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More To Ruble’s Collapse Than Meets The Eye
More To Ruble’s Collapse Than Meets The Eye.
The ruble is dying, and fast. In what is now being dubbed ‘Black Monday’ the ruble’s value to the dollar dropped nearly 15 percent. Tuesday brought no respite and the ruble fell another 10 percent. The ruble’s collapse follows a similar – though by no means as extreme – slump in oil prices. Still, the Russian economy’s troubles are deeper than that and President Vladimir Putin will be hard-pressed to find an easy out. With a recession looming, state energy companies are struggling to stay afloat, if not directly contributing to the country’s woes.
On the year, the ruble has lost more than 55 percent of its value against the dollar, breaking psychological barrier after psychological barrier. Tuesday’s low of 80 marks a new record and harkens back to the period of hyperinflation that characterized post-Soviet Russia. Then, as now, citizens are seeing their material wealth disintegrate amid rising costs domestically.
Related: Sanctions, Oil Prices Push Russia Into Currency Crisis
Source: QZ
BBC News – China’s manufacturing activity contracts at year-end
BBC News – China’s manufacturing activity contracts at year-end.
China’s factory activity is in contraction, based on a private survey, reinforcing calls for more stimulus.
The HSBC/Markit manufacturing purchasing manager’s index’s initial reading fell to 49.5 in December from November’s final reading of 50.
A reading above 50 indicates expansion, while one below 50 points to contraction on a monthly basis.
China will release its official PMI reading for December in the new year.
The state’s official PMI came in at 50.3 for November.
This morning’s latest reading from HSBC marks a seven-month low.
Qu Hongbin, Chief Economist for China at HSBC said “Domestic demand slowed considerably and fell below 50 for the first time since April 2014. Price indices also fell sharply. The manufacturing slowdown continues in December and points to a weak ending for 2014.”
Norway Central Bank, Slammed By Oil Plunge, Warns Of “Severe Downturn”, Unexpectedly Cuts Rates | Zero Hedge
The governor of Norway’s central bank says western Europe’s biggest oil producer is facing a major economic slowdown as crude prices continue to plunge. As Bloomberg reports, Oeystein Olsen said today in an interview after a press conference in Oslo, “our job now is that we need to prevent a severe downturn in the economy… that is presently the major concern of the board.”
Olsen cut Norway’s main interest rate today by 0.25 percentage point to 1.25 percent, a move that shocked markets and sent the krone down almost 2 percent against the euro (weakest since July 2009). The decision came after almost three years of unchanged rates and marked a shift away from a policy that had sought to prevent excessive monetary easing from fueling house price growth.
Even after today’s cut, the bank sees a “50-50 chance” for another rate reduction next year, Olsen said.
Oil prices have plunged 44 percent from a June high, the worst decline since the financial crisis erupted in 2008. Norges Bank estimates oil investments will decline by 15 percent next year, with the risk of “spillover” effects on the rest of the economy and rising unemployment.
And as Nick Cunningham via OilPrice.com, this is why… since Norway depends on the oil industry for almost a quarter of its economic output and has built an $860 billion wealth fund from its offshore revenue.
…click on the above link to read the rest of the article…
This Time Is The Same: Like The Housing Bubble, The Fed Is Ignoring The Shale Bubble In Plain Sight | David Stockman’s Contra Corner
We are now far advanced into the third central bank generated bubble of the last two decades, but our monetary politburo has taken no notice whatsoever of its self-evident leading wave.Namely, the massive malinvestments and debt mania in the shale patch.
Call them monetary bourbons. It is no exaggeration to say that inhabitants of the Eccles Building deserve every single word of Talleyrand’s famous epithet: “They learned nothing and forgot nothing.”
To wit, during the last cycle they claimed to be fostering the Great Moderation and permanent full employment prosperity. It didn’t work. When the housing and credit bubble blew-up, it washed out all the phony gains from the Greenspan/Bernanke printing spree. By the time the liquidation was finished in early 2010, there were 2 million fewer payroll jobs than there had been at the turn of the century.
Never mind. The Fed simply doubled-down. Instead of expanding its balance sheet by 50%, as happened during the eight years between 2000 and 2008, it went into monetary warp drive, ballooning its made-from-thin-air liabilities by 5X in only six years. Yet even after Friday’s ballyhooed jobs report there were three million fewer full-time breadwinner jobs in November 2014 than there were in the early 2000s.
…click on the above link to read the rest of the article…
Central Bank Credibility, the Equity Markets and Gold
Central Bank Credibility, the Equity Markets and Gold.
Central bank credibility is at all-time highs. As a consequence, we suggest, equities are near all-time highs too while gold is scraping multi-year lows. A change though may be in the offing with all three. Not today, nor tomorrow. But perhaps sooner than most think.
Here’s how we see it…
In the context of five plus years of the most unconventional monetary policies the world has ever seen, there is a near universal belief that a group of Keynesian/Monetarist schooled, largely academic economists have got it all figured out; namely, that super-sized, well-orchestrated, easy money policies – zero even negative benchmark interest rates, a smorgasbord of essentially free lending programs and of course mega-size asset purchase programs (QE) – can produce sustainable, economic growth. In other words, central bank credibility and the efficacy of their policies are in the heavens.
No central bank is more revered in this regard than the Federal Reserve. As we discussed here, the Federal Reserve, it is said, is “pulling it off.” Because of its heroic, unconventional, all-in easy money policies, the Federal Reserve is said to have “saved” America from an almost certain depression and then, because of its continued easy money policies, is the driving force behind America’s now accelerating economic growth. Just look at the economic numbers, say the pundits. The Federal Reserve’s monetary policies are working. Yes, not as fast as we would like, but going in the right direction. Only one task left – a well-calibrated, data-driven exit from these unconventional policies. The strengthening economy can take it, they say. In fact, the exit should be welcomed because it signals a strong and growing economy, one that will no longer require any Federal Reserve support.
…click on the above link to read the rest of the article…
Ukraine Bank Runs Begin As Poroshenko Plans To Sever Socio-Economic Ties With Separatist-Held Regions | Zero Hedge
In what the pro-Russian separatists call “an act of genocide,” Ukraine’s President Poroshenko signed a decree Friday that will explicitly withdraw state support for the regions within a month. While appearing to implicitly recognize the regions of Donetsk and Luhansk as autonomous, the decree means that the central bank will no longer service bank accounts, prisoners will be transferred (inmates with minor offences will be released), and perhaps most troubling as the cold winter begins, the order covers all public services, including crucial ones, such as schools, hospitals, and emergency services; and local heating and power plants will be subject to new laws that could involve cutting energy supplies altogether to the plants that don’t pay. Luhansk’s leader exclaimed, “the total socio-economic blockade of Donbass is de facto an act on genocide and devastation of our people,” and as the images below show, bank runs have already begun across the region with long lines forming at ATMs.
Ukraine’s president has ordered the withdrawal of all state services, including funding for hospitals and schools, from rebel-held areas.
Petro Poroshenko issued a decree that also asks parliament to revoke a law granting self-rule to the Donetsk and Luhansk regions.
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Global shares jump, yen slumps as BOJ cranks up stimulus | Reuters
Global shares jump, yen slumps as BOJ cranks up stimulus | Reuters.
(Reuters) – World shares jumped and the yen fell to a seven-year low against the dollar on Friday as the Bank of Japan surprised financial markets by significantly expanding its massive stimulus program.
In a rare split decision, the BOJ’s board voted 5-4 to accelerate purchases of Japanese government bonds so that its holdings increase at an annual pace of 80 trillion yen ($725 billion), up by 30 trillion yen.
The central bank also said it would triple its purchases of exchange-traded funds and real-estate investment trusts (REITs), while sources said the government’s huge pension fund would more than double its holdings of domestic stocks.
For investors, the timing of the moves sent a strong signal, coming right as six years of aggressive U.S. stimulus come to an end and just before euro zone inflation data that is likely to keep the pressure on the ECB to further ease its policy.
…click on the above link to read the rest of the article…
Central Banker Admits Central Bank Policy Leads To Wealth Inequality | Zero Hedge
Central Banker Admits Central Bank Policy Leads To Wealth Inequality | Zero Hedge.
Six years after QE started, and just about the time when we for the first time said that the primary consequence of QE would be unprecedented wealth and class inequality (in addition to fiat collapse, even if that particular bridge has not yet been crossed), even the central banks themselves – the very institutions that unleashed QE – are now admitting that the record wealth disparity in the world – surpassing that of the Great Depression and even pre-French revolution France – is caused by “monetary policy”, i.e., QE.
Case in point, during the Keynote speech by Yves Mersch, ECB executive board member, in Zurich on 17 October 2014 titled “Monetary policy and economic inequality” he said:
More generally, inequality is of interest to central banking discussions because monetary policy itself has distributional consequences which in turn influence the monetary transmission mechanism. For example, the impact of changes in interest rates on the consumer spending of an individual household depend crucially on that household’s overall financial position – whether it is a net debtor or a net creditor; and whether the interest rates on its assets and liabilities are fixed or variable.
Such differences have macroeconomic implications, as the economy’s overall response to policy changes will depend on the distribution of assets, debt and income across households – especially in times of crisis, when economic shocks are large and unevenly distributed. For example, by boosting – first – aggregate demand and – second – employment, monetary easing could reduce economic disparities; at the same time, if low interest rates boost the prices of financial assets while punishing savings deposits, they could lead to widening inequality.
…click on the link above to read the rest of the article…
How The Federal Reserve Is Purposely Attacking Savers – Chris Martenson | Peak Prosperity
How The Federal Reserve Is Purposely Attacking Savers – Chris Martenson | Peak Prosperity.
There’s something we ‘regular’ citizens wrestle with that the elites never seem to: a sense of moral duty.
For example, following the collapse of the housing bubble, many people struggled with mortgages they could no longer afford to pay, fearing the shame of default. Many believed defaulting was wrong somehow; that it was their moral obligation to pay their mortgages, no matter how dire their personal situation. And of course, the mortgages lenders did their utmost to reinforce this perception.
In a perfect world, we would honor our debts and obligations, every one of us. But the world is an imperfect place ,and moral obligation is something that almost never enters into the decision matrix of our society’s richest. Or the banking industry.
For them, the number one (and two, and three…) rule is that whatever is expedient and makes the most money is the right thing to do.
,,,click on the above link to read the rest of the article…
Did An Obscure IMF Document Start A Global Bail-In Revolution? by Daniel Amerman
Did An Obscure IMF Document Start A Global Bail-In Revolution? by Daniel Amerman.
When revolutions start, it’s not uncommon for almost nobody to notice. It may take years or even decades before historians can look back, point a finger and say “that’s where it really began.”
An obscure International Monetary Fund “Staff Discussion Note” may have already started a “Bail-In” financial revolution that could transform the global investment world.
In this quite remarkable document, the staff discusses a world where risks to the global financial system have not gone away – but are worse than ever. As candidly discussed, the “SIFI” (systemically important financial institution) problem has not been improving, but instead has been getting worse than ever – and there doesn’t appear to be any solution under existing contract law and bankruptcy law.
More risk than ever is concentrated in fewer financial institutions, while there is no way under existing law to unwind a failure of one of these institutions without risking triggering global financial chaos. Moreover, there is a deadly feedback loop between these “too-big-to-fail” institutions and sovereign governments. That is, as the IMF staff discusses, the bailing out of these massive institutions can bankrupt sovereign governments, and sovereign governments going bankrupt can wipe out the “too-big-to-fail” institutions.
So the IMF staff has come up with an audacious plan for how the globe can emerge from this seemingly impossible situation. The key word is “insurance”.
…click on link above to read the rest of the article…
