While Janet Yellen and her band of money printers work themselves into a tizzy over whether two buzz words—-“considerable time”—– should be dropped from their post-meeting word cloud, they might be better advised to just read the newspapers. This morning’s WSJ brings word that the lending boom which our monetary central planners are eager to stimulate is apparently off-to-the-races.
Well, sort of. The item in question is a $122 billion globally syndicated loan to facilitate an M&A deal between the world’s two largest beer companies—AB InBev with a 20% global market share and SABMiller with 10%. Needless to say, the only possible reason for creating a monstrosity with $60 billion in sales spread among scores of highly differentiated regional and national beer markets is the “synergy” euphemism—-that is, the “savings” from thousands of job terminations especially in those two paragons of job growth known as North America and Europe.
So the purpose is self-evidently the opposite of the Fed’s intent—whether the sweeping job cuts which Wall Street will peddle to justify the deal actually happen or not. In any event, the deal has virtually ...
(Kitco News) - A two-day Federal Open Market Committee meeting ends Wednesday and economists said they are expecting the Federal Reserve will announce some sort of change on forward guidance as it prepares to end its asset-purchase program. Economists said the Fed will likely announce another $10 billion reduction in its [...]
Since Nixon closed the gold window in 1971, gold has made an impressive move upward from its fixed price of $32 an ounce, to where it sits now around $1,250. But few seem to grasp what actually causes gold to move higher. An increase in the gold prices occurs when the market becomes convinced that a currency will lose its purchasing power due to central bank-induced money supply growth and real interest rates that have been forced into negative territory. And nothing convinces a market more of a rising gold price than when debt and deficits explode.
But while the parabolic move higher in gold from 2009 to 2011 did contain a period of low nominal interest rates, real rates did not fall. And, the surging gold price was not accompanied by a growing money supply either. In fact, the growth rate of M3 plummeted during 2009 thru 2010-it wasn't until 2011 that the money supply rebounded. So what would explain the steady move in gold from $800 to $1,900 per ounce during that time period? The gold price simply got ahead of itself because the market feared that out of control deficits would force the Federal Reserve into an unending cycle of debt monetization, which would engender a protracted period of negative real interest rates, booming money supply growth and inflation.
However, those fears were temporarily ameliorated by the reduction of Federal Budget deficits starting in 2011. This is because the Fed was, ironically, able to temporarily re-engineer asset bubbles, while sending borrowing costs lower, causing revenues to increase and expenditures to decrease. Annual deficits fell from $1.3 trillion in 2011, to $500 billion today. Adding to the gold market's recent woes is the specious belief held by U.S. dollar bulls that the Fed will be aggressively raising interest rates while the rest of the world is cutting rates. This is the explanation to why gold and gold mining shares have suffered mightily during the past three years. ...
What is left of the middle class is living on its credit cards.
American credit-card debt hits a post-recession high Published: Sept 13, 2014 8:02 a.m. ET
U.S. consumers may be relying too heavily on their plastic.
Americans added $28.2 billion to their credit cards in the second quarter of 2014, the largest amount in the last six years and nearly 200% more than in the second quarter of 2009, when the economy emerged from the depths of the Great Recession, ...
The US economy is set upon by two opposing forces - inflation and deflation. Right now they're more or less in check - each one working against the other to produce a fairly benign influence on the overall economy. But eventually one will emerge victorious. And when that happens, as Jim Rickards explains, gold investors will come out on top. Read on...
"The apparently long-term rupture of Russia's relations with the West offers an opportunity to the Chinese leadership to enhance its already close relationship with the Kremlin and thus turn the global geopolitical balance in its favor - not unlike former US president Richard Nixon and former secretary of state Henry Kissinger who reached out to Chairman Mao Zedong in 1972. The Russians, angry with Washington, are now more amenable to giving China wider access to their energy riches and their advanced military technology. The Western sanctions pushing Russia out of the international financial system are also making Moscow more ready and willing to back the Chinese yuan against the US dollar." - China Daily
This is why we're going to eventually see, I think, gold take off.
Complacent melt-ups aren't just boring--they're not very profitable.
File this under Devil's Advocate: what if the easy money in the stock market is no longer the "guaranteed" Bull melt-up but the Bearish bet on a sudden air pocket?Just as a thought experiment, put yourself in the shoes of the money managers who have the leverage to move the markets.
You probably know the drill: program your trading bots to recognize every technical trading scheme's key support and resistance levels, and then unleash huge futures/options buys after hours or pre-open so the market jumps in the direction that makes you the most money. ...
This is an interesting read. Click through for the rest.
CME Group Inc will launch a physically deliverable gold futures contract in Hong Kong later this year to capture growing hedging and investment buying in the Asian region. CME to launch gold futures contract in Hong Kong by year-end
BEIJING (Reuters) - Russia and China pledged on Tuesday to settle more bilateral trade in rouble and yuan and to enhance cooperation between banks, Russia's First Deputy Prime Minister Igor Shuvalov said,
Yuanification continues around the world. As The USA attempts to corral its allies in a 'broad coalition', an increasing number of people - including domestic economic policy advisors - are shifting away from the USD as primary reserve currency. However, the move by British Chancellor of the Exchequer George Osborne, announced Friday, is likely the most notable yet in the world's de-dollarization. As Xinhua reports, the British government intend to be the first nation (ex-China) to issue Renminbi denominated bond and to use the proceeds to finance the government's reserves of foreign currency. Osborne described this dialogue outcome as "a historic moment" and a statement of British confidence in the potential of the RMB to become "the main global reserves currency".
Cranking markets full of financial cocaine so they never correct simply sets up the crash-and-burn destruction of the addict.
Human memory being what it is, almost three years of risk-on euphoria has created the illusion that risk-on is The New Normal that will continue on for years to come. Perhaps, but there are converging signals that suggest the risk-on trade is about to reverse polarity to risk-off. These include: 1. Junk bonds. Two charts below (one from Lance Roberts and the second from Chris Kimble) suggest the risk-on extremes have reached the point of reversal.
2. Soaring U.S. dollar. Without going into detail, it's increasingly clear that ...
Robert Fitzwilson tells King World News in an article titled, The Global Ticking Time Bomb, Economic War & World War III.
As for precious metals, the recent smash could also be aimed at the currency antagonists of the West, particularly Russia and China. Those two nations, along with India, own the lion’s share of the world’s stock of gold and silver. Driving the price down to tarnish the role of precious metals makes perfect sense if you want to keep printing money out of thin air without constraints. As with oil, there is no economic basis for the price of precious metals being this low. It is simply collateral damage from war between the major powers....
No less than six sovereign borrowers are now paying negative nominal interest rates on their 2-year borrowing in euros. In other words, they are making money by going into debt. In real terms, medium-term U.S. TIPS and British index-linked gilts have had negative interest rates for several years. Contrary to the views of the happy Keynesians around us, this is very dangerous indeed. If negative interest rates were to persist, the world's stock of capital would eventually disappear. Without capital, we'd be back up the trees.
You don't even have to be a decent credit risk to borrow money at negative interest rates in euros—France's 2-year bond yield has just turned negative. Since France hasn't balanced its budget since 1969 and is enduring a prolonged period of stagnation caused by having one of the world's largest public sectors, to rational investors it ranks as a credit with substantial risk. Of course, today's bond-market investors aren't rational; their brains are fogged by six-years-and-counting of monetary "stimulus." ...
Gold is still in a downtrend, if you examine a chart of gold prices measured in dollars. But gold in euros looks much stronger, and that’s actually a bullish condition, eventually.
People often ask at what dollar price is gold likely to find support or resistance. But it can be argued that the dollar price of gold is not very relevant for a lot of the old-school technical tools. The static price levels of prior highs and lows do not generally show much significance as support or resistance agents once they are reached again.
Today one of the legends in the business spoke with King World News about the Swiss Gold Initiative and the fact that the U.S. Plunge Protection Team is very close to losing control of the price of gold. Keith Barron, who consults with major companies around the world and is responsible for one of the largest gold discoveries in the last quarter century, also spoke about the disastrous policies of the Swiss National Bank.
Barron: “One of the most interesting things happening right now is a move by the Swiss National Bank to begin instituting negative interest rates. The reason they want to do this is because the capital inflows over the last couple of weeks from European countries into Switzerland has increased dramatically. This is destabilizing the peg between the Swiss franc and the euro....
The significance of the Asian region to the gold market has been reinforced once again by the announcement from CME Group that it plans to launch a gold futures contract in Hong Kong by year-end. Asian Gold Demand Remains In Focus; CME Group Plans Futures Contract In Hong Kong
Gold – A major cycle low is due now so a move back to the low end of a trading range that has been in force for over a year comes as no surprise. I do think the fact that so many bears are now pounding their chests that both gold and silver are a Contrarian’s delight at this point. Risk appears to be down to $1,180 while reward is $1,400+
Click through for his thoughts on other markets. Pay close attention to the opening as he writes of another tragedy to arise after 9/11.
Here we are in 2014 and another US President is crafting yet another plan for another conflict in the Middle East. Defeating violent ideologies is never easy and the fight on terror continues to be very costly. What is now unfolding in Iraq and Syria will have wide-reaching implications for global security as well as international money markets, world economies, multi-national currencies, and universal indebtedness.
We have all seen reports about the gruesome beheadings of US journalists in Iraq, and we’ve been introduced to a new, violent threat called ISIS (Islamic State of Iraq and Syria) and ISIL (Islamic State of Iraq and the Levant), a radical Islamist group that has declared a caliphate. Their jihadist-fueled killings have shocked the sensibilities of the world. While they share some of the basic ideologies of Hamas, Hezbollah, and al Qaeda … they are better financed, better organized, better equipped, and far more brutal than anything the world has previously seen. ...
Early this year, the Commerce Department told me there were an estimated 2,000 e-mails exchanged between the head of the Philadelphia region of the Census Bureau and his counterpart in the Chicago region from 2010 to early 2014.
In fact, Commerce even quoted me an exact price for copying services — $304.
Soon afterward, Commerce reassigned my request — which was made under the Freedom of Information Act (FOIA) — to another processor (one with a PhD!) and then told me that it wouldn’t provide the bulk of the e-mails because of … one excuse or another. ...
This is a must read report. Bottom line, you can't trust the people and numbers coming out of institutionalized government offices. What a sham.