For Norway’s $890 billion sovereign-wealth fund, the investment risks stemming from monetary policy have never been greater. Like most global investors, the Oslo-based fund is trying to navigate uncharted terrain as central banks across the world push out stimulus to protect economic growth and spur inflation. “Monetary policy does affect pricing in today’s market to such an extent that monetary policy itself has been a risk you have to watch,” Yngve Slyngstad, chief executive officer of the fund, said in an interview on Wednesday at Bloomberg’s New York headquarters. “Investors are focused more on monetary policy changes than has been generally the case, than at any time, as far as I can remember.” The world’s biggest wealth fund, which says it faces diminished returns amid record-low bond yields, last month revealed it was seeking to profit from quantitative easing by, among other things, buying Spanish bonds. The European Central Bank embarked on its historic asset-purchase program in March, buying euro-area sovereign debt to bring down long-term rates.
Richard Russell: "I note that many advisors are warning of massive movements in the stock and bond markets ahead. Some are warning of a crash in the US dollar. The rising dollar has hurt US exports.
The Truth, QE4 And Silver Scarcity
My suspicions are that the government and the Fed have praised the US economy beyond reality. In due time, the truth will come out. The US economy is sadly lagging and a few observers have even suggested that the US economy is in recession. If this turns out to be true, the dollar will crash and the Fed may even turn to QE 4. It’s a dramatic situation unlike anything I’ve ever seen. Physical silver will be scarce in the coming months and is now priced below the cost of production.
BEIJING, April 15 (UPI) -- China-led Asian Infrastructure Investment Bank finalized a list of 57 founding member states on Wednesday. The announcement came after China accepted the last group of nations that includes Sweden, Israel, Poland and South Africa, reported The South China Morning Post.
Founding members have the right to establish the rules for the bank's activities. They hold other privileges that will not be available to countries that may opt to join the bank at a later point.
The United States and Japan have abstained from joining the AIIB, but South Korea, a key U.S. ally in the region, has agreed to join as a founding member along with Australia, New Zealand, Canada, Britain, France and Germany.
At some point you would think that the US would begin to see that the currency war is more than started.
The fairy dust peddlers who moonlight as Wall Street economists were out in force this morning after March retail sales came in with a positive m/m change for the first time since November. This purportedly confirms that we’re back on track for a big rebound in Q2:
Ian Shepherdson, chief economist at Pantheon Economics, said he expected stronger sales in coming months as the drop in gas prices have built up consumer cash savings.
Now how in the world does he figure that? Total retail sales in March were up a miniscule $5.5 billion or 1.3% over prior year. But then again, gasoline sales were down $10 billion, meaning that consumer spending on everything else was up by $15 billion or 4%. So consumers weren’t hoarding their money or building a cash cushion for some big shopping spree later this spring——-they were just reallocating it like they always do.
Asian demand seems to be setting support at a little below $1200 for the gold price currently, while a potential Greek default waits in the wings. Julian Phillips’ latest thoughts on the gold and silver markets and price drivers.
Richard Russell: "The most important lesson in investing is never to sustain a big loss. With this in mind, I have and still do advise my subscribers to be out of all common stocks except for gold shares, and to be positioned in silver and gold bullion, holding the actual metals in a safe place. I also like the Central fund of Canada, CEF, which holds actual silver and gold in what I consider a safe place — Canada.
The very same people that caused the last economic crisis have created a 278 TRILLION dollar derivatives time bomb that could go off at any moment. When this absolutely colossal bubble does implode, we are going to be faced with the worst economic crash in the history of the United States. During the last financial crisis, our politicians promised us that they would make sure that “too big to fail” would never be a problem again. Instead, as you will see below, those banks have actually gotten far larger since then. So now we really can’t afford for them to fail. The six banks that I am talking about are JPMorgan Chase, Citibank, Goldman Sachs, Bank of America, Morgan Stanley and Wells Fargo. When you add up all of their exposure to derivatives, it comes to a grand total of more than 278 trillion dollars. But when you add up all of the assets of all six banks combined, it only comes to a grand total of about 9.8 trillion dollars. In other words, these “too big to fail” banks have exposure to derivatives that is more than 28 times greater than their total assets. This is complete and utter insanity, and yet nobody seems too alarmed about it. For the moment, those banks are still making lots of money and funding the campaigns of our most prominent politicians. Right now there is no incentive for them to stop their incredibly reckless gambling so they are just going to keep on doing it.
China's state-run Shanghai Gold Exchange said on Sunday it was working on launching new price benchmark fixing products as a new service to market participants. Shanghai Gold Exchange says to introduce new pricing products
The key drivers for the year-to-date growth were the Indian currency and equity products and the hydrocarbon segment. DGCX's Indian product suite which includes the Indian Rupee and Sensex Futures registered a year-to-date growth of 11% and 20% respectively.
Centrally issued money centralizes wealth and generates systemic inequality.
A Thought Experiment on Money
Let’s imagine a small mountain kingdom with only ten very scarce and thus highly valued seashells in circulation. These few shells are certainly valuable in terms of scarcity, but there aren’t enough of them to act as a means of exchange.
One solution to this innate problem of scarcity—money has to be scarce enough to retain value but not so scarce that there isn’t enough of it in circulation to grease trade—is for the kingdom to issue 100 slips of paper for each shell, each slip of paper representing 1/100thof the shell’s value. Now there is enough money in circulation to facilitate trade and each slip retains a store of value equal to 1/100th of a shell. The slips are paper money, i.e. currency.
So, why exactly does it matter how much gold China has accumulated and what are the ramifications depending what the number is? First, if the number comes in “large” (it will), it means China “likes gold” and believes it to be a worthy monetary reserve asset. A large number would give gold China’s “stamp of approval” so to speak. Next, we have the “mathematics” to the equation. If the number comes in anywhere near 10,000 tons, the natural question then becomes “where oh where did it all come from”? This is a VERY important question because as I’ve said many times before, gold can only come from current supply and also from above ground supplies in vaults. We know the total annual global supply (ex China and Russia) is about 2,200 tons of which China has chewed up a very large percentage over the last six years. Total global production has been 11,000 tons over the last six years, we know India and Russia have been importers, not to mention all the other geographical demand and jewelry. A number even close to 10,000 tons will raise the question of “how?”, how could China have accumulated this much gold if the world is not producing enough to make the math work? In other words, if China bought virtually all of the global supply, what was used to satisfy the rest of the world’s demand?
Another day of “incoming data” and still more evidence that this isn’t your father’s business cycle. This time it comes from the Eccles Building itself, but don’t expect the Keynesian money printers domiciled there to recognize that the industrial production report they issued today constitutes yet another rebuke to their entire macro model.
The March index slipped badly (0.6%) and thereby predictably elicited a “do not be troubled” assurance from the talking heads. It was just aberrant weather again. Well, that’s actually right. March was so much warmer than February that the utility component of the index plunged by 5.9%.
Indeed, as another branch of the Fed revealed a few days ago, March was actually warmer than normal for the month. Presumably this means the punk economic data for March can’t be explained by winterish weather—-since it is the very opposite condition which explains last month’s steep drop in utility production.
So the better part of wisdom would be to keep the weather and its unpredictable impact on monthly power plant demand out of it. And, as it happens, the trends in the other two components of the index—–mining and manufacturing—-do offer some very pertinent clues about the dismal state of the US economy.
Author: Paul Ploumis 16 Apr 2015 Last updated at 00:54:02 GMT
EDGWARE (Scrap Monster): Gold price swings held in a tight $8 range around $1195 per ounce in London trade Wednesday, but for Euro investors the metal rose to halve this week's earlier 2% drop as the single currency fell following no change to the European Central Bank's policy of QE and sub-zero rates.
After 10,000 people protested outside the European Central Bank's new Frankfurt offices when they were officially opened last month – more than 17 years after the ECB was founded – a lone protester shouting "End the ECB dictatorship!" today interrupted president Mario Draghi's regular press conference, storming the stage and showering him with confetti.
The availability of emergency ECB loans to Greek banks "is entirely in the hands of the Greek government," Draghi later said in Q&A, referring to sovereign debt negotiations between the ruling Syriza Party and its EU partner states, adding that he didn't "want to contemplate [or] discuss any possible situation like" a default by Athens on its obligations. ...
Indian Prime Minister Narendra Modi wants to get his hands on the gold in the country’s temples—approximately 3,000 tonnes, more than two-thirds the amount held at Fort Knox—to combat the country’s chronic trade imbalance.
He plans to launch a program next month that would “encourage” temples to deposit their gold with banks, in return for interest payments. The government would then melt the gold and loan it to jewelers. The thinking is that this would reduce gold imports, and thus the trade deficit. Gold accounted for 28% of the country’s deficit last year.
If successful, gold prices could come under pressure. India represented 17% of total global gold demand last year.
Some of the world’s biggest iron ore miners were on Tuesday placed on “credit watch negative” by Standard and Poor’s (S&P), as the price of the commodity continues to plunge amid a supply glut and soft Chinese demand.
The global ratings agency said the credit watch changes were due to a lowering of its iron ore price forecasts to US $45 per tonne for the rest of this year, to $50 for next year and $55 for 2017.
On Tuesday Russia officially becomes a founder of the China-led Asian Infrastructure Investment Bank (AIIB). It means Russian companies can take part in infrastructure projects in the Asia-Pacific region, and could attract foreign investment into Russia.
Russia applied for membership as a founding member of the AIIB 2 weeks ago, along with another 52 countries. The founding members have the right to establish the rules guiding the bank’s activities. China reportedly had rejected requests from North Korea and Taiwan to join the AIIB. The final list of the bank’s founding members will be announced on April 15.
"Russia as a country belonging to the target region of the bank's operations, and is meant to play an important role in investment decisions and also attract investment funds from the bank in the interest of improving the infrastructure of Siberia and the Russian Far East. We expect that the bank will become an effective tool for strengthening transcontinental links and will contribute to Eurasian integration,” Russian Foreign Ministry spokesman Aleksandr Lukashevich said, according to RIA Novosti.
The currency wars are really beginning to fire up.
“The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.” ― Alexis de Tocqueville
And that is exactly what has happened in the U.S. and Europe. Politicians give away more and more entitlements in order to get elected to office … and what candidate is going to suggest CUTTING entitlements?
Brookings published a nice opinion piece entitled “The federal debt is worse than you think.” The opinion piece is based largely on Professor Laurence Kotlikoff’s U.S. Senate Testimony on the grossly misleading health of our economy.
In a nutshell, the U.S. has a $210 trillion “fiscal gap” and “may well be in worse fiscal shape than any developed country, including Greece,” according to Kotlikoff.
“The first point I want to get across is that our nation is broke,” Kotlikoff testified. “Our nation’s broke, and it’s not broke in 75 years or 50 years or 25 years or 10 years. It’s broke today.”
Promises of wealth and security are far more contingent than is being advertised.
The Millennial Generation, if we're to believe various polls, aspires to either make boatloads of money on Wall Street, or secure a can't-be-fired job in the government. Given the dominance of finance and an economic backdrop of rising insecurity, these are rational choices.
But all those Millennials hoping to work for Goldman Sachs does raise a question:when did playing financial games become so much more profitable than producing goods and services?
And that raises another question: is the dominance of the FIRE sectors (finance, insurance, real estate) permanent or cyclical?
Let's turn to some charts for answers. The first is a look at the finance and insurance sectors' share of the gross domestic product (GDP). The sectors's share reached 4% of GDP in the stock market bubble of 1929 and the echo bubble in the mid-1930s.
It took 40 years for finance and insurance to exceed the highs of the Roaring 20s bubble.
April 12 – (King World News) – The recent stock market volatility has caused the major averages to lose nearly all their gains for 2015. However, it is clear stock prices are still extremely overvalued by virtually every metric, especially when viewed in the absence of GDP and earnings growth.
For starters, the Cyclically Adjusted PE Ratio on the S&P 500 is currently 27, whereas the normal level for this longer-term valuation metric is just 15. Also, the ratio of Total Market Cap to GDP is currently at 125%. This reading, which measures the value of all stock prices in relation to the economy, is the second highest in history outside of the tech bubble and is far above the 110% level witnessed in 2007….
"The central banks of the world are pumping liquidity into the global economic system in an effort to thwart the current forces of deleveraging and deflation.
Meanwhile, Here Is What The Big Money Is Doing
The big money, the smart money, sees the picture, and they have been moving into tangible items, which tend to hold their purchasing power in the face of a dollar correction and possible eventual dollar collapse. Thus the auction dollar prices of great art, top quality jewelry, diamonds and classic cars have been exploding.
Central bank financial repression results in the systematic and severe mispricing of financial assets. And that has sweeping consequences far beyond the munificent windfalls it bestows on the thin slice of mankind that frequents the casinos of Wall Street, London, Tokyo and Shanghai.
The fact is, the prices of money, debt, equity, traded commodities and all their derivatives comprise a vast and instantaneous signaling system that cascades through every nook and cranny of the real economy. When these signals are systematically falsified by a few dozen central bankers they cause hundreds of millions of ordinary businessmen, workers, investors and entrepreneurs to alter their economic calculus.
Click through for the rest of this post from David Stockman.
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