Category: zerohedge

Let’s Face It: The U.S. Constitution Has Failed

Authored by Charles Hugh Smith via OfTwoMinds blog,

Elections provide the bread-and-circuses staged-drama that is passed off as democracy.

Despite the anything-goes quality of American culture, one thing remains verboten to say publicly: the U.S. Constitution has failed. The reason why this painfully obvious fact cannot be discussed publicly is that it gives the lie to the legitimacy of the entire status quo.

The Constitution was intended to limit 1) the power of government over the citizenry 2) the power of each branch of government and 3) the power of political/financial elites over the government and the citizenry, as the Founders recognized the intrinsic risks of an all-powerful state, an all-powerful state dominated by one branch of government and the risks of a financial elite corrupting the state to serve their interests above those of the citizenry.

The Constitution has failed to place limits on the power of government, on the emergence of unaccountable states-within-a-state agencies and on the political power of financial elites.

How has the Constitution failed? It has failed in three ways:

1. Corporations and the super-wealthy elite control the machinery of governance. The public interest is not represented except as interpreted / filtered through corporate/elite interests.

2. The nation’s central bank, the Federal Reserve, has the power to debauch the nation’s currency and reward the wealthy via issuing new currency and buying Treasury bonds in whatever sums it deems necessary at the moment. The Fed is only nominally under the control of the elected government. It is in effect an independent state-within-a-state that dominates the financial well-being of the entire nation.

3. The National Security State–the alphabet agencies of the FBI, CIA, NSA et al.–are an independent state-within-a-state, answerable only to themselves, not to the public or their representatives. Congressional oversight is little more than feeble rubber-stamping of the Imperial Project and whatever the unelected National Security leadership deems worthy of pursuit.

The Constitution’s core regulatory element–the balancing of executive, legislative and judicial power–has broken down. The judiciary’s independence is as nominal as the legislative branch’s control of the central bank and National Security state: the gradual encroachment of corporate and state power is rubber-stamped and declared constitutional.

The secret power of the National Security agencies was declared constitutional early in the Cold war, when unleashing unaccountable and secret agencies was deemed necessary.

The bizarre public-private Federal Reserve was deemed constitutional at its founding in 1913, and the Supreme Court famously declared that corporations have the same rights to free speech (including loudspeakers that cost millions of dollars) as living citizens.

The powers of the Imperial Presidency also continue expanding, regardless of which party is in office or the supposed ideological tropisms of Supreme Court justices.

Every step of this erosion of public representation and the elected government’s power is declared fully constitutional, in classic boiled-frog fashion. The frog detects the rising temperature of the water but isn’t alarmed as the heat is increased so gradually.

Since the rise of unaccountable states-within-a-state are constitutional, as is the dominance of corporate / private-wealth elites, on what grounds can citizens protest their loss of representation?

Elections provide the bread-and-circuses staged drama that is passed off as democracy. The key goal of the corporate/state media coverage, of course, is to foster the illusion that elections really, really, really matter, when the reality is they don’t. The National Security State grinds on, the Federal Reserve grinds on and the dominance of corporate-wealth elites grinds on regardless of who’s in office.

Every emergency is met by the ceding of more power to unelected elites in positions to serve their own interests. The Cold War, financial panics, Cold War Redux–every crisis is an excuse to expand the powers of the unaccountable, opaque states-within-a-state.

The media is already gearing up with 24/7 coverage of the 2020 elections. The constant churn of drama-trauma serves to mask the impotence and powerlessness of the citizenry and the unaccountability of the states-within-a-state that rule the nation.

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via ZeroHedge News https://ift.tt/2NeZ74O Tyler Durden

China Warns New US Tariffs Will Be “Catastrophic” For Global Stocks

Chinese state-run newspaper the Global Times warned – or perhaps threatened – late Tuesday that failed trade negotiations would have dire consequences for global stocks. 

The threat of a market catastrophe has pigeonholed the US into striking a deal with Beijing, the report suggests although many are confident that the situation is flipped. 

“[Trump’s] words further stoked the stock markets of the US, which reached the highest in two months and so increased pressure on the Trump administration to close the deal with China,” said the Global Times in an Op-Ed, adding that if the Trump team “imposes more tariffs on Chinese products while China responds with fiercer countermeasures,” it would “be a catastrophic strike to global stock markets.”

“In terms of avoiding such blows, the Trump administration is probably the most pressured,” the Op-Ed continues. “Thus in general, by the end of the trade negotiations, China and the US have become more psychologically equal” (according to the state-run outlet). As a result, “both sides would eventually lose,” the Times warned. 

Why China’s implicit threat? Perhaps because, as Shard’s Bill Blain noted earlier today, at least in the context of its economy, China is already losing the trade war, and therefore has little to lose by escalating the war of words. This is what Blain said overnight:

The recent data highlights the Chinese economy may be slowing faster than XI can maintain his grip – he’s weaker than ever before. (Raising one scenario threat of a long-drawn out period of uncertainty if he is marginalised/deposed and a power struggle follows. That could be very destabilising and disruptive for the Occidental economies desperate to sell the China!)

We reckon XI knows he’s out of time and has to settle – handing Trump a critical victory. Long-term the US-China tech-war is difficult to call. Trump is determined to garner payback for China IP theft, and its difficult to imagine the rest of Asia adopting Chinese tech systems if they lose the current trade war to the US. However, you can’t just undo years of China tech development. My techy contacts tell me Huawai’s boasts about the US’ inability to close them is partial bluff and bluster – it’s not as advanced or robust as it claims, plus the US is going to insist on wrecking it – which could prove another long-term friction point.

The next question is how much of a favorable outcome the market has already priced in. Yesterday the S&P 500 rose modestly after President Trump suggested that the two largest economies might have more time to hammer out a deal without raising tariffs by the March 1 deadline, however it gave up much of the gains into the close suggesting that all good news may now be priced in..

Meanwhile, a Chinese trade delegation is currently in Washington D.C. this week for the latest round of trade negotiations, however with the March 1 deadline a little more than a week away, signs of any tangible progress are sorely lacking. 

And speaking of China’s economic context, the world’s most populous economy is facing an accelerating slowdown in export growth in coming months according to Nomura chief China economist Ting Lu, who notes that the rush to buy up goods in advance of possible tariff increases is now over. 

via ZeroHedge News https://ift.tt/2twBxrb Tyler Durden

As Stocks Approach A Critical Level The Fed Better Deliver

Submitted by Mark Orsley of PrismFP

Equities continue to trade “well” but the all-important test of 2798 is growing closer by the day.  2798 is important because the trend line connecting that point failed three times in Oct, Nov, and Dec.  It would also coincide nicely with my Elliott Wave “5 count” that would speak of an “ABC” correction.  Those are minor “cool offs” not substantial sell offs. 

However, also recall from my note last week that in the past 20 years, the S&P future has only been this extended to its 50-day moving average two times.  Both times saw significant corrections of ~10%. 

So if you flew down from the dark side of the moon, ignored fundamentals/positioning, looked at the chart of S&P mini’s, saw RSI’s overbought, and momentum indicators starting to roll over; you would expect some sort of correction near that 2798 level.  The only question would be how deep.  

However, we know that the market is in a much different place than Oct/Nov/Dec when the Fed unwisely had its foot on the hiking pedal and the equity market was undoubtedly positioned bullish.  The data has now softened but the Fed has responded with a pause in its hiking cycle with the market largely de-risked.  Voilà, 2800 approaching.   

Easily the most misunderstood theme in the market right now is the Fed’s “dovish pivot” narrative.  There was a “neutral pivot” and that’s it. If we dissect the Fed speak in the last 24 hours, it’s full of evidence.

Let’s first look at what the Fed’s Mester (leans hawk, 2020 voter) said yesterday:

  • Fed has wait and see approach to future moves
    • There you go Loretta. That is the company line right there = neutral
  • Rates may need to go a bit higher if outlook met
    • Hmmm well that is not very dovish.  Ok so what’s the outlook?
  • Sees economy in a very good spot with inflation near 2%, and does not see a recession in 2019 or 2020

So we can see that Mester, recognizing she leans hawkish, is playing the company line of a neutral stance but with a bias towards more hikes.  No dovish pivot there.  

Next we got some sound bites from the Fed’s Williams who is moderate and more important than Mester as he is obviously a voter every year.

  • Monetary policy was where it ought to be with rates around neutral
    • There we go, the typical Fed line these days.  Nicely done John.
  • The new patient-minded Fed stance did not mean not hiking rates or that policy was set for all time
    • Whoa easy John, market thinks you are in a “dovish pivot”
  • Expects to be drawing down the balance sheet for some time (noted a move from $1.6t to 1.0t)

Like Mester, Williams delivers the neutral stance but with a clear bias towards more tightening via hikes AND continued balance sheet unwind.  So where is the dovish pivot everyone is talking about?  

This is important because we get the FOMC minutes today from the “dovish pivot” January meeting.  A simple thought is the market is priced for the dovish pivot, so anything less is a disappointment.  

Scenarios:  

  • If the Fed can convey a more dovish message than all these “neutral” comments Fed speakers have been delivering, then 2798 gets taken out and my Elliott Wave “5 count” will have to move up to 2900.  
  • If its neutral and the market finally realizes there is no dovish pivot; then you will likely get the correction the charts are forewarning.  Again, the only question would be how severe.  A simple ABC correction to say 2700/2650 (2-4%), or a deep 10% correction to blast out the FOMO buyers.    
  • No chance of a hawkish message so let’s not bother.

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A couple quick hits from around the world….

One central bank that has clearly gone full dovish is the ECB.  Chief Economist Praet floated the TLTRO discussion but more importantly also said that the business climate in the Euro area “seems to be changing in a more fundamental way”, and adding that “we are not in a vicious circle, but we are close to that.”   

We can add in ECB members like de Guindos saying that policy will “stay accommodative for a long while.”  

Now that my friends is a dovish pivot.  

Thus Euribor spreads are topping out and at risk to going completely flat.  You should sell ERZ9/ERZ0 at trend resistance.

Does it make sense that US Eurodollar spreads are mostly negative and European Euribor spreads are mostly positive?  That means the ECB will be hiking when the Fed is cutting, at a time when the EZ economic data is in a “vicious circle,” and with the ECB utterly dovish/sounding the alarm bells.  Something is wrong there.  Either ED spreads need to steepen or ER spreads need to flatten, or both.    

More of the same in Australia with wages coming in slightly soft last night.  There were also reports that home loan delinquencies rose in December and that 90-day arrears are hitting record highs.   We have talked about this theme enough but note that Aussie 3yr futures hit trend support and held so you are getting another buying opportunity to play the Aussie housing debacle that will force an RBA dovish pivot.  

Lastly, with regards to trade wars, the street chatter has become that there will be either a partial deal with the agreement to continue to negotiate, or a pure “kick the can” style deal (i.e.: 60-day tariff extension).  

On the one hand it is another vol killer along with the Fed’s neutral stance.  On the other hand, it will allow the global economic data bleed that I have been noting to continue unabated.  Additionally, as I have been warning, there are signs already that TW’s have persisted too long.  So any extension to draw it out further will only see the data hemorrhage even more as global businesses tighten up with uncertainty.          

I believe that to be an out of consensus thought given conversations with clients.

via ZeroHedge News https://ift.tt/2TZERXp Tyler Durden

Russia Will Target US With New Hypersonic Weapons If It Deploys Missiles To Europe

In his first major public address since the US formally pulled out of the INF arms-control treaty, Russian President Vladimir Putin warned on Wednesday that Russia would point its new arsenal of hypersonic missiles – which can purportedly bypass NATO’s ABM systems – directly at the US if it dares to reintroduce ground-based intermediate-range missiles to Europe.

According to Fox, Putin threatened to deploy Russia’s new Zircon missiles, which Putin said can fly at nine times the speed of sound and carry a range of 620 miles and are part of the country’s drive to upgrade its defensive capabilities against an increasingly aggressive US and NATO.

Putin

Putin also took a few moments to praise Russia’s weapons program, comparing the new Avangard hypersonic missile – which Russia infamously tested on the day after Christmas, sending a shiver of alarm through Western intelligence and defense analysts – to the 1957 launch of Sputnik-1, the world’s first artificial satellite, which was built by the Soviet Union. The weapon has demonstrated that Russia has the technological capabilities to surpass the US, according to RT.

And in another warning that, if true, will likely aggravate the US defense community, Putin revealed that Russia has been carrying out successful tests of its  Burevestnik cruise missile and the Poseidon nuclear-powered underwater drone.

“It seemed until recently that Russia can’t make a breakthrough in defense technologies, but we made it,” Putin said.

Though Russia won’t deploy weapons preemptively, Putin said that if the US does place weapons in Europe, Russia will deliver an “asymmetric” response and target not only the host countries of those weapons, but “decision-making center” in the US (presumably Washington).

Still, Putin said he’s hoping the US and Russia can work out their differences.

“We don’t want confrontation, particularly with such a global power as the US.”

With the US and Europe reportedly close to agreeing on a fresh raft of sanctions against Russia (just in time for the Mueller report), Putin also criticized what he described as a “destructive” US policy of targeting Russia.

Moving on from national security-related issues, Putin also spoke about plans to increase welfare spending and embark on public works projects. As reports have shown that his popularity in the Russian hinterlands has taken a hit in response to a controversial plan to ship Moscow’s garbage to Siberia, Putin promised improved healthcare and education spending, while promising to upgrade 60 airports during the coming year.

via ZeroHedge News https://ift.tt/2SNpqoP Tyler Durden

The Lost War – Market Strength Is A Chance To Sell

Authored by Sven Henrich via NorthmanTrader.com,

At the time of this writing US markets are up 9 weeks in a row following the December lows making for risk free markets since Jay Powell famously caved on January 4th signaling flexibility on the balance sheet run off. Every tiny dip is bought and bears increasingly look the ones trapped,not bulls.

And the parade of central bank jawboning has been as spectacular as it has been global. Consider what signals have been sent to markets by central banks in just the past few weeks: The US Fed: No more rate hikes, flexible on balance sheet reduction, even open to stopping it altogether and discussing making bond purchases a regular tool, not just an emergency measure. I thought we were done with those? QE4 coming? The ECB: Discussing bringing LTRO (long term financing operation) back which would constitute another liquidity infusion. Didn’t they just end QE six weeks ago? BOJ: Ready to ease more. More? They never stopped and the BOJ famously owns more than 75% of the Japanese ETF market already. And China has added record liquidity infusions in 2019 desperate to provide liquidity to its lending market.

There is no doubt that this renewed global central bank capitulation has succeeded in levitating asset prices from the abyss in December. Greed is back, daily headlines hinting at a successful China trade deal to come and POTUS tweeting “up, up, up” all add up to a buying panic atmosphere.

Global growth slowing? Who cares. Buy stocks vertically up:

A couple comments of principle on this linear $DJIA chart: 1. This is not a chart of a stable, normal bull market, it’s a highly erratic chart. 2. Vertical, extreme tight channel ramps don’t have happy endings and this is most extreme tight channel ramp in many years. These ramps can extend no doubt, but they eventually end in tears as we saw in February 2018, except this ramp is even steeper 3. Central bank capitulation amid slowing macro data have proven bears right as I outlined the other day. Central banks panicked and once again participants are witness to the awesome hold central banks have on equity prices.

But while central banks appear to have won the battle there is one chart that strongly suggests they’ve already lost the war.

There’s a chart I’ve been watching for years and it’s not an index chart, rather it is a ratio driven chart that divides the S&P 500 into $CPI (consumer inflation) and it produces a fascinating picture:

For decades this ratio has followed a very repetitive pattern: During bull markets the ratio rises and then forms lows coinciding with market corrections and these lows form along a very precise trend line. When markets enter a topping process the ratio wobbles, becomes unstable in its ascent until the ratio breaks below the trend line coinciding with a bull market top. And each time the ratio breaks the break coincides with a break in the S&P 500 bull market trend. At the same time, as we’ve seen with index chart tops, the relative strength index (RSI) prints a negative divergence (a lower high) while the ratio prints a new high. All of these things have now again come to fruition.

Coincidence? Judge for yourself looking at the chart above.

What is clear is that the ratio broke its trend line in December for the first time since 2009. The 2 previous breaks marked the end of bull markets and brought about sizable bear markets. But note also that these bear markets experienced sizable bear market rallies first and I’ll use a chart of the Industrials ($XLI) here to illustrate the point:

It sends the same message as the CPI ratio chart: The war is already lost, no matter how desperate central banks are in attempting to re-inflate asset prices. The larger message I take away from this: Market strength is an opportunity to sell, especially considering that this rally remains untested, technically uncorrected and dovish central banks have now been fully priced in. But hey, perhaps it’s different this time. It has to be, otherwise the CPI ratio chart suggests new lows are coming.

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Trump Demands $2.5Bn Back For California’s High-Speed Rail Fail; Pulls $929Mn Grant

The US Department of Transportation (DOT) says it is exploring legal options to claw back $2.5 billion from California in federal funds which have already been spent on the ill-fated statewide high-speed rail system, according to the New York Times. 

The Trump administration is also canceling a $929 million grant which was allocated to the California High-Speed Rail Authority detailed in a letter from DOT, just one week after California Governor Newsom announced that the project had been derailed by cost overruns and numerous delays. Instead of canceling the entire project, however, Newsom announced that the state will focus on finishing the line currently under construction, running 171 miles from Merced to Bakersfield – and could open as soon as 2027. 

Construction at a site near Fresno, Calif., for the new high-speed rail tracks. Photo: Jim Wilson/The New York Times

The decision to yank the grant money and claw back the billions in federal funds comes one day after California filed a lawsuit along with 15 other states challenging President Trump’s emergency declaration on the border. 

The $77 billion Los Angeles-to-San Francisco bullet train, which has been a goal of California transportation planners for decades, has long faced opposition from Mr. Trump and other Republicans. But on Tuesday morning, the president explicitly tied the rail line to efforts to stymie construction of the Mexican border wall. –New York Times

Trump slammed California’s decision to sue, noting on Tuesday over Twitter that “The failed Fast Train project in California, where the cost overruns are becoming world record setting, is hundreds of times more expensive than the desperately needed Wall!”

One day after California canceled the project, President Trump tweeted of California: “They owe the Federal Government three and a half billion dollars. We want that money back now. Whole project is a “green” disaster!” 

And on Wednesday, Trump tweeted: “California now wants to scale back their already failed “fast train” project by substantially shortening the distance so that it no longer goes from L.A. to San Francisco. A different deal and record cost overruns. Send the Federal Government back the Billions of Dollars WASTED!” 

Newsom slammed the DOT decision as retaliation for the border lawsuit, saying in a statement. “It’s no coincidence that the administration’s threat comes 24 hours after California led 16 states in challenging the president’s farcical ‘national emergency,’” adding “This is clear political retribution by President Trump, and we won’t sit idly by. This is California’s money, and we are going to fight for it.“

On Tuesday, Trump hit back – disparaging the way California wasted the rail money, as well as the state’s decision to spearhead the national emergency lawsuit. 

“California, the state that has wasted billions of dollars on their out of control Fast Train, with no hope of completion, seems in charge!” tweeted Trump on Tuesday. 

Ronald Batory – administrator of the Federal Railroad Administration wrote that the federal funds were being pulled after the California High-Speed Rail Authority had “failed to make reasonable progress on the project.”

The Transportation Department said in a separate statement on Tuesday that it was “actively exploring every legal option” to seek the return of the $2.5 billion. That threat, however, was not mentioned in Mr. Batory’s letter.

Late Tuesday, a Trump administration official pointed to Mr. Newsom’s remarks last week as an indication that the project was too costly and would “never be constructed as planned.”

Given that acknowledgment, the official said, the administration had a responsibility to taxpayers to “cancel the financial support for this boondoggle.” –New York Times

There may be hope for California’s $929 million, however, as former chairman of the board of the high-speed rail project, Dan Richard (who stepped down last Thursday), noted that the federal notice reads that the Trump administration intends to terminate the agreement, rather than saying it was canceling it outright. 

Richard believes this may give California room to negotiate. 

“Of course it’s a serious matter — the federal government has a lot of power in this situation,” said Richard, adding: “I’m hoping that the phrase ‘intends to terminate’ gives an opportunity for parties to resolve this issue.“

The high speed rail project was going to be former California Governor Jerry Brown’s legacy. 

via ZeroHedge News https://ift.tt/2TUPPO8 Tyler Durden

Gartman: “The Time For Buying Stocks Is Past”

Two months ago, in the depth of the December market doldrums, one person said that it was time to go long stocks ahead of the Fed’s dovish reversal, Mnuchin’s call to the plunge protection team and Trump’s appeal to Americans to buy stocks on Dec 25 2018: that man was “world-renowned commodity guru” Dennis Gartman, and for the subsequent 8 weeks, Gartman has been stadfast, and correct, in his contrarian at the time reversal which promptly became a consensus call after stocks rebounded in their best January since 1987, a rally which has since continued into February and the S&P is fast approaching its Sept 20 all time high.

Which then begs the question: has Gartman’s reptuation of being the world’s most contrarian indicator finally ended? That remains to be seen, however, it is worth noting that after being relentless bullish for the duration of the S&P’s 400 point increase, this morning Gartman has another contrarian call: “we say here this morning that the time for buying stocks and or for adding to long positions is past. The time for being less involved… less long… less enthusiastic in the short term is now upon us.”

Of course, having learned from prior mistakes and staying from absolute trade recommendations, Gartman is quick to note that the rally may indeed continue, to wit:

We remain positive of equities in the long term … not, however, in the short term and we’ve more on this below… for the same reason that we’ve been bullish thus far for most of this year: that we are certain that the Fed has adopted a changed and more expansionary monetary policy, made quite clear by the Fed’s Chairman, Mr. Powell, over a month ago when he spoke on his own regarding this fact and made even clearer following the FOMC meeting when he noted in his post-meeting press conference that the Fed’s balance sheet will continue to be run-off through the process of its debt securities being allowed to mature, but in a far  more “patient” manner than had been its course of action previously. This, we suspect, shall be made clearer still this afternoon when the minutes of the last FOMC meeting are made public at 2:00 p.m..

Further…and this we do in fact believe has been materially overlooked by so many others in the capital markets on a daily basis and it is all the more important given the focus upon the Chinese Renminbi’s valuation being focused upon far more certainly as explained above in our comments on the forex market… we continue to view the Chinese government’s cut in bank reserve requirements and the tax cuts announced nearly five weeks ago are materially long term supportive of shares in China and eventually to the markets abroad. As we have said previously several times, reserve requirement changes are the monetary authorities’ equivalents of a handy piece of lumber applied to the head of a reluctant mule: It does indeed get the mule’s attention and sometimes the mule even likes it!

That’s the good news. Now the not so good:

Note that the CNN Fear and Greed Index made its way to 70 as of the close on Friday but closed 2 “points” lower yesterday at 68. The CNN Index has in the past proved its merit time and again and we’ve maintained that until it has risen above 70… and preferably to 75… and then has turned down, we’ve no choice but to remain bullish. It’s 68 presently and it has turned lower, but only very marginally so.

Thus we say here this morning that the time for buying stocks and or for adding to long positions is past. The time for being less involved… less long… less enthusiastic in the short term is now upon us.

And then this:

Given our comment above that the CNN Fear & Greed Index has made it to 70 and has turned lower and given that the short interest on both the NYSE and the NASDAQ have fallen, and given simply that the markets have run a very, very long way since late December we will absolutely not be adding to long positions at this point and will likely be taking defensive actions to protect our profits. Buying puts; selling futures; buying “short side” derivatives and selling calls against long positions to reduce our exposure a bit. This seems both rational and reasonable.

If this “new and improved” Gartman is no longer the contrarian indicator of years past, algos – and bulls – better take note: if he is right, and many other strategists are confident we will top out just around the “quad top” around 2,800, this may be as good as it gets.

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Hello Old Friend… Gold Nears $1,350 Resistance (That Has Repelled It 4 Times In 5 Years)

Authored by John Rubino via DollarCollapse.com,

The past five years have been baffling for gold bugs. In an environment of massive central bank money creation, rising government deficits and a populist takeover of many countries’ political systems – all of which should be great for safe haven assets – gold has spiked to around $1,350 four times, only to be smacked back down each time. Very demoralizing.

And now it’s gearing up for another try.

It’s obvious that the forces now at work in the world will eventually send terrified capital pouring into sound money like gold and silver — and that, from a technical standpoint, piercing $1,350 resistance should trigger a big, fast move to the next resistance level somewhere in the high $1,400s.

But the “when” part of this story has become an embarrassment, given the number of disappointments the past few years have dished out.

So why risk ridicule by going back there? Because, damn it, $1,350 will be not just pierced but shattered one of these days. And next week could be the week.

I know, Charlie Brown’s football, Einstein’s definition of insanity, Sisyphus’s boulder, some people never learn. But the world really is set up for serious instability, and two new factors have swung in gold’s favor since the last failed attempt.

First, central banks have become fairly aggressive net buyers of gold. Recall that not so long ago central banks as a group were dumping gold on the market in order to “diversify” their reserves into government bonds. Now they’ve apparently seen the error of that approach and are back to buying. See Central bank gold buying hits highest level in half a century.

This is a big, not-especially-price-sensitive new source of demand that might not view $1,350 as a reason to slow down.

Second, the Fed, which had been promising to tighten for years and then actually did tighten for one year was, like the proverbial mule, smacked in the head with a stock market two-by-four. That got its attention, and the tightening has stopped, to be replaced shortly with another, probably much bigger round of easing.

This aligns the US with other major countries, which are already easing. Japan, for instance, is now apparently doubling down on its high-fiscal deficit/NIRP experiment:

Architect of BoJ stimulus calls for big fiscal spending backed by c-bank

(Reuters) – Japan must ramp up fiscal spending with debt bankrolled by the central bank, the Bank of Japan’s former deputy governor Kikuo Iwata said, a controversial proposal that highlights the BOJ’s challenge as it tries to reignite an economy after years of sub-par growth.

Iwata, an architect of the BOJ’s massive bond-buying programme dubbed “quantitative and qualitative easing” (QQE), warned that inflation will miss the central bank’s 2 percent target without stronger measures to boost consumption.

That means Japan must lean on fiscal policy by ditching this year’s scheduled sales tax hike and committing to boost government spending permanently with money printed by the BOJ, he said.

“Inflation won’t hit 2 percent just with the BOJ continuing its current policy. The BOJ doesn’t need to change its policy much now. What needs to change is fiscal policy,” Iwata said.

“Fiscal and monetary policies need to work as one, so that more money is spent on fiscal measures and the total money going out to the economy increases as a result,” he told Reuters on Friday. “That’s the only remaining policy option.”

Instead of relying on commercial banks to lend more to already cash-rich companies, the BOJ should finance government spending for measures to boost consumption such as payouts or tax breaks for younger-generation households, he said.

His proposal resembles the idea of “helicopter money” – a policy where the central bank directly finances government spending by underwriting bonds.

Europe, now descending into what might be the death throes of its post-WWII single market plan, has one and only one chance to salvage it: Aggressive banking integration funded with extremely easy money.

And China, after accounting for 60% of the world’s new credit in the past decade, has decided that that wasn’t enough, and is now creating new credit at an even faster rate:

China’s banks throw open spigots in January, lend record 3.23 trillion yuan

China’s banks made the most new loans on record in January – totaling 3.23 trillion yuan ($477bn) – as policymakers try to jumpstart sluggish investment and prevent a sharper slowdown in the world’s second-largest economy. Chinese banks tend to front-load loans early in the year to get higher-quality customers and win market share. But they have also faced months of pressure from regulators to step up lending, particularly to cash-starved smaller firms. Net new yuan lending last month was far more than expected and eclipsed the last high of 2.9 trillion yuan in January 2018. Analysts… had predicted new loans of 2.8 trillion yuan, more than double the level seen in December.”

China’s January new bank loans were 11.4% higher than the previous record from January 2018 – and 15% above estimates. Bank Loans expanded an imprudent $821 billion over the past three months alone, a full 20% above the comparable period from one year ago. Total Bank Loans expanded 13.4% over the past year; 28% in two years; 45% in three years; 91% in five years; and an incredible 323% during the past decade.

Which brings us to the strong dollar. Gold is actually up nicely in most other currencies, but a rising dollar has depressed the metal’s US price. Now, however, with a presidential election in which the choice is between Republicans committed to trillion dollar deficits basically forever and Democrats who are either quasi or overtly socialist, the dollar looks like a sitting duck at these levels.

Add it all up – newly aggressive fiscal and monetary ease, central bank gold buying, and political turmoil – and gold $1,350 is toast. Okay, eventually.

via ZeroHedge News https://ift.tt/2GTe0Zx Tyler Durden

Rosenstein Will Step Down Mid-March: DOJ Official

US Deputy Attorney General Rod Rosenstein is expected to step down in mid-March, according to Reuters, citing a Justice Department official.

Rosenstein – who has refused to testify in front of Congress since reports emerged that he wanted to secretly record President Trump and invoke the 25th Amendment to remove Trump from office, had been expected to leave his position shortly after newly minted Attorney General William Barr assumed his office. 

The DOJ official said Rosenstein’s departure was not connected to the 25th Amendment or surveillance allegations. 

Of note, Rosenstein recommended the firing of former FBI Director James Comey, then launched the special counsel probe using Comey’s hand-written ‘evidence’ that Trump obstructed justice by pressuring him to end the investigation into former National Security Adviser Michael Flynn. 

According to a September New York Times report and renewed allegations by former acting FBI Director Andrew McCabe, Rosenstein considered wearing a wire in meetings with Trump – an accusation that the Deputy AG has called “inaccurate and factually incorrect.” 

Earlier on Monday Trump accused both McCabe and Rosenstein of planning a “very illegal act,” which he described in a tweet as “illegal and treasonous.”

Rosenstein ceased overseeing Mueller’s probe on Nov. 7 when Trump named Matt Whittaker acting attorney general.

Barr now has oversight of the investigation. –Reuters

President Trump has repeatedly fumed over the Mueller probe, which has yet to report any evidence of collusion between Trumpworld and Russia surrounding the 2016 US election.

via ZeroHedge News https://ift.tt/2Nf5mpi Tyler Durden

UBS Shares Tumble As French Judge Slaps Bank With $5.1 Billion Tax Evasion Fine

In a landmark ruling that sent a clear message to other banks battling misconduct investigations in French courts, a Paris court on Wednesday found UBS guilty of having actively helped some of its wealthy French clients hide money from French tax authorities in undeclared Swiss bank accounts, and ordered the bank to pay a $5.1 billion fine. The fine represents a record sum in France, and isn’t too far below the $6 billion maximum allotted by French law.

UBS

Shares of the bank slumped 5% on the ruling.

UBS

Regarding the penalty, which followed trials of UBS and its French subsidiary,  trials where the bank was ultimately found guilty, the judge said it reflected the serious nature of the charges.

“The criminal wrongdoings were of an exceptionally serious nature,” said Presiding Judge Christine Mee.

The fine consisted of a 3.7 billion euro ($4.2 billion) penalty and another 800 million euro ($907 million) fine to compensate the French government for lost revenue. The penalty comes after the bank turned down a settlement after the two sides failed to agree on a number. The ruling marks the conclusion of an eight-year-long probe, and also comes as money laundering probes into Baltic banks heated up with allegations that Swedbank, the biggest bank in the region, has been drawn into the Danske Bank money laundering probe.

via ZeroHedge News https://ift.tt/2SRKhYl Tyler Durden