Fed Pays Banks $12 Billion on ‘Excess Reserves,’ Taken from Taxpayer Pockets

Circuitous hidden wonders of paying interest on ‘excess reserves.’
The Federal Reserve just went through its annual ritual of disclosing its preliminary results for the year: The income it earned less its operating expenses, according to central bank accounting, and how much of these earnings it is remitting, as it does every year, to the US Treasury Department. But this statement includes another nugget.
In 2016, the Fed paid our favorite banks $12 billion in interest on their ‘excess reserves’ held at the 12 regional Federal Reserve Banks (the New York Fed, the Boston Fed, the Dallas Fed, the San Francisco Fed, etc.). But wait… who’s actually paying that $12 billion?
Is it just a well-earned freebie for the banks, conjured up out of nothing, in Fed-style? Nope. The taxpayer paid the $12 billion to the banks. Here’s how.
The Fed earns interest income from the $2.46 trillion in Treasury securities and from the $1.74 trillion in Agency mortgage-backed securities on its balance sheet. These are the securities the Fed bought from its Primary Dealers with money that it had created under the QE program. So now, it’s collecting the coupons. This is its income.

This post was published at Wolf Street by Wolf Richter ‘ Jan 11, 2017.

To “Prevent Public Panic”, Beijing Orders Banks To Keep Capital Controls Secret

China is so concerned about the ongoing surge in capital outflows that its forex regulator, SAFE, has taken the unprecedented step of ordering banks to keep its instructions about curbing capital outflows secret and also to ensure that research analysts do not publish any negative views about the yuan according to Reuters. According to bankers from local and foreign banks, both demands are seen as an attempt by the authorities to prevent alarm that could trigger further declines in the yuan.
With the yuan losing 6% of its value against the dollar last year as a result of hundreds of billions in official outflows (and as much as $1.1 trillion in unofficial since August 2015 according to Goldman calculations), Beijing has unleashed a flurry of restrictive measures on capital outflows from the State Administration of Foreign Exchange (SAFE), including setting limits on banks’ currency volumes in some cities or provinces and requiring approval for ever smaller transactions. Overnight, the PBOC even unveiled probed into bitcoin exchanges, sending the digital currency plunging over 20%.
Reuters reports that SAFE, which is part of the People’s Bank of China, is insisting, orally, that dozens of bank don’t reveal its role in such restrictions, which was damaging their relationships with clients since they were unable to explain why they were turning away business. SAFE’s reticence began at least as far back as August, when its Shanghai branch called at least 20 of the major foreign and domestic banks operating in the city to a meeting with the regional heads of several SAFE departments.

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

BofA Finds Consumer Spending Tumbled In December, Warns Of Disappointing Retail Sales

With this week’s most important economic data point – this Friday’s retail sales – fast approaching, economists are keen for clues if this key datapoint giving insight into the health of the US consumer will maintain the recent outsized spike in favorable and better than expected economic data, or if adversely, it may be a downward inflection point which could have significant implications on the dollar trade as RBC explained earlier. And according to BofA’s internal debit and credit card data, always released just ahead of the retail sales report, it looks like it will be the latter.
As Bank of America’s chief US economist Michelle Meyer reports, the aggregated BAC credit and debit card data showed that retail sales ex-autos declined 1.0% mom seasonally adjusted in December. “This contrasts with other indicators of consumer strength including reports of a robust holiday shopping season, a rebound in consumer confidence and strong autos sales” according to Meyer.
Actually, based on earnings reports of those companies who have recently closed their quarter, a weak December is precisely what one should expect, further corroborated by JPM’s satellite imagery at early December showing empty parking lots (recall: “Satellite Imagery Reveals Sharp Retail Spending Slowdown After The Election“) and a plunge in brick and mortar sales, which has been greater than the offsetting pick up in online sales.

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

Soros Group Vows To Stay In Hungary Despite Plans For Government Crackdown On NGOs

The Open Society Foundations has vowed to continue operations inside of Hungary despite plans from the country’s ruling party to crackdown on NGOs funded by the Hungarian-born George Soros.
Hungary plans to use ‘all the tools at its disposal’ to ‘sweep out’ NGOs funded by Soros, which ‘serve global capitalists and back political correctness over national governments,’ Szilard Nemeth, a vice president of the country’s ruling Fidesz party, told reporters on Tuesday.
‘I feel that there is an opportunity for this, internationally,’ because of Trump’s election victory, state news service MTI reported Nemeth as saying.
Hungarian lawmakers will debate legislation allowing the European Union member to audit NGOs, according to the country’s parliamentary agenda.

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

Nomi Prins: More Corporate Defaults, Central Bank Desperation in 2017

Nomi Prins joined Yahoo Finance and The Final Round’s Jen Rogers to discuss the events facing 2017 – including increased corporate defaults, market volatility and the impact of oil under Rex Tillerson at the U. S State Department.
When posed the question about economic growth and the incoming Trump administration Prins did not mince words saying, ‘Ultimately what is going to happen is he’s not going to be able to push a ‘mega fiscal budget’ through a Republican Congress, nor will he try. Nor will he be able to sustain the kind of growth that he has promised. There may be a PR element, but in terms of actual conversions and the practical realities of the economy, that was weak to begin with for so many people, that’s not going to be a reality. That is going to take its toll on not just our stock market, but will add uncertainty into the rest of the world that is looking at these expectations.’
Nomi Prins is the best selling author of All the Presidents’ Bankers and is currently working on her latest book, The Artisans of Money. Prins is a former Managing Director at Goldman Sachs and worked at an array of the most influential Wall Street banks. She continues to be a strong advocate for a modern Glass-Steagall Act and breaking up big bank institutions that pose a threat to the global economy.

This post was published at Wall Street Examiner on January 11, 2017.

The ‘Trump Bump’ Rallies Gold to 7-Week High

Donald Trump’s press conference gave gold a rollercoaster ride on Wednesday as prices hit a 6-week low ahead of the president-elect’s speech, only to rally back to its highest point in 7 weeks. Spot gold moved from $1,176.94 to $1,198.40, the highest since late November.
Investors made a move into the yellow metal after the dollar took a tumble, according to Reuters. Stocks saw a negative move as well. Pharmaceutical stocks lead an overall decline in the market after Trump made comments about drug companies ‘getting away with murder’ by price gouging their customers.

This post was published at Schiffgold on JANUARY 11, 2017.

To RBC, This Is The Single Largest Risk To The Market Right Now

From everyone’s multi-strat wizard, the head of RBC’s cross-asset strategy, Charlie McElliggott
The Single Largest Macro Risk To The Buyside
The US Dollar is the ‘grand unifying theory asset’ for nearly any and all ‘profile’ global macro or thematic equities trades in the marketplace right now, as it represents investors being long this ‘new’ version of ‘economic growth.’ As such, performance is significantly tied to the direction in the US Dollar.
SO THEN…let’s take it back to the ‘January Effect.’ I’ve been doing a bunch of client marketing this week, with the ‘meat’ of the discussion being largely centered upon buy-side concerns surrounding said ‘seasonal mean-reversion’ metastasizing into something larger. I qualify this as ‘something larger,’ because at this time, NONE of the YTD performance reversals from Q4 have been outright PNL destroyers. Sure, popular shorts like USTs / ‘long duration,’ EM stocks, gold and equity ‘growth’ factor are all squeezing higher out of the gates – but by and large, so too are popular longs like small cap equities, inflation, copper, ‘high beta cyclical’ equities, ‘value’ factor and HY.
The fact is, there has been a ton of money made / performance driven by, for example, ‘long Russell 2k’ vs ‘short USTs’ / ‘short ED,’ or being long equities ‘value’ against short equities ‘growth’ since back mid 2016 when we began seeing positioning pivot this way (and accelerating post-Trump). But the problem is that for many, much of that positive PNL was booked last year. So an ‘upside-down out of the gates’ January is more than inauspicious – it’s an outright ‘non-starter’ for risk managers in light of the performance-challenged era of the past few years. Fund willingness to stomach slow starts in January to begin the year – especially in light of the proliferation of ‘tight stop’ multi-managers with a massive institutional AUM concentration, and a pod / center book structure which exacerbates crowding – can ‘turn wrong-way fast’ when CRO’s become de facto heads of trading into potential deleveraging.

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

JAN 11/JPMORGAN CONTINUES TO ACQUIRE SILVER INVENTORY/GOLD AND SILVER ADVANCE ON LACKLUSTRE TRUMP PRESS CONFERENCE WITH A LACK OF DETAIL/VOLKSWAGEN HIT WITH 4.3 BILLION DOLLAR USA FINE AND MUST F…

Gold at (1:30 am est) $1195.60 UP $11.40
silver at $16.78: DOWN 2 cents
Access market prices:
Gold: $1192.00
Silver: $16.75
THE DAILY GOLD FIX REPORT FROM SHANGHAI AND LONDON
The Shanghai fix is at 10:15 pm est last night and 2:15 am est early this morning
The fix for London is at 5:30 am est (first fix) and 10 am est (second fix)
Thus Shanghai’s second fix corresponds to 195 minutes before London’s first fix.
And now the fix recordings:
TUESDAY gold fix Shanghai
Shanghai FIRST morning fix Jan 11/17 (10:15 pm est last night): $ 1207.31
NY ACCESS PRICE: $1187.50 (AT THE EXACT SAME TIME)/premium $19.80
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Shanghai SECOND afternoon fix: 2: 15 am est (second fix/early morning):$ 1205.91
NY ACCESS PRICE: $1189.40 (AT THE EXACT SAME TIME/2:15 am)
HUGE SPREAD 2ND FIX TODAY!!: $16.01
China rejects NY pricing of gold as a fraud/arbitrage will now commence fully
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
London Fix: Jan 11/2017: 5:30 am est: $1187.55 (NY: same time: $1187.70 5:30AM)
London Second fix Jan 11.2017: 10 am est: $1178.55 (NY same time: $1180.10 (10 AM)
It seems that Shanghai pricing is higher than the other two , (NY and London). The spread has been occurring on a regular basis and thus I expect to see arbitrage happening as investors buy the lower priced NY gold and sell to China at the higher price. This should drain the comex.
Also why would mining companies hand in their gold to the comex and receive constantly lower prices. They would be open to lawsuits if they knowingly continue to supply the comex despite the fact that they could be receiving higher prices in Shanghai.

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

2017: The Year When The World Economy Starts Coming Apart

Some people would argue that 2016 was the year that the world economy started to come apart, with the passage of Brexit and the election of Donald Trump. Whether or not the ‘coming apart’ process started in 2016, in my opinion we are going to see many more steps in this direction in 2017. Let me explain a few of the things I see.
[1] Many economies have collapsed in the past. The world economy is very close to the turning point where collapse starts in earnest.

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

Is The Fed REALLY Tightening? The Monetary Shell Game (Hint: M1 Money Growing at 8-10% YoY)

The Federal Reservc Open Market Committee (FOMC) has ‘tightened’ the Fed Funds Target rate twice since December 2015. One in December 2015 and once in December 2016.
Well, 75 basis points is hardly ‘tight.’ But what about The Fed’s asset purchases? The Fed ended their third round of asset purchases in October 2014. While QE expansion has stoppped (for the moment), The Fed’s balance sheet is being reduced very slowly. Hardly monetary tightening, but not loosening either,

This post was published at Wall Street Examiner on January 11, 2017.

Obama Does One Last Thing To Keep The Economic Illusinary Bubble Inflated – Episode 1175a

The following video was published by X22Report on Jan 11, 2017
The Dow is approaching 20,000 points, Gold is moving closer to 1200. Boeing will be laying off more employees, sales are down and orders are down. Obama keeps the real estate bubble inflated before he leaves office. Spain’s banks are in trouble, we are now seeing German, Italian and Spanish banks in real trouble.

IRS WARNING: MILLIONS OF REFUNDS FOR LOW-INCOME FAMILIES WILL BE DELAYED

The Immoral Robbery Swindlers, er, the Internal Revenue Service, has made an announcement that is sure to disappoint those who are expecting two very common types of tax refunds this year.
More than 40 million low-income families who claim the earned income tax credit (EITC) and the additional child tax credit (ACTC) will get those refunds later than expected.
IRS Commissioner John Koskinen wrote on the agency’s website:
In an effort to make it easier for the IRS to detect and prevent refund fraud, Congress passed a new law that requires the IRS to hold refunds claiming those credits until February 15th. But this doesn’t mean you should wait to file until then. Taxpayers claiming the EITC or ACTC should file as soon as they have all of the necessary documentation together to prepare an accurate return. In other words, file as you normally do.
The IRS will begin releasing refunds claiming these credits the week of February 15th, but it takes time for these to work through the financial system. With weekends and Presidents’ Day, EITC and ACTC filers should not expect to have access to their refunds via their bank or financial institution before the week of February 27th.

This post was published at The Daily Sheeple on JANUARY 11, 2017.

Trump Presser Ends, Details Underwhelm: Gold Gains As Dollar, Dow, & Drug Stocks Drop

The USD Index whipsawed higher and lower as Trump teased and un-teased comments on trade policies, only to tumble to the day’s lows by the end as details were missing and thus disappointed…
This rippled through risk assets, leaving gold higher, stocks lower, peso higher (after initial crashing), but idiocyncratic issues slammed drug stocks, and aircraft makers.

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

Tillerson Protests Break Out As Chants Of “Reject Rexx” Fill D.C.

Before Rex Tillerson’s Senate confirmation hearing even got started this morning, America’s disaffected, Hillary-supporting snowflakes took to the streets of Washington D. C. in protest of his inevitable appointment as Secretary of State. If only they could work so hard at finding a job it would be easy to “Make America Great Again.”
Outside the hearing, these clever millennials dressed up in T-Rex outfits and shouted “Reject Rexx” at the top of their lungs.


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

UBS Warns: Spain’s ‘Most Italian Bank’ Runs Out of Options

The bank-bailout business rages on.
During the first week of 2017, Spain’s ‘most Italian bank’, Banco Popular, got off to a flying start as its stock outperformed all other major Spanish banks. By Jan 5th its shares had even crossed the 1-line for the first time in nearly a month. But Popular’s New Year fairy tale was not made to last.
Its upward momentum, if that’s the right term, was brought to a halt by a bombshell report from UBS that concludes that Popular’s stock, which already lost three-quarters of its value last year and is down over 90% since 2008, is still overvalued by 20%. In less than an hour, Popular’s shares were back under a euro. That’s life in the penny-stock lane.
According to the report, Popular has a provision deficit of 1.9 billion. In other words, it has nonperforming loans and other toxic assets on its books whose losses would amount to 1.9 billion. But it has not yet booked (or ‘recognized’) those losses. If it did finally recognize those losses, it could end up with a 2.4 billion capital gap. That’s the equivalent of roughly 60% of its current market cap.
The UBS analysts acknowledged that their previous forecast of the bank’s capacity to absorb loss provisions had been ‘too optimistic’, with the new estimates showing a lower coverage ratio (46% compared to the previous 50%) and capital ratio (10% instead of 10.8%).

This post was published at Wolf Street on Jan 11, 2017.

Making Taxes Great Again – Trump vs. GOP Proposals

The dust of an inimitable 2016 year seems to have finally settled. The holiday season served as a wonderful escape to the political reality we found ourselves in after Election Day back in November. But as the holiday fantasia comes to an end, reality is sinking back in. 9 days from the time I am writing this, a presidential election will have transpired a new administration and commence the start of a new era.
As President-elect Trump and his cabinet prepare for inauguration day on January 20th, campaign promises and new policy proposals are leaving many of us with questions about what this administration will accomplish. A ‘Hot-topic’ item that has remained high on President-elect Trump’s priority list as President has been the need for tax reform. Both President-elect and Congress House Republicans have proposed plans to resolve the country’s broken tax system. The question is: what are House Republicans and the Trump administration proposing and how willing are they to work together? Below is a summary of the main proposals for a move toward tax reform in 2017.
Where Trump and the GOP align:

This post was published at FinancialSense on 01/11/2017.

Flight To Safety – Jan 2017 Update

The following video was published by ChrisMartensondotcom on Jan 11, 2017
There’s a preponderance of data that shows the world’s major asset markets are dangerously overvalued. And when these asset bubbles start to burst, the ‘save haven’ markets that investment capital will try to flee to are ridiculously small. Investors who do not start moving their capital in advance of crisis will be forced to pay much higher prices for safety — or may find they can’t get into these haven assets at any price.