• Tag Archives Federal Reserve
  • Bitcoin’s ‘Message’ & Tax Reform’s ‘Hidden Agenda’

    Authored by James Howard Kunstler via Kunstler.com,
    The hidden agenda in the so-called tax reform bill is to act as stop-gap quantitative easing to plug the ‘liquidity’ hole that is opening up as the Federal Reserve (America’s central bank) makes a few gestures to winding down its balance sheet and ‘normalizing’ interest rates. Thus, the aim of the tax bill is to prop up capital markets, and the apprehension of this lately is what keeps stocks making daily record highs. Okay, sorry, a lot to unpack there.
    Primer: quantitative easing (QE) is a the Federal Reserve’s weasel phrase for its practice of just creating ‘money’ out of thin air, which it uses to buy US Treasury bonds (and other stuff). The Fed buys this stuff through intermediary Too Big To Fail banks which allows them to cream off a cut and, theoretically, pump the ‘money’ into the economy. This ‘money’ is the ‘liquidity.’ As it happens, most of that money ends up in the capital markets. Stocks go up and up and bond yields stay ultra low with bond prices ultra high. What remains on the balance sheets are a shit-load of IOUs.
    The third round of QE was officially halted in 2014 in the USA. However, the world’s other main central banks acted in rotation – passing the baton of QE, like in a relay race – so that when the US slacked off, Japan, Britain, the European Central Bank, and the Bank of China, took over money-printing duties. And because money flies easily around the world via digital banking, a lot of that foreign money ended up in ‘sure-thing’ US capital markets (as well as their own ). Mega-tons of ‘money’ were created out of thin air around the world since the near-collapse of the system in 2008.

    This post was published at Zero Hedge on Dec 8, 2017.

  • Can You Trust this Stock Market? Warning Signs Grow.

    Some of the same warning signs that emerged before the 1929 to 1933 market crash, the tech mania crash of 2000, and the epic Wall Street meltdown of 2008 are flashing red.
    If you have significant amounts of your 401(k) invested in equity mutual funds (that is, those invested in stocks), it’s time to take an objective appraisal of today’s market versus historic benchmarks.
    This is also a good time to remember that markets have lost as much as 50 percent of their value from peak to trough in the last 20 years. If that’s more pain than you’re prepared to suffer, it may be time to trim back your exposure.
    We’ll get to the specifics on today’s market shortly, but first some necessary background.
    In the market crash of 1929 to 1933, the stock market lost 90 percent of its value. It did not return to the level of 1929 until 1954 – a quarter of a century later.
    There is some basis to speculate that the bear market of October 2007 to March 2009, which included the epic Wall Street crash of 2008, would have produced far more serious pain than the 50 percent retracement in the S&P 500 that did occur – perhaps pain on the level of 1929 to 1933 – had it not been for the secret $16 trillion in almost zero-interest loans that the Federal Reserve Bank of New York sluiced into the major brokerage firms on Wall Street – which was on top of the hundreds of billions of dollars in bailout funds that were authorized by Congress.

    This post was published at Wall Street On Parade By Pam Martens and Russ Marte.

  • US Homelessness Rate Rose This Year For First Time Since 2010

    Here’s one statistic about the US economy that you probably won’t find in President Trump’s twitter feed.
    Thanks to a surge in homelessness centered around several large west coast cities, the overall rate of homelessness in the US ticked higher this year, the first increase since 2010, according to a survey from the Department of Housing and Urban Development.
    The U. S. Department of Housing and Urban Development released its annual Point in Time count Wednesday, a report that showed nearly 554,000 homeless people across the country during local tallies conducted in January. That figure is up nearly 1 percent from 2016.
    Of that total, 193,000 people had no access to nightly shelter and instead were staying in vehicles, tents, the streets and other places considered uninhabitable. The unsheltered figure is up by more than 9 percent compared to two years ago.
    Increases are higher in several West Coast cities, where the explosion in homelessness has prompted at least 10 city and county governments to declare states of emergency since 2015.
    The homelessness crisis is only one byproduct of the burgeoning wealth inequality in the US caused by the Federal Reserve’s decision to pump trillions of dollars of ‘stimulus’ into the markets.
    Central-bank money printing has caused asset valuations to balloon while wages for everyone but the most highly skilled workers have stagnated, as the chart below illustrates.

    This post was published at Zero Hedge on Dec 7, 2017.

  • Heartache Tonight! Bank C&I Lending Falls To 1.2% YoY (Auto Loans Fall To 2.1% YoY, Real Estate Loans Fall To 5.1% YoY)

    We’ve got a heartache tonight … in terms of bank lending. Particularly commercial and industrial lending (C&I) and auto loans. Particularly since bank lending is the primary transmission vehicle for Federal Reserve policies.
    C&I lending growth fell to 1.2% YoY, which has historically meant that a recession is close at hand.

    This post was published at Wall Street Examiner on December 4, 2017.

  • Fed Chair Janet Yellen Urges Congress to Monitor U.S. Debt As She Steps Down (NOW A Warning??)

    This is a syndicated repost courtesy of Snake Hole Lounge. To view original, click here. Reposted with permission.
    Federal Reserve Chair Janet Yellen’s final speech to Congress (Joint Economic Commitee) reminded me of the scene in the movie Death Becomes Her where Meryl Streep swallows a magic potion and Isabella Rosselini then says ‘Now a warning.’
    Yes, Yellen warned Congress that they should monitor the US debt load, now at $20.6 trillion, up from $9.5 trillion in Q2 2008. She also called on Congress to adopt policies that will promote investment, education and infrastructure spending.
    Yes, US public debt outstanding has more than doubled since Team Bernanke/Yellen began quantitative easing (QE) back in September 2008.

    This post was published at Wall Street Examiner on December 4, 2017.

  • Walking in Their Footsteps: Powell Will Maintain Status Quo at Fed

    It looks like Trump’s pick to chair the Federal Reserve plans to walk in the footsteps of his predecessors.
    In other words, we can expect the legacy of Ben Bernanke and Janet Yellen to continue unbroken. That means a continuation of interventionist monetary policy, artificially low interest rates into the foreseeable future, and plenty of quantitative easing when the time comes.
    Yes. The new boss looks a lot like the old boss.
    Jerome Powell testified before the Senate Banking Committee on Tuesday. The New York Times described it as a ‘relatively placid affair.’
    Maintaining the status quo doesn’t set off too many fireworks.
    Democrats seem OK with the pick. Interestingly, the people who were against Powell when he was an Obama appointee are OK with him now that he’s a Trump appointee.
    Some Democrats have indicated they might oppose the nomination. But, importantly, Mr. Powell drew little opposition from conservative Republicans who opposed both his nomination as a Fed governor in 2012 and his reappointment in 2014. Senator Dean Heller, a Nevada Republican who voted against Mr. Powell both times, said he was trying to get to yes.’

    This post was published at Schiffgold on NOVEMBER 29, 2017.

  • Dollar Jumps As Yellen Goes Full Bernanke: Warns “Asset Valuations Are High” But Risk Is “Contained”

    Yes, departing Fed chair Janet Yellen used the ‘c’ word…
    Federal Reserve Chair Janet Yellen, in prepared remarks ahead of what may be her last appearance before Congress as head of the central bank, somewhat gloated at the steadily brightening picture for the U. S. economy she has left behind for Jay Powell (while downplaying the risks of financial instability).
    ‘The economic expansion is increasingly broad based across sectors as well as across much of the global economy,” Yellen said in prepared testimony to the bicameral Joint Economic Committee on Wednesday in Washington. ‘I expect that, with gradual adjustments in the stance of monetary policy, the economy will continue to expand and the job market will strengthen somewhat further, supporting faster growth in wages and incomes.”

    This post was published at Zero Hedge on Nov 29, 2017.

  • The Flattening Yield Curve Is Not a Threat to US Equities

    Summary: On its own, a flattening yield curve is not an imminent threat to US equities. Under similar circumstances over the past 40 years, the S&P has continued to rise and a recession has been a year or more in the future. Investors should expect the yield curve to flatten further in the months ahead.
    Investors are concerned about the flattening yield curve. Enlarge any image by clicking on it.
    The yield curve measures the gap between long and short-term treasuries. The curve “flattens” when either short-term rates rise faster than long-term rates, or when long-term rates fall faster than short-term rates. The standard interpretation is that a flattening curve means that the bond market is pessimistic about future growth (low long rates) while the Federal Reserve is overly worried about inflation (rising short rates). The bond market’s view is typically more relevant.
    Our monthly macro updates (here) start with the latest yield curve, with the note that the yield curve has ‘inverted’ a year ahead of every recession in the past 40 years (arrows). With the yield curve still 60 basis points away from inversion, the current expansion will probably last well into 2018, at a minimum. In short, the risk of an imminent recession is low.

    This post was published at FinancialSense on 11/27/2017.

  • 2017: The Year of the Bubbles

    2017 may well go down in history as the year of the bubble.
    We’ve talked a lot about the stock market bubble in recent months, but there are a whole slew of bubbles floating around out there – most of them created by loose monetary policy that has dumped billions of dollars of easy money into the world’s financial systems over the last eight years.
    Even the Federal Reserve has taken notice of the stock market bubble and seems to be a bit spooked by the monster it created. According to the most recent FOMC minutes released by the Fed, several participants ‘expressed concerns about a potential buildup of financial imbalances,’ in light of ‘elevated asset valuations and low financial market volatility.’
    But the stock market isn’t the only bubble that’s blown up over the last year. Earlier this month, Mint Capital strategist Bill Blain warned us about the bond bubble.

    This post was published at Schiffgold on NOVEMBER 27, 2017.

  • The Dumbest Dumb Money Finally Gets Suckered In

    Corporate share repurchases have turned out to be a great mechanism for converting Federal Reserve easing into higher consumer spending. Just allow public companies to borrow really cheaply and one of the things they do with the resulting found money is repurchase their stock. This pushes up equity prices, making investors feel richer and more willing to splurge on the kinds of frivolous stuff (new cars, big houses, extravagant vacations) that produce rising GDP numbers.
    For politicians and their bureaucrats this is a win-win. But for the rest of us it’s not, since the debts corporations take on to buy their own stock at market peaks tend to hobble them going forward, leading eventually to bigger share price declines than would otherwise be the case.
    The ultimate loser? The only people traditionally willing to buy in after corporations are finished overpaying for their stock: Retail investors, of course.
    Let’s see how it’s playing out this time.
    First, corporations spent several years elevating stock prices with share repurchases. Note the near perfect correlation between the two lines:

    This post was published at DollarCollapse on NOVEMBER 26, 2017.

  • Kunstler Warns “There Is Some Kind Of Revolution Coming To American Life”

    Authord by James Howard Kunstler via Kunstler.com,
    What if the fun and games of 2017 are over?
    The hidden message behind the sexual harassment freak show of recent weeks is that nothing else is sufficiently serious to occupy the nation’s attention. We’re living in the Year of Suspended Reality, stuck in the sideshow and missing the three-ring circus next door in the big tent.
    It probably all comes down to money. Money represents the mojo to keep on keeping on, and there is probably nothing more unreal in American life these days than the way we measure our money – literally, what it’s worth, and what everything related to it is worth.
    So there is nothing more unreal in our national life than the idea that it’s possible to keep on keeping on as we do.
    The weeks ahead may be most illuminating on this score. The debt ceiling suspension runs out on December 8, around the same time that the tax reform question will resolve one way or another. The debt ceiling means that the treasury can’t issue any more bonds, bills, or notes. That is, it can’t borrow any more money to pretend the government can keep running. Normally these days (and it’s really very abnormal), the treasury pawns off paper IOUs to the Federal Reserve and the Fed makes digital entries on various account ledgers that purport to be ‘money.’ And, by the way, the Fed is a consortium of private banks not a department of government – which is surely one of a thousand ways that the public is confused and deceived about what condition our condition is in, as the old song goes.

    This post was published at Zero Hedge on Nov 24, 2017.

  • Trusting the Fed: Will the White Knight Save the Day?

    As we reported last week, investors are in an era of ‘irrational exuberance.’
    The US stock market is at all-time highs. Meanwhile, market volatility is at lows not seen since the 1990s. In an odd juxtaposition of seemingly contradictory points of view, investors realize the market is overvalued, but at the same time, they believe it will continue to go up. According to a Bank of Ameria survey, 56% of money managers project a ‘Goldilocks’ economic backdrop of steady expansion with tempered inflation.
    In an article published at the Mises Wire, economist Thorsten Polleit adds some further analysis and asks a critical question.
    Credit spreads have been shrinking, and prices for credit default swaps have fallen to pre-crisis levels. In fact, investors are no longer haunted by concerns about the stability of the financial system, potential credit defaults, and unfavorable surprises in the economy or financial assets markets.
    ‘How come?’
    In simplest terms, most investors now believe the Federal Reserve will ride in like a white knight and save the day.
    After all, the Fed saved the day before. Surely it will do it again. Peter Schiff put it this way during an interview on The Street.

    This post was published at Schiffgold on NOVEMBER 22, 2017.

  • A Look At Which Students Are Most Likely To Default On Their Student Debt

    Since the early 2000’s the amount of student debt outstanding has grown exponentially, along with annual tuitions, and now stands at nearly $1.5 trillion. Moreover, and not terribly surprisingly, defaults on that growing mountain of student debt have also surged as graduating students quickly discover that they just dropped $200,000 on a near-zero ROIC investment.
    But while a lot of attention is given to the growing default rates on this particular future economic disaster in the making, less time is spent trying to understand which students are most susceptible to default. That said, the following series of charts from the Federal Reserve Bank of New York help to shed some light on that particular topic.

    This post was published at Zero Hedge on Nov 21, 2017.

  • Goodbye American Dream: The Average U.S. Household Is $137,063 In Debt, And 38.4% Of Millennials Live With Their Parents

    Once upon a time the United States had the largest and most vibrant middle class in the history of the world, but now the middle class is steadily being eroded. The middle class became a minority of the population for the first time ever in 2015, and just recently I wrote about a new survey that showed that 78 percent of all full-time workers in the United States live paycheck to paycheck at least part of the time. But most people still want to live the American Dream, and so they are going into tremendous amounts of debt in a desperate attempt to live that kind of a lifestyle.
    According to the Federal Reserve, the average U. S. household is now $137,063 in debt, and that figure is more than double the median household income…
    The average American household carries $137,063 in debt, according to the Federal Reserve’s latest numbers.
    Yet the U. S. Census Bureau reports that the median household income was just $59,039 last year, suggesting that many Americans are living beyond their means.
    As a nation, we are completely and utterly drowning in debt. U. S. consumers are now nearly 13 trillion dollars in debt overall, and many will literally spend the rest of their lives making debt payments.

    This post was published at The Economic Collapse Blog on November 21st, 2017.

  • This Flat Yield Curve Is No Greenspan Conundrum (Low Inflation Prevails)

    This is a syndicated repost courtesy of Snake Hole Lounge. To view original, click here. Reposted with permission.
    Fed Study Says San Francisco Fed research blames low inflation, neutral rate There’s some risk that term premium could rise abruptly (Bloomberg) – This isn’t Alan Greenspan’s yield curve.
    The gap between short and longer-term interest rates has been narrowing even as the Federal Reserve raises its policy rate, a trend that echoes the so-called ‘flattening’ of the curve between June 2004 and December 2005. Then-Fed Chairman Greenspan called the mid-2000s episode a ‘conundrum,’ but the leveling out is no mystery this time around, Federal Reserve Bank of San Francisco researcher Michael Bauer writes in a note called the Economic Letter. Low inflation and neutral interest rates as well as political uncertainty are all weighing on longer-dated bond yields, keeping them low even as the Fed boosts the cost of borrowing in the near-term, Bauer writes. That’s important, because it means that if price pressures pick up quickly, investors could begin to demand better compensation for holding longer-dated securities – reversing the flattening and potentially dinging stock market valuations, which are based partly on the low level of yields in the bond market.

    This post was published at Wall Street Examiner by Anthony B Sanders ‘ November 20, 2017.

  • Yellen Confirms She Will Step Down When New Fed Chair Sworn In

    Federal Reserve Chair Janet Yellen says she will step down once her successor is sworn into the office, resolving a key question as to whether she would stay on in a diminished role.
    Yellen could technically stay on as a governor even after stepping down as the institution’s leader, because her term as governor does not end until January 31, 2024.
    Her decision to leave will give Trump an additional spot to fill on the Fed’s seven-person Board of Governors in Washington, which already has three openings.
    Yellen resignation letter – notably proclaiming everything is awesome…
    Economy ‘is close to achieving the Federal Reserve’s statutory objectives of maximum employment and price stability,’Yellen says in letter.

    This post was published at Zero Hedge on Nov 20, 2017.

  • Saying Goodbye to Richard Cordray at CFPB Is Hard to Do

    Last Wednesday, Richard Cordray, the Director of the Consumer Financial Protection Bureau (CFPB), announced he would be stepping down from his post at the end of this month. Cordray is the former Attorney General of Ohio and there are rumors he may make a run for Governor there.
    The CFPB, a Federal agency, was created under the Dodd-Frank financial reform legislation of 2010. The legislation resulted from the greatest fraudulent wealth transfer from the middle class to the 1 percent since the Wall Street frauds of the late 1920s. Both periods ended in an epic financial crash that left the U. S. economy on life support. Since the financial crash of 2008, the U. S. economy has grown at an anemic 2 percent or less per year despite massive fiscal stimulus and unprecedented bond purchases (quantitative easing) by the Federal Reserve.
    Despite the desperate need for the CFPB, Republicans fought against its creation and then refused to confirm Cordray for his post as Director for two years. Cordray was finally sworn in on July 17, 2013 after having served in the post for 18 months under a recess appointment by President Obama. Republicans have continued to battle Cordray and attempt to derail his work in protecting vulnerable consumers from credit card, student loan and mortgage frauds.

    This post was published at Wall Street On Parade By Pam Martens and Russ Marte.

  • Another Step Forward for Sound Money: Location Picked for Texas Gold Depository

    The Texas Bullion Depository took a step closer becoming operational earlier this month when officials announced the location of the new facility. The creation of a state bullion depository in Texas represents a power shift away from the federal government to the state, and it provides a blueprint that could ultimately end the Federal Reserve’s monopoly on money.
    Gov. Greg Abbot signed legislation creating the state gold bullion and precious metal depository in June of 2015. The facility will not only provide a secure place for individuals, business, cities, counties, government agencies and even other countries to store gold and other precious metals, the law also creates a mechanism to facilitate the everyday use of gold and silver in business transactions. In short, a person will be able to deposit gold or silver in the depository and pay other people through electronic means or checks – in sound money.
    Earlier this summer, Texas Comptroller Glenn Hegar announced Austin-based Lone Star Tangible Assets will build and operate the Texas Bullion Depository. On Nov. 3, the company announced it will construct the facility in the city of Leander, located about 30 miles northwest of Austin. According to the Community Impact Newspaper, the Leander City Council has approved an economic development agreement with Lone Star. Construction of the depository is expected to begin in early 2018. Lone Star officials say it will take about a year to complete construction of the 60,000-square-foot secure facility located on a 10-acre campus.

    This post was published at Schiffgold on NOVEMBER 16, 2017.

  • Thompson Reuters GFMS Outlook: Gold Above $1,400 in 2018

    Analysts at Thomson Reuters expect the price of gold to push back over $1,300 and then continue to rise above $1,400 through next year, primarily driven by overvalued stock markets, according to the GFMS Gold Survey 2017 Q3 Update and Outlook.
    Gold briefly broke through the key $1,300 level in late August. Safe-haven buying served as a key driver, as heated rhetoric between the US and North Korea was at a peak late last summer. But gold fell back below $1,300 and has traded within a tight range over the last few weeks as investors mull future Federal Reserve moves and the impact of GOP tax reform – if Congress can get it done. Lackluster investment demand in the West, particularly North America, has also led to a supply surplus.
    Thompson Reuters analysts say the initial push above $1,300 was an overextension of the price at the time, and they call the drop back below that level ‘a healthy correction for the price that has formed a base for a more sustainable move above $1,300 later this year.’

    This post was published at Schiffgold on NOVEMBER 16, 2017.

  • Retail Sales (US) Are Exhibit #1

    In January 2016, everything came to a head. The oil price crash (2nd time), currency chaos, global turmoil, and even a second stock market liquidation were all being absorbed by the global economy. The disruptions were far worse overseas, thus the global part of global turmoil, but the US economy, too, was showing clear signs of distress. A manufacturing recession had emerged which would only ever be the case on weak demand.
    But the Fed just the month before had finally ‘raised rates’ for the first time in a decade, though after procrastinating all through 2015. Still, surely these wise, proficient technocrats wouldn’t be so careless and clueless as to act in this way during a serious downturn. After all, what are ‘rate hikes’ but the central bank’s shifting concerns toward a faster economy perhaps reaching the proportions of overheating.
    The dissonance was striking, nowhere more so than at the Federal Reserve itself. On the day the FOMC voted for the first of what was supposed to be (by now) ten to fifteen increases (not just four) the central bank also released estimates on US Industrial Production that were negative year-over-year, a condition that just doesn’t happen outside of either a recession or a condition very close to one.
    The mainstream sided easily and eagerly with the technocrats. Even as the Fed failed to act month after month, the word ‘transitory’ printed prominently in each article rationalizing why a manufacturing recession just wouldn’t matter, the media would claim how ‘strong’ and ‘resilient’ especially US consumers were.

    This post was published at Wall Street Examiner on November 15, 2017.