• Tag Archives Quantitative Easing
  • Bitcoin Mania Shows The World Financial System Is a Con

    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 Wall Street Examiner on December 8, 2017.


  • Shocking New Stock Market Prediction Shows When We’ll Hit a Top

    The current bull market is in its ninth year, but Money Morning Liquidity Specialist Lee Adler’s newest stock market prediction shows that we are now in its final stages. In fact, he sees the S&P 500 hitting its final high sometime in the first quarter of 2018.
    As December unfolds, we’ve seen a breakout in stocks, and Adler’s technical analysis bumped up his long-term price target on the S&P 500 to 2,800. That’s based on his work with market cycles and published in his Wall Street Examiner Pro Trader Market Updates each week. Simply put, by rising above 2,630, the market’s character changed for the better, suggesting one more leg higher.
    However, December looks like the last chance to ride the current bull markethigher before conditions change and a bear market becomes likely…
    Stock Market Prediction: Expect a Market Top in Q1
    Pundits considered the U. S. Federal Reserve’s quantitative easing (QE) program as the punch bowl keeping the recovery party going and goosing the economy and the stock market for several years.
    However, as Adler has been warning, things will change in 2018…
    This Book Could Make You a Millionaire: The secrets in this book have produced 42 chances to double, triple, and even quadruple your money this year alone. Claim your free copy…
    And it already has, now that the Fed’s bond purchases are over. Plus, we’ve already seen the first of several planned hikes in short-term interest rates.
    So far, it has not made much of a dent.
    However, the forces of monetary policy and liquidity will be hostile to the markets in 2018. The Fed’s program, which it calls ‘normalization,’ is designed to reduce the size of its balance sheet.

    This post was published at Wall Street Examiner on December 6, 2017.


  • 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.


  • 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.


  • Banks and the Fed’s Duration Trap

    This is a syndicated repost courtesy of theinstitutionalriskanalyst. To view original, click here. Reposted with permission.
    Atlanta | Is a conundrum worse than a dilemma? One of the more important and least discussed factors affecting the financial markets is how the policies of the Federal Open Market Committee have affected the dynamic between interest rates and asset prices. The Yellen Put, as we discussed in our last post for The Institutional Risk Analyst, has distorted asset prices in many different markets, but it has also changed how markets are behaving even as the FOMC attempts to normalize policy. One of the largest asset classes impacted by ‘quantitative easing’ is the world of housing finance. Both the $10 trillion of residential mortgages and the ‘too be announced’ or TBA market for hedging future interest rate risk rank among the largest asset classes in the world after US Treasury debt. Normally, when interest rates start to rise, investors and lenders hedge their rate exposure to mortgages and mortgage-backed securities (MBS) by selling Treasury paper and fixed rate swaps, thereby pushing bond yields higher.

    This post was published at Wall Street Examiner by (Admin) Bill Patalon ‘ November 30, 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.


  • 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.


  • Doug Noland: Not Clear What That Means”

    This is a syndicated repost courtesy of Credit Bubble Bulletin . To view original, click here. Reposted with permission.
    November 15 – Bloomberg (Nishant Kumar and Suzy Waite): ‘Hedge-fund manager David Einhorn said the problems that caused the global financial crisis a decade ago still haven’t been resolved. ‘Have we learned our lesson? It depends what the lesson was…’ Einhorn said he identified several issues at the time of the crisis, including the fact that institutions that could have gone under were deemed too big to fail. The scarcity of major credit-rating agencies was and remains a factor, Einhorn said, while problems in the derivatives market ‘could have been dealt with differently.’ And in the ‘so-called structured-credit market, risk was transferred, but not really being transferred, and not properly valued.’ ‘If you took all of the obvious problems from the financial crisis, we kind of solved none of them,’ Einhorn said… Instead, the world ‘went the bailout route.’ ‘We sweep as much under the rug as we can and move on as quickly as we can,’ he said.’
    October 12 – ANSA: ‘European Central Bank President Mario Draghi defended quantitative easing at a conference with former Fed chief Ben Bernanke, saying the policy had helped create seven million jobs in four years. Bernanke chided the idea that QE distorted the markets, saying ‘It’s not clear what that means’.’
    Once you provide a benefit it’s just very difficult to take it way. This sure seems to have become a bigger and more complex issue than it had been in the past. Taking away benefits is certainly front and center in contentious Washington with tax and healthcare reform. It is fundamental to the dilemma confronting central bankers these days.

    This post was published at Wall Street Examiner on November 18, 2017.


  • The Federal Reserve Has Just Given Financial Markets The Greatest Sell Signal In Modern American History

    Why have stock prices risen so dramatically since the last financial crisis? There are certainly many factors involved, but the primary one is the fact that the Federal Reserve has been creating trillions of dollars out of thin air and has been injecting all of that hot money into the financial markets. But now the Federal Reserve is starting to reverse course, and this has got to be the greatest sell signal for financial markets in modern American history. Without the artificial support of the Federal Reserve and other global central banks, there is no possible way that the massively inflated asset prices that we are witnessing right now can continue.
    The chart below comes from Sven Henrich, and it does a great job of demonstrating the relationship between the Fed’s quantitative easing program and the rise in stock prices. During the last financial crisis the Fed began to dramatically increase the size of our money supply, and they kept on doing it all the way through the end of October 2017…

    This post was published at The Economic Collapse Blog on November 5th, 2017.


  • What Do You Mean ‘No Inflation?’

    When the Fed launched its aggressive monetary policy in the wake of the 2008 financial crisis, many free-market economists predicted it would result in massive price inflation. That never materialized. As a result, Keynesian economists like Paul Krugman love to finger-point and mock those who criticize easy money policies designed to ‘stimulate aggregate demand.’ They claim the lack of price inflation proves they were right all along. You can massively increase the money supply during a downturn to stimulate the economy without sparking inflation. Free-market people are wrong.
    But just because we don’t see price inflation doesn’t mean there isn’t any inflation at all. After all, the new money has to go someplace. If we don’t see it manifested in rising prices, it’s because we’re looking in the wrong place.
    In response to the Great Recession, the Federal Reserve plunged interest rates to near zero and held them at historically low levels for several years. It also engaged in three rounds of quantitative easing – in essence, printing money out of thin air. Over a span of nearly seven years, the Fed’s balance sheet increased 427%. With all of that new money entering into the economy, one would expect a significant increase in price inflation. And yet the rise in the consumer price index has been muted. In fact, officials at the Federal Reserve constantly fret about the lack of price inflation.
    So where did all that money go?

    This post was published at Schiffgold on NOVEMBER 2, 2017.


  • The Scariest Charts In The World

    Authored by Anthony Doyle via BondVigilantes.com,
    Investment markets have been remarkably resilient over the course of 2017. Sure, the geopolitical environment has thrown up a few frightening days which saw markets sell-off but on the whole volatility has been muted and most asset classes have generated solid total returns. That said, any horror movie fan will tell you that the scariest part of a horror film happens when things are relatively calm. With that in mind, here are a few charts that shine a light on a number of threats that are lurking just below the surface of the global economy.
    1. ECB quantitative easing has propped up government bond markets

    This post was published at Zero Hedge on Oct 31, 2017.


  • In Fed We Trust…Or Do We?

    There’s been a lot of focus on the Federal Reserve lately.
    Earlier this month, the central bank launched efforts to shrink its balance sheet after years of quantitative easing. Most analysts also expect one more interest rate increase this year. Then there is rampant speculation about who will take the reins at the Fed when Janet Yellen’s term ends early next year. Many observers think Trump will pick a more hawkish Federal Reserve chair who will increase the pace of ‘normalization.’
    But Peter Schiff has said ultimately the Fed doesn’t want to do anything to upset the status quo. And at this point, the central bank is between a rock and a hard place. It can normalize, which will ultimately pop the bubble, or it can continue with its easy money policies and wreck the dollar. Peter has said the Fed will ultimately sacrifice the dollar on the altar of the stock market.
    In a recent article published on the Mises Wire, economist Ryan McMaken weighs in, arguing along these same lines. He says the Fed won’t do anything that will spook the markets. That means we can expect more ‘easy money.’ But this raises a question – what happens when the next recession rolls along?

    This post was published at Schiffgold on OCTOBER 30, 2017.


  • Technical Scoop – Weekend Update Oct 29

    Can stock markets fly? Or is it really different this time? As we outlined last week, in celebration of the 30th anniversary of the 1987 October stock market crash, stock markets, it appears, can fly or soar as you may wish to call it. Just when you think the stock market couldn’t go any higher it does. Last week we noted the Dow Jones Industrials (DJI) had soared 30% since the US election on November 4, 2016. When compared with other stock market blow-offs such as the ‘Roaring Twenties,’ the dot.com bubble of the 1990s, or the Tokyo Nikkei Dow (TKN) of the 1980s it was a rather puny performance, so far.
    A more appropriate start point might actually be the February 11, 2016 low. That low came following six months of stock market gyrations mostly to the downside because of the ending of quantitative easing (QE). The DJI only fell about 15% during that time but it was the steepest correction since the 2011 EU/Greece crisis and only the second time the DJI fell more than 10% since the financial crisis of 2007 – 2009. The DJI fell 6% during the Brexit mini-panic and was down just over 4% into the November election. Pullbacks since then have been even shallower. So, given no correction over 10% maybe we should be looking at this blow-off as having started with the February 2016 low.
    Since then the DJI is up just under 52% over a period of 624 days. We noted last week the average of six blow-offs we examined had seen gains of 176% over a period of 658 days. Based on this we are doing well time-wise but not so well on the gains. The longest period seen for a blow-off was about 1,050 days. There is no denying the stock market could rise further and longer than many expect.

    This post was published at GoldSeek on 29 October 2017.


  • Quantitative Easing Lives on in the EU

    Central bank quantitative easing is a little like a zombie. It dies – but it never really dies.
    There’s been a lot of focus on the Federal Reserve raising interest rates and unwinding its balance sheet. Sometimes it’s easy to forget the Fed isn’t the only game in town. While most people consider QE dead and buried in the US, it remains alive and kicking in other parts of the world.
    Yesterday, the European Central Bank (ECB) announced it would extend its bond-buying program deep into 2018, continuing the flow of easy money into the European Union. ECB President Mario Draghi said the central bank would cut its bond purchases in half beginning in January, a faint hint at eventual normalization. But the central bank president left the door open to backtracking.
    Draghi said the EU’s economy is improving, but still needs support.
    Domestic price pressures are still muted overall and the economic outlook and the path of inflation remain conditional on continued support from monetary policy. Therefore, an ample degree of monetary stimulus remains necessary.’

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


  • Fed/ECB Strangle Stock Bull

    This epic central-bank-easing-driven global stock bull is starting to be strangled by the very central banks that fueled it. This week the European Central Bank made a landmark decision to drastically slash its quantitative easing next year. That follows the Fed’s new quantitative-tightening campaign just getting underway this month. With CBs aggressively curtailing easy-money liquidity, this stock bull is in serious trouble.
    The US flagship S&P 500 broad-market stock index (SPX) has powered an incredible 280.6% higher over the past 8.6 years, making for the third-largest and second-longest bull market in US history! The resulting popular euphoria, a strong feeling of happiness and confidence, is extraordinary. So investors brazenly shrugged off the Fed’s September 20th QT and the ECB’s October 26th QE-tapering announcements.
    That’s a grave mistake. Extreme central-bank easing unlike anything witnessed before in history is why this stock bull grew to such grotesque monstrous proportions. Without QE, it would have withered and died years ago. Central banks conjured literally trillions of new dollars and euros out of thin air, and used that new money to buy assets. This vast quantitative easing inarguably levitated the world stock markets.
    QE greatly boosted stocks in two key ways. Most of it was bond buying, which forced interest rates to deep artificial lows nearing and even under zero at times. This bullied traditional bond investors looking for yield income into dividend-paying stocks. The record-low interest rates fueled by QE were also used to justify extremely-expensive stock prices. QE aggressively forced legions of investors to buy stocks high.

    This post was published at ZEAL LLC on October 27, 2017.


  • $1 Trillion In Liquidity Is Leaving: “This Will Be The Market’s First Crash-Test In 10 Years”

    In his latest presentation, Francesco Filia of Fasanara Capital discusses how years of monumental liquidity injections by major Central Banks ($15 trillion since 2009) successfully avoided a circuit break after the Global Financial Crisis, but failed to deliver on the core promise of economic growth through the ‘wealth effect’, which instead became an ‘inequality effect’, exacerbating populism and representing a constant threat to the status quo.
    Fasanara discusses how elusive, over-fitting economic narratives are used ex-post to legitimize the “fake markets” – as defined previously by the hedge fund – induced by artificial flows. Meanwhile, as an unintended consequence, such money flows produced a dangerous market structure, dominated by both passive-aggressive investment vehicles and a high-beta long-only momentum community ($8 trn and rising rapidly), oftentimes under the commercial disguise of brands such as behavioral Alternative Risk Premia, factor investing, risk parity funds, low vol / short vol vehicles, trend-chasing algos, machine learning.
    However as Filia, and many others before him, writes, only when the tide goes out, will we discover who has been swimming naked, and how big of a momentum/crowding trap was built up in the process. The undoing of loose monetary policies (NIRP, ZIRP), and the transitioning from ‘Peak Quantitative Easing’ to Quantitative Tightening, will create a liquidity withdrawal of over $1 trillion in 2018 alone. The reaction of the passive community will determine the speed of the adjustment in the pricing for both safe and risk assets.

    This post was published at Zero Hedge on Oct 18, 2017.


  • New York, New York! New Foreclosures in NYC Up 79% in Q3 2017

    This is a syndicated repost courtesy of Snake Hole Lounge. To view original, click here. Reposted with permission.
    Both New York City and Washington DC have been the slowest growing cities in terms of home prices of the Case-Shiller 20 metro index. In fact, New York City home prices are only back to where they were when The Fed started their quantitative easing (QE) program and crammed their target rate down to 0.25% in 2008.

    This post was published at Wall Street Examiner by Anthony B Sanders ‘ October 10, 2017.


  • Can We Blame the New iPhone’s Mediocrity on Inflation?

    Apple held its 10th anniversary iPhone press event on 9/12. As expected, the tech giant released new iterations of their decade-old smartphone as well as the new iPhone X. Whereas the media has focused on innovation and technology, the event also tells another story: how the company uses the perception of innovation as a strategy for dealing with inflation.
    Yes, inflation. This is despite the fact the consumer tech market generally – and accurately – is characterized as deflationary: new generations of improved and innovative devices are released at a rapid pace and sold at unchanging or even falling prices. In other words, we get better and cheaper computers and other tech gadgets. But even though price deflation accurately describes this industry, it is not unaffected by inflationary pressures on prices due to the Fed’s quantitative easing.
    Consequently, Apple needed to find a way to jack up prices for their devices to maintain profitability. But with the consumer tech market being extremely competitive, even a market leader cannot simply raise prices without potentially losing market share. Being Apple, they find a solution in marketing.
    The Marketing The iPhone set a standard ten years ago both in terms of the look-and-feel of the smartphone and the pricing. Throughout the past decade, the dollar price of premium smartphones, including the annually updated iPhone, has remained basically the same. With only very few exceptions, premium smartphones sell at a standard $700-800.

    This post was published at Ludwig von Mises Institute on Oct 10, 2017.


  • Understanding The Results of Financialization – Part II – “Mationalization”

    WHY A NEW FORM OF ‘NATIONALIZATION’ WILL OCCUR
    The extended period of Quantitative Easing (QE) and ZIRP have now left the major global central bankers in an untenable position because of the Era of Unlimited Leverage which it has fostered. According to the Bank for International Settlements, central banks’ combined asset holdings in the major advanced economies (the US, the eurozone, and Japan) expanded by $8.3 trillion over the past nine years, from $4.6 trillion in 2008 to $12.9 trillion in early 2017. Yet this massive balance-sheet expansion has had little to show for it. Over the same nine-year period, nominal GDP in these economies increased by only $2.1 trillion.

    This post was published at GoldSeek on Sunday, 8 October 2017.


  • Who Will Be the Next Fed Chair? The 3 Most Likely Candidates

    This is a syndicated repost courtesy of Money Morning. To view original, click here. Reposted with permission.
    Ladies and gentlemen, place your bets. U. S. President Donald Trump announced last week he will name the next Federal Reserve Chair in the next two or three weeks.
    And there are three leading candidates for the job, who we’ll detail for you in just a minute…
    Since the financial crisis in 2008, the Fed has exercised enormous power over the economy through interest rates and the supply of money available for the economy. Market pundits were left scrambling for legitimacy as ZIRP (zero interest rate policy) and QE (quantitative easing) stomped out the efficacy of traditional forms of investment analysis.

    This post was published at Wall Street Examiner by Money Morning Staff Reports ‘ October 4, 2017.