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The G-30 Group Of Central Bankers Warn They Can “No Longer Save The World”
The G-30 Group Of Central Bankers Warn They Can “No Longer Save The World”
In a detailed report by the Group of Thirty, central bankers warned that ZIRP and money printing were not sufficient to revive economic growth and risked becoming semi-permanent measures. As Reuters reports, the flow of easy money has inflated asset prices like stocks and housing in many countries but have failed to stimulate economic growth; and with growth estimates trending lower and easy money increasing company leverage, the specter of a debt trap is now haunting advanced economies. “Central banks have described their actions as ‘buying time’ for governments to finally resolve the crisis… But time is wearing on,” sending a message of “you’re on your own” to governments around the world.
The G30 begins their report rather pointedly…
Central banks worked alongside governments to address the unfolding crises during 2007–09, and their actions were a necessary and appropriate crisis management response. But central bank policies alone should not be expected to deliver sustainable economic growth. Such policies must be complemented by other policy measures implemented by governments.At present, much remains to be done by governments, parliaments, public authorities, and the private sector to tackle policy, economic, and structural weaknesses that originate outside the control or influence of central banks. In order to contribute to sustainable economic growth, the report presumes that all other actors fulfill their responsibilities.
Roughly translated… central bankers are saying “you are now on your own.”
Central banks alone cannot be relied upon to deliver all the policies necessary to achieve macroeconomic goals. Governments must also act and use the policy-making space provided by conventional and unconventional monetary policy measures. Failure to do so would be a serious error and would risk setting the stage for further economic disturbances and imbalances in the future.
And the “need to exit” appears to be front and center for The G30 bankers…
…click on the above link to read the rest of the article…
“We Should Have Known Something Was Wrong”
“We Should Have Known Something Was Wrong”
Remember when stuff such as the following was written exclusively on “conspiracy” tin-foil blogs by deranged lunatics who could not appreciate the brilliance of the neo-Keynesian system and central-planning by academics, in all its glory? Good times.
Here is Bank of America’s Athanasios Vamvakidis channeling Tyler Durden circa 2009
The real cost of QE
QE was not a free lunch after all
If only it was that easy to print our way out of a global crisis. Eight years after the crisis, we are still debating about whether the recovery has gained enough of a momentum to allow exit from crisis-driven policies and start hiking rates from zero. The world economy has actually lost momentum this year (Chart 1), deflation risks have increased (Chart 2), and EM indicators and overall market volatility have reached crisis levels (see Chart 3). All this is despite unprecedented expansion of central bank balance sheets (Chart 4). Things may have been worse otherwise, but in hindsight we believe relying too much on unconventional monetary policies was not a free lunch after all.
We should have known something was wrong
The Fed “taper tantrum” could have been the first warning that QE had gone too far. The Fed’s announcement in June 2013 that they would consider tapering QE, contingent upon continued positive data, triggered a sharp market sell-off, particularly in EM. The aggressive search for yield, which intensified after the Fed announced QE3—or QE infinity as markets called it—came to a sudden stop. QE was not for infinity after all. The Fed tried to reassure markets that QE tapering was still policy easing and that its end would not imply rate hikes immediately, but the markets apparently thought otherwise. A key takeaway was not that QE had already gone too far, but that announcing its tapering may have been a mistake. The Fed waited until December to start tapering, although the market had already priced its beginning in September.
…click on the above link to read the rest of the article…
What’s The Worst That Could Happen?
What’s The Worst That Could Happen?
Via ConvergEx’s Nicholas Colas,
The 30 stocks of the Dow Jones Industrial Average currently trade for an average of 14.8x next year’s consensus earnings. But… Everyone knows Wall Street analysts are always too optimistic, so what if we just look at the lowest estimate for each company? That “Worst Case scenario” P/E is 16.7x – not “Cheap”, but not crazy expensive either – and incorporates a decline in earnings from 2015 of 1.5%.As tempting as it is to say “Buy stocks” with this math, the truth is hazier. In reality, markets currently discount this “Worst case” as the “Base case”. With the 10 year Treasury yielding 2.1%, that 16.7x multiple is where stocks should actually trade.
The driver of this market pessimism sits at the top of the income statement – the Street’s worst case revenue estimates call for a decline of 1.7% in 2016. Now, Q3 earnings season is unlikely to provide much comfort here; why should corporate managements go out on a guidance limb when their stocks are down on the year? All this points to further volatility in October, and with a bias to the downside.
Of all the words of tongue or pen, the dumbest are these: “What’s the worst that could happen?” I imagine every stupid stunt ever uploaded to Youtube started life with that question. Skateboard off the roof of your parent’s house into the pool… Taunt the chimps at the zoo… Jump a bike over 17 of your friends… That phrase is cursed. Even a movie of the same name, starring Martin Lawrence and Danny DeVito, only has a 10% approval rating on Rotten Tomatoes.
In financial markets, however, this is one of the most important questions you can ask. A few examples:
Every hedge fund uses some form of risk management to understand the worst case scenario for their portfolio. In general, the larger the firm and more complex the strategy, the more elaborate the analysis.
…click on the above link to read the rest of the article…
China’s Central Bank Chief Admits “The Bubble Has Burst”
China’s Central Bank Chief Admits “The Bubble Has Burst”
In a stunningly honest admission from a member of the elite, Zhou Xiaochuan, governor of China’s central bank, exclaimed multiple times this week to his G-20 colleagues that a bubble in his country had “burst.”While this will come as no surprise to any rational-minded onlooker, the fact that, as Bloomberg reports, Japanese officials also confirmed Zhou’s admissions, noting that “many people [at the G-20] expressed concerns about the Chinese market,” and added that “discussions [at the G-20 meeting] hadn’t been constructive”suggests all is not well in the new normal uncooperative G-0 reality in which we live.
Surprise – The Bubble Has Burst!!
But, as Bloomberg reports, the admission that it was a bubble and it has now burst is a notablke narrative change for the world’s central bankers…
Zhou Xiaochuan, governor of China’s central bank, couldn’t stop repeating to a G-20 gathering that a bubble in his country had “burst.”It came up about three times in his explanation Friday of what is going on with China’s stock market, according to a Japanese finance ministry official. When asked by a reporter if Zhou was talking about a bubble, Japanese Finance Minister Taro Aso was unequivocal: “What else bursts?”
A dissection of the slowdown of the world’s second-largest economy and talk about the equity rout which erased $5 trillion of value was a focal point at the meeting of global policy makers in Ankara.That wasn’t enough for Aso, who said that the discussions hadn’t been constructive.
…
It was China, rather than the timing of an interest-rate increase by the Federal Reserve, that dominated the discussion, according to the Japanese official, with many people commenting that China’s sluggish economic performance is a risk to the global economy and especially to emerging-market nations.
…click on the above link to read the rest of the article…
Insouciance Rules The West
Insouciance Rules The West
Europe is being overrun by refugees from Washington’s, and Israel’s, hegemonic policies in the Middle East and North Africa that are resulting in the slaughter of massive numbers of civilians. The inflows are so heavy that European governments are squabbling among themselves about who is to take the refugees. Hungary is considering constructing a fence, like the US and Israel, to keep out the undesirables. Everywhere in the Western media there are reports deploring the influx of migrants; yet nowhere is there any reference to the cause of the problem.
The European governments and their insouciant populations are themselves responsible for their immigrant problems. For 14 years Europe has supported Washington’s aggressive militarism that has murdered and dislocated millions of peoples who never lifted a finger against Washington. The destruction of entire countries such as Iraq, Libya, and Afghanistan, and now Syria and Yemen, and the continuing US slaughter of Pakistani civilians with the full complicity of the corrupt and traitorous Pakistani government, produced a refugee problem that the moronic Europeans brought upon themselves.
Europe deserves the problem, but it is not enough punishment for their crimes against humanity in support of Washington’s world hegemony.
In the Western world insouciance rules governments as well as peoples, and most likely also everywhere else in the world. It remains to be seen whether Russia and China have any clearer grasp of the reality that confronts them.
Lt. Gen. Michael Flynn, Director of the US Defense Intelligence Agency until his retirement in August 2014, has confirmed that the Obama regime disregarded his advice and made a willful decision to support the jihadists who now comprise ISIS. ( https://medium.com/insurge-intelligence/officials-islamic-state-arose-from-us-support-for-al-qaeda-in-iraq-a37c9a60be4 )
…click on the above link to read the rest of the article…
The HFT “Treasure Map” – Presenting The Rigged Stock Market’s Full “Latency Abritrage” In One Chart
The HFT “Treasure Map” – Presenting The Rigged Stock Market’s Full “Latency Abritrage” In One Chart
Last week, when poring through the SEC’s complaint over ITG’s criminal frontrunning of client order flow in a “experiment” prop trading group within its Posit dark pool known as “Project Omega”, we clearly laid out the “criminal fraud” that allowed the original dark pool to make money without any risk, and explained why HFT’s never lose money.
Only, in this particular case, the fraud was so egregious, even the SEC had to step in and slam ITG with the biggest fine on record for a private Wall Street exchange (at least until the fine about to be levied at Credit Suisse’s own dark pool, the biggest in the US, Crossfiner is revealed).
The reality is that most HFTs do not engage in such brazen criminal activity – most act within the confines of the law. And yet, as Virtu has shown year after year, they never lose money. How can the two coexist?
Simple: the answer is that in the aftermath of Reg NMS, and the terminal capture of regulators by those who benefit from market fragmentation, regulators blessed a two-tier market, one in which HFTs can frontrun non-HFT order flow and not be worried one bit about the consequences.
The technical term for this gross aberration of market fairness and efficiency is latency arbitrage, and it is best shown on the following annotated “map” courtesy of Nanex’ Eric Hunsader, laying out the embedded, and regulator blessed, latencies between the three big New Jersey exchange centers: Mahwah (NYSE), Secaucus (BATS), and Carteret (Nasdaq) for everyone but the top tier – the High Frequency Traders, whose only advantage is having the millions to spend both in one-time collocation setup as well as recurring microwave/laser fees to obtain faster data access which thenallows them to frontrun everyone else and generate massive returns on their investment. Returns that are due only to done thing: frontrunning.
What the map clearly shows is the unprecedented timing advantage HFTs have not only over the Securities Information Processor (SIP), which is used by virtually all non-HFT participants, who pay millions for real time feeds.
Citi Predicts Greek Hyperinflation Breaks Out In Two Years
Citi Predicts Greek Hyperinflation Breaks Out In Two Years
Earlier, we showed that according to Citigroup (among many) for Greece to have any hope of surviving, it needs a masive debt haircut: the bigger, the better, with Citi tossing out numbers as high as €130 billion. Still, even if Greece does get debt relief, as long as it remains in the Eurozone, its economy has nothing but hell to look forward to.
Here is how Citi previews the next few years:
From an economic and financial sector angle, the success or failure of a third programme will depend on i) the strength of a possible economic recovery in coming quarters, following an overhaul of the Greek banking system, and on ii) whether debt re-profiling discussions look likely and take place as envisaged. On the first item, the degree of fiscal austerity and outright reforms to be implemented in a short period of time is likely to result in a prolongation of economic recession in coming quarters. And we need to factor in the economic costs from the (very likely) persistence of stringent capital controls and the lack of liquidity in the economy. We recently updated our real GDP growth forecasts and now expect the Greek economy to contract by at least 2.4% YY in 2015 (compared with -0.2% YY projected in June), with the economy likely to remain in recession at least until Q1 2016. Such a poor performance in terms of economic activity would mean a higher risk that Greek economic and fiscal performance would undershoot its programme targets, which could likely challenge its membership in the Eurozone. In addition, debt re-profiling is likely to be deferred, conditional and tranched, and is unlikely to boost the government’s fiscal space for public spending increases or tax cuts. Failure by the Greek authorities to lift capital controls in a meaningful way and a further increase in unemployment (we forecast that the jobless rate will rise from 27% in 2015 to 29% in 2016) could also increase social tensions, in our view.
…click on the above link to read the rest of the article…
World Powers Reach Landmark Nuclear Deal With Iran, Oil Slides – Full Deal Text
World Powers Reach Landmark Nuclear Deal With Iran, Oil Slides – Full Deal Text
It is only fitting that almost exactly 24 hours after the Greek “pre-deal”, which may and will end up crashing and burning in very short notice, another long expected “deal”, one which has been about a decade in the making, was reached, when Iran reached a landmark nuclear agreement with the U.S. and five other world powers, a long-sought foreign policy goal of the Obama administration. However, just like with the Greek deal celebrations, these too will likely be short lived as the outcome sets the White House on course for months of political strife with dissenters in Congress and in allied Middle Eastern nations.
In the end, however, the reality is that with little oversight both Iran and the West will maintain the status quo, even if the chances of a middle-east “preemptive” war involving Israel and/or Saudi Arabia increase substantially.
Here are some of the deal highlight bullets from Reuters and Bloomberg:
- Iran ballistic missile embargo seen in place for 8 years
- Conventional weapon embargo seen in place for 5 years
- Iran to cut 98% of enriched uranium stockpile under deal
- Iran will eliminate two-thirds of centrifuges under deal
- EU to lift sanctions on Iran as it meets nuclear obligations
- Iran deal implementation will take months, officials say
- Iran won’t receive sanctions relief until it complies with terms of agreement
In terms of the next steps timeline, Bloomberg adds that oil sanctions on Iran unlikely to be lifted before December 2015, according to most optimistic assessment of steps involved in draft of nuclear agreement obtained by Bloomberg. Most analysts expect this to happen sometime in 2016.
Key steps as follows: the Joint Comprehensive Plan of Action, or JCPOA, will be adopted 90 days after endorsement by UN Security Council resolution, or sooner by unanimous consent of all parties.
…click on the above link to read the rest of the article…
Darwin’s Casino
Darwin’s Casino
Our age has no shortage of curious features, but for me, at least, one of the oddest is the way that so many people these days don’t seem to be able to think through the consequences of their own beliefs. Pick an ideology, any ideology, straight across the spectrum from the most devoutly religious to the most stridently secular, and you can count on finding a bumper crop of people who claim to hold that set of beliefs, and recite them with all the uncomprehending enthusiasm of a well-trained mynah bird, but haven’t noticed that those beliefs contradict other beliefs they claim to hold with equal devotion.
I’m not talking here about ordinary hypocrisy. The hypocrites we have with us always; our species being what it is, plenty of people have always seen the advantages of saying one thing and doing another. No, what I have in mind is saying one thing and saying another, without ever noticing that if one of those statements is true, the other by definition has to be false. My readers may recall the way that cowboy-hatted heavies in old Westerns used to say to each other, “This town ain’t big enough for the two of us;” there are plenty of ideas and beliefs that are like that, but too many modern minds resemble nothing so much as an OK Corral where the gunfight never happens.
An example that I’ve satirized in an earlier post here is the bizarre way that so many people on the rightward end of the US political landscape these days claim to be, at one and the same time, devout Christians and fervid adherents of Ayn Rand’s violently atheist and anti-Christian ideology. The difficulty here, of course, is that Jesus tells his followers to humble themselves before God and help the poor, while Rand told hers to hate God, wallow in fantasies of their own superiority, and kick the poor into the nearest available gutter.
…click on the above link to read the rest of the article…
China Soars Most Since 2009 After Government Threatens Short Sellers With Arrest, Global Stocks Surge
China Soars Most Since 2009 After Government Threatens Short Sellers With Arrest, Global Stocks Surge
Here is a brief sample of some of the measures the Chinese government and the PBOC have unleashed in just the past ten days to prop up the crashing market include:
- a ban on major shareholders, corporate executives, directors from selling stock for 6 months
- freezing more than half (1400 at last count per Bloomberg) of the listed companies from trading,
- blocking fund redemptions, forcing companies to invest in the market,
- halting IPOs,
- reducing equity transaction fees,
- providing daily bailouts to the margin lending authority,
- reducing margin requirements,
- boosting buybacks
- endless propaganda by Beijing Bob.
The measures are summarized below.
But it wasn’t until last night’s first official threat to “malicious” (short) sellers that they face charges (i.e., arrest), as Xinhua reported yesterday:
[Ministry of Public Security in conjunction with the recent Commission investigation of malicious short stock and stock index clues ] correspondent was informed on the 9th morning , Vice Minister of Public Security Meng Qingfeng led to the Commission , in conjunction with the recent Commission investigation of malicious short stock and stock index clues show regulatory authorities to the operation of heavy combat illegal activities.
… that the wall of Chinese intervention finally worked. For now.
And since this is all about one thing, the stock, market, it is worth noting that the Shanghai Composite Index had dropped as much as 3.8% to a 4 month low before the news that the cops were going to arrest anyone who used a wrong discount rate in their DCF, when everything suddenly took off, and the SHCOMP closed a “Dramamine required” 5.8% higher, the biggest daily increase since March 2009!
“As China beefs up its efforts to rescue the market, with even the public security ministry involved, market sentiment is recovering slightly from a panicky stage earlier,” Shenyin Wanguo analyst Qian Qimin says by phone
…click on the above link to read the rest of the article…
Greece Caves, Formally Requests ESM Bailout: Full Headline And Next Steps Summary
Greece Caves, Formally Requests ESM Bailout: Full Headline And Next Steps Summary
As we reported yesterday, following the latest European leaders summit, Greece was given until the end of the week to come up with a proposal for sweeping reforms in return for loans that will keep the country from crashing out of Europe’s currency bloc and into economic ruin.
“The stark reality is that we have only five days left … Until now I have avoided talking about deadlines, but tonight I have to say loud and clear that the final deadline ends this week,” European Council President Donald Tusk told a news conference.
It did that moments ago when Greece officially submitted a request for a three-year loan facility from the European Stability Mechanism. And to think Syriza’s main election promise was no more bailouts…
As Bloomberg reports, the loan will be used to meet Greece’s debt obligations, and to ensure financial system stability. Greece proposed immediate implementation of measures, including tax, pension reforms as early as next week. Govt to detail its proposals for specific reform agenda on July 9 at latest or tomorrow.
More details from the WSJ:
Greece formally requested a three-year bailout from the eurozone’s rescue fund Wednesday and pledged to start implementing some of the overhauls demanded by creditors by early next week, according to a copy of the request seen by The Wall Street Journal.
Crucially for Greece’s creditors, the letter says the government would start implementing some measures, including on taxation and pensions, by the beginning of next week, though it doesn’t go into details.
The letter is a first step toward fulfilling a demand by international creditors, who have given Athens until Sunday to come up with tougher measures they would impose in return for desperately needed financing that could keep the country from bankruptcy and even worse economic turmoil.
…click on the above link to read the rest of the article…
The Biggest Winner From The Greek Tragedy
The Biggest Winner From The Greek Tragedy
Long after Greece has left the Eurozone and Germany is using the Deutsche Mark as its currency, the people of the two nations, antagonized to a level unseen since World War II, will be accusing each other of benefiting more from the brief but tumultuous period of the common currency.
In reality, nobody had put a gun to Greece’s head and told it to lever up, enriching local oligarchs and corrupt politicians, taking advantage of credit that was artificially cheap only due to the common currency and an implicit monetary, if not fiscal, union.
Germany, whose exports account for nearly 50% of GDP, on the other hand experienced an unprecedented exporting golden age, made possible only due to an artificial currency, the Euro, that was by definition created to be weaker than the Deutsche Mark and benefitted from any bout of weakness in Europe’s periphery, such as the past 5 years.
The truth is, when things were good nobody second-guessed any decisions for a second, and since the rising economic tide lifted all boats, nobody cared.
And then the tide rolled out, displaced by trillions in bad loans and gargantuan mountains of sovereign and financial debt, which ultimately would lead to the first, then second, then third and then an all-out cascade of sovereign defaults.
Sadly, the losers – regardless of the propaganda and jingoist rhetoric – are the ordinary, common, taxpaying people of Germany and Greece (and every other European nation), who enjoyed a few brief years of artificial prosperity, which in retrospect was entirely due to debt, masked well by the “currency swaps” and other financial engineering concocted by banks such as Goldman Sachs, in clear violation of the Maastricht treaty which is now a long-forgotten memory of the founding ideals behind the Eurozone.
…click on the above link to read the rest of the article…
The Biggest Issue Now Is “The Math”
The Biggest Issue Now Is “The Math”
Some quick pre-market observations from Bloomberg’s Richard Breslow
Just Don’t Nip Out for a Haircut
The Greek citizenry voted and the handicappers got it very wrong. The result of the vote was called much earlier than anyone expected. It wasn’t close.
Much was made last week of the abrogating of responsibility by PM Tsipras by allowing the referendum. How can mere citizens be trusted with understanding such difficult issues? Issues that the technocratic experts got nowhere with. No one expected the result. No one was set up for the result. Chaos will ensue. But here we are, admittedly early the next morning and the markets are remarkably calm
Merkel and Hollande will meet. The ECB will meet. The Greek cabinet will meet. Cool heads will prevail. The unpopular Varoufakis is not gloating, he is resigning. The base case remains that a deal will happen because it must happen. The Greek people may have gotten us closer to a deal than all of the summits ever could
EUR/USD has held inside last Monday’s range. Two Mondays in a row, the pair has traded below 1.1000 and quickly rejected those lower prices. The 100-DMA (1.1057) is looking more like a pivot than a line in the sand. USD/JPY has bent, but not broken; 122.00 continues to be an important level and is holding. Watch the JPY as a measure of safe-haven demand
I remain a USD bull and still think EUR/USD will go lower, but its resilience in light of all the news is impressive.
Bund futures are higher, but holding well below the 55-DMA (153.61). U.S. 10-yr futures are holding below the important 127-00 level. Watch 126-16 as interesting support. Below there we are back into familiar territory
…click on the above link to read the rest of the article…
Tomgram: Naomi Oreskes, Why Climate Deniers Are Their Own Worst Nightmares
Tomgram: Naomi Oreskes, Why Climate Deniers Are Their Own Worst Nightmares
When I go out with my not quite three-year-old grandson, his idea of a good time is hide-and-seek. This means suddenly darting behind a bush too small to fully obscure him or into a doorway where he remains in plain sight, while I wander around wondering aloud where in the world he could possibly be. In this, there’s a kind of magical thinking and denial of reality that has great charm. When similar acts of denial are committed by adults, when they refuse to see what’s right before their eyes — the melting sidewalks and roads of India, the emptying reservoirs of parched California, the extreme rain and flooding in parts of Texas and Oklahoma, the news that last year was a global heat record for the planet and this year isalready threatening to be another, or that Alaska just experienced its hottest May ever, or that 13 of the 14 hottest years since temperatures began to be recorded took place in this century, or that a supposed post-1998 “pause” in the planetary warming process was a fantasy — the charm fades fast. When you discover that behind this denial of reality lies at least $125 million in dark money, it fades even faster. In just three years, unidentified conservative sources have poured that eye-popping figure into a web of think tanks and activist outfits dedicated to promoting climate denial (and not even included in that amount are the vast sums that Big Energycontinues to contribute to the promotion of denialism, as it has done since the 1980s). In other words, some of the most powerful and profitable interests on the planet are determined to deny reality with a ferocity meant to confuse the public and put a damper on any moves or movement to save a planetary environment that has long nurtured humanity. It’s a charmless spectacle.
…click on the above link to read the rest of the article…
