2015: How A Pork Bellies Trader And Milton Friedman Created “The Greatest Trading Casino In World History”

“I held in my hand the Holy Grail for the Chicago Mercantile Exchange. The most influential economic mind of the twentieth century provided the CME with the intellectual foundation upon which to build its financial superstructure.” Nixon’s estimable free-market advisors who gathered at the Camp David weekend were to an astonishing degree clueless as to the consequences of their recommendation to close the gold window and float the dollar. In their wildest imaginations, they did not foresee that this would unhinge the monetary and financial nervous system of capitalism. They had no premonition at all that it would pave the way for a forty-year storm of financialization and a debt-besotted symbiosis between central bankers possessed by delusions of grandeur and private gamblers intoxicated with visions of delirious wealth. In fact, when Nixon announced on August 15, 1971, that the dollar was no longer convertible to gold at $35 per […] Read More

Signs Of Financial Turmoil Are Brewing In Europe, China And The United States

Submitted by Michael Snyder via The Economic Collapse blog, As we move toward the second half of 2015, signs of financial turmoil are appearing all over the globe.  In Greece, a full blown bank run is happening right now.  Approximately 2 billion euros were pulled out of Greek banks in just the past three days, Barclays says that capital controls are “imminent” unless a debt deal is struck, and there are reports that preparations are being made for a “bank holiday” in Greece.  Meanwhile, Chinese stocks are absolutely crashing.  The Shanghai Composite Index was down more than 13 percent this week alone.  That was the largest one week decline since the collapse of Lehman Brothers.  In the U.S., stocks aren’t crashing yet, but we just witnessed one of the largest one week outflows of capital from the bond markets that we have ever witnessed.  Slowly but surely, we are […] Read More

2015: If Quantitative Easing Works, Why Has It Failed to Kick-Start Inflation?

Illustration by William Banzai QE Has Failed to Spark Inflation Quantitative easing (QE) was supposed to stimulate the economy and pull us out of deflation. But the third round of quantitative easing (“QE3″) in the U.S. failed to raise inflation expectations. And QE hasn’t worked in Japan, either. The Wall Street Journal noted in 2010: Nearly a decade after Japan’s central bank first experimented with the policy, the country remains mired in deflation, a general decline in wages and prices that has crippled its economy. The BOJ began doing quantitative easing in 2001. It had become clear that pushing interest rates down near zero for an extended period had failed to get the economy moving. After five years of gradually expanding its bond purchases, the bank dropped the effort in 2006. At first, it appeared the program had succeeded in stabilizing the economy and halting the slide in prices. […] Read More

2014: “The Fed Is Heading For Another Catastrophe… Central Banking Has Lost Its Way” Stephen Roach Warns

Authored by Stephen Roach, originally posted At MarketWatch via Project Syndicate, America’s Federal Reserve is headed down a familiar — and highly dangerous — path. Steeped in denial of its past mistakes, the Fed is pursuing the same incremental approach that helped set the stage for the financial crisis of 2008-2009. The consequences could be similarly catastrophic. Consider the December meeting of the Federal Open Market Committee, where discussions of raising the benchmark federal funds rate were couched in adjectives, rather than explicit actions. In line with prior forward guidance that the policy rate would be kept near zero for a “considerable” amount of time after the Fed stopped purchasing long-term assets in October, the FOMC declared that it can now afford to be “patient” in waiting for the right conditions to raise the rate. Add to that Fed Chair Janet Yellen’s declaration that at least a couple more […] Read More

The End Of Exuberance?

Submitted by Sean Corrigan via True Sinews blog, Back in the halcyon days of summer, it seemed nothing could go wrong. Commodities were still things it was not utterly disreputable to own. Base metals had shaken off a springtime swoon to hit 18 month highs. Though still suffering from that enervating, post-bubble flatness, precious metals had just enjoyed a neat little 10% rally. Energy was threatening to print new 2 ½ year highs as WTI sold for more than $107 at the front and $86 at the back of the curve. Nor were people much interested in paying for downside protection: across the complex, options premia were as low as ever they had been in recent years. Volatility – and risk measures in general – were drifting ever southwards, everywhere you looked. The US equity market’s VXO index was being quoted in single figures, the lowest in its 29-year […] Read More

2014: Calling The Fed’s Bluff

Via ConvergEx’s Nick Colas, If U.S. stocks have stabilized – granted, a big “If” – you can thank the fact that markets don’t believe the Federal Reserve’s outlook on interest rates.  According to the latest CME Group’s contract pricing, Fed Funds rates will end 2015 at 43 basis points. That essentially signals a less-than-100% chance of being at 50 bp in 14 months; the Fed’s own estimates are for Fed Funds to reach 127 basis points by that time. Only three of 17 Fed officials who submit estimates for inclusion in the now-famous “Dot Plot” are lower than the market’s own estimate of future monetary policy.  Looking at 2016, the disparity between market expectations and Fed estimates is even broader.  Policy makers at the Fed believe rates should be at 2.17%; the Fed Funds futures contract sits at 1.27%. In the everlasting debate about whether markets want good or […] Read More

The Fed Has A Big Surprise Waiting For You

Submitted by Raul Ilargi Meijer via The Automatic Earth blog, Risdon Tillery Greenwich House day care, New York May 1944 The topic of potential interest rate hikes by central banks is no longer ever far from any serious mind interested in finance. Still, the consensus remains that it will take a while longer, it will take place in a very gradual fashion, and it will all be telegraphed through forward guidance to anyone who feels they have a need or a right to know. Sounds like complacency, doesn’t it? Now, it seems obvious that the Bank of Japan and the ECB are not about to hike rates tomorrow morning. In Europe, dozens of national politicians wouldn’t accept it, and in Japan, it would mean an early end to many things including Shinzo Abe. But the Bank of England and the Fed are another story. Though if the Yes side […] Read More

Icahn, Soros, Druckenmiller, And Now Zell: The Billionaires Are All Quietly Preparing For The Plunge

“The stock market is at an all-time, but economic activity is not at an all-time,” explains billionaire investor Sam Zell to CNBC this morning, adding that, “every company that’s missed has missed on the revenue side, which is a reflection that there’s a demand issue; and when you got a demand issue it’s hard to imagine the stock market at an all-time high.” Zell said he is being very cautious adding to stocks and cutting some positions because “I don’t remember any time in my career where there have been as many wildcards floating out there that have the potential to be very significant and alter people’s thinking.” Zell also discussed his view on Obama’s Fed encouraging disparity and on tax inversions, but concludes, rather ominously, “this is the first time I ever remember where having cash isn’t such a terrible thing.” Zell’s calls should not be shocking following […] Read More

Why One Big Bank Is “Worried That The Market Is Stretched And Could Correct Rapidly”

Aside from a relentless barrage of deteriorating geopolitical updates almost on a daily basis, which have led even the “very serious thinkers” to pull up comparisons to the days just before World War I, it has been smooth sailing for global capital “markets” which merely continue to follow the path of least central bank balance sheet resistance. It is this relentless melt up which has seen what was once a market and is has for the past 5 years become a policy vehicle to boost confidence (for whom, it is unclear: the vast majority of the population no longer cares what rigged stocks do, as for the trickle down wealth effect, 5 years of deteriorating real incomes for the middle class have promptly put an end to that fable) alongside a slow-motion LBO of the entire S&P 500, as companies repurchase trillions of their shares using ultra-cheap credit, bask […] Read More