Yesterday’s “Watershed” Central Bank Announcement Which Everybody Missed

In what may have been a watershed moment in monetary policy – which awkwardly was missed by almost everyone as a result of the concurrent launch of the latest North Korean ballistic missile which immediately drowned out all other newsflow – late on Thursday, the Bank of Canada held a conference on inflation targeting and monetary policy titled “Bank of Canada Workshop ‘Monetary Policy Framework Issues: Toward the 2021 Inflation-Target Renewal” in which, in a stunning shift of monetary orthodoxy, BoC Senior Deputy Governor Carolyn A. Wilkins said that Canada was open to changes in the BoC mandate.
WILKINS: OPEN TO LOOKING AT `SENSIBLE’ ALTERNATIVES TO MANDATE Or in other words, lowering or outright abolishing the central bank’s inflation target, or explicitly targeting financial conditions and asset prices.
While still early in the process, the BOC may be setting a precedent, one which other DM central banks may have no choice but to follow: If the Bank of Canada is going to look at alternatives to their mandate (with an emphasis on inflation), it – as several trading desks have suggested – could become the first central bank to officially change its mandate to reflect financial conditions that are too loose in the context of the current low r-star lowflation environment.
In practical terms, this would mean that instead of seeking chronically easier conditions to hit legacy inflation targets around ~2.0% while inflating ever greater asset bubbles, one or more central banks could simply say that 1.5% (or less) is sufficient for CPI and call it a day, in the process soaking up record easy financial conditions and bursting countless asset bubbles. In the context of a “new supply paradigm” in retail (where even FOMC members now blame Amazon for lack of inflation) and energy (same but with OPEC) which appears to be gaining traction within central banks, as well as frustration with distortion in asset markets, It would make much sense for the Fed to lower the inflation target to 1.5%, declare victory, and normalize policy.
Why? Because as several banks noted after the BoC conference, we know that central banks world-wide are concerned about the size of their balance sheets and associated dysfunctionality in government and other bond markets, and the ever-increasing risks from the ultimate unwind as the QE programs continue to grow in a war against inflation where the victory looks increasingly Pyrrhic. Furthermore, negative rates have caused money markets to become dysfunctional and less efficient, which could be a structural issue “if the temporary was allowed to become permanent.”

This post was published at Zero Hedge on Sep 15, 2017.

SWINDLING FUTURITY

‘The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.’ ‘ Thomas Jefferson

Yesterday the government reported a ‘modest’ August budget deficit of $108 billion. That’s one month folks. This is another example of how the government and their mainstream media mouthpieces portray horrifically bad, extremely abnormal financial data as normal and expected. They pretend everything that has happened since 2008 is just standard operating procedure. They follow the Big Lie theory to the extreme. The masses have been so dumbed down, desensitized, and taught to believe delusions, they can’t distinguish the abnormal from the normal.
Those in power pretend near zero interest rates eight years after the recession was supposedly over is normal. They pretend $500 billion to $1.4 trillion annual deficits are normal. They pretend 20% unemployment is really 4.4%. They pretend the stock market is at all-time highs due to an improving economy rather than central bank easy money and corporate stock buybacks. They pretend $20 trillion of debt and $200 trillion of unfunded welfare promises is no problem. We are living in the grand delusion.

This post was published at The Burning Platform on Sept 14, 2017.

BofA: $2 Trillion YTD In Central Bank Liquidity Is Why Stocks Are At Record Highs

One week ago, in his weekly “flow report“, BofA’s Michael Hartnett looked at the “Disconnect Myth” between rising stocks and sliding yields and succinctly said that there is “no disconnect between stocks & bonds.”

Why? The reason for low yields and high stocks was simple: trillions in central bank intervention. The result is an era of lower yields & higher stocks, or as the chart above shows, an era in which the alligator jaws of death are just waiting for their moment to shine. Here are the three phases:
1981-2009 (disinflation/Fed put), 10-year Treasury yields down from 15.8% to 3.9% = 10.7% annualized S&P 500 returns; 2009-2016 (Fed QE/global ZIRP) yields down from 3.9% to 2.4% = 14.9% SPX ann. return; 2017 YTD (ECB/BoJ QE) yield down to 2%, SPX annualizing 17.5%. Fast forward to today, when in the interim period stocks have continued to rise, hitting new all time highs in both the US and globally, oblivious of any news and fundamental developments – as one would expect from a massive asset price bubble, and in line with what Hartnett has dubbed a Liquidity Supernova.

This post was published at Zero Hedge on Sep 15, 2017.

Market Talk- September 15th, 2017

North Korea spooked markets yet again by launching a missile that reported flew over Japan, which came a day after North Korea claimed it would sink Japan. The events were short-livid however and after a brief flight to safety in gold, treasuries and the Yen markets quickly corrected back. The JPY traded into the low 110’s but by US trading had drifted into the 111’s. Gold did have a bid in Asian trading but by the late US session was testing $1320. The recovery had already taken place by the time Asia closed with the Nikkei closing in positive territory (+0.55%) with exporters and financials setting the pace. The Australian ASX closed down -0.8% led by industrials and miners. SENSEX and Hang Seng were both little changed but we saw a positive return for the core Shanghai index closing up +0.55% as the Yuan drifted again.

This post was published at Armstrong Economics on Sep 15, 2017.

Debt Ceiling Delusions and Dollar Difficulties

Guest Post from Clint Siegner, Money Metals Exchange
Those who paid any attention to the financial press last week saw the following narrative; President Donald Trump betrayed Republicans by cutting a deal with Democrats Nancy Pelosi and Charles Schumer. They agreed to punt on the borrowing cap until December and spend $15 billion for hurricane relief.
Americans are supposed to conclude that Trump is flip-flopping, and that Republicans aren’t responsible. Dig just a little, and you’ll find only one of those things is true.

This post was published at Deviant Investor on September 15, 2017.

1987 Versus 2017: Will History Repeat Or Just Echo?

Authored by Sara Potter via FactSet,
Last week, I detailed the various factors leading up to the stock market crash of October 19, 1987. As we approach the 30-year anniversary of Black Monday, are there signs that the bull market of 2017 could end in the same way? Let’s compare the financial, economic, and political factors now and then to paint a better picture.

The U. S. stock market is currently in the ninth year of a bull market. As of close September 13, the S&P 500 is up 11.6% since the beginning of 2017 and 269% since March 9, 2009, the beginning of the current bull market. Through its peak on October 5, 1987, the S&P 500 was up 35.5% year-to-date, capping off a five-year bull run, during which the index surged by 220% (starting August 12, 1982).

This post was published at Zero Hedge on Sep 15, 2017.

SEPT 15/YOUR USUAL FRIDAY WHACKING ON GOLD AND SILVER/GOLD DOWN $4.25 AND SILVER WAS DOWN 13 CENTS/OPEN INTEREST IN SILVER CONTINUES TO RISE COUPLED WITH ANOTHER 845,000 OZ GAIN IN AMOUNT STANDIN…

GOLD: $1321.40 DOWN $4.25
Silver: $17.64 DOWN 13 CENT(S)
Closing access prices:
Gold $1320.30
silver: $17.61
SHANGHAI GOLD FIX: FIRST FIX 10 15 PM EST (2:15 SHANGHAI LOCAL TIME)
SECOND FIX: 2:15 AM EST (6:15 SHANGHAI LOCAL TIME)
SHANGHAI FIRST GOLD FIX: $1334.30 DOLLARS PER OZ
NY PRICE OF GOLD AT EXACT SAME TIME: $1331.30
PREMIUM FIRST FIX: $3.00
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
SECOND SHANGHAI GOLD FIX: $1332.13
NY GOLD PRICE AT THE EXACT SAME TIME: $1329.95
Premium of Shanghai 2nd fix/NY:$2.18

This post was published at Harvey Organ Blog on September 15, 2017.

21st Century Shoe-Shine Boys

Anecdotal Flags are Waved
‘If a shoeshine boy can predict where this market is going to go, then it’s no place for a man with a lot of money to lose.’
– Joseph Kennedy
It is actually a true story as far as we know – Joseph Kennedy, by all accounts an extremely shrewd businessman and investor (despite the fact that he had graduated in economics*), really did get his shoes shined on Wall Street one fine morning, and the shoe-shine boy, one Pat Bologna, asked him if he wanted a few stock tips. Kennedy was amused and intrigued and encouraged him to go ahead. Bologna wrote a few ticker symbols on a piece of paper, and when Kennedy later that day compared the list to the ticker tape, he realized that all the stocks on Bologna’s list had made strong gains. This happened a few months before the crash of 1929.
Kennedy sold all his stock market investments over the next several months and put the money in what he considered the safest banks. He had already made a fortune in the bull market, and reportedly augmented it later by going short in the bear market. We are pretty sure his meeting with the market-savvy shoe-shine boy wasn’t the only reason for which he decided to sell. He did mention the anecdote later in life though and the experience served to solidify a conclusion he had already arrived at: It was very late in the game and the market was likely to crack badly fairly soon.

This post was published at Acting-Man on September 16, 2017.

Is This President Trump’s “Read My Lips” Moment?

Authored by Patrick Buchanan via Buchanan.org,
‘Having cut a deal with Democrats for help with the debt ceiling, will Trump seek a deal with Democrats on amnesty for the ‘Dreamers’ in return for funding for border security?’
The answer to that question, raised in my column a week ago, is in. This week, President Donald Trump cut a deal with ‘Chuck and Nancy’ for amnesty for 800,000 recipients of the Deferred Action for Childhood Arrivals program who came here illegally as youngsters, in return for Democratic votes for more money for border security.
According to preening Minority Leader Pelosi, the agreement contains not a dime for Trump’s Wall, and the ‘Dreamers’ are to be put on a long glide ‘path to U. S. citizenship.’
Trump denies this is amnesty, and says the Wall comes later.

This post was published at Zero Hedge on Sep 15, 2017.

America Is Going Broke At Mach 30 “And No One Cares”

Authord by MN Gordon via EconomicPrism.com,
‘No one really cares about the U. S. federal debt,’ remarked a colleague and Economic Prism reader earlier in the week. ‘You keep writing about it as if anyone gives a lick.’
We could tell he was just warming up. So, we settled back into our chair and made ourselves comfortable.
‘The voters certainly don’t care about the federal debt,’ he continued. ‘They keep electing the same spendthrifts to office.
‘And the politicians know the voters don’t care. They also know that making more and more promises is the formula for getting reelected.
‘Deep down, the aging masses know they need massive amounts of government debt to pay their social security, medicare, and disability checks. On top of that, many of the so-called gainfully employed are really on corporate welfare; they hang their hats on government contracts to fund their paychecks.
‘You know as well I do how this crazy debt based fiat money system works. The debt must perpetually increase or the whole financial system breaks down. The best we can hope for is that the ongoing currency debasement merely leads to a subtle erosion of living standards. That’s the best-case scenario.
‘But, again, no one except maybe a handful of your readers’ gives a rip about the federal debt. Plus, if you’re gonna keep writing about it you need to use better terminology.

This post was published at Zero Hedge on Sep 15, 2017.

With a Central Bank, Bank “Deregulation” Can Be a Bad Thing

Leading Federal Reserve policymaker Stanley Fischer has hit out at plans to unwind banking regulation, calling it a “terrible mistake.”
President Donald Trump and republican politicians have advocated the repeal of Dodd Frank, a major piece of post-crisis legislation, and the loosening of some capital and liquidity requirements in a bid to ease banks’ ability to lend.
In an interview with the Financial Times on August 16, 2017, Fischer said that loosening capital and liquidity requirements is dangerous and could lead to a new economic crisis. “I find that really, extremely dangerous and extremely short-sighted.”
While Fischer is not a friend of a free market, in this case I am in agreement with Fischer’s comment.
A True Free Financial Environment vs A Central-Bank Controlled Financial System The proponents for less control in financial markets hold that fewer restrictions imply a better use of scarce resources, which leads to the generation of more real wealth.
It is true that a free financial environment is an agent of wealth promotion through the efficient use of scarce real resources, while a controlled financial sector stifles the process of real wealth formation. The proponents of deregulated financial markets have overlooked the fact that the present financial system has nothing to do with a free market. What we have at present is a financial system within the framework of the central bank, which promotes monetary inflation and the destruction of the process of real wealth generation through fractional reserve banking. In the present system the more unrestricted the banks are the more money out of ‘thin air’ generated and hence greater damage inflicted upon the wealth generation process. (With genuine free banking (i.e., the absence of the central bank) the potential for the creation of money out of ‘thin air’ is minimal).

This post was published at Ludwig von Mises Institute on Sept 15, 2017.

Government Nearing Default on Debt to Russia

The government in question is that of Venezuela, which is nearing default as it is running out of resources to pay back the money it owes to its Russian creditors according to the terms it accepted when it chose to borrow money from them.
MOSCOW, Sept 8 (Reuters) – Russian Finance Minister Anton Siluanov told reporters on Friday that Venezuela is having problems with fulfilling its obligations on its debt to Russia.
‘We have a request from our colleagues in Venezuela to do a restructuring,’ Siluanov said.
Venezuela owed Russia $2.84 billion as of September last year.
The Venezuelan government is now scrambling to restructure its foreign-held liabilities following sanctions put on the country’s President Nicolas Maduro and 20 other individuals, and also the Venezuelan government-owned oil company by the US Treasury Department after Maduro rigged an election to select representatives to rewrite the country’s constitution in his favor.

This post was published at FinancialSense on 09/15/2017.

Industrial Production Falls -0.9% MoM In August (Worst Since May 2009), But +1.54% YoY [Hurricane Harvey?]

This is a syndicated repost courtesy of Snake Hole Lounge. To view original, click here. Reposted with permission.
US Industrial Production fell -0.9% MoM in August, the worst decline since May 2009 during The Great Recession.

The Federal Reserve blamed the decline on Hurricane Harvey.
Hurricane Harvey, which hit the Gulf Coast of Texas in late August, is estimated to have reduced the rate of change in total output by roughly 3/4 percentage point.

This post was published at Wall Street Examiner by Anthony B Sanders ‘ September 15, 2017.

Suddenly, ‘De-Dollarization’ Is A Thing

For what seems like decades, other countries have been tiptoeing away from their dependence on the US dollar. China, Russia, and India have cut deals in which they agree to accept each others’ currencies for bi-lateral trade while Europe, obviously, designed the euro to be a reserve asset and international medium of exchange.
These were challenges to the dollar’s dominance, but they weren’t mortal threats.
What’s happening lately, however, is a lot more serious. It even has an ominous-sounding name: de-dollarization. Here’s an excerpt from a much longer article by ‘strategic risk consultant’ F. William Engdahl:
Gold, Oil and De-Dollarization? Russia and China’s Extensive Gold Reserves, China Yuan Oil Market
(Global Research) – China, increasingly backed by Russia – the two great Eurasian nations – are taking decisive steps to create a very viable alternative to the tyranny of the US dollar over world trade and finance. Wall Street and Washington are not amused, but they are powerless to stop it. So long as Washington dirty tricks and Wall Street machinations were able to create a crisis such as they did in the Eurozone in 2010 through Greece, world trading surplus countries like China, Japan and then Russia, had no practical alternative but to buy more US Government debt – Treasury securities – with the bulk of their surplus trade dollars. Washington and Wall Street could print endless volumes of dollars backed by nothing more valuable than F-16s and Abrams tanks. China, Russia and other dollar bond holders in truth financed the US wars that were aimed at them, by buying US debt. Then they had few viable alternative options.

This post was published at DollarCollapse on SEPTEMBER 15, 2017.

Why Saudi Aramco Delayed Its IPO

Authored by Cyril Widdershoven via OilPrice.com,
The long-awaited Saudi Aramco IPO, scheduled for mid-2018, could be delayed to 2019.

International news reports have stated that the Saudi government is currently putting together contingency plans for a possible delay to the biggest IPO ever. The listing of 5 percent of Saudi Arabia’s crown jewel, the world’s largest oil company Saudi Aramco, could bring in around $300-$400 billion, based on a valuation of Aramco at between $1.5-2 trillion. The cash generated by the IPO has already been earmarked for the coffers of the Saudi Public Investment Fund (PIF), to be used as financial support for Saudi Vision 2030, the economic diversification program proposed and pushed for by Crown Prince Mohammed Bin Salman (MBS).

This post was published at Zero Hedge on Sep 15, 2017.

UMich Consumer Confidence Slides On Loss Of ‘Hope’

University of Michigan’s headline consumer confidence index slipped lower in Septemeber (prelim) from 96.8 to 95.3 driven by a tumble in ‘expectations’ that offset a burst in ‘current conditions’ to its highest since Nov 2000!
As Bloomberg reports, the figures are the first to broadly capture the effects of Harvey and Irma, which caused more than $100 billion in damage and sparked a jump in claims for unemployment benefits. According to the survey, 9 percent of respondents spontaneously said the storms would hurt the economy. The sentiment index was unchanged among consumers who didn’t mention the storms.
Across all interviews in early September, 9% spontaneously mentioned concerns that Harvey, Irma, or both, would have a negative impact on the overall economy.

This post was published at Zero Hedge on Sep 15, 2017.