• Tag Archives Fed
  • The Return of Sound Money

    On Sunday evening, August 15, 1971, President Nixon told the American people the U. S. would ‘suspend temporarily the convertibility of the dollar into gold or other reserve assets’ as a means of defending the dollar against ‘the speculators.’ This was one part of his New Economic Policy, a phrase borrowed from communist Vladimir Lenin, which included a 90-day freeze on prices and wages, and a 10 percent tax on imports. Gary North points out that Barron’s editor Robert Bleiberg, in a 1974 speech at Hillsdale College, thought the price-wage freeze was perhaps a ploy to distract attention from the ‘unthinkable’ act of severing the dollar’s last connection to gold.
    As North notes, the voters knew nothing about gold and most economists, with their Keynesian pedigree, approved of Nixon’s action. It wasn’t a high-risk move on Nixon’s part.
    Of course, the promised dollar stability resulted instead in a decade of unemployment and inflation. According to the BLS, the price level today is six times higher than it was when Nixon slit our monetary throats on a long-ago midsummer night. Inflation and unemployment began to abate only after President Carter appointed Paul Volcker as Fed chairman in July, 1979. At a press conference on July 25,
    Volcker spoke of price stability. To his way of thinking, the only way to get price stability was to drive up interest rates to the point where the economy stalled, to where people no longer wanted to buy. [Paul Volcker, The Making of a Financial Legend, p.64]

    This post was published at GoldSeek on Tuesday, 15 August 2017.

  • Household Debt At Record Level – Bigger Than China’s GDP

    The economy continues to grow weaker despite all of the Fed, Wall St. and media propaganda to the contrary. The economy is growing weaker due to the deteriorating financial condition of the consumer, which is by far the biggest driver of GDP in the United States. The only way the policy-makers can avoid a systemic collapse is ‘helicopter’ money printing, in which printed cash or digital currency credits is, in some manner, distributed to the populace.
    The Fed reported that non-revolving consumer debt (not including mortgage debt) hit $2.6 trillion at the end of the first quarter. Student loans outstanding hit a record $1.44 trillion. Recall that at least 40% of this debt is in some form of delinquency, default or ‘approved’ non-pay status. Auto loans hit a record $1.2 trillion. Of this, at the very least 30% is subprime. A meaningful portion of the auto debt is of such poor credit quality when it’s issued that it is not even rated. Credit card debt is now over $1 trillion dollars and at a record level. The average outstanding balance per capita is $9600 per card for those who don’t pay in full at the end of the month. Just counting the households with credit card debt balances, the average balance per household is $16,000. The average household auto loan balance for all households with a car loan is over $29,000.
    The data shows a consumer that is buried in debt and will likely begin to default at an accelerating rate this year. In fact, I’d call these statistics an impending economic and financial disaster. Credit card companies are already warning about credit charge-offs. Synchrony (which issues credit cards for Amazon and Walmart) reported that its credit card charge-offs would rise at least 5% in 2017. Capital One (Question: ‘What’s in your wallet?’ – Answer: ‘Not money’) reported that credit card charge-offs soared 28% year over year for Q1. Synchrony, Capital One and Discover combined increased their Q1 provision for bad loans by 36% over last year’s provisions taken.

    This post was published at Investment Research Dynamics on August 14, 2017.

  • Fed’s Dudley Drops Bombshell: Low Inflation ‘Actually Might Be a Good Thing’

    QE unwind in September, ‘another rate hike later this year.’
    The media have been talking themselves into a lather about how the less-than-2% inflation would force the Fed to stop hiking rates. But William Dudley, president of the New York Fed and one of the most influential voices on the policy-setting Federal Open Markets Committee (FOMC), just dropped a stunning bombshell about low inflation – why it might be low and how that ‘actually might be a good thing.’
    The kickoff for unwinding QE appears to be in the can. There’s unanimous support for it on the FOMC. It appears to be scheduled for the September meeting. The market has digested the coming ‘balance sheet normalization.’ Stocks have risen and long-term yields have fallen, and financial conditions have eased further, which is the opposite of what the Fed wants to accomplish; it wants to tighten financial conditions. So it will keep tightening its policy until financial conditions are tightening.
    QE was designed to produce the ‘wealth effect,’ as Bernanke himself explained it to the public, where those with assets get wealthier and then spend some of that wealth in the real economy. Part one worked. Part two didn’t. Now the experiment is over and will be partially unwound. Asset holders are requested to hang on – that’s the message.
    In his interview with the

    This post was published at Wolf Street by Wolf Richter ‘ Aug 15, 2017.

  • VIX Tumbles, Global Stocks And Dollar Rally As Korea Tensions Ease

    Overnight bulletin summary
    Global equities trade higher amid easing geopolitical tensions Pound tumbles on weaker than expected inflation data Today’s calendar includes US retail sales, Empire Fed, import prices, NAHB, and API crude oil inventories Global stocks and US futures are up for a second day, with the VIX sliding 0.65 vols to 11.68 (-5.2%) and haven assets dropping, after a KCNA report report suggested North Korea had pulled back its threat to attack Guam after days of increasingly bellicose “fire and fury” rhetoric with President Trump, and hours after China took its toughest steps to support U. N. sanctions against Pyongyang, while the possibility of a Sino-American trade war was played down. The report, from KCNA on Tuesday, said Kim praised the military for drawing up a ‘careful plan’ to fire missiles toward Guam. Kim was cited by KCNA saying he would watch the U. S.’s conduct ‘a little more.’
    “There is a more relaxed attitude being taken towards the Korean situation in markets. With the report North Korea has put its plans on hold, there is a sense of stepping back from the brink,” Rabobank analyst Lyn Graham-Taylor said.

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

  • Bi-Weekly Economic Review: Ignore The Idiot

    This is a syndicated repost courtesy of Alhambra Investments. To view original, click here. Reposted with permission.
    Of the economic releases of the past two weeks the one that got the most attention was the employment report. That report is seen by many market analysts as one of the most important and of course the Fed puts a lot of emphasis on it so the press spends an inordinate amount of time dissecting it. I don’t waste much time on it myself because it is subject to large revisions and has little predictive capability. In fact, about the only thing about the report that has any relevance is the sign – as in negative or positive. The magnitude really doesn’t matter much. So, just so I don’t upset any conventions let me state that the employment report released since my last update was positive. I think. How positive? I’ll let you know in a year or so when it is fully revised. Besides it was not the most important report of the last two weeks by a long shot.
    I don’t look at the incoming data the way most people do. I don’t pay a lot of attention to the headlines for most reports because I don’t think it really tells you very much. If your reason for monitoring the economy is to, hopefully, have some warning of recession then watching the incoming reports probably won’t do you much good. There are very few individual reports that are highly correlated with the business cycle. And each cycle is a bit different so different metrics become more important. Rather than try to figure all that out, we use market indicators that have proven useful no matter the nature of the cycle. The yield curve and credit spreads tell you pretty much all you need to know. The Chicago Fed National Activity Index, a composite of 85 other indicators, gives a great overall view of the economy and also has a good track record for predicting recession. Watch those three things, ignore the rest and you’ll be way ahead of most investors.

    This post was published at Wall Street Examiner by Joseph Y. Calhoun ‘ August 14, 2017.

  • Government & Revolution – Is it Inevitable?

    I have been warning that as governments move closer to this major event of a Sovereign Debt Crisis which begins next year with the start of the Monetary Crisis Cycle, they historically will ALWAYS, and without exception, bite the hand that has fed them. The object for government is survival of the fittest and that is them. This is never really about helping people as they raise retirement ages, punish the youth with school loans they cannot discharge, and exempt themselves from most laws that apply to us. This is also never about how to properly run the economy for the benefit of all. It always boils down to it being them against us. Throughout history, there has never been even one benevolent government that has ever surrendered power willingly for the good of the country or the people. That has NEVER happened even once. Power has always had to be ripped from their grasp either by the people, an internal coup, or some foreign invader.

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

  • A New Currency Emerges As The Old Currency Withers Away, Welcome To The Transition – Episode 1355a

    The following video was published by X22Report on Aug 14, 2017
    The restaurant industry is experiencing a slow down in traffic and sales even with rising food and drink prices. Trump signs memo looking into the trade agreements with China. From all the indicators that are now out in the public domain the US economy is in a recession even though the Fed has not acknowledged it. IRS reports quarterly taxes are down 40% as more individuals are not paying up. Does the Fed have 6200 tons of gold, we don’t because they will not allow anyone to audit it . Venezuela and many other countries are turning towards cryptocurrencies. The central banks are pushing to stop people from using cryptocurrencies, what we are witnessing is the transition into a new currency, a new system.

  • Citi Chief Economist Fears “Financial Froth” But Thinks “Fed Tightening Is No Big Deal”

    There are few entertaining economists, and fewer still work on Wall Street. Willem Buiter, the chief economist of Citigroup, is one of them. He is not only entertaining, but also outspoken – and his analysis of key economic trends and themes is second to none.
    The Epoch Times spoke with Buiter about Federal Reserve (Fed) interest rate policy and the surprising strength of the euro, as well as the impossibility of a Chinese soft landing.
    The Epoch Times: What is the Fed up to?
    Willem Buiter: Well, there is very little tightening. The Fed has been raising its policy rates, unlike most of the central banks, who’ve been keeping them constant or are still cutting. But in real terms, policy rates are no higher now than they were before – maybe slightly less expansionary than they were, but there’s very little restraint.
    You have the anticipation of balance sheet shrinking being announced probably in September. But that itself is not a major issue for markets in the most liquid assets in the universe.

    This post was published at Zero Hedge on Aug 14, 2017.

  • Dudley Warns “Market’s Rate Hike Expectations Are Unreasonable” Sending Yields, Dec. Odds Higher

    One day after the 5th consecutive miss in US CPI, NY Fed President William Dudley threw currency and eurodollar traders for another loop when he said on Monday that it was not “unreasonable” to think that the central bank would begin trimming its balance sheet in September and sees another rate hike this year – supposedly in December – should economic data hold up, ignoring the message sent from monthly inflation reports.
    In an interview with the AP, Dudely warned that “the expectations of market participants are unreasonable,” when asked if the expectation of the Fed reducing its bond holdings in September was accurate. The news sent the dollar and yields higher, pushing the 10Y from 2.2050% briefly to 2.2230%, although the move was subsequently faded. The news also sent December rate hike odds modestly higher on the day, up to 33% from 25% earlier, after Dudley said that he expects another rate rise as long as economic data meets his expectations. “I would expect – I would be in favor of doing another rate hike later this year.”

    This post was published at Zero Hedge on Aug 14, 2017.

  • Shocking Admission From Global Head Of Strategy: “Our Clients Have Given Up On Valuation As A Metric”

    For all the recent concerns about an “imminent” nuclear war with North Korea (not happening, according to the head of the CIA), which prompted a stunned reaction from Morgan Stanley which earlier today observed the “70% rise in the VIX index over three days, 2% drop in global equities, and more than a few holidays disrupted”, leading it to conclude “Well, That Escalated Quickly“, the market continues to ignore the real risk: the upcoming central bank balance sheet taper which will have a dire and drastic impact on markets according to Citi’s global head of credit product strategy, Matt King:
    Markets seem optimistic that central bank plans to modestly reduce their support for markets in coming months can be achieved without disruption. We are not convinced.
    Borrowing an analogy from developmental psychology, King compares the relationship between the Fed and the market to that between a (failed) parent and a child obsessed with their cell phone.
    When other people’s children behave badly, the temptation is to presume it’s something to do with the parents. But then one day, even if you managed to avoid the terrible twos, your very own adolescent comes downstairs to breakfast with a look that could curdle the milk in its carton, fails even to grunt a response to your cheery good morning, and makes straight for their mobile phone. It shortly becomes clear that the mere fact of your breathing is something they find deeply offensive. Nothing in their previous twelve-or-so years of almost uninterrupted sweetness gave any hint of this. Where on earth did you go wrong?

    This post was published at Zero Hedge on Aug 13, 2017.

  • Technical Scoop – Weekly Update: August 13, 2017

    It hardly seems much of a contest: the world’s most powerful nation both economically and militarily vs. one of the poorest nations on earth but with a strong, or at least large, military. So far, the war has been rhetorical as both sides though their respective leaders hurl superlatives at each other that usually end in one of them being engulfed in a ring of fire. The words, however, have unnerved global markets.
    This past week saw upwards of $1 trillion shaved from global stock markets triggered by Donald Trump’s and Kim Jong Un’s ongoing war of words. The last word has so far gone to Donald Trump who did his usual tweet, asserting that ‘military solutions are now in place, locked and loaded, should North Korea act unwisely.’ Earlier, North Korea had threatened to land a missile near the US Pacific territory of Guam in response to Trump’s promise to unleash ‘fire and fury.’ The world can only shudder at the thought of a nuclear exchange. But words are having an impact as stock markets ‘hurled’ and safe havens of Japanese Yen, Swiss Francs, US Treasuries, and German Bunds and gold jumped higher.
    US and global stock markets had been hurtling ever higher and valuations are near record. A correction was most likely overdue. The war of words and tensions over North Korea was the trigger. How deep the correction goes is anybody’s guess at the moment. Numerous pundits believe that the odds of actual war between the verbal combatants is low, but that a correction was probably overdue and this could result in a buying opportunity.
    The likelihood is that the rhetoric and war of words is liable to continue for some time. Even if North Korea were to launch more missiles into the sea, it most likely would up the ante and rattle markets further. An overvalued market and sabre rattling is a recipe for the correction. Inflation numbers released this past week were benign. As a result, the combination of the sabre rattling and a stumbling market could keep the Fed on the sidelines through the rest of the year. And that is not even getting into the looming fight over the budget, tax reform and the debt ceiling. Also, let’s not forget the ongoing investigation into the Trump campaign and the Russians being conducted by special counsel Robert Mueller.

    This post was published at GoldSeek on 13 August 2017.

  • Is The Fed On The Verge Of Losing Control?

    Dear Black Bag Confidential Reader,
    In the coming weeks, former SEAL sniper Cade Courtley and special operations physician Omar Hamada will each take a turn answering your most pressing survival inquiries.
    So send in your questions! Shoot an email to SPYfeedback@LFB.org and be sure to specify who your question is for.
    Now let’s take a look at this week’s reader mail.
    How do you feel about signage? Apart from a camera, ‘ADT’ and ‘beware of dog,’ do you want to advertise ‘insured by Smith & Wesson’ or ‘trespassers will be shot, survivors will be shot again’?
    – Nils M.
    Signs like the ones you mentioned, Nils, essentially broadcast that there are firearms on the premises – which is both good and bad. Of course, this kind of sign would probably make a criminal think twice before breaking into your home in the middle of the night, because they will assume you are armed.

    This post was published at Laissez Faire on Aug 12, 2017.

  • Is The Yellen Fed Planning To Sabotage Trump’s Presidency?

    Authored by Stefan Gleason via Money Metals Exchange,
    The Federal Reserve can make or break a president.
    Monetary policy influences all financial markets as well as the cycles in the economy. No president wants to have to run for re-election when the stock market and economy are turning down.
    Recall that President George H. W. Bush was sitting on sky-high job approval numbers in 1991 and was expected to coast to victory in his 1992 re-election bid. But then the economy swooned toward recession, giving Bill Clinton the opening he needed.
    Bush later blamed Federal Reserve chairman Alan Greenspan for his defeat. Greenspan had held interest rates too high for too long, Bush complained.
    On the campaign trail in 2016, Donald Trump complained that Fed chair Janet Yellen was trying to help Hillary Clinton by keeping rates near zero and pumping up the stock market with liquidity.
    ‘They’re keeping the rates artificially low so that Obama can go out and play golf in January and say that he did a good job… It’s a very false economy,’ Trump told reporters in September 2016. Later that month in the second presidential debate, he declared, ‘We are in a big, fat, ugly bubble. . . The only thing that looks good is the stock market. But if you raise interest rates even a little bit, that’s going to come crashing down.’

    This post was published at Zero Hedge on Aug 12, 2017.

  • August 11/COT report shows bankers capitulating in silver/gold rises $4.10 and silver up 4 cents/gold and silver withstand another attack by bankers today/Rhetoric increases between North Korea a…

    GOLD: $1287.80 UP $4.10
    Silver: $17.08 up 4 cent(s)
    Closing access prices:
    Gold $1289.50
    silver: $17.11

    This post was published at Harvey Organ Blog on August 11, 2017.

  • Goldman Cuts Rate Hike Odds After 5th Consecutive Inflation Miss

    The Fed is becoming increasingly trapped: despite the FOMC’s “best intentions” to telegraph that the economy is improving with the unemployment rate at a paltry 4.3% – because otherwise it clearly wouldn’t be hiking, right – CPI has now missed consensus estimates for 5 consecutive months, and what worse, the biggest historical driver of inflation in recent years, shelter and rent inflation, appears to have peaked and is now declining. Worse, wage inflation is nowhere to be found, much as one would expect from a bartender and waiter-led “recovery.”

    Of course, never one to miss a scapegoat, earlier today Dallas Fed president Robert Kaplan blamed the lack of inflation on technology, saying at an event in Texas that technological disruption is “a new and powerful structural factor that is influencing inflation” and finally noticing that “technology is increasingly replacing people in the jobs market” while “allowing consumers to change shopping habits, and is limiting the pricing power of businesses. That – in addition to global factors – has an impact on inflation.”

    This post was published at Zero Hedge on Aug 11, 2017.

  • Fed’s Facebook Page Gets Viciously Trolled

    Whomever runs social media for the Federal Reserve learned a tough lesson about the cruelty of the internet this week.
    The Fed’s Facebook page got wickedly trolled after the central bank posted a simple warning about potential scams.
    The post seemed innocent enough. The Fed simply wanted to warn people about scammerssending out emails that claim to be from the Fed.
    The very first comment gave a pretty good indication as to how this was going to go.
    Whether it is or isn’t from the federal reserve the answer is yes…it is a scam.’
    From there, people just piled on.

    This post was published at Schiffgold on AUGUST 10, 2017.

  • How to Cash In When the Fed’s Sweetheart Deal with the World’s Biggest Banks Turns Sour

    I recently showed you why ‘don’t fight the Fed’ is likely the most profitable investment advice you can get.
    Now I’m going to show you why it works so well.
    And while I do that, I’m going to blow the door off the hinges and expose how the Federal Reserve’s outsized influence and tight relationships with some of the planet’s biggest, most powerful banks can make or break markets…
    …and lead you to some of the biggest gains you’ve ever seen: 100% sure money.
    Meet the Fed’s ‘Accomplices
    Big surprise: the U. S. Federal Reserve does things a little differently than your ‘usual’ bank.
    You see, the Fed handpicks a small group of (very) privileged dealers to trade with.
    They are officially called ‘Primary Dealers,’ and today there are 23 of them. These banks are based in Canada, France, Switzerland, Japan, Germany, the United Kingdom, and of course, the United States. The foreign banks the Fed deals with maintain a presence in New York City.

    This post was published at Wall Street Examiner on August 10, 2017.