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Janet Yellen’s clout today is especially hefty: Don Pittis
The sense that change is afoot lends power to the U.S. central banker’s words
If you live in a cave and survive on nuts, berries and the odd roasted squirrel, what U.S. Federal Reserve chair Janet Yellen says today won’t make much difference to your life. At least not right away.
But for the rest of us, from Saskatoon to Shahjahanpur, what she says will matter. The powerful Yellen may talk softly, but she carries an enormous stick.
- Rate hike could leave mortgage holders stretched: survey
- Janet Yellen warns on high stock market valuations
- Rate hike may be warranted this year, Yellen says
Of course the U.S. central bank always has a certain amount of clout. But there are reasons that Yellen’s pronouncements today on interest rates may be more newsworthy than usual.
The first thing is the way Yellen’s message will be presented. Even when the Fed issues a written statement, market analysts go over the wording with a fine-toothed comb, interpreting subtle changes in wording.
Like the printed statement, Yellen’s speech will also be carefully penned, but emphasis can lend special meaning to a prepared text.
Most revealing of all is the question and answer period, when Yellen stands up and, in the glare of camera lights, faces the slavering wolves of the financial press who will try to tempt her into tiny indiscretions.
Adding to the import of today’s speech and news conference is the timing. It may be an illusion, but it feels as if the world is currently on the knife edge of change, what mathematicians call an inflection point, where things, once trending one way, suddenly begin trending another.
In the fullness of time we may find out we were wrong, but today part of Yellen’s impact will be the sense that change is afoot.
…click on the above link to read the rest of the article…
The Futility of Our Global Monetary Experiment
The Futility of Our Global Monetary Experiment
Jeff Deist: The Fed recently announced just this past week that it would not use specific dates for targeting higher Fed funds rate this year and you almost get the sense that poor Janet Yellen is at the end of this Greenspan-Bernanke experiment and there’s not much left for her to do. I mean, what’s our sense of Yellen and her position?
David Stockman: Yeah, I agree with that. I think in some ways they’re petrified as to where they ended up or they should be. After all, we’re in an experiment of monumental proportions.
Let’s just assess where we are. If they don’t raise the interest rate in June — and I think all the signals now are pretty clear they’re going to find another reason to delay — that will mean seventy-eight straight months of zero rates in the money market. As I always say, the money-market price, that is the Federal Funds Rate or Overnight Money or a short term treasury bill, is the most important price in all of capitalism because that determines the cost of carry, the cost of speculation and gambling.
When you conduct a monetary policy that says to the speculators, to the gamblers, “come and get it,” you are guaranteed free money to carry your positions, whether you’re buying German Bonds or you’re buying the S&P 500 Stock Index or the whole array of yielding or price gaining assets that are available in the financial market. This monetary policy also sends the message that you can leverage and carry those positions for free and roll it day after day without worry because the central bank has pegged your cost and production, and in a sense has pledged on its solemn honor that it will not change without many months of warning. And that’s what this whole thing is about — changing the language and so forth. I think you have created a massive distortion in the very heart of capitalism in the financial system.
…click on the above link to read the rest of the article…
Macedonia Central Bank Blocks Greek Bank Withdrawals “In Case Of Grexit”
Macedonia Central Bank Blocks Greek Bank Withdrawals “In Case Of Grexit”
The bank runs (and capital controls) begin. Macedonia Central Bank Governor Bogov states:
- *GREEK BANKS IN MACEDONIA CAN’T WITHDRAW CASH: BOGOV
- *MACEDONIAN BANKS PROTECTED IN CASE OF GREXIT: BOGOV
How long before the rest of Europe follows suit and a bank holiday is declared Monday to “Cyprus” depositors?
He further added:
- *MACEDONIAN CENTRAL BANK SEES MAJOR RISKS FROM POLITICAL CRISIS
Just to be clear, this withdrawal halt is protection against a worst case scenario… BUT, by imposing capital controls you are ASSURING a worst case scenario occurs!!
Guess How Many Nations In The World Do Not Have A Central Bank?
Guess How Many Nations In The World Do Not Have A Central Bank?
Central banking has truly taken over the entire planet. At this point, the only major nation on the globe that does not have a central bank is North Korea. Yes, there are some small island countries such as the Federated States of Micronesia that do not have a central bank, but even if you count them, more than 99.9% of the population of the world still lives in a country that has a central bank. So how has this happened? How have we gotten the entire planet to agree that central banking is the best system? Did the people of the world willingly choose this? Of course not. To my knowledge, there has never been a single vote where the people of a nation have willingly chosen to establish a central bank. Instead, what has happened is that central banks have been imposed on all of us. All over the world, people have been told that monetary issues are “too important” to be subject to politics, and that the only solution is to have a group of unelected, unaccountable bankers control those things for us.
So precisely what does a central bank do?
You would be surprised at how few people can actually answer that question accurately. The following is how Wikipedia describes what a central bank does…
A central bank, reserve bank, or monetary authority is an institution that manages a state’s currency, money supply, and interest rates. Central banks also usually oversee the commercial banking system of their respective countries. In contrast to a commercial bank, a central bank possesses a monopoly on increasing the monetary base in the state, and usually also prints the national currency, which usually serves as the state’s legal tender. Examples include the European Central Bank (ECB), the Bank of England, the Federal Reserve of the United States and the People’s Bank of China.
…click on the above link to read the rest of the article…
103 Years Later, Wall Street Turned Out Just As One Man Predicted
103 Years Later, Wall Street Turned Out Just As One Man Predicted
In 1910, three years before the US Federal Reserve was founded, Senator Nelson Aldrich, Frank Vanderlip of National City (Citibank), Henry Davison of Morgan Bank, and Paul Warburg of the Kuhn, Loeb Investment House met secretly at Jekyll Island in Georgia to formulate a plan for a US central bank just years ahead of World War I.
The result of their work was the so-called Aldrich Plan which called for a system of fifteen regional central banks, i.e., National Reserve Associations, whose actions would be coordinated by a national board of commercial bankers. The Reserve Association would make emergency loans to member banks, and would create money to provide an elastic currency that could be exchanged equally for demand deposits, and would act as a fiscal agent for the federal government.
In other words, the Aldrich Plan proposed a “central bank” that would be openly and directly controlled by Wall Street commercial banks on whose behalf it would solely operate, instead of doing so indirectly, behind closed doors and the need for criminal investigations.
The Aldrich Plan was defeated in the House in 1912 but its outline became the model for the bill that eventually was adopted, as the Federal Reserve Act of 1913 whose passage not only unleashed the Fed as we know it now, but the entire shape of modern finance.
In 1912, one person who warned against the passage of the Aldrich Plan was Alfred Owen Crozier: a man who saw how it would all play out, and even wrote a book titled “U.S. Money vs Corporation Currency” (costing 25 cents) explaining and predicting everything that would ultimately happen, even adding some 30 illustrations for those readers who were visual learners.
…click on the above link to read the rest of the article…
The “Better Than Cash Alliance” Has an Orwellian Plan
The “Better Than Cash Alliance” Has an Orwellian Plan
In the fall of 1910, under the pretense of a duck hunting trip, a group of powerful bankers, political figures, and businessmen met secretly at Jekyll Island, Georgia, to plan the creation of a central bank for the United States.
The “game” that this elite group of “hunters” brought back to their ivory towers of Lower Manhattan and Capitol Hill was the blueprint for one of the most destructive financial institutions in modern history, theFederal Reserve.
One-hundred years later, another group of powerful bankers, political figures, and businessmen have converged to promote a cashless society.
Ruth Goodwin-Groen, Director of the“Better Than Cash Alliance”
Their ultimate aim: an economic system that would compel every man, woman, and child to utilize corporate, government-monitored electronic systems to make purchases of any kind.
The diabolically named Better Than Cash Alliance is as dangerous as the group of “outdoor enthusiasts” that met at Jekyll Island.
The Jekyll Island group sold their grand plans based on lies (they claimed that the Fed would protect the value of the currency, foster full employment, and guarantee liquidity in times of financial panics). And the Better Than Cash Alliance (BTCA) is promoting the notion of a cashless society based on the farce that eliminating cash would stimulate entrepreneurship among the poor.
Among the problems that come with the elimination of cash, the BTCA would reduce a great many opportunities for entrepreneurship for people of few means.
Gone would be the informal businesses the working poor often operate: roadside produce stands, street performances, handicraft tables, and day labor. Contrary to the assertions of the BTCA, a cash-free society would limit entrepreneurship to those with the means to incorporate a business, afford the proprietary system required to accept electronic payments, and understand the local, state, and federal tax burden the payment system may create.
…click on the above link to read the rest of the article…
The Central Banks Are Losing Control Of The Financial Markets
The Central Banks Are Losing Control Of The Financial Markets
Every great con game eventually comes to an end. For years, global central banks have been manipulating the financial marketplace with their monetary voodoo. Somehow, they have convinced investors around the world to invest tens of trillions of dollars into bonds that provide a return that is way under the real rate of inflation. For quite a long time I have been insisting that this is highly irrational. Why would any rational investor want to put money into investments that will make them poorer on a purchasing power basis in the long run? And when any central bank initiates a policy of “quantitative easing”, any rational investor should immediately start demanding a higher rate of return on the bonds of that nation. Creating money out of thin air and pumping into the financial system devalues all existing money and creates inflation. Therefore, rational investors should respond by driving interest rates up. Instead, central banks told everyone that interest rates would be forced down, and that is precisely what happened. But now things have shifted. Investors are starting to behave more rationally and the central banks are starting to lose control of the financial markets, and that is a very bad sign for the rest of 2015.
And of course it isn’t just bond yields that are out of control. No matter how hard they try, financial authorities in Europe can’t seem to fix the problems in Greece, and the problems in Italy, Spain, Portugal and France just continue to escalate as well. This week, Greece became the very first nation to miss a payment to the IMF since the 1980s. We’ll discuss that some more in a moment.
…click on the above link to read the rest of the article…
How To Spot A Bubble
How To Spot A Bubble
We’ve been entertaining ourselves to no end the past couple days with a ‘vast array’ of articles that purport to provide us with ‘expert’ opinion on the question of whether we are witnessing a bubble or not. Got the views of Goldman’s David Kostin, Robert Shiller, Jeremy Grantham, Jeremy Siegel, Howard Marks.
But although these things can be quite amusing because while they’re at it, of course, the ‘experts’ say the darndest things (check Bloomberg ‘Intelligence’s Carl Riccadonna: “You had equity markets benefit from QE, but eventually QE also jump-started the broader recovery..Ultimately everyone’s benefiting.”), we can’t get rid of this one other nagging question: who needs an expert to tell them that today’s markets are riddled with bubbles, given that they are the size of obese gigantosauruses about to pump out quadruplets?
Moreover, when inviting the opinions of these ‘authorities’, you inevitably also invite denial and contradiction (re: Siegel). And before you know what hit you, it turns into something like the climate change ‘debate’: just because a handful of ‘experts’ deny what’s right in front of their faces as tens of thousands of scientists do not, doesn’t mean there’s a valid discussion there. It’s just noise with an agenda.
And though the global climate system is infinitely more complex than the very vast majority of people acknowledge, fact remains that a plethora of machine-driven and assisted human activities emit greenhouse gases, greenhouse gases trap heat and higher concentrations of greenhouse gases trap more heat. In very similar ways, central banks’ stimuli (love that word) play havoc, and blow bubbles, with and within the economic system. Ain’t no denying the obvious child.
But even more than the climate ‘debate’, the bubble expert articles made us think of a Jerry Seinfeld episode called The Opera, which ends with Jerry doing a stand-up shtick that goes like this:
…click on the above link to read the rest of the article…
Mario Draghi’s Slippery Downward Slope
Mario Draghi’s Slippery Downward Slope
Mario Draghi made another huge faux pas Thursday, but it looks like the entire world press has become immune to them, because it happens all the time, because they don’t realize what it means, and because they have a message if not a mission to sell. But still, none of these things makes it alright. Nor does Draghi’s denying it was a faux pas to begin with.
And while that’s very worrisome, ‘the public’ appear to be as numbed and dumbed down to this as the media themselves are -largely due to ’cause and effect’, no doubt-. We saw an account of a North Korean defector yesterday lamenting that her country doesn’t have a functioning press, and we thought: get in line.
It’s one thing for the Bank of England to research the effects of a Brexit. It’s even inevitable that a central bank should do this, but both the process and the outcome would always have to remain under wraps. Why it was ‘accidentally’ emailed to the Guardian is hard to gauge, but it’s not a big news event that such a study takes place. The contents may yet turn out to be, but that doesn’t look all that likely.
The reason the study should remain secret is, of course, that a Brexit is a political decision, and a country’s central bank can not be party to such decisions.
It’s therefore quite another thing for ECB head Mario Draghi to speak in public about reforms inside the eurozone. Draghi can perhaps vent his opinion behind closed doors, for instance in talks with politicians in European nations, but any and all eurozone reforms remain exclusively political decisions, even if they are economic reforms, and therefore Draghi must stay away from the topic, certainly in public. Far away.
…click on the above link to read the rest of the article…
Stephen Poloz may let inflation creep higher: Don Pittis
Bank of Canada governor may prefer an inflation bump to the damaging impact of higher interest rates
Which would you prefer, higher interest rates or higher inflation?
If you are someone who actually watches what the Bank of Canada does month to month, its two per cent inflation target may seem sacrosanct.
In which case, you might be surprised to hear that the concept of raising or lowering interest rates to freeze inflation at exactly two per cent is a relatively recent innovation. It was put in place in reaction to the soaring prices and wages of the 1970s and 1980s.
And the Bank of Canada has been seriously considering changing that target. Any change would still require a new agreement between the federal government and the bank. The current agreement is scheduled to end next year.
A fresh report from the business news service Bloomberg implies that the bank could surprise us with just such an announcement any time soon.
A higher inflation target means prices, from clothing to gasoline, could increase at a faster rate without fear of higher interest rates that might slow the industrial economy. (The Canadian Press)
“After shocking markets with an interest rate cut in January,” wrote Bloomberg’s Greg Quinn, “Bank of Canada Governor Stephen Poloz is considering whether to deliver another surprise: changing the central bank’s two per cent inflation target.”
‘No surprise’
Quinn does not offer the source for his latest story, but he follows the bank’s activities assiduously. The Bank of Canada, on the other hand, was quick to play down the story.
“It is absolutely wrong to characterize research done by the bank on the implications of a higher inflation target as a surprise,” said an official bank spokesperson in response to my inquiry as to whether the Bloomberg story was true.
Stunned Greeks React To Initial Capital Controls And The “Decree To Confiscate Reserves”, And They Are Not Happy
Stunned Greeks React To Initial Capital Controls And The “Decree To Confiscate Reserves”, And They Are Not Happy
Earlier today, following weeks of speculation, Greece finally launched the first shot across the bow of capital controls, when it decreed that due to an “extremely urgent and unforeseen need” (ironically the need was quite foreseen since about 2010, but that is a different story), it would be “obliged” to transfer – as in confiscate – “idle cash reserves” located across the country’s local governments (i.e., various cities and municipalities) to the Greek central bank.
Several hours later the decree which was posted in the government gazette has finally percolated among the population, and the response to what even ordinary Greeks realize is now the endgame, is less than exuberant.
Bloomberg reports, that “as Greece struggles to find cash to stay afloat, local authorities say they oppose a government decision to use their reserves for short-term financing.”
“The government’s decision to seize our reserves not only raises legal and constitutional issues, but also a moral one,” said George Papanikolaou, mayor of Glyfada, the third-largest municipality in the metropolitan region of Attica after Athens and Piraeus. “We have a responsibility to serve our citizens,” Papanikolaou said by phone on Monday. Glyfada has about 16 million euros in cash reserves, he said.
George is unhappy because as recently as tomorrow, he will find there is precisely zero euros in his public bank account, as all the money has now been forcibly sequestered by the government in order to repay future Troika, pardon, IMF obligations.
Sadly for Greece, this is the only option left as the money has now fully run out: Greek Prime Minister Alexis Tsipras ordered local governments and central government entities to move their cash balances to the central bank for investment in short-term state debt.
…click on the above link to read the rest of the article…
Iceland To Take Back The Power To Create Money
Iceland To Take Back The Power To Create Money
Who knew that the revolution would start with those radical Icelanders? It does, though. One Frosti Sigurjonsson, a lawmaker from the ruling Progress Party, issued a report today that suggests taking the power to create money away from commercial banks, and hand it to the central bank and, ultimately, Parliament.
Can’t see commercial banks in the western world be too happy with this. They must be contemplating wiping the island nation off the map. If accepted in the Iceland parliament , the plan would change the game in a very radical way. It would be successful too, because there is no bigger scourge on our economies than commercial banks creating money and then securitizing and selling off the loans they just created the money (credit) with.
Everyone, with the possible exception of Paul Krugman, understands why this is a very sound idea. Agence France Presse reports:
Iceland Looks At Ending Boom And Bust With Radical Money Plan
Iceland’s government is considering a revolutionary monetary proposal – removing the power of commercial banks to create money and handing it to the central bank. The proposal, which would be a turnaround in the history of modern finance, was part of a report written by a lawmaker from the ruling centrist Progress Party, Frosti Sigurjonsson, entitled “A better monetary system for Iceland”.
“The findings will be an important contribution to the upcoming discussion, here and elsewhere, on money creation and monetary policy,” Prime Minister Sigmundur David Gunnlaugsson said. The report, commissioned by the premier, is aimed at putting an end to a monetary system in place through a slew of financial crises, including the latest one in 2008.
RED ALERT – IBM Moves to Create a Centralized, Central Bank Controlled Blockchain for Currency Control
RED ALERT – IBM Moves to Create a Centralized, Central Bank Controlled Blockchain for Currency Control
International Business Machines Corp is considering adopting the underlying technology behind bitcoin, known as the “blockchain,” to create a digital cash and payment system for major currencies, according to a person familiar with the matter.
Unlike bitcoin, where the network is decentralized and there is no overseer, the proposed digital currency system would be controlled by central banks.
– From the Reuters article: IBM Looking at Adopting Bitcoin Technology for Major Currencies
Many activists and thinkers in the anti-status quo world were understandably very suspicious of Bitcoin when it first entered mainstream consciousness during its run-up from $10 to $260 in spring 2013. I myself had heard of Bitcoin years before I publicly expressed my interest and support of the technology. With no tech background, I was immediately overwhelmed with the concept, and so I initially dismissed it and forgot about it. It was only in 2012, that I started asking questions of tech experts who I had become friends with it about it in order to calm my concerns. Considering these people have similar political leanings and are even more paranoid than I am about the corporate-gulag state, I felt somewhat reassured. Then, when I recognized the powerful political implications of the technology, I wrote my first public thoughts on it. The post was titled, Bitcoin: A Way to Fight Back Against the Financial Terrorists?
Here’s a key excerpt from the post, and what really got me interested in Bitcoin:
…click on the above link to read the rest of the article…
QE Inventor: It’s EASY to Create a Full-Blown Recovery, But Central Banks Chose to Make Banksters Rich Instead of Helping Main Street
QE Inventor: It’s EASY to Create a Full-Blown Recovery, But Central Banks Chose to Make Banksters Rich Instead of Helping Main Street
QE Is a Sham
Richard Werner (economics professor at University of Southampton) is the inventor of quantitative easing (QE).
Werner previously said that QE has failed to help the economy. (Former long-time Fed chair Alan Greenspan agrees. Numerous academic studies confirm this. And see this.)
But Werner is now taking off the gloves …
He said recently:
- It’s easy for central banks to take steps which would quickly create “full-blown recovery” for the economy
- But the central bankers are instead choosing to act in a way which creates massive profits for the big banks, instead of stabilizing the economy. Werner blames the revolving door between central bankers and private bankers
- The central banks have twisted the whole concept of easing … pretending that they’re trying to help the economy, when they’re doing something else entirely
- Credit should be extended to the productive economy – businesses which create goods and services – and not to financial speculators or high levels of consumer debt. Extending credit to small businesses former creates prosperity; lending to financial speculators only leads to economic instability and soaring inequality; and when too high a percentage of lending goes to luxury consumer consumption, it’s bad for the economy
- Banks create money and credit out of thin air when they make loans (background)
- It’s a myth that interest rates drive the level of economic activity. The data shows that rates lag the economy
Indeed, economists also note that QE helps the rich … but hurts the little guy. QE is one of the main causes of inequality (and see this and this). And economists now admit that runaway inequality cripples the economy. So QE indirectly hurts the economy by fueling runaway inequality.
…click on the above link to read the rest of the article…
