudis show growing independence from U.S. (Reuters)
- Banks Slash Dividends as Loans Sour From Beijing To Pearl River (BBG)
- North American Railroads Caught by Speed of Crude-Oil Collapse (BBG)
- Japan’s Zero Inflation a Setback for Abenomics (WSJ)
- Cooperman Says U.S. Seeks Information About Omega Trades (BBG)
What would happen, for example, if a large number of holders decided to sell a high yield bond ETF all at once? In theory, the ETF can always be sold. Buyers may be scarce, but there should be some price at which one will materialize. But we can’t get away from depending on the liquidity of the underlying high yield bonds. The ETF can’t be more liquid than the underlying, and we know the underlying can become highly illiquid.... no investment vehicle should promise more liquidity than is afforded by its underlying assets. Do these recent promises represent real improvements, or merely the seeds for subsequent disappointment?