China Proposes To Cut Two Thirds Of Its $3 Trillion In USD Holdings

Submitted by Tyler Durden on 04/24/2011 11:05 -0400
All those who were hoping global stock markets would surge tomorrow based on a ridiculous rumor that China would revalue the CNY by 10% will have to wait. Instead, China has decided to serve the world another surprise. Following last week's announcement by PBoC Governor Zhou (Where's Waldo) Xiaochuan that the country's excessive stockpile of USD reserves has to be urgently diversified, today we get a sense of just how big the upcoming Chinese defection from the "buy US debt" Nash equilibrium will be. Not surprisingly, China appears to be getting ready to cut its USD reserves by roughly the amount of dollars that was recently printed by the Fed, or $2 trilion or so. And to think that this comes just as news that the Japanese pension fund will soon be dumping who knows what. So, once again, how about that "end of QE" again?

Axel Merk: Why Is Anyone Still Waiting to Sell the Dollar?

Submitted by Tyler Durden on 04/23/2011 12:11 -0400

In this podcast, Axel explains:

• Why Ben Bernanke is hell-bent on debasing the US dollar to spur economic growth
• How the politics of the Fed work, where the power lies and which arguments and actions are likely to carry the day
• Why inflation expectations actually matter more than actualy inflation, and why the Fed will not rest until it is satisfied the market expectations for inflation are higher
• That the US is on its way to a fiscal trainwreck - a reality our political leadership continues to lack to backbone to address honestly
• The Fed's powers are prodigious, but not as great as the market. If and when the market moves against policymakers, nothing will stop it. The growing risk is we quickly tip into the inflation the Fed wants, which then quickly leads to runaway prices
• His outlook for gold and why he thinks this "ultimate currency" can go much higher from current levels
• How the US is caught in a Catch-22: our loose monetary policy continues to encourages credit consumption that makes us increasingly vulnerable; but we're so indebted already that if the Fed tightens rates, the economy could easily fall into a full-blown depression

Things That Make You Go Hmmm.... The Ben Bernanke Flying Circus

Submitted by Tyler Durden on 04/24/2011 12:43 -0400

Today, the world has replaced Messrs.. Cleese, Chapman, Palin, Gilliam, Idle and Jones with a new ‘Flying Circus’. Their names are, for the most part, equally well-known and, sadly, becoming ever-more identified with high comedy as they try to convince the world that the dollar is, actually, in rude health. Ladies and gentlemen, I give you ‘Ben Bernanke’s Flying Circus’ - starring Ben Bernanke, Timothy Geithner, Janet Yellen, Bill Dudley, Charles Plosser, Richard Fisher & featuring Barack Obama. 

Hawaii Average Premium Gas Hits $4.708, As Nationwide Pump Prices Jump By 30 Cents In A Month

Submitted by Tyler Durden on 04/24/2011 06:34 -0400

Now that the Obama approval rating has hit a plateau where it correlates only with the inverse average price of gas instead of the Russell 2000, the AAA brings some more ominous news for the man who last week launched a crusade to wipe out all oil speculators (and witches) from the face of the earth. While last week the average price at the pump was $3.81, it has since surged once again to hit a new multi year nominal high of $3.86, getting dangerously close to the all time high record price of $4.114 recorded on July 17, 2008. Incidentally premium is already above that mark,currently averaging $4.128. The number is also a nearly 10% increase from a month ago when the average price was $3.561. Seven states reported an average gas price above $4 with Hawaii once again leading the pack at a $5 rounding up $4.534. And of course, instead of focusing on the real cause of surging commodity prices, the administration's response: the creation of a "working group" to battle manipulation. 

BOJ's Shirakawa Lowers Japanese Growth Outlook, Prepares For More QE, Blames "Mrs Watanabe" For Yen Surge

Submitted by Tyler Durden on 04/23/2011 18:11 -0400

It is one thing for sellside research, caught in its traditional lemming frenzy, to cut national GDP outlook. In the case of Japan the resistance to reality provide futile early on and based on the average of 43 economists' forecasts, economic growth is now expected to post a 0.22% GDP decline in Q1 and a whopping 2.83% in the April-June period. As had been predicted this is not surprising. What is surprising, is that the head of the BOJ, Shirakawa-san himself has now indicated that Japanese growth is stalling. Per the WSJ: ""We are now expecting production and GDP will decline in the first quarter and the second quarter," Mr. Shirakawa said in an interview on Friday. It is rare for the central bank governor to make such forecasts and is the first time that Mr. Shirakawa officially admitted the likelihood that the economy may shrink in the first two quarters of the year, in line with many private-sector economists' predictions." So for those wondering who will take the temporary lead in money printing in the brief period between QE2 and QE3, look no more: "given high uncertainties surrounding the Japanese economy, many analysts expect Japan's central bank to be eventually forced to take additional easing steps." And just how much money printing are we talking here? "The central bank currently buys ¥1.8 trillion of long-term JGBs every month from financial firms as part of its regular market operations. The bank's hands are tied by the so-called banknote rule, which limits long-term JGB buying to the amount of banknotes in circulation. But the central bank still has capacity to purchase around ¥20 trillion of long-term bonds, according to the central bank's latest account data." In other words, lots.

The Cost Of Attorney General Silence: How Bank Of America Made Sure There Would Be No Surprises In The Robosigning Settlement

Submitted by Tyler Durden on 04/23/2011 16:50 -0400

For those needing yet another reminder of how in America the incestuous conflicts of interest between the various branches of government and Wall Street run to the very top, here is Time with an article highlighting yet another example of impropriety. Today's case focuses on Iowa’s Democratic Attorney General Tom Miller, who at least superficially took the noble lead on the investigation by all 50 state attorneys general into the “robo-signing” foreclosure scandal. Alas, one look below the surface reveals that we may be days away from a very ignoble and very BAC-friendly settlement, courtesy of a few backroom "arrangements" brought to you by none other than Bank of America's petty cash account. 

Will Adverse Regulatory Changes Cause Further Deterioration In Shadow Banking And Force The Fed's QE Hand Again?

Submitted by Tyler Durden on 04/23/2011 15:19 -0400

Confused by the recent dramatic moves in General Collateral repo rates? Carry trade killing FDIC assessments got you down (and copycatting other blogs)? Still anguished by relentless end of quarter window dressing even as primary dealers reduce leverage to post crisis lows? Surprised by the ongoing deterioration in near term shadow banking despite the so-called improvement? Stunned by how the Fed has seemingly lost control of the near end even as the announcement of implicit tightening could be a few shorts days away? Then the following presentation from Barclay's Joseph Abate on the regulatory changes in money markets, and their broad consequences for funding markets is a must read for anyone concerned by the very peculiar recent goings on in shadow banking.