Home » Posts tagged 'central banks'

Tag Archives: central banks

Olduvai
Click on image to purchase

Olduvai III: Catacylsm
Click on image to purchase

Post categories

Post Archives by Category

Rabobank: It’s A Depressing Idea To Admit We Have No Ideas

Rabobank: It’s A Depressing Idea To Admit We Have No Ideas

It is said that small minds talk about people, average minds talk about events, and great minds talk about ideas – and I would add the smallest of minds talk about themselves.

The smallest-minded market view is what your individual asset class did yesterday. For example, I see across Bloomberg that ‘equities went up’, ‘bond yields went up’, and ‘oil went up’. No joined-up thinking as to what this means jointly.

The small-minded market view is President Biden telling the CEO of Chevron he was “mildly sensitive” for pointing out to the government how the energy market actually works, as oil rises again.

The average-minded market view is that the White House may cut gasoline taxes for 4 July. Yet even an average market mind should also be able to see this would be bad economics because it won’t help supply, while boosting demandBut careful now, that’s an idea!

The great-minded market view it is to accept what this Daily –and many others– have stressed repeatedly: that to raise rates means huge pain (and I add: and US geopolitical gain); and to cut rates means huge pain (and I add: and US geopolitical loss). There are no good choices. So, cheering equities going up while bond yields and energy also do makes no sense.

However, as Tom Hardy says to Leonardo DiCaprio in ‘Inception’, “Dream a little bigger, darling.”

I recently underlined that central banks have *never* been in real control of inflation. Their inflation-fighting success –or ‘over-success’ pre-Covid, when inflation was “too low”– was *always* reflected the local and global political-economic environments, neither of which they set. One can go back over history to show that fact very simply with a long-run CPI chart for the UK, transposing different local and global backdrops on top.

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

Putin Says US Decision To Print Money Is Behind Soaring Food Prices

Putin Says US Decision To Print Money Is Behind Soaring Food Prices

Earlier, we reported on the deranged, confused, false ramblings of a senile old man who is so out of his depth in running the world’s biggest economy, the catastrophic results will soon be obvious to even his most die-hard fans. Now, it’s time for his nemesis on the world scene, Russia’s Vladimir Putin to respond.

Speaking in a TV interview on Friday evening, following a meeting with African leaders in Sochi, Putin accused Western leaders of trying “to shift the responsibility for what is happening in the world food market” and said that “restrictions imposed by the US and its allies against Russia and Belarus will only exacerbate the looming global food crisis by affecting fertilizer trade and sending the food prices further up.”

Instead of looking toward Russian, Putin said that the root causes of the crisis lie with the US decision to print record amounts of money which led to an increase in global food prices, as well as Europe’s over-reliance on renewables and short-term gas contracts, which have led to price hikes and rising inflation.

“It began to take shape as early as February 2020 in the process of combating the consequences of the coronavirus pandemic,” he added.

High gas prices, the direct result of Europe’s catastrophic green/ESG policies which as we warned one year ago would spawn energy hyperinflation, resulting in under-investment in the traditional energy sector, have forced many fertilizer producers to shut down their businesses because of unprofitability; such developments have shrunk the fertilizer supply, which, in turn, has sent the food prices up, he added. This is another topic we have discussed extensively in the past (see our Oct 2021 article “Fertilizer Prices Hit Record Highs, May Pressure Food Inflation Even Higher“), and yes, Putin is correct again.

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

The Handbook for Debt-Soaked Nations: Lie, Print, Inflate & Finger-Point

The Handbook for Debt-Soaked Nations: Lie, Print, Inflate & Finger-Point

Below we consider the classic (and oh-so predictable) tactics of debt-soaked nations facing a showdown (corner) between tanking markets and ripping inflation.

Ultimately, I see a stagflationary end-game in which both occur, but for the near-term, prepare for more inflation, as it’s the option all debt-soaked sovereigns are eternally forced to take.

The Cruelest Month

T.S. Elliot famously described April as the cruelest month, but the recent (and ever-unfolding) events of May seem far crueler.

As we have warned from the very onset of this otherwise avoidable war in Ukraine, the backfiring of Western sanctions against Putin (de-dollarization, inflationary tailwinds and increasingly discredited central banks) were not only plain to foresee, but placed the West in an almost comical (yet tragic) scenario in which nations like Germany find themselves sending weapons to the Ukraine while simultaneously sending Rubles to Putin.

How did the world become so hypocritical, dishonest, cornered and silly?

(Cold) Economic Realism vs. (Empty) Moral Posturing

As George Washington observed in a 1770’s moment of Realpolitik candor: “Nations have no permanent friends nor permanent enemies, just permanent interests.”

Turning to 2022, the self-interested reality of Western reliance on Russian energy has made their front-page virtue signaling a bit less virtuous…

Such cold realism explains why Italian Prime Minster Draghi realistically confessed as early as May 11 that EU companies could pay for Russian gas in Rubles in the very same week German Chancellor Olaf Scholz realistically opposed any immediate halting of oil imports from Russia.

Meanwhile, by May 12, the headlines revealed that Russian oil revenues had increased YoY by 50% despite the Western “boycott.”

An equally realistic Japan, like Germany, will take its time to phase-out its dependence on Russian energy, as it, like Germany, recognizes that an immediate G-7 boycott of Russian oil and gas amounts to little more than an energy suicide pact.

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

The Big Questions We Should All Be Asking Geopolitically

The Big Questions We Should All Be Asking Geopolitically

To say that current events are ‘messy’ today would be the height of understatement. Everyday the headlines blare at us some new set of contradictory data points convincing us of some lie that serves someone’s purpose.

No matter how hard we try to keep up with things, cutting out the extraneous to find the nuggets of signal from the jungle of noise is more than a full-time job.

Sometimes, however, it’s best to take a few steps back, fall back on first principles and remind ourselves who the players are, what they want and then ask the big question of each of them… are they succeeding?

But to even ask that question we have to ask ourselves honestly the following question:

“What will they be willing to do to survive under present circumstances?”

This is the most uncomfortable question you can ever ask anyone. What would you do to survive? To protect your family? Your position? Your conception of yourself?

Everyone’s morality has limits. Everyone. Everyone has a shadow, a dark side, a place where they retreat to their Hobbesian self and see the world purely in terms of ‘a war of all against all.’ Anyone who refuses to admit this to themselves is someone you should run screaming from.

Those that always claim the moral high ground, who are always “the goodies!” are those without limits on their behavior. As the great H.L. Mencken proclaimed nearly 70 years ago:

The urge to save humanity is almost always only a false-face for the urge to rule it. Power is what all messiahs really seek: not the chance to serve. This is true even of the pious brethren who carry the gospel to foreign parts.

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

China, U.S. lead rise in global debt to record high $305 trillion – IIF

China, U.S. lead rise in global debt to record high $305 trillion – IIF

View of the city skyline in Shanghai

A view of the city skyline in Shanghai, China February 24, 2022. Picture taken February 24, 2022. REUTERS/Aly Song

NEW YORK, May 18 (Reuters) – The world’s two largest economies borrowed the most in the first quarter as global debt rose to a record above $305 trillion, while the overall debt-to-output ratio declined, data from the Institute of International Finance showed on Wednesday.

China’s debt increased by $2.5 trillion over the first quarter and the United States added $1.5 trillion, the data showed, while total debt in the euro zone declined for a third consecutive quarter.

The analysis showed many countries, both emerging and developed, are entering a monetary tightening cycle -led by the U.S. Federal Reserve- with high levels of dollar denominated debt.

Global debt totals
Global debt totals

“As central banks move ahead with policy tightening to curb inflationary pressures, higher borrowing costs will exacerbate debt vulnerabilities,” the IIF report said.

“The impact could be more severe for those emerging market borrowers that have a less diversified investor base.”

The yield on the benchmark 10-year Treasury note has risen some 150 basis points so far this year and earlier this month hit its highest since 2018.

SOVEREIGNS BEWARE

Corporate debt outside banks and government borrowing were the largest sources of the increase in borrowing, with debt outside the financial sector rising above $236 trillion, some $40 trillion higher than two years ago when the COVID-19 pandemic hit.

Government debt has risen more slowly in the same period, but as borrowing costs rise sovereign balance sheets remain under pressure.

Government financing needs
Government financing needs

“With government financing needs still running well above the pre-pandemic levels, higher and more volatile commodity prices could force some countries to increase public spending even further to ward off social unrest,” said the IIF.

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

Buckle Up for a Crashing Economy and More Inflation

Buckle Up for a Crashing Economy and More Inflation

Jerome Powell began hinting that inflation might be a problem last August. In November, Powell retired the word “transitory.” But here we are in May and the Federal Reserve still hasn’t done anything substantive to address the inflation problem.

And now it may be too late. It’s probably time to buckle up for more inflation – and perhaps a crashing economy.

Powell and Company have been talking tough for months, but there hasn’t been a whole lot of action. In March, the central bank raised interest rates a paltry 25 basis points. At the May meeting, the FOMC followed up with a more aggressive 1/2% rate hike but took a 75 basis point rate hike off the table.

Meanwhile, the Fed didn’t even start tapering quantitative easing until January. In mid-April, the balance sheet was still expanding, hitting an all-time high of $8.97 trillion.

At the May FOMC meeting, the Fed unveiled its balance sheet reduction scheme. It was hardly impressive. If the Fed shrinks its balance sheet at the proposed rate, it will be back to pre-pandemic levels in about eight years.

The Fed has targeted a 2.5% interest rate by the end of the year. With GDP already going negative in Q1, it’s questionable that the Fed can get there without completely tanking the economy. There are already signs that the Fed has pricked the housing bubble.

And as Mises Institute senior editor Ryan McMaken pointed out in a recent article, the Fed really needs to push rates much higher than 3%.

One percent may seem high to some market observers of recent rate cycles, but we’re now in a high-inflation environment with price inflation above 8 percent. The Fed is going to have to do more than a mild hike here and there to make a dent in 8 percent CPI (Consumer Price Index) inflation…

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

Collapse Is Happening Before Our Eyes

Collapse Is Happening Before Our Eyes

Analysts and authors, myself included, have been warning about the collapse of the dollar as the global reserve currency for years. I described this prospect in my first book, Currency Wars (2011), and in several other books in the years since.

This process can take many years. For example, the decline of sterling as the leading global reserve currency played out over 30 years from 1914 (the beginning of World War I) to 1944 (the Bretton Woods conference).

Still, events today are playing out so quickly that the collapse is happening in front of our eyes.

It’s no longer a matter of a major event on the horizon; it’s occurring in real-time. Russia has just linked the ruble to gold at a rate of 5,000 rubles to one gram of gold. China is discussing with Saudi Arabia the prospect of paying for oil in yuan.

Israel is likewise considering taking yuan in exchange for its high-tech exports. China and Russia are creating new payments systems to avoid U.S. sanctions. You get the point.

Foreign Central Banks Aren’t Dumb

Central banks have been net buyers of physical gold since 2010. Countries all over the world are considering dumping dollars for fear that they will be next on the list to have their dollar assets frozen or seized the way the U.S. seized the dollar-denominated assets of the Central Bank of Russia.

That makes sense. What’s the point of holding dollars in your reserve positions if the U.S. can freeze those accounts on a whim? Americans tend to take dollar strength for granted, but that’s a mistake. It’s helpful at times like this to get a foreign perspective.

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

Australia Shocks With Bigger Than Expected Rate Hike, As Lowe Admits Embarrassment At Being So Wrong

Australia Shocks With Bigger Than Expected Rate Hike, As Lowe Admits Embarrassment At Being So Wrong

In our preview of what was expected to be Australia’s first rate hike since 2010, we said that consensus expects a 15bps rate hike to 0.25%, with a handful of bank still expecting a hold (including CBA, Goldman and HSBC) and nobody expected a greater than 15bps rate hike. Well, everyone was wrong, because a few hours ago, Australia’s central bank – one of the developed world’s last remaining doves turned hawkish – and joined the global tightening bandwagon when it increased interest rates by more than any economists anticipated, rocking markets with a bigger-than-expected interest-rate hike in the middle of an election campaign and signaled further hikes to come, sending the currency and bond yields higher, while stocks slumped.

Abandoned his pledge of just two months ago to remain patient, Reserve Bank Governor Philip Lowe topped economists estimates by raising the cash rate 25 basis points to 0.35%, defying expectations for a hike of 15 basis points. It was the first time borrowing costs had been lifted in an election campaign in almost 15 years. That move and suggestions that more hikes will follow sent benchmark three-year bond yields soaring through 3% for the first time in eight years.

“The RBA managed to wrongfoot every forecaster and even the market — no one was braced for 25 basis points,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. Economists’ consensus was for a 15 basis-point hike.

Pouring gasoline on the hawkish case, the RBA forecast for 2022 is that headline inflation will accelerate to about 6% and core inflation will rise to around 4.75%. The RBA targets inflation of 2-3%. In response to a question about why the RBA had previously guided against rate hikes, Lowe said that “Inflation has surprised everyone on the upside.”

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

Food Shortages In Six Months – The Globalists Are Telling Us What Happens Next

Food Shortages In Six Months – The Globalists Are Telling Us What Happens Next

In mid 2007 the Bank for International Settlements (The central bank of central banks) released a statement predicting an impending “Great Depression” caused by a credit market implosion. That same year the International Monetary Fund also published warnings of “subprime woes” leading to wider economic strife. I started writing alternative economic analysis only a year earlier in 2006 and I immediately thought it was strange that these massive globalist institutions with far reaching influence on the financial world were suddenly starting to sound a lot like those of us in the liberty movement.

This was 16 years ago, so many people reading this might not even remember, but in 2007 the alternative media had already been warning about an impending deflationary crash in US markets and housing for some time. And, not surprisingly, the mainstream media was always there to deny all of our concerns as “doom mongering” and “conspiracy theory.” Less than a year later the first companies awash in derivatives began to announce they were on the verge of bankruptcy and everything tanked.

The media response? They made two very bizarre claims simultaneously: “No one could have seen it coming” and “We saw this coming a mile away.” Mainstream journalists scrambled to position themselves as the soothsayers of the day as if they said all along that the crash was imminent, yet, there were only a handful of people who actually did call it and none of them were in the MSM. Also ignored was the fact that the BIS and IMF had published their own “predictions” well before the crash; the media pretended as if they did not exist.

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

Countdown to U.S. Government Default

Countdown to U.S. Government Default

Central Bank Digital Currencies (CBDC) are coming.  And they’re coming much faster than most people care to think about.  Are you ready?

At the moment, roughly 90 central banks – including the European Central Banks and the Federal Reserve – are either experimenting with, or are in varying stages of CBDC implementation.  Moreover, these CBDC friendly central banks include all G20 economies.  And together, represent more than 90 percent of global GDP.

What’s important to understand is the adoption of a CBDC in your country of residence would accompany the abolition of cash.  This would be for your own good, of course.  To eliminate nefarious transactions and black markets.

If you value financial privacy and the liberty to spend your money as you please, then the rapidly approaching rollout of CBDCs is a major red flag.  Compulsory use of a CBDC, like a digital dollar for example, would give central planners complete oversight and control over your finances.

You see, under a CBDC regime – free of cash – all of your transactions would be subject to government surveillance.  All remnants of financial freedom, privacy, and anonymity would be destroyed.  But that’s not all…

CBDCs would allow control freak, power mad central planners to do much more than spy and surveil your financial transactions.  CBDCs would allow them to control how and when you spend your money.

This may sound crazy to a sane person, who operates with a modicum of modesty and integrity.  But, in truth, this is one of the main intents of CBDCs.  In fact, several years ago Bank for International Settlements General Manager Agustin Carstens outlined the extraordinary powers CBDCs would afford central planners.  Here are the particulars from Carstens himself:

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

Unbeknown to Most, A Financial Revolution Is Coming That Threatens to Change Everything (And Not for the Better)

Unbeknown to Most, A Financial Revolution Is Coming That Threatens to Change Everything (And Not for the Better)

Given how much is at stake, this financial revolution is among the most important questions today’s societies could possibly grapple with. It should be under discussion in every parliament of every land, and every dinner table in every country in the world.

Around 90 central banks are either in the process of experimenting with or are already piloting central bank digital currencies (CBDCs). In a world of just over 190 countries that is a large contingent, but given they include the European Central Bank (ECB) which alone represents 19 Euro Area economies, the actual number of economies involved is well over 100. They include all G20 economies and together represent more than 90% of global GDP.

Three CBDCs have already gone fully live in the past two years: the so-called DCash in the Eastern Caribbean, the Sand Dollar in the Bahamas and the eNaira in Nigeria. The International Monetary Fund, the world’s most powerful supranational financial institution, has been lending its expertise in the roll out of CBDCs. In a recent speech the Fund’s President Kristalina Georgieva lauded the potential benefits (on which more later) of CBDCs while heaping praise on the “ingenuity” of the central banks busily trying to conjure them into existence.

Also firmly on board is the world’s largest asset manager, BlackRock, which helps many of the world’s largest central banks, including the Federal Reserve and the ECB, manage their assets while obviously keeping all potential conflicts of interests at bay. The fund was the largest beneficiary of the Federal Reserve’s bailout of exchange-traded funds during the market rout of Spring 2020.

In his latest letter to investors, the CEO of BlackRock, Larry Fink, said the Ukrainian conflict has the potential to accelerate the development of digital currencies across the world.

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

Designing a new currency is impractical

Designing a new currency is impractical

Rising interest rates threaten to destabilise both financial asset values and the fiat currencies in which they are priced. This outcome is feared by the chattering classes who increasingly speculate about currency resets.

So far, we have seen cryptocurrencies such as bitcoin, plans for the introduction of central bank digital currencies, plans to de-dollarise Asian trade, and even El Salvador adopting bitcoin as legal tender. But are these resets valid?

Except for a new currency mooted for cross-border trading purposes between Russia, its former Central Asian satellites and China only at the conceptual stage, all these plans fail in one important respect: as things stand, legally none of them can have the status of a currency. Money, that is physical gold and silver, banknotes and bank credit are exempt from property law with respect to stolen goods which otherwise can be seized from innocent parties who have subsequently acquired them.

Without this exemption embodied in lex mercatoria a currency replacement is useless. The only replacement for fiat is a currency credibly backed by gold. And that is the legal position!
Introduction

The introduction of new currencies is a topic moving increasingly into public debate driven by both the inflation dilemma faced by central banks and, recently, by the consequences of fiat currency sanctions against Russia. There is a convergence of events at play. While there are the immediate problems of rising interest rates and of the financial and commodity price war being waged between the West and Russia, there are plans for central bank digital currencies (CBDCs) to give the monetary authorities greater control over the use of new currencies that could replace existing fiat.
…click on the above link to read the rest of the article…

The Ins and Outs of Whose Money is it Anyway?

The Ins and Outs of Whose Money is it Anyway?

“Inside, Outside…. Leave me alone!
Inside, Outside … Nowhere is home!
Inside, Outside … Where have I been?
Out of my brain on the 5:15…”
— The Who

There’s been a massive reaction to Credit Suisse analyst Zoltan Poszar’s note about the birth of a new Bretton Woods agreement.

Every investor in the world should read it. Zerohedge posted (behind their paywall) a lengthy analysis of Poszar’s musing along with some reactions from Wall St. It is well worth your time.

The people most freaked out about this note are the Keynesians who worship at the altar of what Poszar calls Inside Money — money that only exists inside the financial system, bonds, credit, dollars, euros, etc.

Austrians, like myself, have always understood that eventually Inside Money fails because it is ultimately nothing more than a Ponzi Scheme built on top of Outside Money — money that exists outside the financial system, like commodities and bitcoin.

Poszar makes his early case and then goes through the mechanics of what is happening in the financial plumbing of the world economy right now to prove the stresses are real and building quickly towards an implosion of Inside Money and an explosion of Outside Money.

Again, anyone with a passing acquaintance with Austrian business cycle theory and Mises’ Theory of Money and Credit always knew this day was coming.

Today’s “Inside Money” standard, known colloquially as the Dollar Reserve standard, is actually what I like to call “Milton Friedman’s Nightmare.” It is nothing more than a system of competitively devalued and inflated debt-based scrips running around drinking each other’s milkshakes until everyone’s glass is empty.

FYI, there are a lot of empty glasses around the world right now and more are being created everyday as the financial system turned predatory after the Lehman Bros. collapse in 2008.

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

The American Empire Self-Destructs, But Nobody Thought That It Would Happen This Fast

The American Empire Self-Destructs, But Nobody Thought That It Would Happen This Fast

Photograph Source: Phil Dolby – CC BY 2.0

Empires often follow the course of a Greek tragedy, bringing about precisely the fate that they sought to avoid. That certainly is the case with the American Empire as it dismantles itself in not-so-slow motion.

The basic assumption of economic and diplomatic forecasting is that every country will act in its own self-interest. Such reasoning is of no help in today’s world. Observers across the political spectrum are using phrases like “shooting themselves in their own foot” to describe U.S. diplomatic confrontation with Russia and allies alike. But nobody thought that The American Empire would self-destruct this fast.

For more than a generation the most prominent U.S. diplomats have warned about what they thought would represent the ultimate external threat: an alliance of Russia and China dominating Eurasia. America’s economic sanctions and military confrontation have driven these two countries  together, and are driving other countries into their emerging Eurasian orbit.

American economic and financial power was expected to avert this fate. During the half-century since the United States went off gold in 1971, the world’s central banks have operated on the Dollar Standard, holding their international monetary reserves in the form of U.S. Treasury securities, U.S. bank deposits and U.S. stocks and bonds. The resulting Treasury-bill Standard has enabled America to finance its foreign military spending and investment takeover of other countries simply by creating dollar IOUs. U.S. balance-of-payments deficits end up in the central banks of payments-surplus countries as their reserves, while Global South debtors need dollars to pay their bondholders and conduct their foreign trade.

This monetary privilege – dollar seignorage – has enabled U.S. diplomacy to impose neoliberal policies on the rest of the world, without having to use much military force of its own except to grab Near Eastern oil.

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

The Inflation Blame Game

The Inflation Blame Game

Now inflation is Russia’s fault. Or is it greedy businesses pushing up prices? Maybe a combination of the two.

It seems that government officials and central bankers are looking everywhere for a place to pin the blame for inflation except the one place they need to look — in the mirror.

I’m already seeing headlines about how Russia’s invasion of Ukraine is causing inflation. CBS broadcast this storyline on the first day of the invasion. As Peter Schiff put it in a recent podcast, Russia is the latest “excuse variant” for inflation.

It is true that the Russian invasion and economic sanctions have caused some prices to spike. Oil was over $130 a barrel over the weekend. Copper hit record highs. The price of wheat surged. But this is not necessarily inflationary. Inflation causes a general rise in prices across the board. In this situation, some prices will rise while others fall. As consumers spend more on food and energy, they will cut spending on other goods and services. Ostensibly, those prices will drop.

Inflation — an increase in the money supply — causes prices to rise more generally. It’s the result of more dollars chasing the same number of (or fewer) goods and services. As Peter explained, the culprit is the central bank.

What makes the prices go up is when the central bank responds to rising energy prices or rising food prices by printing more money, which is what they are going to do. Because as consumers have to tighten their belts because food is so expensive, because home heating oil and gasoline are so expensive, and they cut back spending on everything else, that causes a recession. And that results in the Fed printing more money, and that’s what’s inflationary.”

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

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
Click on image to purchase

Click on image to purchase @ FriesenPress