When global central banks began to expand their balance sheets in an attempt to ward off the Great Recession of 2008-2009, their efforts were unprecedented. Never before had we seen so much money creation occur simultaneously on a global basis. At the time, planned central bank quantitative easings (printing money) were well defined in terms of time over which they would occur and magnitude of dollars/foreign currency involved in each QE iteration.
That was then. Despite significant global government borrowing (US Federal debt alone has doubled since 2006) and global central banks printing over $11 trillion since 2008, global economic growth is tepid. In fact, this unprecedented global government borrowing over the last four years has necessitated tax increases in many countries, including the US. The US has sold this as a tax on the wealthy. But when looking at the reality of US Government budget and forward spending projections, there is absolutely no way our federal government can fund its current spending and promises trajectory without very meaningful middle class tax increases to come. Shhh!!! The politicians just have not told anyone yet.
As a bit of a bookend to global central bank balance sheet expansions, we've now come 180 degrees from where we were in early 2009. No longer are central bank quantitative easings defined either in terms of time or magnitude - several central banks have recently promised unlimited money printing over an indefinite period of time.
This is exactly what the US Federal Reserve continues to say and do four years into our current economic recovery. The election of Abe in Japan a month ago cements the fact that the Bank of Japan will join in unlimited money printing. The Bank of England is on the cusp of another round of money stimulus. And despite the recent appearance of calm in Europe, banking system recapitalization has not even begun - it will be quite the eye opener in terms of European Central Bank balance sheet expansion to come. Four years after the Great Recession reportedly ended, global central bank actions are pushing the definitional limit of "unprecedented". ...
Interesting piece worth thinking about in regard to savings rate and central bank QE. click through for the full piece.
"I willingly accept Cassandra's fate To speak the truth, although believed too late."
~ Anne Killigrew
One fine day on the streets of Washington D.C. the ghost of Charles Ponzi struck up a conversation with the ghost of Cassandra. He was a charming devil and assumed she would find him irresistible so he began with "It is ironic, I think, that I am a thief, while you see and speak the truth, but the people believe me and scorn you."
Cassandra was not impressed and replied, "It is true. Most people would prefer a charming falsehood to the severity of truth. Since no one believes me anyway, you might as well tell me what scam you are currently promoting. I am truly interested. Please, do tell."
Never one to miss an opportunity, Senator Ponzi replied, "I am finding great success with central banking, paper money, and ever-increasing debt. Frankly, they are an easy sell, and people come to me begging to be part of the scam. It has been quite profitable so far and looks to be good for a long time." ...
Keynesian policy requires an expansionist Central State and Bank bent on imposing central planning on every level of the economy. Keynesians are natural partners with the neofeudal financial Aristocracy which benefits so enormously from Keynesian print-borrow-blow policies.
Here is the standard Keynesian cargo-cult analysis of our economic woes: 1. The problem is a lack of aggregate demand, i.e. people buying stuff and services.2. As a result, the economy is running below capacity, i.e. economic output is below potential.3. The solution is fiscal and monetary stimulus, i.e. the Central State borrowing and spending trillions on politically directed programs and the Federal Reserve printing and injecting trillions of "free money" dollars into the financial sector to boost borrowing and lending. The cargo-cult program has failed for a number of fundamental reasons. Let's illuminate these reasons with a few thought experiments. 1. If we borrow or print $1 trillion and bury it in the ground, how much demand does it create? Answer: none, of course; it just sits there, utterly inactive. The Fed has printed around $2 trillion and made huge sums available to the financial sector at 0% interest. Most of the funds are sitting in the Fed as reserves, doing nothing except earning interest for the banks who borrowed it at 0%. ...
You should click over for the rest and the charts.
PM Abe continued on his relentless assault on the BOJ and today he repeats his request for the bank to act on the 2% inflation target.
By Robert Jillies PM Abe continued on his relentless assault on the BOJ and today he repeats his request for the bank to act on the 2% inflation target. In addition, he mentioned that the fiscal spending will not be forever and that once growth and inflation is attained then raising taxes will be viable.
Meanwhile, bond traders are worried that the Fed may cut short QE program as early as the end of 2013 which could indicate a possible rise in interest rate to curb potential rise in inflation. This argument is based on the latest media frenzy that the US economy is on the road to recovery. Such argument is also boosted by a better economic data from the Euro zone as well as verbal confirmation from European leaders that they are out of the crisis.
In addition, China better than expected GDP numbers lend a hand to the current optimistic equities market. However, is this optimism a sustainable one? ...
Click through from the analysis on gold and silver.
GOLD PRICE NEWS – Gold prices remained in consolidation mode on Tuesday as investors and traders digested the impact of the Bank of Japan’s latest expansionary monetary policy decision. The spotprice of gold oscillated between gains and losses near $1,690 per ounce after the Japanese central bank announced yesterday that it would launch an unlimited quantitative easing program in January of 2014 and raise its inflation target from 1% to 2%.
The policy measures were consistent with proclamations made by Shinzo Abe, the recently-elected Prime Minister of Japan, who advocated for more aggressive measures to stimulate the nation’s stagnant economy. Following the central bank’s move, the U.S. dollar fell against the Japanese yen by 1.2% to 88.56.
Commenting on the impact of the Bank of Japan’s decision for the gold price, David Govett – Marex Spectron’s head of precious metals – wrote in a note to clients that “This is seen as mildly bullish for gold, but has been mooted for a while and is fairly discounted.” ...
Commenting on an article by Matt Taibbi, Jim Sinclair wrote:
"This has been our thesis and mindset from 2008 forward. QE is for the Banksters and nothing else. The problem is there is no other tool able to create unlimited liquidity at the push of a computer button via electronic money transfers.
"The world as we knew it ended with the flushing of Lehman. There is no way back.
"Gold will go to and above $3500. The single reason for this monetary and human disaster is the manufacturing and distribution of OTC derivatives, a fraud from day #1. ..."