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Banks Are Evil

Barandash Karandashich/Shutterstock

Banks Are Evil

It’s time to get painfully honest about this 

I don’t talk to my classmates from business school anymore, many of whom went to work in the financial industry.

Why?

Because, through the lens we use here at PeakProsperity.com to look at the world, I’ve increasingly come to see the financial industry — with the big banks at its core — as the root cause of injustice in today’s society. I can no longer separate any personal affections I might have for my fellow alumni from the evil that their companies perpetrate.

And I’m choosing that word deliberately: Evil.

In my opinion, it’s long past time we be brutally honest about the banks. Their influence and reach has metastasized to the point where we now live under a captive system. From our retirement accounts, to our homes, to the laws we live under — the banks control it all. And they run the system for their benefit, not ours.

While the banks spent much of the past century consolidating their power, the repeal of the Glass-Steagall Actin 1999 emboldened them to accelerate their efforts. Since then, the key trends in the financial industry have been to dismantle regulation and defang those responsible for enforcing it, to manipulate market prices (an ambition tremendously helped by the rise of high-frequency trading algorithms), and to push downside risk onto “muppets” and taxpayers.

Oh, and of course, this hasn’t hurt either: having the ability to print up trillions in thin-air money and then get first-at-the-trough access to it. Don’t forget, the Federal Reserve is made up of and run by — drum roll, please — the banks.

…click on the above link to read the rest of the article…

Eric Peters: “If China And The World Bank Are Right, We’re Headed For A Depression”

Eric Peters: “If China And The World Bank Are Right, We’re Headed For A Depression”

“Some people blindly invested offshore and were in a rush to do so,” explained China’s central bank chief, justifying his recent capital controls.

“Some of this outbound investment was not in line with our own policies and had no real gain for China.” No doubt he’s right. The tycoons fleeing Chinese capital markets have done so selfishly. “So to regulate capital flows, I think it is normal,” concluded the central banker.

Chinese credit relative to GDP has doubled in the past decade to 300%. Which remains less than the US at 350%, but the rate of Chinese credit growth is as unsustainable as it is difficult to reverse — without tanking the economy. The tycoons are running from this dynamic. Because such loops almost always end badly. 

Anyhow, after so many years of secular stagnation fears, global investors have grown conditioned to run. They’ve been running away from fear for so long, they’ve forgotten how to run toward greed. Which has left them blindly holding over $10trln of bonds, which yield negative interest.

Now, this might make sense in a deflationary depression. But the global economy has not seen such strong synchronized cyclical growth in years. Inflation is likewise firming everywhere.

But China lowered its growth target again. As the World Bank warned that today’s strong global upswing in confidence and financial markets are not enough to pull the world out of a “low-growth trap.” If they’re right, we’re surely headed for depression. Because all this new debt requires robust economic strength to shoulder the weight.

But European debt markets are still largely priced for depression. And with JP Morgan’s CEO Jamie Dimon announcing the return of animal spirits in America’s economy, it seems more likely that this cycle ends like every other. With a blind run toward greed.

…click on the above link to read the rest of the article…

When This All Blows Up…

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When This All Blows Up…

Understanding the how & when of the next economic crash 

This report marks the end of a series of three big trains of thought. The first explained how we’re living through the Mother Of All Financial Bubbles. The next detailed the Great Wealth Transfer that is now underway, siphoning our wealth into the pockets of an elite few.

This concluding report predicts how these deleterious and unsustainable trends will inevitably ‘resolve’ (which is a pleasant way of saying ‘blow up’.)

The Ka-POOM Theory

In terms how this will all end, we favor the scenario put forth by Eric Janszen in 1998 called the Ka-POOM theory.

This theory rests on the belief that the Federal Reserve along with the other world central banks looked at Japan’s several decades of economic stagnation and decided that deflationary recessions are to be avoided at all costs — even if that means blowing asset bubbles and then cleaning up the destruction left behind in their aftermath.

Because the Fed, et al. have a limited playbook (which is: print, and then print some more), the Ka-POOM model calls for limited periods of disinflation, followed by massive money printing sprees that then produce high inflation.

Despite the trillions and trillions in thin-air money printed by the world’s central banks over the past 8 years, a common rebuttal we hear is “But there’s been no inflation so far!”  To which I reply, “Yes, that’s what we’re being told. But that’s not actually true.”

Remember: inflation is simply “too much money chasing too few goods.”  We can detect today’s excess of money in the rising prices in our cost of living — but those higher prices are symptoms, not causes. Inflation is not “higher prices”. Inflation is “too much money”.

…click on the above link to read the rest of the article…

China Central Bank Admits It Has A Debt Problem, Warns No Easy Solution

China Central Bank Admits It Has A Debt Problem, Warns No Easy Solution

It’s a well-known risk, perhaps the biggest to the global financial system: China’s debt is too high, with estimates ranging from 250% to 300% of GDP per the IIF:

And while China has largely ignored, or avoided, discussing the troubling implications of its unprecedented debt load, this changed today when the head of China’s central bank, Zhou Xiachuan finally admitted that it has a debt “problem” saying that corporate debt levels are too high and that “it will take time to bring them down to more manageable levels”, underlining what has become the defining battle to put the world’s second-largest economy on a more sustainable footing: keeping GDP growing at 6.5% (or above) while injecting trillions in new debt.

“Non-financial corporate leverage is too high,” PBOC Governor Zhou Xiaochuan told reporters at a news conference on the sidelines of the annual parliament session.

Quoted by Reuters, he said that efforts will be made to contain debt levels, including restructuring of firms with heavy debt burdens, alongside a push to reduce excess industrial capacity.  Furthermore, banks will withdraw support for financially unviable firms, he added, repeating pledges by other officials last year to drive such “zombie” firms out of the market.

“I personally think this process is relatively medium-term. It won’t have very obvious results in the short-term because the existing stock (of debt) is very large,” he said.


Zhou Xiaochuan, Governor of the People’s Bank of China, attends a news 

conference in Beijing China March 10, 2017. REUTERS/Jason Lee

Zhou also said that measures by local governments to cool rising house prices will slow mortgage growth to some degree, but housing loans will continue to grow at a relatively rapid pace. We profiled China’s mortgage debt problem last October when we showed that over 70% of all new loans went to fund mortgages, which in turn now account for a fifth of total Chinese outstanding loans.

…click on the above link to read the rest of the article…

Bill Gross: “Our Financial System Is A Truckload Of Nitroglycerin On A Bumpy Road”

Bill Gross: “Our Financial System Is A Truckload Of Nitroglycerin On A Bumpy Road”

Courtesy of Bill Gross’ latest monthly letter “Show Me The Money“, here are some perspectives on the only thing that has kept the global economy going since the financial crisis: debt, and lost of it.
in 2017, the global economy has created more credit relative to GDP than that at the beginning of 2008’s disaster. In the U.S., credit of $65 trillion is roughly 350% of annual GDP and the ratio is rising. In China, the ratio has more than doubled in the past decade to nearly 300%. Since 2007, China has added $24 trillion worth of debt to its collective balance sheet. Over the same period, the U.S. and Europe only added $12 trillion each. Capitalism, with its adopted fractional reserve banking system, depends on credit expansion and the printing of additional reserves by central banks, which in turn are re-lent by private banks to create pizza stores, cell phones and a myriad of other products and business enterprises. But the credit creation has limits and the cost of credit (interest rates) must be carefully monitored so that borrowers (think subprime) can pay back the monthly servicing costs. If rates are too high (and credit as a % of GDP too high as well), then potential Lehman black swans can occur. On the other hand, if rates are too low (and credit as a % of GDP declines), then the system breaks down, as savers, pension funds and insurance companies become unable to earn a rate of return high enough to match and service their liabilities. 

U.S. Total Credit Market Debt as a Percent of GDP

Chart: U.S. Total Credit Market Debt as a Percent of GDP

Central banks attempt to walk this fine line – generating mild credit growth that matches nominal GDP growth – and keeping the cost of the credit at a yield that is not too high, nor too low, but just right. Janet Yellen is a modern day Goldilocks.

…click on the above link to read the rest of the article…

Are We Witnessing The Weirdest Moment In Economic History?

Are We Witnessing The Weirdest Moment In Economic History?

It is an unfortunate reality that most people tend to be oblivious to massive sea changes in geopolitics and economics. You would think that these events would catch the immediate attention of everyone as they happen, but usually it is not until they realize that the microcosm of their personal lives is subject to the consequences of the macrocosm that they wake up and take notice.

There are, however, ways to train yourself to pick up on signals within the news cycle and within political and financial rhetoric; signals that indicate a great shift is perhaps on the way. Sometimes these initial signs are subtle, sometimes they are as subtle as a feminist slut-walk. I would point out that over the next few months there are dangerous correlations so numerous and blatant in the economic sphere that I would almost rather watch a marching gaggle of frumpy feminists wearing nothing but electrical tape than bear witness to the mayhem that is about to strike the unwitting public.

What am I talking about? Well, let’s go through the list…

Federal Reserve Meeting March 14-15th

As my readers know well, I have been warning since before the election that the Fed would use a Trump presidency as an opportunity to pull the plug on near-zero interest rates and remove a primary pillar supporting stock markets — stock buybacks made possible by free overnight loans to numerous banks and corporations. Without QE and low interest rates the equities bubble will inevitably implode.

Corporate earnings certainly aren’t holding up stocks, neither is GDP or consumer spending. The Fed is the only determining factor of the ongoing bull market. Anyone who claims otherwise is probably a mainstream analyst or overzealous day trader with a vested interest in keeping the illusion going.

…click on the above link to read the rest of the article…

Whose Banks Are Riskiest: A Surprising Answer From The BIS

Whose Banks Are Riskiest: A Surprising Answer From The BIS

When one thinks of unstable, risky banking systems, the first thing that comes to mind are visions of insolvent, state-backed building – with or without long ATM lines – in China, Greece, Italy or, in recent times, Germany. However, according to the most recent report by the Bank for International Settlements, the country with the riskiest banking system is neither of these, and is a rather “unusual suspect.”

As part of its latest quarterly report, the BIS looked at highlights of global financial flows, and found that after a modest slowdown in 2015, growth in both claims and international denominated debt securities resumed its rise in 2016, leaving banks even more exposed as counterparties to international issuers, especially should the world hit another “Dollar margin call” situation, where borrowers are unable to make payments on their obligations due to a surge in the global reserve currency.

However, cross-border international debt flows is just one aspect of bank riskiness. As part of a separate excercise profiling the domestic banking systems of some of the most prominent Developed and Emerging nations, the BIS looked at four distinct “risk” or crisis early warning indicators: i) Credit-to-GDP gap, or the difference in the current ratio from the long-run trend; ii) Property Price Gap, or the deviation of real residential property prices from their long-run trend, iii) Debt Service Ratio (DSR), which also is the deviation in the current DSR from the long-run average, and finally iv) DSR assuming a 2.50% increase in interest rates.

What it found is that the early warning indicators for financial crises continue to signal vulnerabilities in several jurisdictions. Here is what it found:

…click on the above link to read the rest of the article…

Arizona Challenges the Fed’s Money Monopoly

Arizona Challenges the Fed’s Money Monopoly

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History shows that, if individuals have the freedom to choose what to use as money, they will likely opt for gold or silver.

Of course, modern politicians and their Keynesian enablers despise the gold or silver standard. This is because linking a currency to a precious metal limits the ability of central banks to finance the growth of the welfare-warfare state via the inflation tax. This forces politicians to finance big government much more with direct means of taxation.

Despite the hostility toward gold from modern politicians, gold played a role in US monetary policy for sixty years after the creation of the Federal Reserve. Then, in 1971, as concerns over the US government’s increasing deficits led many foreign governments to convert their holdings of US dollars to gold, President Nixon closed the gold window, creating America’s first purely fiat currency.

America’s 46-year experiment in fiat currency has gone exactly as followers of the Austrian school predicted: a continuing decline in the dollar’s purchasing power accompanied by a decline in the standard of living of middle- and working-class Americans, a series of Federal Reserve-created booms followed by increasingly severe busts, and an explosive growth in government spending. Federal Reserve policies are also behind much of the increase in income inequality.

Since the 2008 Fed-created economic meltdown, more Americans have become aware of the Federal Reserve’s responsibility for America’s economic problems. This growing anti-Fed sentiment is one of the key factors behind the liberty movement’s growth and represents the most serious challenge to the Fed’s legitimacy in its history. This movement has made “Audit the Fed” into a major national issue that is now closer than ever to being signed into law.

…click on the above link to read the rest of the article…

NEW UNCOVERED INFORMATION: Why Central Banks Were Forced To Rig The Gold Market

NEW UNCOVERED INFORMATION: Why Central Banks Were Forced To Rig The Gold Market

According to newly uncovered information in the gold market, it provides additional evidence of why the Fed, Central Banks and the IMF were forced to RIG the gold market.  Not only was the dropping of the Gold-Dollar peg going to release a great deal of pressure on the manipulated gold price, but forecasts of a massive increase in gold demand was going to totally overwhelm supply.

Thus, this new information provides clear evidence that the gold market was being assaulted on “two fronts.”  Not only was the gold market suffering from a decades of price suppression schemes via the Fed and Central Banks, but also that surging gold demand in the jewelry and industrial sectors was going to lead to severe shortages in the gold market.

Which means, the gold market was experiencing a great deal more stress than complications stemming from the debasement of the U.S. Dollar due to massive money printing.  Actually, looking at this new information, I had no idea of the amount of Fed, Central Bank and IMF gold market intervention until I put all the pieces together.

Now, when I say “new information”, it pertains to new information and data that I dug up from older official documents.  While most of the folks in the precious metals community realize that the Fed and Central Banks have sold gold into the market to depress the price, this new evidence puts the gold market it in an entirely DIFFERENT LIGHT. 

Furthermore, additional data points to a “Gold Supply & Demand” situation that would have gone completely out of control, if the Fed, Central Banks and IMF did not step in.

…click on the above link to read the rest of the article…

March 2017: The End Of A 100 Year Global Debt Super Cycle Is Way Overdue

March 2017: The End Of A 100 Year Global Debt Super Cycle Is Way Overdue

Global Debt Super Cycle - Public DomainMarch 2017: The End Of A 100 Year Global Debt Super Cycle Is Way OverdueFor more than 100 years global debt levels have been rising, and now we are potentially facing the greatest debt crisis in all of human history.  Never before have we seen such a level of debt saturation all over the planet, and pretty much everyone understands that this is going to end very, very badly at some point.  The only real question is when it will happen.  Many believe that the current global debt super cycle began when the Federal Reserve was established in 1913.  Central banks are designed to create debt, and since 1913 the U.S. national debt has gotten more than 6800 times larger.  But of course it is not just the United States that is in this sort of predicament.  At this point more than 99 percent of the population of the entire planet lives in a nation that has a debt-creating central bank, and as a result the whole world is drowning in debt.

When people tell me that things are going to “get better” in 2017 and beyond, I find it difficult not to roll my eyes.  The truth is that the only way we can even continue to maintain our current ridiculously high debt-fueled standard of living is to grow debt at a much faster pace than the economy is growing.  We may be able to do that for a brief period of time, but giant financial bubbles like this always end and we will not be any exception.

Barack Obama and his team understood what was happening, and they were able to keep us out of a horrifying economic depression by stealing more than nine trillion dollars from future generations of Americans and pumping that money into the U.S. economy.

…click on the above link to read the rest of the article…

Have Central Banks Finally Unleashed Inflation?

Have Central Banks Finally Unleashed Inflation?

Globally inflation is on the rise.

On Monday Spain reported a year over year 7.5% jump in its PPI reading (a measure of inflation). Take a look at that chart.

Spain is just the latest major economy to join the inflationary tide.

German also saw a recent spike in PPI.

 

In the US, inflation is now well above the Fed’s target 2%, having ripped over 3% higher in the last six months alone.

This is much bigger than Trump or any single factor. After eight years of low interest rates and Trillions of Dollars in QE spent, global Central banks have finally unleashed inflation…

The big problem with this is that inflation is like ketchup in a bottle. It always takes longer to get achieve than you’d predict… but once it hits, you usually get more than you hoped for.

This is the sort of environment in which a major market event could happen. Over $100 trillion in bonds are at risk of entering a bear market if inflation REALLY takes hold.

And while the odds are low that we get an actual Crash… this environment is more conducive to Black Swan events than any other in the last seven years.

China Accounts For Half Of All Global Debt Created Since 2005: Here Are The Implications

China Accounts For Half Of All Global Debt Created Since 2005: Here Are The Implications

Over three years ago, in November 2013, when the world’s attention was still largely focused on what the “Big 4” central banks would do with QE and/or interest rates, we wrote an article showing in one simple chart  “How In Five Short Years, China Humiliated The World’s Central Banks“, and noted that in just the brief period since the financial crisis “Chinese bank assets (and by implication liabilities) have grown by an astounding $15 trillion, bringing the total to over $24 trillion. In other words, China has expanded its financial balance sheet by 50% more than the assets of all global central banks combined.”

Fast forward to today, when not only is China’s debt the biggest wildcard for the stability of the global financial system (recall last week UBS observated that for the first time in years, the global credit impulse had tumbled to negative largely as a result of a slowdown in Chinese credit creation), but even central banks openly admit that China’s relentless debt-issuance spree is a major risk factor for global financial stability. One such bank is the NY Fed, which earlier today issued a report titled “China’s Continuing Credit Boom“, which while containing nothing that regular readers don’t already know, provides a handy snapshot of the full extent of China’s debt problems.

Here are some of the higlights:

  • Debt in China has increased dramatically in recent years, accounting for roughly one-half of all new credit created globally since 2005.
  • The country’s share of total global credit is nearly 25 percent, up from 5 percent ten years ago. By some measures (as documented below), China’s credit boom has reached the point where countries typically encounter financial stress, which could spill over to international markets given the size of the Chinese economy.

…click on the above link to read the rest of the article…

In A Battle Between Trump And The Federal Reserve, Who Really Wins?

In A Battle Between Trump And The Federal Reserve, Who Really Wins?

As a part of the increasingly obvious set-up of conservative movements by international banking interests and globalist think-tanks, I have noticed an expanding disinformation campaign which appears to be designed to wash the Federal Reserve of culpability for the crash of 2008 that has continued to fester to this day despite the many claims of economic “recovery.”  I believe this program is meant to set the stage for a coming conflict between the Trump Administration and the Fed, but what would be the ultimate consequences of such an event?

In my article ‘The False Economic Recovery Narrative Will Die In 2017’, I outlined the propaganda trap being established by globalist owned and operated media outlets like Bloomberg, in which they consistently claim that Donald Trump has “inherited” an economy in recovery and ascendancy from the Obama administration.  I thoroughly debunked their positions and “evidence” by showing how each of their fundamental indicators has actually been in steady decline since 2008, even in the face of massive monetary intervention and fiat printing by the Fed.

My greatest concern leading up to the 2016 election was that Trump would be allowed to win because he represents the perfect scapegoat for an economic crisis that central banks have been brewing for years. Whether or not Trump is aware of this plan cannot yet be proven, but as I have mentioned in the past, his cabinet of Goldman Sachs alumni and neo-con veterans hardly gives me confidence.  In the best case scenario, Trump is surrounded by enemies; in the worst case scenario, he is surrounded by friends.

…click on the above link to read the rest of the article…

Kyrgzstan’s Central Bank Urges Citizens To Own Gold

Kyrgzstan’s Central Bank Urges Citizens To Own Gold

Gold can be stored for a long time and, despite the price fluctuations on international markets, it doesn’t lose its value for the population as a means of savings,” Kyrgyzstan’s Central Bank Governor Tolkunbek Abdygulov said, “I’ll try to turn the dream into reality faster.”

A landlocked nation perched between China and Kazakhstan is embarking on an experiment with little parallel worldwide: shifting savings from cattle to goldAs Bloomberg reports,

One of the first post-Soviet republics to adopt a new currency and let it trade freely, Kyrgyzstan’s central bank wants every citizen to diversify into gold. Governor Tolkunbek Abdygulov says his “dream” is for every one of the 6 million citizens to own at least 100 grams (3.5 ounces) of the precious metal, the Central Asian country’s biggest export.

In the two years that the central bank has offered bars directly to the population, about 140 kilograms of bullion have been sold, Abdygulov, 40, said by phone from the capital, Bishkek.

“We are hopeful that our country’s population will learn to diversify its savings into assets that are more liquid and — more importantly — capable of retaining their value,” he said. In rural areas, cattle is still the asset of choice for investors and savers, according to Abdygulov.

What makes Kyrgyzstan unique is the central bank’s effort to win converts by providing infrastructure for safe-keeping and investment. The central bank produces bars of different sizes, varying in weight from 1 to 100 grams.

The central bank governor believes his plan is realistic, even though it means the population would own about 600 tons of gold, equivalent to 30 times the nation’s current annual output. Abdygulov declined to specify the timeframe for when his goal of 100 grams per person can be met.

…click on the above link to read the rest of the article…

The Central Banks Face Unwelcome Realities: Their Policies Boosted Wealth Inequality and Failed to Generate “Growth”

The Central Banks Face Unwelcome Realities: Their Policies Boosted Wealth Inequality and Failed to Generate “Growth”

Rather than be seen to be further enriching the rich, I think central banks will start closing the “free money for financiers” spigots.
Take a quick glance at these charts of the Federal Reserve balance sheet and bank credit in the U.S. Notice what happened to bank credit after the Fed “tapered” and stopped expanding its balance sheet?
Bank credit exploded higher:
Now look at corporate profits:
Once the Fed ended its $3.7 trillion “experiment” of vastly expanding its money-creation and bond-buying in early 2014, what happened to bank credit? Bank credit had expanded by a bit over $1 trillion in the early years of the Fed’s quantitative easing, but it really took off after QE3 ended, soaring roughly $2 trillion.
This was the policy goal all along: the Fed would do the heavy lifting to keep credit and the financial markets from imploding, and eventually private-sector credit would expand enough to fuel a self-sustaining recovery.
While measures of employment and production have lofted higher, productivity, profits and wages for the bottom 95% have all stagnated. Is it coincidental than corporate profits began weakening once the Fed’s QE3 ended? Perhaps.
How about the stagnation of household median income during the Fed’s expansion and the rise of private bank credit from 2014 to the present? Was that also a coincidence?
If the economy was expanding smartly as the Fed was goosing credit higher, it certainly wasn’t trickling down to households.
What’s happening beneath the happy-happy surface is that the returns on expanding credit are diminishing rapidly. The Fed’s QE “free money for financiers” never did “trickle down” to the bottom 95%, and the enormous expansion of bank credit is no longer driving corporate profits higher.

…click on the above link to read the rest of the article…

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