Central bankers reached a new low overnight when Swiss National Bank President Thomas Jordan warned of "disastrous consequences" from a pulpit in a church on a historic hill in the town of Uster, Switzerland, which Bloomberg dubbed the 'sermon on the hill.' "Hungry people don't stay hungry for long, they get hope from fire and smoke as they reach for the dawn..."
Goosing stocks ever higher will eventually push wealth inequality to the point that it unleashes social instability.
The monetary tectonic plates are shifting, and predicting the next global financial earthquake is relatively easy.
The topic of ‘currency war’ has been bantered about in financial circles since at least the term was first used by Brazilian Finance Minister Guido Mantega in September 2010. Recently, the currency war has escalated, and a ‘sanctions war’ against Russia has broken out. History suggests that financial assets are highly unlikely to preserve investors’ real purchasing power in this inhospitable international environment, due in part to the associated currency crises, which will catalyse at least a partial international remonetisation of gold. Vladimir Putin, under pressure from economic sanctions, may calculate that now is the time to play his ‘gold card’.
Day after day, well-dressed talking heads are paraded on business media and proclaim how cheap Japan is, how Abenomics will work (he promise... if it doesn't we'll have to question everything we believe in), how GDP is backward-looking (so ignore it... and every other economic indicator), and how being long Japanese stocks (of course, hedged back to dollars because you don't want to take the currency risk that Abe is creating) is a "no brainer." The problem with that strategy is... in 2014, the JPY-hedged Japanese stock market investor in the US has not had a daily close in the green year-to-date and is down over 5% for the year... but it gets worse.
With Japan planning a few trillion Yen stimulus plan of airdropping "gift cards" directly to the poor to spur spending (and the virtuous awesomeness of economic utopia), it appears Switzerland is about to go one step further. As Motherboard reports, Switzerland could soon be the world’s first national case study in basic income. Instead of providing a traditional social net - unemployment payments, food stamps, or housing credits - the government would pay every citizen a fixed stipend. The proposed plan would guarantee a monthly income of CHF 2,500, or about $2,600 as of November 2014; meaning every Swiss family can expect an unconditional yearly income of $62,400 without having to work, with no strings attached. What could go wrong?
Unfortunately, Natixis warns, the same error is being repeated by the Bank of Japan. The starting point of their analysis is the contrarian fact that Japan needs a strong yen. Japanese exports are hardly sensitive to their prices; Japan has a large proportion of "necessary" imports (commodities) whose price rises when the yen weakens. Unfortunately, Natixis warns, the Bank of Japan has just increased the size of its quantitative easing program, which will lead to a steeper depreciation of the yen. The only benefit will be a temporary rise in the Nikkei, an automatic result of the conversion of Japanese companies' results into yen. Nothing more...
Keynesian fiscal policies and central banking regimes have buried the public sectors of most of the world’s major economies in unsustainable debt. Now they propose to double down on more of the same because an entire generation of politicians have been house-trained in permanent fiscal profligacy and endless kicking of the fiscal can down the road. To be sure, in perhaps putting off Japan’s day of fiscal reckoning once again, Prime Minister Abe is proving himself to be a certifiable madman. In short order, however, he will have plenty of company all around the planet.
Something is dreadfully wrong in America.
Throughout history, in most cases of economic collapse the societies in question believed they were financially invincible just before their disastrous fall. Rarely does anyone see the edge of the cliff or even the bottom of the abyss before it has swallowed a nation whole. This lack of foresight, however, is not entirely the fault of the public. It is, rather, a consequence caused by the manipulation of the fundamental information available to the public by governments and social gatekeepers.
The U.S. and many other economies left the gold standard more than 40 years ago, yet advocates periodically call for its return, saying that it would curtail or prevent inflation. In these brief clips from the St. Louis Fed video series, David Andolfatto, a vice president and economist explains the gold standard noting "most economists believe a return to the gold standard would not be a wise policy," and "under the gold standard, banking panics are more likely to occur," and then pointing out somewhat stunningly that "however, the fiat system employed by the Federal Reserve has been largely successful in maintaining low inflation and price stability." Enjoy...
The vice will close on some cities and states sooner than others, but it will eventually squeeze every city and state with declining revenues and rising fixed costs into default.
Chris Martenson is an economic researcher and futurist, specializing in energy and resource depletion, and co-founder of PeakProsperity.com. As one of the early econobloggers who forecasted the housing market collapse and stock market correction years in advance, Chris rose to prominence with the launch of his seminal video seminar, The Crash Course, that interconnected forces in the economy, energy, and the environment that are shaping the future, one that will be defined by increasing challenges as we have known it. Chris’s insights are in high demand by the media as well as academic, civic, and private organizations around the world, including institutions such as the U.N., the U.K. House of Commons, and the U.S. State Legislatures. So with that we’d like to welcome Mr. Chris
On one hand, global growth is slowing down. And on the other, the cost of living is rising. That’s a bad combination, but we’ll make it. While you’re waiting for QE4 to see how it all goes down, remember to hold on to your assets… if you have any.
There are a number of cause-and-effect mechanisms that are creating a "dangerous spiral" in various emerging markets. As Natixis explains, this five-step vicious circle is currently affecting Russia, Brazil, Argentina and South Africa; and some of the components are now manifesting in Turkey and India.