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Investors Do Not See “Transitory” Inflation

Investors Do Not See “Transitory” Inflation

The Federal Reserve and European Central Bank repeat that the recent inflationary spike is “transitory”. The problem is that investors do not buy it.

Inflation is always a monetary phenomenon, and this time is not different. What central banks call transitory effects, and the impact of supply chains are not the real drivers of inflationary pressures. No one can deny certain supply shock impacts, but the correlation and extent of the increase in prices of agricultural and industrial commodities to five-year highs as well as the abrupt rise of non-replicable goods and services to decade-highs have monetary policy to blame.  Injecting trillions of liquidity makes more funds chase fewer goods and the rise in the real inflation perceived by citizens is much larger than the official CPI.

Take food prices. The United Nations Food Price Index is up 30% in the past five years and up 10% year-to-date (April 2021). The rise in food prices already caused protests all over the world in 2018 and it continues to reach new highs. The correlation in the price increase of most agricultural goods also shows that it is a monetary effect.

The same can be said about the Bloomberg Commodity Index which is also at five-year highs and up 15% year-to-date.

Yes, there have been some supply disruptions in a few commodities, but it is not widespread let alone the norm. If anything can be said is that the rise in agricultural and industrial commodities is happening despite the persistent overcapacity that many of these had already before the pandemic. We should also remember that one of the unintended consequences of massive monetary expansion is perpetuation of overcapacity. Excess capacity is refinanced and maintained even in crisis times…

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Yield Curve Control: Bubbles And Stagnation

Yield Curve Control: Bubbles And Stagnation

Central banks do not manage risk, they disguise it. You know you live in a bubble when a small bounce in sovereign bond yields generates an immediate panic reaction from central banks trying to prevent those yields from rising further. It is particularly more evident when the alleged soar in yields comes after years of artificially depressing them with negative rates and asset purchases.

It is scary to read that the European Central Bank will implement more asset purchases to control a small love in yields that still left sovereign issuers bonds with negative nominal and real interest rates. It is even scarier to see that market participants hail the decision of disguising risk with even more liquidity. No one seemed to complain about the fact that sovereign issuers with alarming solvency problems were issuing bonds with negative yields. No one seemed to be concerned about the fact that the European Central Bank bought more than 100% of net issuances from Eurozone states. What shows what a bubble we live in is that market participants find logical to see a central bank taking aggressive action to prevent bond yields from rising… to 0.3% in Spain or 0.6% in Italy.

This is the evidence of a massive bubble.

If the European Central Bank was not there to repurchase all Eurozone sovereign issuances, what yield would investors demand for Spain, Italy or Portugal? Three, four, five times the current level on the 10-year? Probably. That is why developed central banks are trapped in their own policy. They cannot hint at normalizing even when the economy is recovering strongly, and inflation is rising.

Market participants may be happy thinking these actions will drive equities and risky assets higher, but they also make economic cycles weaker, shorter, and more abrupt.

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From a Hamilton Moment to Perpetual Debt Slaves: This Is the True Face of the EU

From a Hamilton Moment to Perpetual Debt Slaves: This Is the True Face of the EU

Over the summer while the U.S. was mired in the worst kind of color revolution with race riots, economic shutdowns and the worst kind of divisive politics, the European Union was celebrating its great achievement.

A seven-year budget and COVID-19 bailout package that was heralded as German Chancellor Angela Merkel’s “Alexander Hamilton Moment.” Because that legislation, meant to be the cornerstone of Germany six-month stint as the president of the European Council finally granted the European Commission the ability to issue debt, collect taxes and disburse funds.

That would be the way the COVID-19 relief funds would be raised and distributed. It was the first moment of fiscal integration under a central EU body that would bypass the individual member states as the means by which to raise capital.

It would be the first step in the process of consolidating debt issuance and euro creation under the control of Brussels, rather than continuing to carry out the fiction of individual sovereign debt.

The euro is a fatally flawed currency because of this and if it is to survive deeper into the 21st century having only one central issuer of it, the EU itself via the European Commission and the European Central Bank, with one aggregated risk profile (interest rate) is necessary.

The current leadership of the EU was put in place to make this happen on powerful Germany’s watch. And in July is looked like it was done. The markets loved it. The media hailed Merkel as the great leader of Europe. Some countries balked, the so-called Frugal Five, but eventually they signed off on the draft legislation once they were no longer directly on the hook for any more wealth transfers from them to perpetual problem children like Italy, Greece and Spain.

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What the Great Reset Architects Don’t Want You To Understand About Economics

What the Great Reset Architects Don’t Want You To Understand About Economics

It shouldn’t come as a surprise that the Vice President of the World Bank Carmen Reinhardt recently warned on October 15 that a new financial disaster looms ominously over the horizon with a vast sovereign default and a corporate debt default. Just in the past 6 months of bailouts unleashed by the blowout of the system induced by the Coronavirus lockdown, Reinhardt noted that the U.S. Federal Reserve created $3.4 Trillion out of thin air while it took 40 years to create $14 Trillion. Meanwhile panicking economists are screaming in tandem that banks across Trans Atlantic must unleash ever more hyperinflationary quantitative easing which threatens to turn our money into toilet paper while at the same time acquiescing to infinite lockdowns in response to a disease which has the fatality levels of a common flu.

The fact of the oncoming collapse itself should not be a surprise- especially when one is reminded of the $1.5 quadrillion of derivatives which has taken over a world economy which generates a mere $80 trillion/year in measurable goods and trade. These nebulous bets on insurance on bets on collateralized debts known as derivatives didn’t even exist a few decades ago, and the fact is that no matter what the Federal Reserve and European Central Bank have attempted to do to stop a new rupture of this overextended casino bubble of an economy in recent months, nothing has worked. Zero to negative percent interest rates haven’t worked, opening overnight repo loans of $100 billion/night to failing banks hasn’t worked- nor has $4.5 trillion of bailout unleashed since March 2020. No matter what these financial wizards try to do, things just keep getting worse. Rather than acknowledge what is actually happening, scapegoats have been selected to shift the blame away from reality to the point that the current crisis is actually being blamed on the Coronavirus!

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

The Insanity of Central Banks

QUESTION: Marty, you mentioned several times now, that the ECB MUST convert to a digital Euro. I have done speeches about that based on a paper from the IMF (Christine Lagarde) last year, in which they too discuss how to do it. But I have a serious question regarding timing.

I live in Germany and I would say that WE (the country) are not ready for such a move yet. Let alone many people. I have people in my family who still don’t have smartphones (just plain mobile).

I am completely with you that this move is coming (I am also part of a crypto community but as a critical member (I am the party spoiler there)).

But how can they move to a digital Euro to prevent bank runs, when I can’t see the infrastructure in place to do so.

Especially in such a short amount of time rg. the date you mentioned. They can eliminate cash withdrawals, yes, but paying with my smartphone reguires technology .. ?

Thanks a lot,

A

ANSWER: We are talking about bureaucrats. They only think in concepts much like Klaus Schwab’s Great Reset. The practical application of what they are doing is not there. They lack even the infrastructure, as in California, to force all cars to be electric. They do not have the power grid to support that.

I was in meetings where they actually told me with a straight face that they had to take trading the Euro away from Britain. I asked if they were going to take it away from the USA, Japan, Hong Kong, Singapore, etc? They looked at me puzzled, and said no! Just Britain. I asked if they really wanted to control the Euro just convert it into the old Soviet Union ruble. No free market at all.

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

A Powerful Ally to the Fed Just Boosted the Prospects for Inflation

Inflation Calculator

This week, Your News to Know rounds up the latest top stories involving gold and the overall economy. Stories include: ECB could follow the Fed’s pro-inflation policy, precious metals in a pandemic, and legendary silver coin to be sold for more than $10 million at an auction.

Gold could move up further as the ECB looks to keep the euro down

If one believes that central bank policies are a primary driver of gold prices, the yellow metal should have plenty of room to go up even as it sits above its previous all-time high. Besides the Federal Reserve’s openness to inflation, gold should be buoyed by a surge of the euro and the European Central Bank’s (ECB) efforts to contain it.

Experts like Mechanical Engineering Industry Association’s chief economist Ralph Wiechers and Natixis strategist Dirk Schumacher note that an overly strong euro poses problems for the eurozone. It hinders both exporters and importers, slows the European economy, and can cause inflationary spikes in individual countries.

While the ECB might not be able to control the euro as easily, Schumacher’s firm expects them to try and push it down by introducing looser monetary policies. BNP Paribas’ analysts share a similar view, stating in a recent note that the ECB would also voice its desire to keep the euro lower. This was exemplified when former ECB vice president Vitor Constancio stated in an interview that the ECB would follow in the Fed’s wake by allowing inflation to run above the targeted rate for periods of time.

Strong currencies are among the biggest headwinds for gold prices, and inflation is one of its most powerful drivers. Given recent statements by officials from both central banks, it should come as no surprise that prominent investor Peter Schiff points to inflation as the next big thing that will power gold’s gains.

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

The U.S. Dollar Collapse Is Greatly Exaggerated

The U.S. Dollar Collapse Is Greatly Exaggerated

The US Dollar Index has lost 10% from its March highs and many press comments have started to speculate about the likely collapse of the US Dollar as world reserve currency due to this weakness.

These wild speculations need to be debunked.

The US Dollar year-to-date (August 2020) has strengthened relative to 96 out of 146 currencies in the Bloomberg universe. In fact, the U.S. Fed Trade-Weighted Broad Dollar Index has strengthened by 2.3% in the same period, according to data compiled by Bloomberg.

The speculation about countries abandoning the U.S. Dollar as reserve currency is easily denied. The Bank Of International Settlements reports in its June 2020 report that global US-dollar denominated debt is at a decade-high. In fact, US-dollar denominated debt issuances year-to-date from emerging markets have reached a new record.

China’s dollar-denominated debt has risen as well in 2020. Since 2015, it has increased 35% while foreign exchange reserves fell 10%.

The US Dollar Index (DXY) shows that the United States currency has only really weakened relative to the yen and the euro, and this is based on optimistic expectations of European and Japanese economic recovery. The Federal Reserve’s dovish announcements may be seen as a cause of the dollar decline, but the evidence shows that the European Central Bank (BOJ) and the Bank Of Japan (BOJ) conduct much more aggressive policies than the U.S. while economic recovery stalls. Recent purchasing manager index (PMI) declines have shown that hopes of a rapid recovery in Europe and Japan are widely exaggerated, and the Daily Activity Index published by Bloomberg confirms it. Furthermore, the balance sheet of the ECB is at the end of August more than 54% of the eurozone GDP and the BOJ´s is 123% versus the Federal Reserve’s 33%.

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

Bank Of Ireland Is Now Imposing Negative Rates On Cash Held In Pensions

Bank Of Ireland Is Now Imposing Negative Rates On Cash Held In Pensions

If you’re holding your pension with the Bank of Ireland, you are now officially being charged to do so. 

In a move that we’re sure is going to have absolutely no consequences, the bank is starting to impose negative interest rates on cash held in pensions, according to The Irish Examiner. The bank is applying a rate of 0.65% on pension pots, which means customers will now pay the bank $65 on every $10,000 held. 

The bank commented: “European Central Bank interest rates have been negative since 2014. Since then banks have been subject to negative interest rates for holding funds overnight and market indications are that rates will remain low for some time.”

It continued: “As a result, we have applied negative rates on deposits for large institutional and corporate customers since 2016. We recently wrote to 14 investment and pension trustee firms to inform them about a rate change to their accounts, which is reflective of the negative interest rate environment.”

“The average amount held on deposit by investment and pension trustee firms is in excess of around €100m, therefore it is no longer sustainable for the Bank to continue with the current rate of interest. We provided 3 months’ advance notification of this rate change to our investment and pension trustee firm customers,” the bank concluded.

Ulster Bank is also considering similar rates in the future. The bank’s CEO, Jane Howard, said: “In terms of Ulster Bank, we did introduce negative rates earlier this year and we’ve introduced it for larger businesses with balances of over €1m.”

She continued: “As I sit here today we have no plans to charge negative interest rates for our personal customers but given the way everything happens, like Covid, so unexpectedly, it is not something I can rule out forever.”

By now, it feels like it is only a matter of time before the U.S. follows suit. And to think, none of this “prosperity” would be possible without the miracle of modern central banking.

Thanks, Christine.

Can Too Big For Fed & ECB

CAN TOO BIG FOR FED & ECB

There are lies, damned lies, and economists. Whether these economists work for the government or a bank, they spend all their time on the computer extrapolating current trends with minor adjustments. 

If you want to understand the future, don’t spend your life preparing and constantly revising an Excel sheet with masses of economic data. Collective human behaviour is extremely predictable. But not by spreadsheet analysis but by studying history. 

HISTORY IS A BETTER FORECASTER THAN ECONOMISTS

There just is nothing new under the sun. So why is there so much time and money wasted around the world to make economic forecasts that are no better than a random job by a few chimps?

Instead, give some lateral thinkers a few history books and let them study the rise and decline of the major empires in history. That will tell them more about long term economic forecasts than any spreadsheet. 

After a 50 year decline of the US economy and the dollar, we still hear about the V-shaped recovery being imminent. 

On what planet do these people live who believe that a world on the cusp of an economic and social collapse is going to see a miraculous recovery out of the blue. 

This is the problem with a system that is totally fake and dependant on constant flow of stimulus even though it has zero value. Most people are fooled and believe it is for real.

ALL EMPIRES END WITH COLLAPSING CURRENCY AND SURGING DEBTS

We are now in the final stages of the end game. The end of the end could be extended affairs or they could be extremely quick. Most declines of major cycles are drawn out and this one has lasted half a century. During that time the dollar is down 50% against the DM/Euro and 78% vs the Swiss franc. And US debt has gone up 65x since 1971 from $400B to $26T. A collapsing currency and surging debts are how all empires end.

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“A Legal Nightmare”: In Latest European “Freakshow”, EU Threatens To Sue Germany Over QE Ruling

“A Legal Nightmare”: In Latest European “Freakshow”, EU Threatens To Sue Germany Over QE Ruling

In the latest European farce, the European Commission threatened to sue Germany after the country’s top court questioned the legality of the ECB’s bond-buying program, Bloomberg reported over the weekend. In what Nordea’s Andrewas Steno Larsen dubbed the “ongoing freakshow in the Euroarea”, the EC president – a German no less – Ursula von der Leyen said that “The final word in EU law is always spoken in Luxembourg. Nowhere else.”

In other words, following last week’s shocking decision by Germany’s constitutional court which found that some aspects of the ECB’s QE are not constitutional and gave the ECB a 3 month ultimatum in which to demonstrate that QE was a proportional response, “we are gearing up for a remarkable legal stand-off between EU and Germany” writes Larsen, who adds that “the German head of the EU Commission, Ursula Von Der Leyen, is now openly battling her mother country’s constitution as she hinted that Brussels is considering taking legal steps that could result in Germany being sued in Europe’s highest court over the ruling from its constitutional court on ECB bond buying in a letter to the German Press Agency. Never underestimate the arrogance of EUR-crats!”

And here is the German European who is tasked with leading the onslaught on the German constitution.

German head of the EU Commission, Ursula Von Der Leyen.

And just to make sure the Germans are really pissed off, the ECB has tasked its staff to study if they should consider buying junk corporate bonds according to Reuters, “as if the ECB hasn’t manipulated credit prices enough already” as Nordea helpfully adds, noting that “ultimately, we think the EUR-ship will be glued together again – but markets are rightfully pricing in a risk of an ugly political showdown for the time being (wider spreads, relatively low EUR/USD etc).”

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

Central Bankers Are Quietly Freaking Out About How To Fight The Next Recession

Central Bankers Are Quietly Freaking Out About How To Fight The Next Recession 

Mark Carney warns about the limits of central bank policy.
Mark Carney, governor of the Bank of England (BOE), listens at the annual Mansion House dinner in … [+]2018 BLOOMBERG FINANCE LP

The world’s top central bank officials are rightly concerned that politicians in rich economies missed one key lesson of the last recession: Interest rate cuts can help to moderate a downturn, but aggressive fiscal policy is key to a healthy recovery. 

It was a pro-austerity stance both in the United States, and even more saliently in the euro zone, that arguably prolonged the period of high unemployment and low wage growth that plagued most of the decade-long recovery from the 2007-2009 U.S. Great Recession. 

Outgoing Bank of England Governor Mark Carney told the Financial Times this week that central banks are running low on fuel. “If there were to be a deeper downturn, [that requires] more stimulus than a conventional recession, then it’s not clear that monetary policy would have sufficient space,” he said.Today In: Money

“It’s generally true that there’s much less ammunition for all the major central banks than they previously had and I’m of the opinion that this situation will persist for some time.”  

That echoed the sentiment of Christine Lagarde, who recently took over the European Central Bank. She’s telling budget-shy European politicians (especially in Germany) to get to work

Now, a new paper from Fed board economist Michael Kiley points to similar alarm among U.S. central bankers about their ability to fight future slumps. 

Drawing up two basic assumptions of what a downturn might look like, Kiley finds that “a recession may result in near-zero interest rates at long maturities, bringing U.S. experience closer to that seen in Europe and Japan.”

This, says Kiley, “could imply limits on the ability of monetary policy to support a recovery.”

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

Central Banks Alarming Move Towards Social Engineering

Central Banks Alarming Move Towards Social Engineering

Recently the central banks have found themselves grasping at straws when it comes to moving the economy forward. Signs have begun to appear on the horizon that in the future they will attempt to expand their power by increasing their role in social engineering. This is a term that refers to efforts to influence particular attitudes and social behaviors on a large scale. Its goal is to produce or change certain desired social characteristics in a population. In the past, this has been more the role of governments with the consent of the people often through laws and tax policies.

In America, the Fed was initially given the mandate to create a stable monetary environment. Since that time it has been expanded into what is now known collectively as the “dual mandate.” Now its two goals also include achieving maximum sustainable employment in conjunction with price stability. The Federal Reserve’s Federal Open Market Committee (FOMC), which sets U.S. monetary policy, has translated these mandates in rather broad terms.

In the last few weeks, Christine Lagarde, the new head of the ECB, said something that shocked many people. She stated, “We should be happier to have a job than to have our savings protected… I think that it is in this spirit that monetary policy has been decided by my predecessors and I think they made quite a beneficial choice.”  If this is true we are in big trouble. It is a sign that something is terribly wrong, the idea that you can have a job but you can’t save anything, places workers in a position of servitude where they are dependent on, at the total mercy of the economy and the government.

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Gold & Silver Extend Gains On Lagarde’s “Inflation Is Coming” Comments

Gold & Silver Extend Gains On Lagarde’s “Inflation Is Coming” Comments

With the dollar sliding, and following yesterday’s dovish market reaction to The Fed, ECB’s Lagarde comments on inflation (increasing its expectations for 2020 and said that Q4 2022 inflation will be at 1.7%) and noting labor costs pressures have strengthened.

Over the medium term, the inflation rate will increase, Lagarde said, adding that “the direction [rising] of inflation is good.”

Additionally, she noted The ECB’s highly accommodative stance will continue for a prolonged period until inflation rises, and said thatincoming economic and survey data point to some stabilization in the slowdown of economic growth in the euro area.

Gold and silver have erased all the post-Payrolls losses…

Analysts Stunned After Lagarde Demands “Key Role” For The ECB In Climate Change

Analysts Stunned After Lagarde Demands “Key Role” For The ECB In Climate Change

Having failed miserably to “trickle down” stock market wealth for a decade as was their intention, something Ben Bernanke made clear in his Nov 4, 2010 WaPo op-ed, central banks have moved on to more noble causes.

Over the weekend Minneapolis Fed chair Neil Kashkari suggested it was time to allow central banks to directly decide how to redistribute wealth, stating unironically that “monetary policy can play the kind of redistributing role once thought to be the preserve of elected officials”, apparently failing to realize that the Fed is not made up of elected officials but unelected technocrats who serve the bidding of the Fed’s commercial bank owners.

Failing to decide how is poor and who is rich, central bankers are happy to settle with merely fixing the climate.

Overnight, Bank of Japan Governor Haruhiko Kuroda joined his European central banking peers by endorsing government plans to compile a fiscal spending package for disaster relief and measures to help the economy stave off heightening global risks. Kuroda said that natural disasters, such as the strong typhoon that struck Japan in October, may erode asset and collateral value, and the associated risk may pose a significant challenge for financial institutions, Kuroda said.

In short, it’s time for central banks to target global warming climate change:

“Climate-related risk differs from other risks in that its relatively long-term impact means that the effects will last longer than other financial risks, and the impact is far less predictable,” he said. “It is therefore necessary to thoroughly investigate and analyse the impact of climate-related risk.”

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

ECB Official: Can Use Portfolio To Combat Climate Change

ECB Official: Can Use Portfolio To Combat Climate Change  

Central banks have been making all kinds of ridiculous climate change statements in the last several quarters. Some monetary authorities have even said, they could also expand balance sheets to purchase climate-related financial investments. 

Sabine Lautenschläger, Member of the Executive Board and Governing Council of the European Central Bank (ECB), was quoted by Bloomberg on Wednesday in Düsseldorf, Germany, as saying the ECB is prepared to use its balance sheet to support the fight against climate change. 

Bloomberg quoted Lautenschläge as saying: 

• Sustainability criteria are already taken into account in our portfolios that are not held for monetary policy purposes: Lautenschlaeger

• The ECB needs to address all citizens, not just an expert audience – without ever becoming political

We’ve suggested in the past, that this is just a giant ruse to sneak through MMT and helicopter money under the virtue-signaling guise of fighting climate change. 

Central banks, who’ve spent a decade expanding balance sheets, have plowed trillions of dollars into financial assets across the world.

The flawed policy lifted financial asset prices but only benefited a few who held stock, bonds, real estate, etc… Everyone else, which is a majority of the global population are considered non-asset holders, didn’t participate in the decades-long orgy of cheap money, thus created a massive wealth gap that can no longer be ignored. 

As a result of the wealth gap, protectionism and nationalism are sweeping across the world. 

Political uncertainty across the world is at the highest levels ever. 

Millions of people are currently protesting from Asia, the Middle East, and South America, calling for change after a decade of flawed monetary policy by global central banks. 

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

Olduvai IV: Courage
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Olduvai II: Exodus
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