With TPP Dead, China Officially Launches Its Own Pacific Free-Trade Deal

As we noted on Thursday, “it was ludicrous for Obama to leave China out of things. China is the second biggest economy in the world, third if you treat the EU as a block. Had China been in the deal all along, we may not have seen the ludicrous provision that allowed companies to sue governments. That provision was one of the key reasons the deal failed. With the election of Trump, TPP is officially dead. China, not the US, will be at the center of a new Asian trade pact.”
Furthermore, as Mish Shedlock pointed out, on November 10, in the wake of Trump’s election, Beijing quickly sought to fill the void left by TPP by reviving its proposed Free Trade Area of the Asia-Pacific pact.
“Xi Jinping is rekindling efforts to promote a rival to the US-led Trans-Pacific Partnership trade agreement in the wake of Donald Trump’s election victory, Chinese officials said on Thursday. With Mr Xi set to travel to Peru this month for the annual Asia-Pacific Economic Co-operation summit, Li Baodong, vice-foreign minister, said China’s plan could fill the void. Chinese officials have previously sought to promote the proposal at Apec, only to encounter resistance from US officials who wanted to prioritise TPP negotiations.

This post was published at Zero Hedge on Nov 19, 2016.

Mike Maloney: This Is The Peak

Precious metals dealer and monetary historian Mike Maloney is quite confident the liquidity-driven ‘recovery’ created by the world’s central banks is now over. In his estimation, the path ahead is one of accelerating descent into inevitable currency destruction:
What the central banks are doing has never worked and they keep on trying – you just hit that nail a little bit harder each time because it isn’t working. They have these theories and they think that the theory is correct that this – and no matter what the results are they say well, we just didn’t do enough of it. Japan has been trying this for 30 years now and it hasn’t worked. These people are just absolutely dangerous. They are going to drag the entire world economy down. You talked about the helicopter money that is now happening in Europe and so on. That is going to be coming to the United States soon. Coming to a Central Bank near you.
It always has damaging results. They don’t look at this. It is a huge wealth transfer. The immorality of an entity and everywhere I go I take a look at – when I would go speak in Singapore or Australia, New Zealand, Malaysia, Colombia, Peru doesn’t matter – Russia – everywhere I go I take a look, I go on the websites of the central bank for that country and I start gathering information. I haven’t found a central bank that is part of the government. They are all private. Here is a private entity that is allowed to create currency and now they are buying bonds from corporations? They can buy stocks. When they write a check and they buy something, currency is created and it enters circulation. A very large portion of it is Fanny Mae and Freddy Mac stuff. It is the mortgage backed securities. And so that means that they own real estate. This private corporation is able to counterfeit and purchase real estate legally. The morality of this is insane.

This post was published at PeakProsperity on August 28, 2016.

The Big Mac Peso-Dollar Blues in Mexico

Could the ‘Tequila Crisis’ happen again? The IMF is worried.
Although Mexico’s economy has grown at a steady rate during the lion’s share of this fledgling century, Mexican workers’ real salaries have barely shifted. In fact, over the last four decades, Mexicans’ purchasing power has not just stagnated, as has happened in many Western nations, in terms of minimum wage, it has shrunk by 78%. In 1976, a family on minimum wage could buy four times as much as today.
So bad have things become that when CNN’s Spanish edition did a study comparing the minimum statutory wage of over a dozen Latin American countries set against each country’s performance on the Big Mac index, with the US Dollar as the benchmark currency, Mexico came in 13th out of 13, behind a host of much smaller, weaker economies.
In Mexico the legal minimum wage is 74 pesos, or around $4 per day. That’s the equivalent of $0.50 per hour, compared to $1.40 in Brazil, $1.45 in Peru, $2.07 in Ecuador and Chile, $2.38 in Argentina (soon to increase by 33%) and $2.43 in Uruguay. According to the study, the five countries in Latin America with the highest minimum-wage purchasing power are, in ascending order, El Salvador, where a minimum-wage worker has to work 1.51 hours to buy a Big Mac; Chile (1.47 hours); Costa Rica (1.33 hours); Puerto Rico (1.03 horas) and y Argentina (1 hour).
In Mexico, by contrast, a minimum-wage worker has to clock in 5.6 hours to be able to get his or her lips around a Big Mac – over triple the number of hours a Salvadorian must work to receive the same ‘reward.’ In other words, Latin America’s second biggest economy appears to have a significantly lower minimum-wage purchasing power than its tiny neighbor to the south.

This post was published at Wolf Street by Don Quijones ‘ May 31, 2016.

Delta Force

Delta Force
GDP = Population Productivity
So Whom Can You Depend On?
Can We Have a Little Economic Participation, Please?
Dallas, Houston, Abu Dhabi, Raleigh, and SIC
Last week we looked at the world’s demographic destiny for the coming decades. I imagine most readers perused the information and said, ‘Yes, we already know the world’s population is getting older. Everybody keeps saying demographics are important, but I’d like to know how slowly changing demographics actually affect the economy here and now.
Today we are going to explore how demographic change impacts growth. (We will use lots of charts and graphs, but the text of the letter is actually shorter than usual. The whole picture is worth 1000 words thing.)
Delta Force
Every politician and economist wants to see the United States – and, I should point out, Europe, Japan, and the rest of the world – return to 3%-plus growth. Given that GDP in the first quarter turned out to be just 0.6% and that growth has sputtered along at less than 1% for the last six months, even the 2% growth that we’ve been averaging for the last five years sounds good now. In my just-concluded series, a letter to the next president on the economic situation he or she will face, I laid out my own plan to reinvigorate growth. But I have to admit that plan does face a strong headwind called fundamental economic reality.

This post was published at Mauldin Economics on MAY 1, 2016.

Glencore confirms $500m gold & silver hedge

Glencore has agreed a $500m gold and silver streaming deal from its Antapaccay mine in Peru to help ease its balance sheet woe, as well as impressing with fourth-quarter production numbers.
The debt-burdened FTSE 100 group, which also posted its 2105 production report, expects to receive the $500m advance payment via its wholly owned Narila subsidiary before the end of the month in return for delivering 630,000 oz of gold, 10m oz of silver.
Analysts said this further insulated Glencore from the potential of a downgrade to its credit rating.
After those amounts are delivered, Narila will supply 30% of gold production and 30% of silver production thereafter in exchange for ongoing payments of 20% of the spot gold and silver price per ounce delivered, increase to 30% of the respective spot prices after 750,000 ounces of gold, and 12,800,000 ounces of silver have been delivered.

This post was published at TruthinGold on February 11, 2016.

Central Banks Have “Over-Promised” What Can Actually Be Delivered

Markets need to retreat from dependency on central bank stimulus which they falsely believe provides the magical elixir that fixes all economic and financial market woes.
At some point during the past few years, central bank stimulus has gone from a net benefit to a source of financial market ailments. Investors who have rightly arrived at this conclusion have shifted from dip buyers in risk assets to sellers of up-ticks (see January 6th note ‘Down Side Up’).
With only limited tools, central bank ‘aspirin’ can only treat symptoms rather than root causes. Monetary policy stimulus healed some pain, but it is not a cure, nor is it able to concoct one. Moreover, too much ‘aspirin’ can produce undesirable side-effects.
There is plenty of evidence to suggest that central banks have over-promised what can actually be delivered. Certainly growth and inflation have under-shot expectations and forecasts every year since QE1 began in 2008. The stated and suggested words of ‘doing whatever it takes’ now look more problematic for financial markets than do the benefits they may or may not be providing economies. The Fed hike in December was likely the result of the FOMC’s assessment that this ‘cost versus benefit equation’ had indeed tilted.
Market volatility in 2016 is a function of this action (reversal). The one-way quasi-coordination of global central banks from 2009 to 2014 has fractured, which in turn has fueled two-way trading and the resulting market volatility. While some central banks (e.g. ECB and BoJ) continue to ease rates, the central banks of the following countries have all hiked rates in the past few quarters: US, Brazil, Peru, Chile, Colombia, South Africa, Philippines, Paraguay, Iceland, and Paraguay, to name a few.

This post was published at Zero Hedge on 01/22/2016.

December Retail Sales? Expect More Census Bureau Fairy Tales

he Government releases its retail sales report for December this Friday. The Census Bureau is the front-man for this report, which means that we can expect something that conforms to the highest standards of statistical manipulation.
But the truth is, we already know base on data released by private-sector entities that retail sales in December, and for the entire fourth quarter, were a disaster. Six days ago, Macy’s announced that its comp store sales dropped 4.7% in November and December vs. those two months in 2014. Recall that the Government reported that retail sales actually fell nearly 1% in December 2014. In addition, Macy’s slashed another 3,000 employees.
I just finished perusing the Cass Freight Index Report for December. It showed that freight shipments in December dropped 5% vs. November and 3.7% vs. December 2014. This would include goods transported by train, truck, ship or plane. The reason freight shipments decline is because orders from retailers decline. The reason orders from retailers decline is because consumer demand has declined and inventories are high.

This post was published at Investment Research Dynamics on January 13, 2016.

How Gold Got Its Groove Back

Who says gold lost its appeal as a safe haven asset?
After five straight positive trading sessions last week, the yellow metal climbed above $1,100, its highest level in nine weeks, on a weaker U. S. dollar.. The rally proves that gold still retains its status as a safe haven among investors, who were motivated by a rocky Chinese stock market, North Korea’s announcement that it detonated a hydrogen bomb last Wednesday and rising tensions between Saudi Arabia and Iran.
Here in the U. S., gold finished 2015 down 10.42 percent, its third straight negative year. Until the new year, sentiment appeared poor, and many gold bulls were finding it hard to stay optimistic.
But after the price jump last week, large exchange-traded gold funds saw massive inflows, confirming a shift in investors’ attitude toward the precious metal.
It’s worth remembering that about 90 percent of physical demand comes from outside the U. S., mostly in emerging markets such as China and India. In many non-dollar economies, buyers are actually seeing either a steady or even rising gold price. The metal is up in Russia, Peru, South Africa, Canada, Mexico, Brazil and many more.
Note the differences in returns between gold priced in U. S. dollars and gold priced in the Brazilian real, Turkish lira, Canadian dollar, Russian ruble and Indonesian rupiah.

This post was published at GoldSeek on 12 January 2016.

Ted Butler Quote of the Day 01-07-16

The final delivery tally for the COMEX December silver futures contract indicated that JPMorgan was, by far, the largest stopper or acceptor of silver deliveries, both for the month and full year, by taking an even 1,400 contracts (100 shy of the maximum amount allowed monthly). As a reminder, I’m only focusing on the deliveries taken by the bank in its proprietary or house trading account and not for clients. For the year, JPMorgan has taken 5,239 COMEX silver deliveries or 26.2 million oz and has issued none on its own behalf. Subsequently, JPM physically transferred almost all of this metal into its own COMEX warehouse (minus the last 2 to 3 million oz still pending).

I would also remind you that this public revelation occurred well after I began to allege that JPM was hoarding massive amounts of physical silver. Among the many feelings and thoughts I have about this basically irrefutable evidence that JPM has acquired actual metal ranges between being happy for the (partial) confirmation of a key premise, to amazement that the bank would be so open about its actions. Certainly, no evidence of JPM’s accumulation of physical silver could be more transparent than what transpired on the COMEX since March.

As the data suggested since the beginning of the month, JPMorgan also ended up as the largest stopper, in its own account, of COMEX gold deliveries for December, taking 2,021 of the 2,073 total contracts issued, an incredible 97.5% market share. For the full year, however, JPMorgan both issued and stopped over 5,000 total COMEX gold contracts, in marked contrast to the bank’s uniform accumulation of silver. One observation does become clear from perusing the yearly delivery data—not only in gold and silver, but also in other COMEX/NYMEX metals—namely, JPM is the big market kahuna, no matter what laws are passed to change that.

Despite JPMorgan’s mixed delivery pattern in COMEX gold this past year, there is little doubt that it was on the hunt for—and determined to acquire—physical gold in December’s delivery process. The dragged-out nature of that month’s COMEX gold and silver deliveries, accompanied by the tightening spread differentials as the delivery month drew to an end, points to tight physical market conditions. That this physical tightness became more apparent as the month progressed and as prices continued to decline, the only rational conclusion can be that physical supply and demand have little to do with prices short term. Isn’t that the ultimate proof of price manipulation?

A small excerpt from Ted Butler’s subscription letter on 02 January 2016.

More precious metals news & information available at
Ed Steer’s Gold & Silver Digest.
 

Spain v Colombia over who owns $2 billion treasure trove

Billions of dollars in gold and silver from an 18th century shipwreck have left Spain and former colony Colombia at odds over who rightfully owns the loot.
The disagreement is over the ‘San Jose,’ a treasure ship wreck that Colombia located recently off the coast of Cartagena de Indias, its old Caribbean port city.
The ‘San Jose’ sank in June 1708 near the Islas del Rosario, during combat with British ships attempting to take its cargo, as part of the War of Spanish Succession.
The Spanish galleon was the main ship in a treasure fleet carrying gold and silver – likely extracted from Spanish colonial mines in Peru and Bolivia – and other valuables to King Philip V.
President Juan Manuel Santos announced in early December that experts had found the ‘San Jose’ on November 27th in a place never searched before.

This post was published at TruthinGold on December 14, 2015.

The world economic order is collapsing, and this time there seems to be no way out

November 2015 – GLOBAL ECONOMY – Europe has seen nothing like this for 70 years – the visible expression of a world where order is collapsing. The millions of refugees fleeing from ceaseless Middle Eastern war and barbarism are voting with their feet, despairing of their futures. The catalyst for their despair – the shredding of state structures and grip of Islamic fundamentalism on young Muslim minds – shows no sign of disappearing. Yet there is a parallel collapse in the economic order that is less conspicuous: the hundreds of billions of dollars fleeing emerging economies, from Brazil to China, don’t come with images of women and children on capsizing boats. Nor do banks that have lent trillions that will never be repaid post gruesome videos. However, this collapse threatens our liberal universe as much as certain responses to the refugees. Capital flight and bank fragility are profound dysfunctions in the way the global economy is now organized that will surface as real-world economic dislocation.
The IMF is profoundly concerned, warning at last week’s annual meeting in Peru of $3tn (1.95tn) of excess credit globally and weakening global economic growth. But while it knows there needs to be an international coordinated response, no progress is likely. The grip of libertarian, anti-state philosophies on the dominant Anglo-Saxon political right in the US and UK makes such intervention as probable as a Middle East settlement. Order is crumbling all around and the forces that might save it are politically weak and intellectually ineffective.
The heart of the economic disorder is a world financial system that has gone rogue. Global banks now make profits to a extraordinary degree from doing business with each other. As a result, bankers’ power to create money out of nothing has been taken to a whole new level. That banks create credit is nothing new; the system depends on the truth that not all depositors will want their money back simultaneously. So there is a tendency for some of the cash banks lend in one month to be re-deposited by borrowers the following month: a part of this cash can be re-lent, again, in a third month – on top of existing lending capacity. Each lending cycle creates more credit, which is why lending has always been carefully regulated by national central banks to ensure loans will, in general, be repaid and sufficient capital reserves are held.

This post was published at UtopiatheCollapse on November 29, 2015.

The Bullish Case for Aussie Gold

On Thursday of last week, I arrived back in the States after spending two weeks globetrotting and attending international investing conferences, first in New Orleans, then in Lima, Peru.
Most recently I was in Melbourne, Australia, for the International Mining and Resources Conference, one of the largest and most distinguished in the world, attended by not only top economists, geologists and CEOs of mining companies but also mining ministers from all corners of the globe.
I was encouraged to see that sentiment for gold was very positive. There’s a gold bear market here in North America, where the yellow metal has plunged to a six-year low of $1,083 per ounce on the strong U. S. dollar. But when priced in the weaker Aussie dollar, the precious metal is sitting at $1,520. As recently as last month, it touched $1,642.
This, combined with lower fuel costs, has been a huge boon to many gold companies in the world’s second-largest gold-producing nation after China. The country has excellent sponsorship by both the Australian and state government of Victoria, where Melbourne was built like San Francisco in a Gold Rush.

This post was published at GoldSeek on Tuesday, 17 November 2015.

Silver Wheaton Pays Glencore $900 Million For Silver At 20% Of Spot Price

Looks like Silver Wheaton struck it rich with its newest silver streaming agreement with Glencore. According to the deal, Silver Wheaton paid Glencore $900 million for future silver production from its share of its Antamina copper mine in Peru. Silver Wheaton receives silver from this Glencore deal at 20% of the silver spot price.
Which means, Silver Wheaton currently pays about $2.85 per silver ounce at the current market price of $14.26. That’s not a bad deal, especially when your cost is only 20%. I would imagine any of the primary silver mining companies would die to produce silver at a 20% cost.
Peru’s copper Antamina mine (picture), is owned by Glencore (33.75%), BHP Billiton (33.75%), Teck Resources (22.5%) and Mitsubishi Corporation (10%). It produced a third of Peru’s copper production in 2013.
According to the Bloomberg article, Glencore Raises $900 Million By Selling Future Output:
Glencore Plc sold a share of its future silver output in a deal that includes a $900 million upfront payment, as the trading and mining company works to cut its $30 billion debt pile by about a third amid tumbling commodity prices.
The deal includes Silver Wheaton Corp. paying 20 percent of the spot price per delivered ounce, the Vancouver-based company said in a statement Tuesday. Silver Wheaton will receive an amount equal to 34 percent of silver production at the Antamina mine in Peru until the delivery of 140 million ounces and the equivalent of 23 percent of silver production thereafter, Baar, Switzerland-based Glencore said in a statement.
This newest silver streaming deal with Glencore provides Silver Wheaton with the cheapest price per ounce (based on the current market price) compared to all its other agreements. If we look at Silver Wheaton’s Silver & Gold Streaming Agreements below, we can see the different prices and time spans for these different agreements:

This post was published at SRSrocco Report on November 13, 2015.

Glencore Stock Is Down 16% In Three Days

Glencore stock popped up last week after it announced a $900 million dollar streaming deal with Silver Wheaton. It involves Glencore’s share of the silver that is produced from the Antimina mine in Peru. But Glencore leveraged up to buy Xstrata in 2012, when silver was $32/oz. The amount of debt that Glencore was able to access for this transaction without doubt assumed a $32/oz valuation on Glencore’s silver assets. It only took 3 days for reality to reassert control over Glencore’s stock:

The stock has plunged 16% since hitting 130 (British pounds) last Wednesday after the streaming deal was announced.

This post was published at Investment Research Dynamics on November 9, 2015.

Are We In The Final Run To Lower Lows – Or Will The Market Offer Another Fake Out?

First published Sat Oct 31 for members: After perusing much of what is being said about the metals market and the Fed this past week, three words come to mind: ‘G-d help me.’
I have seen articles this past week that suggest the investment world is delusional. I have seen articles suggesting that the only thing we need to do is listen to the Fed to know which way the market is going. And, if you count your own perspective amongst these ‘common beliefs,’ then G-d help you too.
The only reason someone believes the rest of the market is delusional is because the market is moving in the opposite manner in which they believe the market should move. And, anyone that thinks we need to listen to what the Fed says in order to understand the appropriate directional moves of the metals market was clearly not listening to the Fed in 2012-2015, or was simply on the wrong side of the market.
What I have seen over the last week that is truly delusional are articles, as well as comments, by ‘believers’ that QE was the Fed’s plan to sink the metals. And, I have seen this perspective written by several analysts and commenters of late. So, let me get this straight. These same ‘believers’ were strongly looking skyward in the metals market in 2012 after the announcement of QE3, expecting QE3 was going to launch the metals rally. And, when the metals reacted in the exact opposite manner in which they expected at the time, now they believe that QE3 ’caused’ the decline in the metals!? Moreover, many even believe it is part of some insidious plan to suppress gold being orchestrated by the Fed. Good grief. Is there any intellectual honesty left in this market?

This post was published at GoldSeek on Wednesday, 4 November 2015.

The World Bank Threatens Free Markets in Peru

Peruvians were pleasantly surprised, if a little bewildered, by the news that on the 8th of October they were to receive an extended weekend holiday. The reason for the impromptu vacation was the arrival of the ‘international community’ in Lima for the IMF and World Bank’s annual board of governors meeting. Peru’s president, Ollanta Humala (enjoying a brief respite from an ongoing scandal involving his wife’s embezzlement of state funds), encouraged Peruvians to take pride in the fact that the leaders of international finance would deign to choose Peru as the venue for their conference and suggested that it ‘demonstrates to the whole world, the excellent stewardship of the Peruvian economy and the secure climate in which investment can be made’ under his auspices.
These comments are interesting because Peru is indeed an undeniable economic success story. If you want a casebook example of markets lifting people out of poverty, look no further than Peru. However, what Humala skipped over is the fact this transformation took place long before his presidency and also that its causes are rooted not so much in wise statecraft, but rather Peru’s long and venerable tradition of state incompetency which has left it up to individuals to provide for themselves.
Fifteen years ago, the economist Hernando de Soto in his provocative book The Mystery of Capital wrote at length about the byzantine workings of Peruvian bureaucracy where registering titles to property or incorporating a business involved jumping through expensive administrative hoops and waiting not months but years for the right approvals. De Soto lamented the fact that this lack of legal recognition prevented the poor collateralizing and leveraging what were in reality quite considerable assets. However, his analysis overlooked the important question of whether, in the presence of an efficient Western-style regulatory state, ordinary Peruvians would have been able to accumulate the wealth to leverage in the first place.

This post was published at Ludwig von Mises Institute on OCTOBER 30, 2015.

BTFD Bravado Hails From A Hill Made Of Bull

Authored by Mark St. Cyr,
Nothing gores a story-line for caution (or warnings with Halloween inspired visions of blood and mutilation) quite like those put to the horns of the – once again, saved via central bank intervention chatter – triumphantly rewarded JBTFD (just by the dip) Bull crowd.
It’s hard to argue caution or, cite reasons for warnings, when you’re in the midst of face-ripping rallies that once again happen day after day. As I implied, it’s hard to talk over the hoof beats currently dancing on what appears to be solid ground. However, that solid ground is precariously close, as within one misstep, of tripping over one’s hoof – and falling off the financial cliff.
Yes, the markets once again rewarded the JBTFD crowd. But (and it’s a very big but) not because it’s a market. This is what takes place in a casino. Confusing financial market expertise and casino gambling is the mistake today’s ‘bull’ crowd keeps making. And just like most gamblers – the odds turn out of your favor just when you believed you had ‘the’ sure-fire system to beat them.
There is an easy generalization that helps one figure out exactly which side of the coin they’re on (i.e., gambler vs expertise)
Gamblers employ systems which they must live and breathe by in order for them to work at their implied rate of efficiency. i.e., If a system states you must bet (or not) if X happens, then, there is no thinking – you bet. Expertise uses intuitive decision-making skills in real-time. A bet or, no-bet can be made indifferent to, or of, a system. I’m well aware of it being a basic or very general example . Yet, it’s a good rule of thumb and reference point for this discussion.
Over the past few weeks the financial markets have been on an absolute rocket ride once again. Triple digit gains have been the headlines and cheers from the financial media. As one peruses many financial sites, blogs, radio and television shows; the name calling of not only Bears, rather, anyone in total who questions this market is being verbally stampeded over. The sheer beating of hoofs, chests, and snorts has been outright deafening.

This post was published at Zero Hedge on 10/25/2015 –.

2015 IMF Meetings in Peru: Three Takeaways for Investors

The world’s finance ministers and central bankers met in Lima, Peru in October for the annual meetings of the IMF and World Bank Group. Here are the takeaways.
This year’s annual gathering of the International Monetary Fund (IMF) and World Bank Group (WBG) was different for one huge reason. Finance Ministers from around the world left Washington, DC to convene in Lima, Peru – the first time the Meetings have been organized in a Latin American country for almost 50 years.
In the five decades since the last annual meeting in the region, in Rio de Janeiro in 1967, the IMF and World Bank have changed on some policy recommendations that forced austerity on much of the western hemisphere. And many governments, such as leftists Bolivia and Ecuador that are in the so-called Washington, DC consensus, are pursuing conventional economic policies that can dramatically improve the lives of the region’s people.
However, presently, a slowdown in emerging markets is pushing the world economy into its weakest expansion since the financial crisis, as stated by the IMF, as it warned of an increasing risk of a global recession and once again downgraded its growth outlook.
On other fronts, the United States’ trade gap widened this past August, signaling trade will weigh on economic growth in the third quarter. Central banks are also selling US government bonds at a much faster pace, a very dramatic move in the $12.8 trillion Treasury market since the financial crisis.
[Check out: The Final Crescendo of Cognitive Dollar Dissonance and the Remonetization of Gold] Much of the discussions focused on countries, like Brazil, Venezuela and Greece. For example, Brazil, the region’s largest economy, recently witnessed its currency plunging to a record low and unemployment skyrocketing to a five-year peak, adding to political tensions behind mass street protests calling for President Dilma Rousseff’s resignation.

This post was published at FinancialSense on 10/19/2015.

IMF and World Bank disagree about competitive devaluations

China’s decision to tweak its exchange rate peg with the dollar in August provoked reactionary howls of derision — from the United States to India—that Beijing was gearing up for a new wave of international currency warfare.
But do currency wars really work?
Ahead of its bi-annual World Economic Outlook in Peru this week, the International Monetary Fund has waded into the debate. It published a comprehensive set of findings confirming that weaker currencies are still an effective tool for economies to grow their way out of trouble.
An exchange rate depreciation of around 10 percent, said the IMF, results on average in a rise in exports that will add 1.5 percent to an economy’s output.
But both the research and the timing are not uncontroversial.

This post was published at The Telegraph

“The Heart Of The Economic Disorder Is A World Financial System That Has Gone Rogue”

The world economic order is collapsing and this time there seems no way out
Europe has seen nothing like this for 70 years – the visible expression of a world where order is collapsing. The millions of refugees fleeing from ceaseless Middle Eastern war and barbarism are voting with their feet, despairing of their futures. The catalyst for their despair – the shredding of state structures and grip of Islamic fundamentalism on young Muslim minds – shows no sign of disappearing.
Yet there is a parallel collapse in the economic order that is less conspicuous: the hundreds of billions of dollars fleeing emerging economies, from Brazil to China, don’t come with images of women and children on capsizing boats. Nor do banks that have lent trillions that will never be repaid post gruesome videos. However, this collapse threatens our liberal universe as much as certain responses to the refugees. Capital flight and bank fragility are profound dysfunctions in the way the global economy is now organised that will surface as real-world economic dislocation.
The IMF is profoundly concerned, warning at last week’s annual meeting in Peru of $3tn (1.95tn) of excess credit globally and weakening global economic growth. But while it knows there needs to be an international co-ordinated response, no progress is likely. The grip of libertarian, anti-state philosophies on the dominant Anglo-Saxon political right in the US and UK makes such intervention as probable as a Middle East settlement. Order is crumbling all around and the forces that might save it are politically weak and intellectually ineffective.
The heart of the economic disorder is a world financial system that has gone rogue. Global banks now make profits to a extraordinary degree from doing business with each other. As a result, banking’s power to create money out of nothing has been taken to a whole new level. That banks create credit is nothing new; the system depends on the truth that not all depositors will want their money back simultaneously. So there is a tendency for some of the cash banks lend in one month to be redeposited by borrowers the following month:

This post was published at Zero Hedge on 10/11/2015.