A Yuan Reserve Currency Is Coming – Brace for a $2 Trillion Global Disruption

It’s almost certain ayuan reserve currency will become reality 11 months from now, triggering a foreign currency shift of as much as $2 trillion – an existential threat to the U. S. dollar’s status as the world’s primary reserve currency.
Last week, Bloomberg reported that International Monetary Fund (IMF) officials have told Chinese officials that the yuan will join the organization’s basket of reserve currencies ‘soon.’
Sources told Bloomberg that Chinese officials are so sure the IMF will decide in their favor that they’re already drafting statements to celebrate it.
The IMF board will meet in November to make a final yuan reserve currency decision. If it decides in favor of China, the yuan will join its basket of currencies, known as Special Drawing Rights (SDR), at the end of September 2016.
The last time the IMF conducted a review of the SDR basket, in 2010, it decided that the yuan was not yet ‘freely usable.’
But since then, the People’s Bank of China has exerted great effort to liberalize its yuan policies to make it trade more like other major world currencies. In fact, China has sought yuan reserve currency status for decades.

This post was published at Wall Street Examiner by David Zeiler – October 30, 2015.

Personal Income, Consumer Spending Rise Less Than Expected; PCE Price Index Negative; 4th Quarter Acceleration Coming Up?

Personal Income, Consumer Spending Weaker Than Economists Expect
Today’s Personal Income and Outlays report came in below Consensus Estimates.

Inflation is not building based on the Fed’s favorite reading, the core PCE price index which inched a lower-than-expected 0.1 percent higher in September with the year-on-year rate steady and flat at only plus 1.3 percent. These results will not lift the odds for a December hike at the next FOMC.
Income and spending data also came in below expectations, at plus 0.1 percent each vs expectations for plus 0.2 percent each. Income got no boost from wages & salaries in September which were unchanged following, however, strong gains of 0.5 percent in the two prior months that underscore this morning’s employment cost index which shows pressure in the third quarter. Spending in September was pulled down by a 1.2 percent plunge in nondurable goods that likely reflects the low price of fuel. Spending on durable goods, driven by vehicles, rose a strong 0.8 percent with spending on services up a solid 0.4 percent.

This post was published at Global Economic Analysis on October 30, 2015.

Weekend Reading: Fed Stampedes The Bulls

What a difference a day can make? Last week the world was consumed with fears of a slowing economy, weak demand and volatile markets. But that was “so last week.”
As I penned this past Tuesday:
“In a more normal market, I would already be well convinced that the bullish trend had ended, particularly against the backdrop of an earnings recession and weak economic data. But this is by no means a normal market given the ongoing interventions by the Federal Reserve to support asset prices.
It is worth noting that contractions/expansions in the Fed’s balance sheet have a very high correlation with subsequent market action as liquidity is pushed into the financial system. As shown in the chart below, the Federal Reserve has already once again began to quietly expand their balance sheet following the recent downturn. Not surprisingly, the market has responded in kind with the recent push higher. My suspicion is that if such minor interventions fail to stabilize the market, a more aggressive posture could be taken.”

This post was published at StreetTalkLive on 29 October 2015.

These Charts Show Exactly How the Fed Killed the Housing Market

Don’t believe any headlines that claim there’s a housing ‘recovery’ in the United States. The truth is, there is no single family housing industry to speak of today.
What for generations was a main driver of U. S. economic growth has been brought down by the past seven years of the U. S. Federal Reserve’s zero-interest-rate policy (ZIRP). ZIRP has been a disaster for the U. S. economy, the middle class – just about every facet of American economic life has suffered from this fiscal disaster masquerading as coherent monetary policy.
Today I’m going to show you five charts that tell the story of exactly how much damage the Fed has done to U. S. housing. Most are derived from this week’s release of new home sales data from the U. S. Census Bureau.
You’ll see how the rise in home sales since 2011 has really been a four-year dead cat bounce that hasn’t helped most Americans, hasn’t meaningfully contributed to U. S. economic recovery – and now appears to be stalling.
New Home Sales at Recession Levels
To get a clear picture of where the housing market is now, let’s get out of the media echo chamber that housing data is typically reported in and put things in perspective.

This post was published at Wall Street Examiner by Lee Adler ‘ October 30, 2015.

The GDP Illusion

Imaginary Numbers
Yesterday we came across a Reuters report on the rather pedestrian, to put it mildly, third quarter GDP report. Reported ‘real’ GDP was greatly helped by the GDP deflator once again declining sharply, coming in a full percentage point lower than in the second quarter (1.2% instead of 2.2%). Perceptive readers have probably noticed this pattern already: weak GDP numbers always tend to coincide with outsized declines in the deflator.
A basic problem in this context is that ‘price inflation’ in terms of a general price level cannot possible be measured; or let us rather say, such a measurement simply makes no sense, neither mathematically nor logically.
The main problem is that there is no fixed yardstick which can be used for measurement, as the value of money depends on supply and demand just as other goods do. In other words, one continually changing magnitude is measured with the help of another continually changing magnitude. This is basically nonsense. Moreover, there is an array of heterogeneous goods and services with an array of prices. Adding up cars, potatoes, movie tickets, rents, and so forth, making an ‘average’ out of the result and calling it the ‘general level of prices’ is absurd.
Just as various new calculation methods that have been adopted over the years have resulted in CPI and similar indicators (PCE is used for deflating GDP) becoming ever lower on average, the same methods have resulted in ever higher real GDP numbers. Needless to say, both effects have the side effect of tending to flatter the government’s economic policies and the Fed’s monetary interventions. Surely that is just a coincidence (cough cough).
The effects on GDP are such that it is fair to say that we are dealing with a complete fantasy number. Whatever it reflects, it is not reality and its connection with ‘economic growth’ seems almost coincidental. This is beside the fact that GDP fails to account for the vast bulk of the economy’s production structure, as we have often discussed in these pages. If one wants to know about the actual distribution of economic activity, one needs to consult gross output data.
One effect of this is that many people erroneously assume that consumption is the biggest part of economic activity. It should be clear purely from a common sense perspective that this cannot be true: if we were to continually consume more than we produce, we would soon be living from hand to mouth.

This post was published at Acting-Man on October 30, 2015.

Economic Bad News Continues As The Economy Slides Into A Deep Depression – Episode 805a

The following video was published by X22Report on Oct 30, 2015
Euro zone unemployment surges to 11.8%. UMich sentiment inched up a little the only increase in 4 months. Compensation for Americans has dropped again. Consumer spending is down and declining, personal savings is in decline. The Baltic Dry Index declined to Oct lows. The FED is now preparing the country for negative interest rates. The US gives a huge amount of aid to other countries, this aid money would be better used in America. Iceland jailed the bankers and had the bankers pay the people, Iceland is the only European country that recovered after 2008. US threatens UK if they leave the Euro zone.

OCT 30/AGAIN NO GOLD ENTERS THE COMEX/COMEX GOLD OI DROPS BY 11,700 CONTRACTS/OI IN SILVER STILL REMAINS RELATIVELY HIGH/WINTER APPROACHING AND AUTHORITIES ARE WORRIED ABOUT REFUGEES FREEZING/CHE…

Gold: $1141.50 down $5.70 (comex closing time)
Silver $15.57 up 3 cents
In the access market 5:15 pm
Gold $1142.25
Silver: $15.53
for the Comex gold and silver: OPTIONS EXPIRED Oct 27.
for the LBMA contracts: OPTIONS EXPIRED today
for OTC contracts:OPTIONS EXPIRED today
First, here is an outline of what will be discussed tonight:
At the gold comex today, we had a very poor delivery day, registering 6 notices for 600 ounces. Silver saw 3 notices for 15,000 oz. Both for first day notice.
Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 208.42 tonnes for a loss of 95 tonnes over that period.
In silver, the open interest fell by only 3655 contracts despite silver being down 74 cents in yesterday’s trading. The total silver OI now rests at 172,385 contracts In ounces, the OI is still represented by .861 billion oz or 123% of annual global silver production (ex Russia ex China).
In silver we had 3 notices served upon for 15,000 oz.
In gold, the total comex gold OI fell by a whopping 11,725 to 458,800 contracts as those who play the comex gold/silver are very silly and can never win against the antics of our criminal bankers. We had 6 notices filed for 600 oz today.
We had a huge withdrawal in gold inventory at the GLD to the tune of 2.08 tonnes / thus the inventory rests tonight at 692.26 tonnes. The appetite for gold coming from China is depleting not only gold from the LBMA and GLD but also the comex is bleeding gold. It sure looks like 670 tonnes will be the rock bottom inventory in GLD gold. It looks to me that China has taken the last amounts of physical gold from the GLD. I guess the only place left for China to receive physical gold will be the FRBNY and the comex. In silver, a big withdrawal of 1.001 million oz in silver inventory / Inventory rests at 314.533 million oz.
We have a few important stories to bring to your attention today…

This post was published at Harvey Organ Blog on October 30, 2015.

Fed’s US Debt Bomb

With the Federal Reserve’s first rate-hike cycle in nearly a decade looming, traders are working overtime trying to divine its timing and impact on the markets. They are closely monitoring the same employment and inflation data the Fed will use to start tightening. But there’s another little-discussed concern for the Fed, the solvency of the US government. The Fed’s zero-interest-rate policy has spawned a grave US debt bomb.
Back in late 2008, the US stock markets suffered their first true stock panic since 1907. This once-in-a-century fear superstorm proved catastrophic. In a single month leading into October 2008, the flagship S&P 500 stock index plummeted 30.0%. Over 6/7ths of these losses happened in 2 weeks, a massive 25.9% cratering! That exceeded the threshold for a stock panic, which is a 20% plunge in a couple weeks.
Such extreme selling catapulted fear so high that the S&P 500 had fallen another 11.4% less than a month later! The American central bankers certainly weren’t immune to this epic fear, so they joined the traders in panicking. The Fed feared that the stock panic’s wealth effect, the tendency for weaker stocks to retard consumer spending, would cast the entire US economy over a cliff right into a new great depression.
So the central bankers acted quickly to try and restore confidence through shoring up the devastated stock markets. The Fed slashed its key federal-funds rate two separate times in October 2008 for 50 basis points each. This certainly didn’t stop the extreme stock selling, so the Fed desperately made an enormous 100bp cut in December! That blasted the federal-funds rate to zero, beginning the ZIRP era.
Running a zero-interest-rate policy is an extreme measure that central banks rarely use. It is reserved for dire economic emergencies, and then promptly reversed soon after. Indeed upon panicking into ZIRP, Fed officials promised that highly-distorting condition would be temporary. Yet here we are, 6.9 years later, and ZIRP is still in place! The Fed has lacked the courage to normalize its extreme stock-panic policies.

This post was published at ZEAL LLC on October 30, 2015.

IIF Warns Household Wealth Gains Will Disappear Unless Fed Normalizes Rates Soon

“Easy policy has passed the point of diminishing return and keeping it longer would only increase moral hazard and distort financial markets,” exclaims the Institute of International Finance, warning that the gap between the value of Americans’ holdings of stocks, bonds and other financial assets and the trend growth rate of the economy is still large and not far off the level that prevailed in 2007 before the financial crisis. “The Fed should start to normalize policy as soon as possible,” removing the excess as the ‘gap’ “typically ends up being narrowed by a correction in the stock market.”
As Bloomberg details, household financial assets have ballooned, far outstripping the growth of the economy since 2013, as the Federal Reserve’s ultra-easy monetary policy fuels excesses in the markets…

This post was published at Zero Hedge on 10/30/2015.

Futures Market Fraud

As we begin another Spec rinse cycle on The Comex, we thought it best to remind everyone once again of the fraudulent nature of the short selling that takes place there.
The central component of any futures market is the physical asset that backs the exchange. Though we can’t be certain of exactly how much gold is in the Comex vaults (recall the disclaimer added in June of 2013: we can be certain that it is nowhere near the amount needed to settle the thousands of paper claims written against it.
And it is the unlimited ability of the “market-making” Bullion Banks to create these paper claims that lies at the heart of the matter.
Your latest example of Bullion Bank price manipulation and suppression through the use of this unlimited leverage has occurred this month. First, let’s look at the CME Gold Stocks data as supplied by the CME Group.

This post was published at TF Metals Report on October 30, 2015.

Mother Yellen’s Little Helper – The Rate-Hike Placebo Effect

Americans are increasingly likely to respond positively to a placebo in a drug trial – more so than other nationalities. That’s the upshot of a recently published academic paper that looked at 84 clinical trials for pain medication done between 1990 and 2013. Over that time, Americans reported an almost 30% incremental reduction in pain symptoms when given a sugar pill or other placebo as compared to a 10% reduction for in non-U. S. studies. Why the difference? The paper’s authors suggest that drug advertising – only allowed in New Zealand and America – may be giving trial populations more confidence that a drug – any drug – will work. Also a factor: drug trials are better funded now, and therefore have more participants and go longer. All that may well spark more confidence in trial participants, even those taking placebos. These findings, while bad for drug researchers, does shed some light on our favorite topic: behavioral finance.
Trust and confidence makes placebos work, and those attributes also play a role in the societal effectiveness of central banks. That’s what makes the Fed’s eventual move to higher rates so difficult; even if zero interest rates are more placebo than actual medicine, markets believe they work to support asset prices.
I keep a mental list of underappreciated scientific developments of the 20th century, and near the top is the placebo. While you can argue that the roots and herbs of ancient societies were the first faith-based medicines, modern placebo research dates to a relatively recent 1955. That was the year Harvard research Henry Beecher published ‘The Powerful Placebo’ in the Journal of the American Medical Association. It was essentially a huge ‘You’re doing it wrong’ to the pharmaceutical industry and showed that drug tests needed to be performed against a placebo and dual blind (neither subject nor researcher knows whether they were taking/dispensing a real medicine or a sugar pill).

This post was published at Zero Hedge on 10/30/2015.

Silver’s Bearish Signal

Several days ago, we published a post titled ‘Why Are Precious Metals Declining?’ and stated that precious metals sector has just gone through ‘a rather sharp reversal in sentiment [which] usually tends to signal a correction during uptrends or a potential for another leg down during downtrends. This is unless of course, assets like Silver can continue a sustained rally with a break above the 200 day MA. We continue to track the overall sector very closely…’

This post was published at GoldSilverWorlds on October 30, 2015.

30/10/15: ‘Internet Natives’: Power of Value Creation Power of Value Destruction

A very interesting Credit Suisse survey of some 1,000 people of the tail end of the millennial generation (age 16-25) across the U. S., Brazil, Singapore and Switzerland. Some surprising insights.
Take a look at the following summary:

The results are seriously strange. Around 48% of all respondents use internet for payments transactions, but only 19% on average use it for obtaining financial advice. In other words, convenience drives transactions use, but not analytics demand.

This post was published at True Economics on October 30, 2015.

Gold and Silver Market Morning: Oct-30-2015

Gold Today -New York closed at $1,145.80 down from $1,156.80 at the close on Thursday but then rose to $1,150 in Asia overnight. The LBMA price setting fixed it at $1,147.75 down from $1,159.00. The dollar Index has risen and now stands at 97.11 down from 97.37. The dollar was weakening this morning as London opened, trading against the euro at $1.0993 down from $1.0931. In the euro the fixing was 1,041.75 down from 1,156.52. At New York’s opening gold was trading in the euro at 1,041.35 and at $1,147.20.
Silver Today – The silver price closed at $15.60 down 39 cents on Thursday. At New York’s opening, silver was trading at $15.57.
Gold (very short-term) The gold price will consolidate today, in New York.
Silver (very short-term) The silver price will consolidate today, in New York.
Price Drivers Yesterday saw support damaged with gold falling through that level. The Technicals are now giving an opaque picture. The downside risk appears limited unless gold falls through $1,130. In the euro the gold price rose to 1,046 ahead of London’s opening so the moves in the gold price remain reflective of currency movements. The gold price was not even reflecting U. S. demand and supply or the global picture and or traders and speculators, or demand and supply influences.

This post was published at GoldSeek on 30 October 2015.