Can QE Prop Up Asset Prices Forever?

Popular Myths and a Shrinking Work Force It’s not just voters who buy into popular myths. Many investors do too. Few have wider appeal than the myth that central banks can create economic growth via the printing press.
What central bankers and their supporters seem to forget is that growth comes from living, breathing human beings.
It often sounds a lot more complicated than it really is. But genuine economic growth comes from two things: the number of workers in the labor force and the productivity of those workers.

That’s a problem for the US. Because according to a recent report in The Economist, its potential labor force is set to grow at less than one-third the 0.9% rate we saw between 2003 and 2013.

This post was published at Acting-Man on November 28, 2014.

Did Bernanke Really Save The World?

Ben Bernanke and his teenaged Wall Street media groupies like to claim that he saved the world with QE. But if QE was such a cureall why has the ‘recovery’ in Japan and Europe been so weak? The ECB printed money out the wazoo for a while and the BoJ is giving Japan, the US, and everybody else an all out BoJob. Yet only the US is rising.
The Fed and friends all pump cash into the same banks all around the world…

This post was published at Wall Street Examiner on November 26, 2014.

“Panicking” Ukrainians Face Soaring Prices, Warn “Inflation Is War”

With Ukraine, according to President Poroshenko, on the verge of World War III, it appears the people of the divided nation face another all too familiar war… on their living standards. As Hyrvnia continues to collapse to record-er lows, Ukraine’s Central Bank warns of further stress and FX (think USDollar or EUR) demand because the “population is in panic.” With a 19.8% inflation rate last month and a 48% devaluation in the currency this year, Bloomberg reports the costs of imported goods from gasoline to fruit and from medicine to meat is soaring. One store-owner reflected that she “feels the hryvnia devaluation everywhere,” and another noted “I can’t imagine how people survive on a single pension. We can’t even go to the drug store. We try to use herbs instead.” The Central bank expects inflation to keep rising (having previously peaked at 10,256% in 1993 as the Soviet economy was dismantled). “Inflation is the same as the war,” warns one analyst, “it may lead to protests if people blame the authorities for failing to conduct proper policies.”

This post was published at Zero Hedge on 11/27/2014.

IRS Hunting People Who Sell Anything on EBay

The following notice was sent out by EBay warning people that the IRS is matching records now between internet companies to make sure you pay taxes on selling any old stuff. EBay wrote:
We are writing today with an urgent message in regards to PayPal account(s) associated with your eBay account.
The IRS recently notified PayPal that the legal business name and/or Taxpayer Identification Number (also known as a TIN) on one or more PayPal account(s) associated with your eBay account does not match what the IRS has on record. If this discrepancy is not corrected, in order to comply with applicable regulations, PayPal will limit the affected PayPal account(s). If these PayPal account(s) are limited, you will not be able to receive payments to these PayPal account(s).

This post was published at Armstrong Economics on November 27, 2014.

Each Investor Can Become His Own Central Bank

Translation of the interview for Oroyfinanzas.com
Oroyfinanzas: These last few weeks half of the planet’s stock markets reached historical heights. Do you see this upward movement continuing going forward?
Fabrice Drouin Ristori: I would answer in two parts:
First, in nominal terms (measured in paper currencies), stock markets have effectively been growing these last years, but evaluating an asset in a devaluating currency (dollar or euro) does not lead to a clear vision of its performance. In order to get a clear idea of its performance, I think it is best to eliminate the monetary factor and compare an asset against other real assets, such as gold or oil, for example. And if we use this method over a long period, we realise that the stock markets do not really perform highly. This performance is an illusion due to the depreciation of paper currencies.
Secondly, stock markets are not the free markets they once were. We now know that central banks intervene massively in those markets, distorting their value by creating demand coming directly from liquidity injections into the system. So as long as central banks keep monetising the stock markets, we will continue to see a high performance in nominal terms, but not in real terms.
Thus, if central banks continue to intervene in the stock markets, they can continue rising in nominal terms.
Oroyfinanzas: Is this rise justified, seen through the lens of economic fundamentals and corporate results?
Fabrice Drouin Ristori: No. The price-to-earnings ratios are approaching levels of over-valuation like the ones of the last speculative bubble of the 2000’s. As I was stating above, the current valuation of the stock markets has strictly nothing to do with fundamentals, and everything to do with central banks’ interventions. Or else, for instance, how could one explain that trading volumes on stock markets have been plunging these last few years, while stock prices are rising? It doesn’t make any sense, unless one factors in central bank interventions.
Oroyfinanzas: Is there a mutual relationship between central banks and stock markets?
Oroyfinanzas: Is there a mutual relationship between central banks and stock markets?
Fabrice Drouin Ristori: The majority of investors keep an eye on the stock markets’ performance. A rising stock market may provide the illusion of economic health and comfort for the masses. And this is what governments and central bankers have been trying to sell us since 2008, while the fundamentals of the real economy keep on deteriorating.
This is the reason why central banks, certainly at the behest of governments, intervene in those markets. This is, notably, the role of the Plunge Protection Team in the United States.

This post was published at Gold Broker on Nov 27, 2014.

The Welfare Costs of Amnesty – Chump Change

It annoys me that we get stories like this. The Social Security costs of putting 4 million illegal immigrants onto the rolls of Social Security will cost taxpayers $2 trillion. This is an estimate by someone at the Heritage Foundation.
What we need is for this guy to study the size of the net unfunded liabilities for Social Security and Medicare. Prof. Lawrence Kotlikoff has used Congressional Budget Office figures – which the CBO now suppresses – to estimate the costs: over $200 trillion.
If the Heritage Foundation wanted to tell the truth, the researcher would hold his press conference and say this…

This post was published at Tea Party Economist on November 26, 2014.

Goldman Sachs joins three other major in banks in lawsuit tied to metals manipulation

The price rigging and manipulations just keep on coming in the Western financial system as a new lawsuit filed against Goldman Sachs, HSBC, and two other major banks accusing the institutions of wide-spread price fixing in Platinum and Palladium over a sever year period has been filed in Federal court this week.
The lawsuit filed in a court in Manhattan was done by Modern Settings LLC, a Florida-based maker of jewelry and police badges, and brings a to a judge a case where losses incurred to both businesses and customers equates to millions of dollars in over-pricing tied directly to commodity broker manipulation.
Four major global firms are to appear in a New York court accused of manipulating platinum and palladium prices for eight years. The law suit is the first of its kind in US history…

This post was published at The Daily Sheeple on November 27th, 2014.

Thankful For Inflation? Turkey Day Dinner Is Up 6,000% Since 1909

While not hyperinflating, the slow and insidious diminishment of the fiat US Dollar’s purchasing power (and thus the living standards of lower- and middle-class Americans – who are not balls deep invested in the US stock ‘market’) is nowhere more evident than in the soaring costs of Thanksgiving Day dinner during the Fed’s 100 year reign…

In 1909… Thanksgiving Day Dinner cost $0.50…

This post was published at Zero Hedge on 11/27/2014.

IIMA and World Gold Council set up India Gold Policy Centre

The centre is aimed towards conducting cutting-edge research on all aspects of the Indian gold industry.
The objective of the ‘India Gold Policy Centre’ is to develop insights into how the significant stocks of gold that India owns that can be used to advance growth, employment, social inclusion and the economic wealth of the nation. It aims to conduct research that has a practical application and that the industry and all stakeholders can use, leading to the development of an effective gold ecosystem in the country.
“As part of the initiative taken by IIMA to connect more closely with practice, and in line with our vision to contribute and reach out to industry, the Gold Centre will provide innovative solutions and insights for the gold industry through cutting-edge research. The research is intended to study the growth and development of the gold industry in India and globally,” said Ashish Nanda, Director, IIMA.
Commenting on the collaboration, Somasundaram PR, Managing Director, India, World Gold Council said,”It is estimated that India holds around 22,000 tonnes of gold valued at over a trillion US dollars. This historic asset can be used to enhance the nation’s prosperity by putting it to work for the economy, creating jobs, developing skills, generating exports and revenues. To develop gold’s potential, we need to understand gold’s role in the Indian economy, through high quality data, insights and research.”

This post was published at Indian Express

Mumbai gold premiums slip but India’s November imports could exceed 100 tonnes again

Gold premiums in Mumbai have dropped after the start of the Indian wedding season but November imports could well exceed 100 tonnes for the third month running, according to early indications.
Spot gold has staged a small recovery in recent sessions and physical demand in Asia is showing signs of improvement, despite premiums in India falling after buying for the annual wedding season died down.
Imports in November could be far higher than this year’s monthly average – imports in the first half of November were around 102 tonnes, Commerzbank said on Wednesday, citing reports from the Indian media. The country imported around 150 tonnes in October.
High imports could also reflect buying ahead of a possible tightening of import restrictions by Reserve Bank of India (RBI) to tackle the country’s ballooning current account deficit (CAD).

This post was published at Bullion Desk

BoJ chief watching impact of falling yen after additional easing

Bank of Japan Gov. Haruhiko Kuroda said Tuesday the central bank is closely watching the impact of the yen’s sharp fall against other major currencies following the bank’s additional monetary easing announced last month.
Speaking to a meeting of business leaders in Nagoya, Kuroda said the weakening currency could negatively affect the economy through rising prices of imports, which place a disproportionate burden on smaller companies and households, although positive aspects include improved earnings for firms operating internationally.
The impact “differs from one economic entity to another,” he said. “We will carefully watch (the environment), including effects on the real economy.”
Kuroda also expressed his hope that companies benefiting from the yen’s depreciation, which has been prompted by the BoJ’s ultra-loose monetary policy, will help spur the economy by boosting wages or increasing business investment.

This post was published at Japan Times

Why is it taking so long?

Why is it taking so long? No, not the turkey cooking in the oven, but the collapse of the economy. Perhaps it is the smell of turkey that gets my brain thinking, as it did at our 1st thanksgiving dinner last Saturday when I wrote about canaries. Divorce is a bitch! So as we await our 2nd dinner, my fingers started typing…
When the subprime mortgage climaxed with the Lehman crash as I was learning how to trade, I was ignorant, thinking that politics still mattered, worried about how I would retire, wondering how to trade the markets, which I no longer trusted to be bullish. (Looks like I picked the wrong year to learn how to trade.) I did not understand QE as it came out and especially did not see metals as a safe haven. Once I noticed that metals prices were rising, I simply bought some to get in on the bullishness and make some fiat. The rest is history and somewhere along the way, I became persuaded that our markets were irreparable, held together with coordinated central bank intervention and would eventually collapse.
Many of you here were instrumental in my education, as well as many who no longer frequent the site.
So I have been sitting here this morning racking my brain (and procrastinating grading essays) trying to recall movie where the final fight scene take place in a location that is falling apart as they fight, causing the combatants to actually cooperate in holding the setting together as they try to destroy one another. That appears to be the reality of our current financial system falling apart underneath us as each country grapples for gold, devalues currencies, sets up sanctions, cuts deals with oil producers to hurt others. But all the while, they loan each other funds through overnight discount windows, purchase bonds via proxies, take turns pumping fiat into the system, collude to keep stocks high and metals low, and let a cabal of mass media oligarchs send out their town criers and lie to the world population, repetitively, that ‘All is well!’
The West is grappling with the East for control of the world. But the cannot let the world crumble while they fight. The CBs are cooperating at some level to hold it together while they grapple for ascendency. I argue that it’s inevitable that the East will overcome, that the West is desperately trying to hang on while the patient Chinese continue to make subtle strategic moves. But China and her allies don’t want to inherit financial control of a world full of wrecked economies.

This post was published at TF Metals Report on November 27, 2014.

False Confidence Rising In The US

A recent article argues that the increasing demand for consumer credit is an indicator of increasing consumer confidence. The argument seems reasonable due to the way it is presented–there is an entirely different conclusion one would draw were the argument presented differently.
If you had a very low income, and few assets, yet people kept lending you money–money that greatly exceeded your assets–would that not suggest that these lenders had confidence in you? It may be that this confidence is unjustified–but we can infer its existence by the continued willingness of others to lend you money despite the fact that you appear to be ruined.
In just the same manner, we can infer the confidence that lenders have in a country by computing the ratio of a nation’s debt to its actual holdings of real money. A high ratio suggests great confidence–even though it could just as easily be a measure of ruin. In the case of the US, we have used the ratio of itsofficial debt to its official gold holdings. For other countries, we would have to include foreign currency holdings as “wealth”.

This post was published at Zero Hedge on 11/27/2014.

Bearish Housing Market Data – Homebuilders Headed For A Fall

On Wednesday the Census Bureau released its new home sales report and the National Association of Realtors released its Pending Home Sales Index. Both data series missed Wall Street estimates by a country mile, with new home sales showing a slight gain over September and the Pending Home Sales unexpectedly dropping from September. With regard to the reliability of the Census Bureau data, John Williams of Shadowstats.com explains:
A lack of stability continued with the Census Bureau’s headline monthly reporting of new-home sales in October…headline reporting remained extremely unstable. Sudden initial headline surges in monthly activity appear to provide no more than one-shot media hypes, which disappear with the next month’s revisions.
In other words, the Government’s estimates for new home sales is unreliable.

This post was published at Investment Research Dynamics on November 27, 2014.

“There Will Be Blood”: Petrodollar Death Means A Liquidity And Oil-Exporting Crisis On Deck

Recently we posted the following article commenting on the impact of USD appreciation and dollar circulation among oil exporters, as well as how the collapsing price of oil is set to reverberate across the entire oil-exporting world, where sticky high oil prices were a key reason for social stability. Following today’s shocking OPEC announcement and the epic collapse in crude prices, it is time to repost it now that everyone is desperate to become a bear market oil expert, if only on Twitter…
How The Petrodollar Quietly Died, And Nobody Noticed
Two years ago, in hushed tones at first, then ever louder, the financial world began discussing that which shall never be discussed in polite company – the end of the system that according to many has framed and facilitated the US Dollar’s reserve currency status: the Petrodollar, or the world in which oil export countries would recycle the dollars they received in exchange for their oil exports, by purchasing more USD-denominated assets, boosting the financial strength of the reserve currency, leading to even higher asset prices and even more USD-denominated purchases, and so forth, in a virtuous (especially if one held US-denominated assets and printed US currency) loop.
The main thrust for this shift away from the USD, if primarily in the non-mainstream media, was that with Russia and China, as well as the rest of the BRIC nations, increasingly seeking to distance themselves from the US-led, “developed world” status quo spearheaded by the IMF, global trade would increasingly take place through bilateral arrangements which bypass the (Petro)dollar entirely. And sure enough, this has certainly been taking place, as first Russia and China, together with Iran, and ever more developing nations, have transacted among each other, bypassing the USD entirely, instead engaging in bilateral trade arrangements, leading to, among other thing, such discussions as, in today’s FT, why China’s Renminbi offshore market has gone from nothing to billions in a short space of time.
And yet, few would have believed that the Petrodollar did indeed quietly die, although ironically, without much input from either Russia or China, and paradoxically, mostly as a result of the actions of none other than the Fed itself, with its strong dollar policy, and to a lesser extent Saudi Arabia too, which by glutting the world with crude, first intended to crush Putin, and subsequently, to take out the US crude cost-curve, may have Plaxico’ed both itself, and its closest Petrodollar trading partner, the US of A.

This post was published at Zero Hedge on 11/27/2014.

Swiss Yes Vote Possible – First ‘Gold Rush’ Of 21st Century?

There are just 3 days left until the’Save Our Swiss Gold’ referendum this Sunday. On November 30, voters in Switzerland will head to the polls to decide whether the Swiss National Bank (SNB) should back the Swiss franc with gold by increasing its gold holdings to 20% – up from current levels of 7%.
The conservative Swiss People’s party proposed the initiative, called “Save OurSwiss Gold“, with the intention of boosting the security and financial and monetary independence of Switzerland in these times of financial uncertainty. They believe that a 20% gold holding will protect the Swiss people from currency debasement, currency devaluation and an international monetary crisis.
In the case of a “yes” vote, gold prices are likely to surge. Analysts do not believe a yes vote is possible. However, analysts have got the mood of the people wrong in many referendums both in Switzerland and throughout Europe in recent years.
We believe that the vote will be very close – much closer than many analysts suggest. After a massive, very well funded and highly coordinated campaign by the banking and political establishment in Switzerland, the polls show that the no side is in the lead.
It is worth remembering some of the recent referendums in Switzerland showed the people would vote with the government and establishment political parties in the polls. Subsequently, they did not.

This post was published at Gold Core on 27 November 2014.

Manipulation Suit Filed in NYC Against Goldman – HSBC – BASF – Standard Bank

Four firms have been named in a lawsuit that was filed in the most corrupt court in the nation – the Southern District of New York where judges are free to change the very words spoken in court. I have constantly warned not to file suits there – they seem to go nowhere and are routinely dismissed protecting the banks. Goldman Sachs and HSBC are among four platinum and palladium dealers to be sued in New York for allegedly fixing the price of the metals. The four companies are said to have rigged prices for eight years. BASF and Standard bank were also named in the lawsuit.
A Florida-based maker of jewelry and police badges filed the complaint in Manhattan federal court. The defendants stand accused of having conspired since 2007 to rig the twice-daily platinum and palladium fixings. It is alleged that the companies illegally shared customer data and then used that information to engage in front running. This is really standard in all markets and has been part of the business overall since the 1970s. Proving that in court is an entirely different story.

This post was published at Armstrong Economics on November 27, 2014.