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Jackson Hole and the Appalachians

August 27, 2017

Jackson Hole and the Appalachians


Henri Cartier-Bresson Trafalgar Square on the Day of the Coronation of George VI 1937
 

The Jackson Hole gathering of central bankers and other economics big shots is on again. They all still like themselves very much. Apart from a pesky inflation problem that none of them can get a grip on, they publicly maintain that they’re doing great, and they’re saving the planet (doing God’s work is already taken).

But the inflation problem lies in the fact that they don’t know what inflation is, and they’re just as knowledgeable when it comes to all other issues. They get sent tons of numbers and stats, and then compare these to their economic models. They don’t understand economics, and they’re not interested in trying to understand it. All they want is for the numbers to fit the models, and if they don’t, get different numbers.

Meanwhile they continue to make the most outrageous claims. Bank of England Governor Mark Carney said in early July that “We have fixed the issues that caused the last crisis.” What do you say to that? Do you take him on a tour of Britain? Or do you just let him rot?

Fed head Janet Yellen a few days earlier had proclaimed that “[US] Banks are ‘very much stronger’, and another financial crisis is not likely ‘in our lifetime’. “ While we wish her a long and healthy life for many years to come, we must realize that we have to pick one: it has to be either a long life, or no crisis in her lifetime.

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

How Capitalist Central Banks Have Been Creating the Next Financial Crisis

August 11, 2017

How Capitalist Central Banks Have Been Creating the Next Financial Crisis

As central bankers, finance ministers, and government policy makers head off to their annual gathering at Jackson Hole, Wyoming, this August, 24-26, 2017, the key topic is whether the leading central banks in North America and Europe will continue to raise interest rates this year; another topic high on the agenda is when the three major central banks – the Federal Reserve, European Central Bank and Bank of England – might begin to sell off their combined $9.8 trillion dollar balance sheets that they accumulated since the 2008-09 banking crisis.

But the more fundamental question – little discussed by central bankers and academics alike – is what are the likely effects of further immediate rate hikes and/or commencement of central banks’ balance sheet reductions? The assumption is further rate hikes and sell-offs will have little negative impact on the real economy or financial markets. But will they? The effects of hikes and sell off will prove the opposite of what they predict.

Central banks in the US and Europe were grossly in error predicting in 2008 that massive liquidity injections and zero interest rates would re-stimulate their economies and return them to pre-crisis real GDP growth rates. They are now about to repeat a similar error, as they presume that raising those rates, and retracting excess liquidity by selling off balance sheets, will not have a significant negative impact on the real economy or financial markets.

Central banks’ balance sheets have been growing for almost nine years, driven by programs of zero-bound (ZIRP) interest rates and the introduction of firehose liquidity injections enabled by quantitative easing, QE, bond and other securities purchases.

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

The Inconvenient Truth of Consumer Debt

June 11, 2017

The Inconvenient Truth of Consumer Debt

It’s acceptable to build infinitely high levels of household debt — as long as rates never rise.
Ready for a rainy day?Photographer: Anoek De Groot/AFP/Getty Images

Oh, but for the days the hawks had a hero in Sydney. Against the backdrop of a de facto currency war, the Reserve Bank of Australia stood as a steady pillar of strength. The RBA held the line on interest rates, maintaining a floor of 2.5 percent, even as its global central bank peers drove rates to the zero bound and beyond into negative territory.

The abrupt end to the commodities supercycle drove the RBA to join the global currency war. The mining-dependent nation’s economy was so debilitated that policy makers felt they had no choice but to ease financial conditions. In February 2015, after an 18-month honeymoon, the RBA reduced its official rate to 2.25 percent, marking the start of a cycle that ended last August with the fourth cut to a record low of 1.5 percent.

The Bank of Canada has taken a similar journey in recent years. It embarked upon a mild tightening campaign in 2010 that raised the overnight loan rate from a record low of 0.25 percent to 1 percent in September 2010. The bank maintained that level until early 2015. Two weeks before the RBA’s first cut, the Bank of Canada lowered rates to 0.75 percent. The January move, which shocked the markets, was followed in July 2015 with an additional ease to 0.5 percent, where it remains today.

Bank of Canada Governor Stephen Poloz, who replaced Mark Carney after he departed to head the Bank of England, explained the moves as necessary to counter the downside risks to inflation emanating from the oil price shock to the country’s economy.

Two resource-rich economies reacting similarly to body blows is intuitive enough. They eased the pressure on their given economies.

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

The Mystery Behind Economic Growth

April 20, 2017

THE MYSTERY BEHIND ECONOMIC GROWTH

With sound money and free markets, the evolving production of businesses increases the purchasing power of money over time.

We learn, out of the blue, that “the Eurozone is performing well, but with opinions divided on the causes, doubts linger over whether it is a sustainable recovery” (Daily Telegraph, 19 April). We are also told that economic growth in the US is stalling, as evidenced by downward revisions by the Atlanta Fed, and the fact that the rate of increase in Loans and Leases by commercial banks is also stalling. The Bank of England was unable to forecast the strength of the UK economy in the wake of Brexit.

This article explains why this confusion occurs. It is clear the economics profession is ill-informed about the one thing it is paid to know about, and the commentary that trickles down to the ordinary person is accordingly incorrect. State-educated and paid-for economists always assume the private sector is the problem, when it is the burden of the state, and the state’s futile attempts to manage the consequences of its actions through the corruption of money.

By misdirecting their attention to the private sector in the search for solutions, economists confuse growth in gross domestic product with progress. Growth is the expansion of a balance sheet total, reflecting an increase in the amount of money spent in the economy between two dates. Progress, on the other hand, is the improvement in living standards we get from more efficient production and technology.

Take Italy as an example. The chart below is of quarterly real GDP. Bear in mind the annualised rate is four times the quarterly figure.

Italy Real GDP

GDP is today’s standard measure of economic performance, and it shows that the volume of consumer transactions in Italy today is well below the record achieved in 2008, before the financial crisis. That’s still down over 7% after eight years.

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

Economic Crises and the Crisis of Economics

January 13, 2017

Economic Crises and the Crisis of Economics

LONDON – Is the economics profession “in crisis”? Many policymakers, such as Andy Haldane, the Bank of England’s chief economist, believe that it is. Indeed, a decade ago, economists failed to see a massive storm on the horizon, until it culminated in the most destructive global financial crisis in nearly 80 years. More recently, they misjudged the immediate impact that the United Kingdom’s Brexit vote would have on its economy.

Of course, the post-Brexit forecasts may not be entirely wrong, but only if we look at the long-term impact of the Brexit vote. True, some economists expected the UK economy to collapse during the post-referendum panic, whereas economic activity proved to be rather resilient, with GDP growth reaching some 2.1% in 2016. But now that British Prime Minister Theresa May has implied that she prefers a “hard” Brexit, a gloomy long-term prognosis is probably correct.

Unfortunately, economists’ responsibility for the 2008 global financial crisis and the subsequent recession extends beyond forecasting mistakes. Many lent intellectual support to the excesses that precipitated it, and to the policy mistakes – particularly insistence on fiscal austerity and disregard for widening inequalities – that followed it.

Some economists have been led astray by intellectual arrogance: the belief that they can always explain real-world complexity. Others have become entangled in methodological issues – “mistaking beauty for truth,” as Paul Krugman once observed – or have placed too much faith in human rationality and market efficiency.

Despite its aspiration to the certainty of the natural sciences, economics is, and will remain, a social science. Economists systematically study objects that are embedded in wider social and political structures. Their method is based on observations, from which they discern patterns and infer other patterns and behaviors; but they can never attain the predictive success of, say, chemistry or physics.

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

First Post-Brexit Bailout Looms As Bank Of England Mulls UK Property Fund ‘Measures’

July 10, 2016

First Post-Brexit Bailout Looms As Bank Of England Mulls UK Property Fund ‘Measures’

Who could have seen that coming? While many have questioned the “suitability of daily-traded, open-ended property funds that are giving investors access to an illiquid asset,” all the time the price is rising, no one wants to rock the boat. However, now that Brexit has rocked the boat, spoiling the party for UK property investors and asset managers alike, it’s time for Carney to ride to the tax-payer-funded bailout rescue to ensure Bear Stearns 2.0 does not become Lehman 2.0…

Following the gating – or forced haircuts – of eight large UK property investment funds this week, fears have grown rapildy of the risk of contagion, which, as The FT reports, is much greater than first feared, with detailed analysis showing that a wide pool of funds have been caught up in the gates imposed on investors withdrawing cash.

The worry is that this will trigger systemic problems for the marketplace, which is already reeling from the UK’s decision last month to end its membership of the EU.

A prominent UK fund manager, speaking on condition of anonymity, said: “When you start getting daily trading funds-of-funds investing in daily trading funds that are invested in illiquid assets, that seems to be layering up potential liquidity risks. “[Investors need to] consider the impact on funds that are caught with material investments in the gated property funds.”

Three multi-asset funds run by Henderson also have around 3.5 per cent of their assets in the company’s own suspended property fund, while Aviva Investors’ multi-asset product has a 4 per cent stake in its gated property fund.

Many other multi-asset funds — one of the fastest-selling investment strategies of the past 12 months — run by rival investment managers have also been caught out by the property fund suspensions.

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

Central Bankers Around The Globle Scramble To Defend Markets: BOE Pledges $345BN; ECB, Others Promise Liquidity

June 24, 2016

Central Bankers Around The Globle Scramble To Defend Markets: BOE Pledges $345BN; ECB, Others Promise Liquidity

There was a reason why we warned readers two days ago that “The World’s Central Bankers Are Gathering At The BIS’ Basel Tower Ahead Of The Brexit Result“: simply enough, it was to facilitate an immediate response when a worst-cased Brexit vote hit. And that is precisely what has happened today in the aftermath of the historic British decision to exit the EU.

It started, as one would expect, with Mark Carney who said the Bank of England is ready to pump billions of pounds into the financial system as he stands at the front line of Britain’s defense against a Brexit-provoked market crisis. The BOE governor declared that the central bank can provide an extra 250 billion pounds ($345 billion) through its existing facilities. It also has further measures if needed to deal with what he described as a “period of uncertainty and adjustment” after Britons voted to end their 43-year membership of the world’s largest single market.

The pound plunged to a three-decade low, British and global stocks tumbled and European bond spreads widened as the Brexit vote unfolded on Friday. Investor bets on a July interest-rate cut rose and Standard & Poor’s said the U.K. will lose its top credit rating.

“Some market and economic volatility can be expected as this process unfolds,” Carney said in a televised statement in London after the referendum result. His comments followed Prime Minister David Cameron’s announcement that he will step down this year, which will inject political uncertainty into an already volatile period. His full announcement is below and his statement can be found here:

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

Another Stern Stock Market Crash Warning Was Just Issued by the IMF

May 29, 2016

Another Stern Stock Market Crash Warning Was Just Issued by the IMF

Another stern stock market crash warning was just issued from the International Monetary Fund (IMF), and it’s fueling fear across global markets.

The IMF, an organization of 189 countries, is worried about the ripple effects should the United Kingdom vote to leave the European Union (EU).

A British vote to exit the EU, or “Brexit,” could have significant and negative effects on the UK economy, the IMF said last Friday. The quickly approaching Brexit voting date is June 23.

Christine Lagarde, the IMF’s managing director, said nothing positive could come from a Brexit. She cautioned a vote in favor of a Brexit could lead to a technical recession. Bank of England Governor Mark Carney shares a similar sentiment.

Dow Jones Industrial AverageThat has many investors worried that tensions overseas could lead to a 2016 stock market crash…

A Brexit vote would cause a “protracted period of heightened uncertainty” and “severe regional and global damage,” the IMF warned. A spike in interest rates, extreme financial market volatility, and damage to London’s revered status as a global financial hub are all likely outcomes.

Other concerns include falling stock prices, a plunge in real estate values, surging borrowing costs for businesses and households, and a steep drop-off in foreign investment.

The UK’s economy could contract by 1% to 9% following a Brexit, according to the IMF’s research. If the UK chooses to stay in the 28-country bloc next month, the IMF expects the economy to grow about 2% this year and around 2.25% in 2017.

And the issue isn’t isolated to the United Kingdom. All global economies will be affected, which is what has sparked the stock market crash fears.

Atlanta U.S. Federal Reserve President Dennis Lockhart said last month that a vote for the UK to leave the EU might have destabilizing consequences for the world economy.

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

Gold is the spectre haunting our monetary system

April 22, 2016

Gold is the spectre haunting our monetary system

Close-up of bars of pure gold bullion
A scramble for gold has begun as central banks bet against US dollar inflation  CREDIT:ALAMY

 

For a century, elites have worked to eliminate monetary gold, both physically and ideologically.

This began in 1914, with the UK’s entry into the First World War. The Bank of England wanted to suspend convertibility of bank notes into gold. Keynes counselled wisely that the bank should not do so. Gold was finite, but credit elastic.

By staying on gold, the UK could maintain its credit, and finance the war effort. This transpired. The House of Morgan organised massive credits for the UK, and none for Germany. This finance was crucial, and sustained the UK until the US abandoned neutrality and tipped the military balance against Germany.

Despite formal convertibility of sterling to gold, the Bank of England successfully discouraged actual conversion.

Gold sovereigns were withdrawn from circulation and turned into 400-ounce bars. This form of bullion limited gold ownership to the wealthy, and confined gold’s presence to vaults. A similar disappearance of gold as a circulating currency occurred in the US.

Gold graph
The price of gold has jumped in recent years CREDIT: LONDON METAL EXCHANGE

In 1933, US President Franklin Roosevelt issued an executive order making ownership of gold a crime. FDR relied on the Trading with the Enemy Act of 1917 as statutory authority for this edict. Since the US was not at war in 1933, the enemy was presumably the American people.

In 1971, US President Richard Nixon ended convertibility of US dollars into gold by trading partners of the US. Closing the gold window was said by Nixon to be temporary. Forty-five years later the window is still closed.

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

Wikileaks Reveals IMF Plan To “Cause A Credit Event In Greece And Destabilize Europe”

April 2, 2016

Wikileaks Reveals IMF Plan To “Cause A Credit Event In Greece And Destabilize Europe”

One of the recurring concerns involving Europe’s seemingly perpetual economic, financial and social crises, is that these have been largely predetermined, “scripted” and deliberate acts.

This is something the former head of the Bank of England admitted one month ago when Mervyn King said that Europe’s economic depression “is the result of “deliberate” policy choices made by EU elites.  It is also what AIG Banque strategist Bernard Connolly said back in 2008 when laying out “What Europe Wants”

To use global issues as excuses to extend its power:
  • environmental issues: increase control over member countries; advance idea of global governance
  • terrorism: use excuse for greater control over police and judicial issues; increase extent of surveillance
  • global financial crisis: kill two birds (free market; Anglo-Saxon economies) with one stone (Europe-wide regulator; attempts at global financial governance)
  • EMU: create a crisis to force introduction of “European economic government”

This morning we got another confirmation of how supernational organizations “plan” European crises in advance to further their goals, when Wikileaks published the transcript of a teleconference that took place on March 19, 2016 between the top two IMF officials in charge of managing the Greek debt crisis – Poul Thomsen, the head of the IMF’s European Department, and Delia Velkouleskou, the IMF Mission Chief for Greece.

In the transcript, the IMF staffers are caught on tape planning to tell Germany the organization would abandon the troika if the IMF and the commission fail to reach an agreement on Greek debt relief.

More to the point, the IMF officials say that a threat of an imminent financial catastrophe as the Guardian puts it, is needed to force other players into accepting its measures such as cutting Greek pensions and working conditions, or as Bloomberg puts it, “considering a plan to cause a credit event in Greece and destabilize Europe.”

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

Brexit Meltdown at the Bank of England

March 24, 2016

Brexit Meltdown at the Bank of England

But it’s supposed to be “independent” from national politics.

Project Fear — the massive PR campaign aimed at sowing and watering the seeds of dread about the potential consequences of a YES vote in the upcoming referendum on a British exit from the EU — is in full bloom. In the event of a wrong answer, all manner of biblical disasters can be expected to befall the nation, the British public is constantly being warned.

The country’s national income will shrink, hundreds of thousands if not millions of jobs will vanish, the City of London’s core industry — financial engineering — will migrate across the channel, the currency will collapse, house prices will plummet, European firms will stop selling products to Brits, the U.S. government will impose massive tariffs on British imports, and even Britain’s already dismal climate will get worse.

Project Fear’s shrillest shills include the British government and institutions of State, the UK’s most powerful business lobby group The Confederation of British Industry, the City of London Corporation (and all the too-big-to-fail financial institutions whose interests it faithfully serves), the European Union, the International Monetary Fund, and the world’s biggest fund manager BlackRock.

Another prominent prophet of Brexit doom and gloom is the Bank of England, an institution that, according to its charter at least, is supposed to be “independent” from national politics, but which has done nothing but feed the fear. In testimony to the UK government’s Treasury Select Committee earlier this month, the central bank’s Canadian and former Goldmanite Chairman Mark Carney warned that Brexit is the “biggest domestic risk to financial stability,” with potentially dire consequences for Britain’s balance of payments, its housing market, foreign investment, and its banks.

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

The ECB and John Law

March 18, 2016

THE ECB AND JOHN LAW

Last week, the ECB extended its monetary madness, pushing deposit rates yet more negative. It is extending quantitative easing from sovereign debt into non-financial investment grade bonds, while increasing the pace of acquisition to €80bn per month. The ECB also promised to pay the banks to take credit from it in “targeted longer-term refinancing operations”.

Any Frenchman with a knowledge of his country’s history should hear alarm bells ringing. The ECB is running the Eurozone’s money and assets in a similar fashion to that of John Law’s Banque Generale Privée (renamed Banque Royale in 1719), which ran those of France in 1716-20. The scheme at its heart was simple: use the money-issuing monopoly granted to the bank by the state to drive up the value of the Mississippi Company’s shares using paper money created for the purpose. The Duc d’Orleans, regent of France for the young Louis XV, agreed to the scheme because it would provide the Bourbons with much-needed funds.

This is pretty much what the ECB is doing today, except on a far larger Eurozone-wide basis. The need for government funds is of primary importance today, as it was then.

In Law’s day, France did not have a central bank, such as the Bank of England, managing the issue of government debt, let alone a functioning government bond market. The profligate spending of Louis XIV had left the state three billion livres in debt, which was the equivalent of 1,840 tonnes of gold. This was about 85% of the world’s estimated gold stock at that time, at the livre’s conversion rate into Louis d’Or. John Law would almost double that by June 1720, with unbacked livre notes issued by his bank.

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

Former Bank of England Governor Says Eurozone Must Break Up

March 2, 2016

Former Bank of England Governor Says Eurozone Must Break Up

From today’s Open Europe news summary:

FORMER BANK OF ENGLAND GOVERNOR WARNS EUROZONE MUST BREAK UP IF SOME MEMBERS ARE EVER TO PROSPER AGAIN

In his new book, former Governor of the Bank of England Lord Mervyn King warns, “Put bluntly, monetary union has created a conflict between a centralised elite on the one hand, and the forces of democracy at the national level on the other…This is extraordinarily dangerous.” He adds that the measures aimed to keep the Eurozone together, such as bail-outs, “Will lead to not only an economic but a political crisis.” Lord King argues that the Eurozone must “face up” to its problems and the fact that some countries can only prosper again outside. Lord King accepts that “the counter-argument – that exit from the euro area would lead to chaos, falls in living standards and continuing uncertainty about the survival of the currency union – has real weight”, but sees little alternative for the struggling states.

Source: The Daily Telegraph

The fall in living standards would be temporay. A breakup of the euro will stop the consumption of capital that is made possible by the Eurozone’s bailout policies. The profligate countries of Europe would no longer have “legal” access to other people’s capital, namely Germany’s. They would have to reform their economies and live within their own, and not someone else’s, means. A breakup of the Eurozone would save Europe from its current socialist, capital-consuming structure.

Striking Admission By Former Bank Of England Head: The European Depression Was A “Deliberate” Act

March 2, 2016

Striking Admission By Former Bank Of England Head: The European Depression Was A “Deliberate” Act

Once again we find that it is only after they leave their official posts that central bankers finally tell the truth.

Last night, it was Alan Greenspan who blasted the state of the economy, saying that “we’re in trouble basically because productivity is dead in the water” and when asked if he is optimistic going forward, Greenspan replied “no, I haven’t been for quite a while.”

Then on Sunday, the former head of the BOE, Mervyn King, warned that another aspect of the global economy, namely the financial system whose structural problems remain untouched since the financial crisis have been untouched, is “certain to have another crisis.

“To be sure, warnings by former central bankers who are more responsible about the current global mess sound as nothing but revisionist bullshit. And yet, it was what King said today at the launch of his new book that left us surprised.

As the Telegraph reports today, according to the former head of the Bank of England Europe’s economic depression “is the result of “deliberate” policy choices made by EU elites. Mervyn King continued his scathing assault on Europe’s economic and monetary union, having predicted the beleaguered currency zone will need to be dismantled to free its weakest members from unremitting austerity and record levels of unemployment.

King also said he could never have envisaged an economic collapse of the depths of the 1930s returning to Europe’s shores in the modern age. But, he added, the fate of Greece since 2009 – which has suffered a contraction eclipsing the US depression in the inter-war years – was an “appalling” example of economic policy failure, he told an audience at the London School of Economics.

“I never imagined that we would ever again in an industrialised country have a depression deeper than the United States experienced in the 1930s and that’s what’s happened in Greece.

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

Essential history: ‘Forever debt’ Federal Reserve system invented to pay interest without ever ever ever repaying debt – definition of ‘Ponzi scheme’

February 26, 2016

Essential history: ‘Forever debt’ Federal Reserve system invented to pay interest without ever ever ever repaying debt – definition of ‘Ponzi scheme’

Posted on February 25, 2016 by Carl Herman

Ponzi scheme: criminal fraud of paying existing “investors” only and always from new “investors.” Collapse occurs without new “investors” and/or existing “investors” panic to cash-in.

The US Federal Reserve is based on the 1694-created Bank of England because this model allows government finance with debt that is never meant to be repaid. It is an “investment” model that pays interest guaranteed through tax collection. Its invention was to finance England’s government and military in a history of continuous centuries of war.

It’s cleverness allowed British finance to fund a short-term empire over rival European powers.

Although we can appreciate this historical manipulation, this is a Ponzi scheme because the system collapses without new “investors” of government debt securities.

This Ponzi scheme model is our US Federal Reserve System today:

US Treasury securities of bills, notes, and bonds continuously mature and must be repaid if the owner chooses to cash-in rather than renew the debt security. The US federal government debt is now $19 trillion, having risen over a trillion each year of the Obama administration.

This amount of total debt compared with ~100 million US households means that the average US household of ~$50,000 annual income owes ~$190,000 each should investors withdraw from this US government funding scheme. If your household income is more than $50,000, then use this ratio to estimate your share for repayment; for example, a $150,000 annual family income would owe $570,000 if US Treasury holders requested repayment rather than continue rolling-over their loans to the US government.

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

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