A Flashing Warning On The "Unintended Consequences" Of Ultra Easy Monetary Policy From... The Fed?!

The case for ultra easy monetary policies has been well enough made to convince the central banks of most Advanced Economies to follow such polices. They have succeeded thus far in avoiding a collapse of both the global economy and the financial system that supports it. Nevertheless, it is argued in this stunningly accurate paper via none other than the Dallas Fed (and BIS economist William White), that the capacity of such policies to stimulate “strong, sustainable and balanced growth” in the global economy is limited. Moreover, ultra easy monetary policies have a wide variety of undesirable medium term effects - the unintended consequences. They create malinvestments in the real economy, threaten the health of financial institutions and the functioning of financial markets, constrain the “independent“ pursuit of price stability by central banks, encourage governments to refrain from confronting sovereign debt problems in a timely way, and redistribute income and wealth in a highly regressive fashion. While each medium term effect on its own might be questioned, considered all together they support strongly the proposition that aggressive monetary easing in economic downturns is not “a free lunch”. Absolute must read!

The Endless War: Saudi Arabia Goes On The Offensive Against Iran

Saudi Arabia has gone on the offensive against Iran to protect its interests.  Their involvement in Syria is the first battle in what is going to be a long bloody conflict that will know no frontiers or limits. Ongoing Disorders in the island kingdom of Bahrain since February of 2011 have set off alarm bells in Riyadh.  The Saudis are convinced that Iran is directing the protests and fear that the problems will spill over the twenty-five kilometer long COSWAY into  oil rich Al-Qatif, where The bulk of the two million Shia in the kingdom are concentrated. The territory is likely to adopt the more fundamentalist principals of the Salafists as it serves as a stepping stone to Iran Itself.  It promises to be a bloody protracted war that will recognize no frontier and will know no limits by all of the participants.

When Channel-Stuffing Comes Home? GM 'Idles' Volt Production (Again)

Color us unsurprised by this turn of events as Automotive News reports GM is set to idle the plant where it assembles the Chevy Volt for four weeks - starting next month. GM will close its Detroit-Hamtramck plant from Sept 17 to Oct 15 with its 1500 staff being made aware by union reps at the end of last week. The knock-on effect is relatively obvious as the illustrious government-owned auto manufacturer notified suppliers last week and while a GM spokesperson would not confirm the planned shutdown, we couldn't help but raise an eyebrow at the comment that "we continue to match supply and demand" as we note this is the second time this year that GM has throttled back on Volt production. The Detroit-Hamtramck plant was idled from March 19 until April 16 amid swollen Volt inventories.

Turkey's gold reserves rise 1/5 to 9.3 million oz/ Bundesbank President Widemann warns of debt monetization/ The Netherlands and Austria have had enough with Greece/ China's industrial profits plummet/

Harvey Organ at Harvey Organ's - The Daily Gold and Silver Report - 1 hour ago

Good evening Ladies and Gentlemen: Gold closed up today to the tune of $2.60 with the final comex closing coming in at $1672.40.  However the star of the day still belongs to silver closing up  43 cents finishing the session at $31.04.  However in the access market, the bankers are getting ready for a raid as they whacked our two precious metals: Access market closing prices:  gold....$1663.60

 

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Only Massive Easing Would Boost Activity

Admin at Marc Faber Blog - 2 hours ago

It would take massive easing, a huge balance sheet expansion to boost economic activity in the United States. -* in Advisor One * * *Related: SPDR S&P 500 Index ETF (SPY) *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.* 

 

 

Gold Is Talking

Eric De Groot at Eric De Groot - 4 hours ago

Gold is talking What do you see? Nothing? Go back to 1. Chart: Gold ETF (GLD) ------------------------------------- Insights is intended to reflect excellence in effort and content. Donations will help maintain this goal and defray the operational costs. Paypal, a leading provider of secure online money transfers, will handle the donations.Thank you for your contribution [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

 

 

Businesses Rein In Big-Ticket Spending

Eric De Groot at Eric De Groot - 6 hours ago

The optimists, beneficiaries of numerous "like this" clicks, make friends easily on the social networks while the pessimists do not. Yet in the end, only the realists with their ability to read the markets and ignore the headline BS survive long enough to profit in this business. There’s no hiding the reality that the purchase of big ticket items continues to deteriorate. July’s collapse... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

Why Paul McCulley Would Be Shorting The Economy With Both Hands Right Now

According to the plethora of long-only managers willing to trot out on the public stage and beg for more commissions, the US has been (and will remain) the cleanest-dirty-shirt in the global risk asset laundry basket; but as David Rosenberg of Gluskin Sheff points out not only has the S&P 500 hit a new record high in its total return index but it also possesses a rather 'ebullient' valuation premium (2012E P/E) of 13.8x relative to China 9.8x and Europe 11.4x. However, while this is more than enough to slow some investors from backing up the long-truck, Rosie goes on to highlight a very worrisome indicator - that favored by ex-PIMCO's Paul McCulley. The YoY trend in the three-month moving average of core capex orders (which was updated last Friday) has just cracked negative, crushing the hopes of US growth prospects and we assume equity superlatives. However, since the market no longer reflects anything; certainly not the economy, but merely who will ease more when and how, one really can't short much if anything, even if McCulley is 100% spot on.

Three Days Ahead Of Jackson Hole, EURUSD Expects The New QE To Be...

Just five weeks ago, EURUSD traded back to 'fair-value' with its comparable ECB and Fed balance sheets. Since 7/20, things have got a little hope-fueled and now the picture is quite different. Based on EURUSD at 1.25, this 'implies' a Fed/ECB ratio of around 1.05x - which in turn provides us with a nice round $400bn expectation for NEW QE in the short-term. Of course, if Draghi goes full retard then the Fed's 'counter' will have to be even higher, but we suspect (ever so subtley) that this afternoon's action (with high beta, QE-sensitive 'everything' selling off) hints at more than a few 'investors' getting cold feet.

Stocks Stumble Despite AAPL's Best Efforts

Not even the almighty power of AAPL could bring to bear a positive end to the day for the S&P 500 or the Dow. Most notably, the Dow Transports are now -2.3% from the highs last Tuesday and diverging aggressively lower. Volume was simply incredibly low today (with London close) in NYSE and S&P 500 e-minis where volume was its lowest of the year by a long-way. VIX soared today, up over 1.2vols to 16.4% with some major put-spread buying in SPY. The afternoon weakness in gold, silver, stocks broadly (and specifically Materials, Industrials, Discretionary, and Financials) tend to indicate a QE-off move but Treasuries (which rallied 2-4bps) were largely unmoved in the afternoon. The USD limped higher also (QE-off) all afternoon but ended the day practically unchanged with AUD weakness the standout. Oil was volatile as Isaac was downgraded, cracks were arb'd, and SPR-release rumors swung it around - though the economically-sensitive commodities all clustered together at the close around -0.5%.

What's Priced In?

There is a glaring divide between the G10 and Emerging Market economies in terms of what monetary easing is priced in - and what is not. Specifically, as Citi notes below, traders 'expect' the US, Europe, and Canada all to be tightening (raising rates) within 18 months, while expectations are for Australia (and the rest of the China-reliant nations across Asia) to see notable easing in that period - and already priced in. Brazil is the standout as far as 'inflation' fighting rate rises just as Eastern Europe is priced for the most 'easing' of rates. It seems clear that not every stimulating headline has the same value with this much EM easing priced in already - and hope priced into DMs.

"Struggle Of The Ant Tribe" - China's Broken Dreams

Those who think that China's centrally-planned transition to the world's leading, fastest growing economy in the shortest time in world history, coupled with its attempt to shift from a mercantilist, export-driven economy, to one sporting the world's largest middle class is progressing smoothly and according to plan, especially as related to millions of overeducated young adults who are finding it impossible to find a job in China's big cities, and find their diplomas uselss in the small ones, are urged to watch the following documentary exposing "China's Broken Dreams." From Al Jazeera: "[The Chinese] people are discovering that society's resources and opportunities are increasingly concentrated in the hands of a few. People in the middle and lower strata of society are becoming increasingly marginalised and are finding that improving their lives is getting harder. [This imbalance could lead to] the rich getting richer and the poor poorer, the strong permanently strong and the weak permanently weak .... The biggest harm may not be in the gap between rich and poor itself, but the deterioration of the overall societal ecosystem." Translation: class war unlike anything seen even in America, where class war is the basis for the entire presidential campaign. Because unlike the US, "class war" in China will have a far more true to its name outcome.

With 60 Minutes Left, NYSE Volume At New Record Low Run-Rate... Again

It has officially become boring to joke about jokes about the record low volume, but here goes.

Lies, Damned Lies, And Pianalto's QE/Deleveraging Lies

We tried to bite our tongue; we ignored some of the sheer hypocrisy of Cleveland Fed's Sandra' oh Sandy' Pianalto (that QE2 was a definitive success in 2010 but now LSAPs require more analysis of costs and benefits); but when she started down the road of praising the US consumer for deleveraging we had enough. In the immortal words of John Travolta: "Sandy, can't you see, we're in misery" as while she notes consumers cutting back on credit card debt (due to forced bankruptcies we note), Consumer debt has only been higher on one month in history! Soaring auto loans and student debt should just be ignored? There is no deleveraging - Total US Consumer debt is 0.23% from its all-time high in mid-2008, and will with all likelihood break the record at the next data point. Meanwhile her speech, so full of careful-not-to-over-commits can be summed up by the world-cloud that shows the six words most prominent: 'Monetary Policy', 'Financial Conditions', and most importantly 'Credit Economy'. Here's the deal: Consumer Debt is Consumer Debt.

Santelli On Liquidity And More Central Bank 'Counterfeiting'

In a little under two-and-a-half minutes, CNBC's Rick Santelli surveys the landscape of just what exactly is Quantitative Easing, why more debt does not solve the problem of too much debt, and why these actions (as even Frau Merkel has ascribed concern) are nothing but counterfeiting. He rhetorically questions how the printing of more money is the way to solve our 'problems', adding via Rick Rule, that "there's been no shortage of cash in the system; but one wonders [given] this economy seems based on liquidity, whether building an economy on what is, in fact, counterfeiting is very good for the economy in the long term?"

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