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Gustave Courbet **The village maidens** 1852

I intentionally start writing this mere minutes away from Fed chair Jay Powell’s latest comments. Intentionally, because the importance ascribed to those comments only means we have gotten so far removed from what capitalism and free markets are supposed to be about, that it’s pathetic. The comments mean something for rich socialists, but nothing for the man in the street. Or, rather, they mean that the man in the street will get screwed worse for longer.

And it’s not just the Fed, all central banks have it and do it. They play around with rates and definitions and semantics until the cows can never come home again. And they have such levels of control over their respective societies and economies that the mere use of the word “markets” should result in loud and unending ridicule. There are no markets, because there is no price discovery, the Fed and ECB and BOJ got it all covered. Any downside risks, that is.

But it doesn’t, because the people who pretend they’re in those markets hang on central banks’ every word for their meal tickets. These are the same people we once knew as traders and investors, but who today function only as rich socialists sucking the Fed’s teats for ever more mother’s milk.

Our economic systems have been destroyed by our central bankers. Who pretend they’re saving them. And we all eat it up hook line and sinker. Because the rich bankers and their media have no reasons to counter Fed or ECB actions and word plays, and because anyone who’s not a rich banker or investor is kept by the media from understanding those reasons.

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

Every Bubble Is In Search Of A Pin

December 8, 2018

Every Bubble Is In Search Of A Pin

The ‘Everything Bubble’ has popped

Now that the world’s central banking cartel is taking a long-overdue pause from printing money and handing it to the wealthy elite, the collection of asset price bubbles nested within the Everything Bubble are starting to burst.

The cartel (especially the ECB and the Fed) is hoping it can gently deflate these bubbles it created, but that’s a fantasy. Bubbles always burst badly; it’s their nature to do so. Economic suffering and misery always accompany their termination.

It’s said that “every bubble is in search of a pin”. History certainly shows they always manage to find one.

History also shows that after the puncturing, pundits obsess over what precise pin triggered it, as if that matters. It doesn’t, because ’cause’ of a bubble’s bursting can be anything. It can be a wayward comment by a finance minister, otherwise innocuous at any other time, that spooks a critical European bond market at exactly the right (wrong?) moment, triggering a runaway cascade.

Or it might be the routine bankruptcy of a small company that unexpectedly exposes an under-hedged counterparty, thereby setting off a chain reaction across the corporate bond market before the contagion quickly spreads into other key elements of the financial system.

Or perhaps it will be the US Justice Department arresting a Chinese technology executive on murky, over-reaching charges to bully an ally into accepting that unilateral US sanctions are to be abided by everyone, regardless of sovereignty.

How was it that the famous Tulip Bulb bubble came to a crashing end back in the 1600’s? No one knows the exact moment or trigger. But we can easily imagine that in some Dutch pub on the fateful night on the Feb 3^rd1637, a bidder on the most-coveted of all bulbs, the Semper Augustus, had an upset stomach and briefly grimaced when hit by a ripping gas pain:

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

Ben Bernanke’s Waffle House

September 16, 2018

Ben Bernanke’s Waffle House

Salvador Dali Spain 1936-38

Yes, it is hard to believe, but still happening: 10 years after Lehman the very same people who either directly caused the financial crisis of 2008 or made things much much worse in its aftermath, are not only ALL walking around freely and enjoying even better paid jobs than 10 years ago, they are even asked by the media to share their wisdom, comment on what they did to prevent much much worse, and advise present day politicians and bankers on what THEY should do.

You know, what with all the wisdom, knowledge and experience they built up. because that’s the first thing you’ll hear them all spout: Oh YES!, they learned so many lessons after that terrible debacle, and now they’re much better prepared for the next crisis, if it ever might come, which it probably will, but not because of but despite what their wise ass class did back in the day.

Which never fails to bring back up the question about Ben Bernanke, who said right after Lehman that the Fed was entering ‘uncharted territory’ but ever after acted as if the territory had started looking mighty familiar to him, which is the only possible explanation for why he had no qualms about throwing trillion after trillion of someone else’s many at the banks he oversaw.

Somewhere along the line he must have figured it out, right, or he wouldn’t have done that?! He couldn’t still have been grasping in the pitch black dark the way he admitted doing when he made the ‘uncharted territory’ comment?! Thing is, he never returned to that comment, and was never asked about it, and neither were Draghi, Kuroda or Yellen. Did they figure out something they never told us about, or were and are they simple blind mice?

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

What Comes Next——Krugman’s Fiscal Equivalent Of War

May 2, 2016

What Comes Next——Krugman’s Fiscal Equivalent Of War

Somebody must have reinstated Paul Krugman’s passport. He was recently back in Japan to meet with the world’s leading economy-wrecking triumvirate —-Prime Minister Abe, BOJ Governor Kuroda and Finance Minister Taro Aso—–to dispense some desperately needed advice.

Japan is on the verge of a second recession during Abe’s tenure despite his plunge into full frontal Keynesian stimulus. But since March 2013 when Kuroda cranked up the BOJ’s printing press to white heat, two main things have happened. The BOJ’s already bloated balance sheet has exploded by 2X and the flat-lining Japanese economy has continued undulating to nowhere.

Japan Central Bank Balance Sheet

Japan GDP Constant Prices

Professor Krugman was naturally at the ready with a solution. He recommended his hosts take a lesson from the America’s World War II playbook and declare “the fiscal equivalent of war”.

Well, the US actually didn’t borrow its way out of the Great Depression; it saved its way out. As I documented in The Great Deformation, total public and private debt at the end of 1938 amounted to 210% of GDP, but by the end of 1945 it had dropped to 190% of GDP.

That’s right. The hoary Keynesian mantra about the fiscal stick save of WWII is a complete myth.

What happened is that the US economy was entirely regimented for war mobilization.There were few consumer goods on the shelves and business had no need to borrow for working capital or equipment because financing was supplied by Uncle Sam. So private sector savings soared to nearly 20% of GDP and combined household and business debt dropped from 150% of GDP on the eve of war to 60% by the end.

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

“We Aren’t Thinking About It At All”, Or How Kuroda Just Assured That Helicopter Money Is Coming To Japan

April 21, 2016

“We Aren’t Thinking About It At All”, Or How Kuroda Just Assured That Helicopter Money Is Coming To Japan

On Friday, courtesy of a Deutsche Bank report laughably titled Helicopter Money 101, we showed how to trade the coming helicopter money paradrop that will be provided by central banks in the very near future. When asking the question of who would be the first to try it, one of the first central banks that comes to mind (both Deutsche’s and ours) would be the Bank of Japan. To date, the BoJ has tried everything in order to increase inflation (or simply to generate any, for that matter), and boost their economy. Everything that is, except for helicopter money (giving money directly to the government or citizens and bypassing all current institutions acting as middle men).

Yesterday according to Bloomberg, BoJ governor Haruhiko Kuroda said that he isn’t thinking about using so-called helicopter money, and that the notion contradicts the law.

“In advanced nations nowadays, fiscal policy is determined by the government and the parliament while monetary policy is decided by the central bank, which is separate from government and parliament,” Kuroda told lawmakers in the Japanese Diet. “Deciding and implementing these things together would contradict the current legal framework. So unless the existing legal framework changes, helicopter money isn’t possible, and we at the Bank of Japan aren’t thinking about it at all.“

If you read the end of that carefully, you’ll want to revisit our article on how to trade the coming helicopter money (here). First, we’ll start with the fact that Deutsche Bank already has an answer on how to work around the “current legal framework”, and it’s called simply getting the legislature’s approval.

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

Gold: Still Misunderstood

April 10, 2016

Gold: Still Misunderstood

Myths That Just Won’t Die

Gold just had its best quarter in 30 years. Not surprisingly, gold bears are coming out of the woodwork en masse in the mainstream media and the analyst community (see e.g. this recent write-up by Mish on the Goldman Sachs analyst who has been screaming “short gold” since right before it started rocketing higher in early February). Below we will discuss a specific assertion that tends to be repeated over and over again.

Gold had a very strong quarter, but skepticism over the durability of the advance remains quite pronounced – click to enlarge.

If there is anything in this world that definitely has more lives than a cat, it is bad economics. Just think about it: Here we are, nearly 300 years after John Law drove France and most of continental Europe into utter ruin, and our central bankers are still doing the exact same things Law did. The only difference between John Law and the trifecta of Draghi, Kuroda and Yellen is really the modern-day level of obfuscation and the fact that there is far more wealth that can be destroyed, so it is taking a lot longer.

In terms of economic principles and the goals allegedly achievable by their policies, the difference between Law and today’s central bankers is precisely zero. It is astonishing that after 300 years of supposed scientific progress, atrociously bad economics has shown such persistence in surviving. We were reminded of this agan when reading a recent comment on gold in the Wall Street Journal. No matter how often and how convincingly they are refuted, unsound economic ideas keep being resurrected with unwavering regularity, as if they were a horde of zombies.

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

Kuroda’s NIRP Backlash – Japanese Interbank Lending Crashes

February 28, 2016

Kuroda’s NIRP Backlash – Japanese Interbank Lending Crashes

Not only has the Yen strengthened and stocks collapsed since BoJ’s Kuroda descended into NIRP lunacy but, in a dramatic shift that threatens the entire transmission mechanism of negative-rate stimulus, Japanese banks (whether fearing counterparty risk or already over-burdened) have almost entirely stopped lending to one another. Confusion reigns everywhere in Japanese markets with short-term interest-rate swap spreads surging and bond market volatility spiking to 3 year highs (dragging gold with it).

As Bloomberg reports,

The outstanding balance of the interbank activity plunged 79 percent to a record low of 4.51 trillion yen ($40 billion) on Feb. 25 since Bank of Japan Governor Haruhiko Kuroda on Jan. 29 announced plans to charge interest on some lenders’ reserves at the monetary authority.

While Kuroda wants to lower the starting point of the yield curve to reduce borrowing costs and spur shift of funds into riskier assets, the interbank rate has fallen only about as far as minus 0.01 percent, above the minus 0.1 percent charged on some BOJ reserves. The swings on bond yields will make it harder for financial institutions to determine how much business risks they can take, weighing on lending in a weak economy even as they are penalized for keeping some of their money at the central bank.

It will take at least another month until the market finds a level where many dealings are settled, as financial institutions face uncertainty over how the new policy affects monthly fund flows, said Izuru Kato, the president of Totan Research Co. in Tokyo.

“Since past patterns don’t apply under the entirely new structure, financial institutions will take a conservative approach until the financing picture is nailed down,” Kato said. “If the funding estimate proves wrong, banks might lose by prematurely lending in negative rates. People are cautious and staying on the sidelines.”

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

Are Asian Central Bankers Even Crazier Than Our Own?

February 22, 2016

Are Asian Central Bankers Even Crazier Than Our Own?

That the world’s central bankers get a lot of things wrong, deliberately or not, and have done so for years now, is nothing new. But that they do things that result in the exact opposite of what they ostensibly aim for, and predictably so, perhaps is. And it’s something that seems to be catching on, especially in Asia.

Now, let’s be clear on one thing first: central bankers have taken on roles and hubris and ‘importance’, that they should never have been allowed to get their fat little greedy fingers on. Central bankers in their 2016 disguise have no place in a functioning economy, let alone society, playing around with trillions of dollars in taxpayer money which they throw around to allegedly save an economy.

They engage solely, since 2008 at the latest, in practices for which there are no historical precedents and for which no empirical research has been done. They literally make it up as they go along. And one might be forgiven for thinking that our societies deserve something better than what amounts to no more than basic crap-shooting by a bunch of economy bookworms. Couldn’t we at least have gotten professional gamblers?

Central bankers who moreover, as I have repeatedly quoted my friend Steve Keen as saying, even have little to no understanding at all of the field they’ve been studying all their adult lives.

They don’t understand their field, plus they have no idea what consequences their next little inventions will have, but they get to execute them anyway and put gargantuan amounts of someone else’s money at risk, money which should really be used to keep economies at least as stable as possible.

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

Is This Debt’s Last Rattle?

February 13, 2016

Is This Debt’s Last Rattle?

Crowd outside Wall Street Stock Exchange on BlackThursday Oct 24 1929

What we see happening today is why we called our news overview the “Debt Rattle” 8 years ago. The last gasps of a broken system ravished by the very much cancer-like progress of debt. Yes, it took longer than it should have, and than we thought. But that’s pretty much irrelevant, unless you were trying to get rich off of the downfall of your own world. Always a noble goal.

There’s one reason for the delay only: central bank hubris. And now the entire shebang is falling to bits. That this would proceed in chaotic ways was always a given. People don’t know where to look first or last, neither central bankers nor investors nor anyone else.

It’s starting to feel like we have functioning markets again. Starting. Central bankers still seek to meddle where and when they can, but their role is largely done. It’s hard to pinpoint what exactly started it, but certainly after Kuroda’s negative rate ‘surprise’ fell as flat on its face as it did, and then fell straight through the floor and subsequently shot up through the midnight skies, a whole lot more ‘omnipotence credibility’ has disappeared.

Kuroda achieved the very opposite of what he wanted, the yen soared up instead of down -big!-, and that will reflect on Yellen, Draghi et al, because they all use the same playbook. And the latter so far still got a little bit of what they were shooting for, not the opposite. Still, one could also make a good case that it was Yellen’s rate hike that was the culprit. Or even Draghi’s ‘whatever it takes’. It doesn’t matter much anymore.

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

Kuroda Suggests “No Limit” To More NIRP Measures To Stall Japanese Bond Yields, Stocks, USDJPY Plunge

February 2, 2016

Kuroda Suggests “No Limit” To More NIRP Measures To Stall Japanese Bond Yields, Stocks, USDJPY Plunge

With Nikkei 225 down 800 points from post-NIRP highs and USDJPY having almost roundtripped, there is little wonder that Japanese government bond yields are collapsing to imply considerably deeper NIRP to come. With 10Y JGBs on the verge of a negative yield, 2Y yields are now at -17bps (well below Kuroda’s -10bps level). Japanese bank stocks are a bloodbath with Nomura leading the way lower.

We’re gonna need more NIRP…

*JAPAN’S TOPIX INDEX FALLS 3.3% TO 1,404.75 AT MORNING CLOSE
*JAPAN’S NIKKEI 225 FALLS 3.1% TO 17,194.17 AT MORNING CLOSE

And that is what bonds are implying…

*JAPAN’S 2-YEAR YIELD FALLS TO RECORD MINUS 0.17%
*JAPAN’S 10-YEAR BOND YIELD FALLS TO RECORD 0.045%

With the entire curve to 8Y below BoJ’s -10bps level…

And Japanese bank stocks are plunging…

Led by Nomura’s 11%-plus plunge – the most since 2011…

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

It’s Official: The BoJ Has Broken The Japanese Stock Market

May 14, 2015

It’s Official: The BoJ Has Broken The Japanese Stock Market

As those who follow such things are no doubt aware, The Bank of Japan often says some very funny things about inflation expectations and monetary policy. Essentially, the bank is forced to constantly defend its QE program because as it turns out, monetizing the entirety of gross JGB issuance and amassing an equity portfolio worth just shy of $100 billion on the way to cornering the ETF market comes across as insanely irresponsible even in a world that is now defined by insanely irresponsible central banks.

Perhaps the best example of the BoJ’s absurd rhetoric came in late March when Governor Haruhiko Kuroda said the following about the bank’s 10 trillion yen equity portfolio:

KURODA: BOJ’S ETF PURCHASES AREN’T LARGE

As we noted at the time, either we don’t know what large means, or Kuroda is simply making things up as he goes along. Meanwhile, the BoJ continues to provide Nikkei plunge protection on an almost daily basis. Here’s what we said in March:

The world has now officially given up any pretensions that Japan’s elephantine QE program isn’t underwriting the rally in Japanese stocks. Not only is the Bank of Japan buying ETFs, they’re targeting their purchases to (literally) ensure that stocks can’t fall by stepping in when things look weak at the open. Unfortunately, Kuroda looks set to run up against the extremely inconvenient fact that while, in his lunacy, he can print a theoretically unlimited amount of money, the universe of purchasable ETFs is limited and so eventually, the BoJ will own the entire market.

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

Why The Dollar Is Rising As The Global Monetary Bubble Craters

March 15, 2015

Why The Dollar Is Rising As The Global Monetary Bubble Craters

Contra Corner is not about investment advice, but its unstinting critique of the current malignant monetary regime does not merely imply that the Wall Street casino is a dangerous place for your money. No, it screams get out of harms’ way. Now!

Yet I am constantly braced with questions about the US dollar and its impending demise. The reasoning seems to be that if America is a debt addicted dystopia—-and it surely is—- won’t the US dollar sooner or later go down in flames as the day of reckoning materializes? Won’t you make money shorting the doomed dollar?

Heavens no! At least not any time soon. The reason is simply that the other three big economies of the world—Japan, China and Europe—are in even more disastrous condition. Worse still, their governments and central banks are actually more clueless than Washington, and are conducting policies that are flat out lunatic—–meaning that their faltering economies will be facing even more destructive punishment from policy makers in the days ahead.

Indeed, Draghi, Kuroda and the commissars of red capitalism in Beijing make Janet Yellen and Stanley Fischer (Fed Vice-Chairman) appear to be slightly sober. So as trite as it sounds, the US dollar is the cleanest dirty shirt in the laundry. And on a relative basis, its is going to look even cleaner as two decades of monetary madness around the world finally hit the shoals.

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

Central Banks Are Crack Dealers and Faith Healers

March 10, 2015

Central Banks Are Crack Dealers and Faith Healers

The entire formerly rich world is addicted to debt, and it is not capable of shaking that addiction. Not until the whole facade that was built to hide this addiction must and will come crashing down along with the corpus itself.

Central banks are a huge part of keeping the disease going, instead of helping the patient quit and regain health, which arguably should be their function. In other words, central banks are not doctors, they’re crack dealers and faith healers. Why anyone would ever agree to that role for some of the world’s economically most powerful entities is a question that surely deserves and demands an answer. But no such answer is forthcoming.

Instead, we all pretend Yellen, Kuroda and Draghi are in fact curing us of our ailments. Presumably because that feels better. That our health deteriorates in the process is simply ignored and denied. But then, that’s what you get when you allow for a bunch of shaky goalseeked economic rules to be taken as some sort of gospel. People one thought leeches healed too, or bloodletting, exorcism, burning at the stake, you name it. Same difference, just a few hundred years later.

What’s happening today is that central bankers start to find that their goalseeked ideas are no longer working. What might work for one may backfire for another. That this might be the direct result of their own mindless policies will never even cross their minds. And so they will continue making things worse, until that facade they operate on cannot hold any longer.

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

Bank Of Japan Warns Abe Over “Fiscal Responsibility” While Monetizing All Its Debt | Zero Hedge

November 19, 2014

Bank Of Japan Warns Abe Over “Fiscal Responsibility” While Monetizing All Its Debt | Zero Hedge.

If one were to look up the definition of hypocrisy, the image of BoJ head Kuroda should be front-and-center. Having tripled-down on his money-printing and ETF-buying largesse just last week, he came out swinging last night at the government’s fiscal irresponsibility blasting Abe’s policies by saying Japan’s fiscal health “is the responsibility of parliament and the government, not an issue for the central bank to be held responsible for.” Aside from the fact that he is directly monetizing all JGB issuance – thus enabling Abe’s arrogant fiscal stimulus plan (by issuing 30Y and 40Y debt),Bloomberg notes that “Kuroda is making it crystal clear the government has to tackle the debt problem and if fiscal trust is lost that’s not going to be on the BOJ.” The world has truly gone mad.

Seemingly paying the same lip-service as Bernanke and Yellen in the US and Draghi in Europe, BoJ’s Haruhiko Kuroda is carefully positioning the blame for lack of growth and economic chaos on the government’s lack of growth-oriented policies… and not the central bank’s enabling experiments…(via Bloomberg)

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

Japan’s Last Stand – Portent Of Keynesian Collapse | Zero Hedge

November 18, 2014

Japan’s Last Stand – Portent Of Keynesian Collapse | Zero Hedge.

Abenomics ‘hope’ and ‘reality’ explained by Diapason Commodities’ Sean Corrigan – do you believe in miracles? After last night’s Japanese GDP print, hope is all that is left (dripping with sarcasm)

So, if the BOJ can just move prices up for long enough, people will start to demand higher wages while companies will gladly accede, since they will be able to count on the Bank printing enough new money for them to meet the extra expense. As such higher wages are spent, this will mean that both the employers’ sales and, miraculously, their profits will increase to the extent that they will soon be jostling to hire more of these nominally costlier workers.

Somehow or other, in one of those Deep Purple, ‘I want everything louder than everything else’ moments, wages will outstrip prices (so avoiding a disastrous fall in real incomes) yet payrolls will rise alongside wages since profits will outpace the gain in the outlay on labour.

Moreover – and here we get to the crux of the issue – though all this new cash is being generated by monetizing vast, ongoing government deficits, the debt stock will rise more slowly than prices, so postponing, if not indeed averting, the nation’s long feared budgetary implosion as it is painlessly inflated away.

Oh – and there will be no first-user Cantillon inequities, no unintended consequences, no spill over to other countries, no undue enrichment or undeserved immiseration of any member of the domestic populace along the way.

Truly Kuroda-san is a mage of the highest order!

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

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