Tag: finance

While the generic overnight futures meltup is present this morning, it is nothing compared to what the epic surge in the EURJPY early in the overnight session suggested it would be, and in fact the levitation in US equities driven as usual by Yen carry trades (just what is the P/E or PEG on the USDJPY, or the EURUSD for that matter?) is far more muted than seen in recent days. The main reason for the easing of the carry-risk signal pair is the increasing confusion over what may happen next week when increasingly more are convinced Bernanke will announce a Taper, and since everyone remembers the summer very vividly, the last thing anyone wants is to be the last Kool-aid drinker at the centrally-planned party.

After a week of losses Asian markets were mixed overnight with the Nikkei outperforming on the back of USDJPY weakness, up +1%, whilst the Hang Sang is up +0.1%, however the Shanghai composite is down 0.31% as we type. This action comes as the US House passed its first bipartisan budget deal in four years yesterday, with the vote being won 332-94 today as 169 Republicans and 163 Democrats voting for the voting for the deal. Also overnight AUDUSD hit a three and a half month low after RBA governor Stevens said that fair value for the currency is 0.85 to the dollar.

Meanwhile in Europe, better trading stocks failed to weigh on Bunds this morning, which remained bid as market participants digested yet another uptick in the 3-month Euribor rate fix. Nevertheless, concerns over liquidity squeeze were somewhat offset by another rise in excess liquidity in the Euro-system, which rose to EUR 162.37bln from EUR 160.785bln and also a drop in EONIA fix to 0.139% from 0.144%, which was the first decline in 9 trading days. Consequent flattening of the Euribor curve, together with upside bets in Sep-14 Euribor with a strike of 100.00 were led by fears of potential negative deposit rates being implemented. Bear steepening of the Euribor curve resumed after the ECB said that banks to repay EUR 3.32bln from 1st 3y LTRO and EUR 19.33bln from 2nd 3y LTRO, which analysts attributed to reduction in bond holding pre-AQR next year and also potential implementation of negative deposit rates by the ECB. This, together with technical selling, saw EUR/USD and GBP/USD move back into negative territory.

On the US calendar today there is just one data point, the PPI release expected at 8:30am, and which consensus sees as rising 0.1%. Perhaps more important, at 11:00am the Fed’s POMO is set to purchase just $1.25b-$1.75b in the 2036-2043 sector.

 

Market Re-Cap from RanSquawk

Better trading stocks failed to weigh on Bunds this morning, which remained bid as market participants digested yet another uptick in the 3-month Euribor rate fix. Nevertheless, concerns over liquidity squeeze were somewhat offset by another rise in excess liquidity in the Euro-system, which rose to EUR 162.37bln from EUR 160.785bln and also a drop in EONIA fix to 0.139% from 0.144%, which was the first decline in 9 trading days. Consequent flattening of the Euribor curve, together with upside bets in Sep-14 Euribor with a strike of 100.00 were led by fears of potential negative deposit rates being implemented. Bear steepening of the Euribor curve resumed after the ECB said that banks to repay EUR 3.32bln from 1st 3y LTRO and EUR 19.33bln from 2nd 3y LTRO, which analysts attributed to reduction in bond holding pre-AQR next year and also potential implementation of negative deposit rates by the ECB. This, together with technical selling, saw EUR/USD and GBP/USD move back into negative territory. Looking elsewhere, FTSE-100 index underperformed its peers throughout the session, with RSA Insurance down close to 20% after company announced acceptance of chief executive’s resignation after the company issued its third profit warning in six weeks and admitted its dividend was in question. Also, Peugeot Citroen shares fell around 10% after General Motors announced plans to sell its entire Peugeot stake. Looking ahead for the session there is a relatively light economic calendar with the most significant event being the release of US PPI at 1330GMT/0730CST.

 

Overnight news bulletin from Bloomberg and RanSquawk

• Bear steepening of the Euribor curve resumed after the ECB said that banks to repay EUR 3.32bln from 1st 3y LTRO and EUR 19.33bln from 2nd 3y LTRO, which analysts attributed to potential reduction in bond holding pre-AQR next year and also potential implementation of negative deposit rates by the ECB.
• US House passes budget measure by 332-94 votes which would ease USD 63bln in US spending cuts, with the USD 1.01trl budget now awaiting a senate vote.
• Japan’s GPIF is to buy inflation-linked JGBs from April. According to reports, GPIF is to buy more than JPY 400bln in inflation-linked JGBs vs. total issuance amount of JPY 1.2trl in the next fiscal year.
• Treasuries head for weekly loss after 3Y/10Y/30Y auctions and as data including stronger-than- expected Nov. retail sales suggested a higher probability of Fed taper at next week’s FOMC.
• JPY fell to a five-year low vs USD as the yield difference between Treasuries and JGBs approached the widest since April 2011 amid investors speculation on the timing of a cut in U.S. stimulus
• The House passed the first bipartisan U.S. budget in four years yesterday, clearing the way for final Senate passage next week to ease $63b in spending cuts and avert another government shutdown
• Health insurers are being asked by the U.S. government to be lenient with Obamacare customers who miss the Dec. 23 deadline for enrolling in the program or are late with their initial payment
• German Social Democratic leaders expressed confidence that the party’s rank and file will agree to governing with Merkel, saying there’s no reason to expect SPD members will reject an alliance with her bloc
• Sovereign yields higher in Asia, little changed in EU. EU peripheral spreads steady. Asian and European stocks mostly higher, U.S. equity index futures gain. WTI crude lower, gold and copper little changed

 

Asian Headlines

Japan’s GPIF is to buy inflation-linked JGBs from April. According to reports, GPIF is to buy more than JPY 400bln in inflation-linked JGBs vs. total issuance amount of JPY 1.2trl in the next fiscal year.

BoJ’s Kuroda says Japan intends to achieve the 2% inflation target and maintain it in a stable manner. On that note, analysts at Morgan Stanley MUFG expect more BoJ easing in July.

EU & UK Headlines

ECB says banks to repay EUR 3.32bln from 1st 3y LTRO and EUR 19.33bln from 2nd 3y LTRO. Bear steepening of the Euribor curve resumed following the release, which analysts attributed to reduction in bond holding pre-AQR next year and also potential implementation of negative deposit rates by the ECB.

Ratings on Italy affirmed by S&P at BBB/A-2, outlook remains negative. Analysts at S&P also affirmed ratings on Luxembourg at ‘AAA/A-1+’; outlook stable.

Fitch head of sovereign ratings said will take time for Britain to earn back AAA rating as needs sustainable fall in debt-to-GDP.

SPD officials say they are more open to the kind of ‘solidarity’ with troubled EU economies frequently asked for by Brussels. That, they say, will mean a different kind of Germany at the EU’s negotiating tables.

UK Construction Output SA (Oct) M/M 2.2% vs Exp. 1.6% (Prev. -0.9%, Rev. -0.5%)

UK Construction Output SA (Oct) Y/Y 5.3% vs Exp. 1.3% (Prev. 5.8%, Rev. 8.2%)

– The ONS said that construction revisions add 0.1% to Q1, Q3 GDP growth and that UK home building grows by 18.6% Y/Y in October, the biggest rise since January 2011.

US Headlines

US House passes budget measure by 332-94 votes which would ease USD 63bln in US spending cuts, with the USD 1.01trl budget no
w awaiting a senate vote.

Following this, analysts at S&P and Moody’s said that the budget deal is encouraging for US credit rating. Specifically, S&P noted that smooth budget talks positive for US creditworthiness’ if continue and Moody’s stated that budget deal reduces possibility of disruptions.

Equities

Better trading stocks failed to weigh on Bunds this morning, which remained bid as market participants digested yet another uptick in the 3-month Euribor rate fix. FTSE-100 index under performed its peers throughout the session, with RSA Insurance down close to 20% after company announced acceptance of chief executive’s resignation after the company issued its third profit warning in six weeks and admitted its dividend was in question. Also, Peugeot Citroen shares fell around 10% after General Motors announced plans to sell its entire Peugeot stake.

FX

In European trade EUR/USD took a move to the downside after breaking the overnight lows around 1.3740 as concerns over negative rates continue to weighs on prices. Furthermore, there has been a trade go through in Euribor options (Sep-14 100.00 calls, buyer of 30k at 1) suggesting that there is a bet on negative rates in the Euro-zone, a topic that has been on the agenda for some weeks now. In combination with this move the USD index is trading in line with overnight highs after breaking above its 50DMA at 80.36 to trade at intra-day highs of 80.37. Consequently, GBP/ USD has also come under some selling pressure, now testing bids at the 1.6300 level.

Analysts at Santander see EUR/USD at 1.4000 in Q4 2014 vs previous forecast of 1.3800 and also see GBP/USD at 1.7000 in Q4 2014 vs previous forecast of 1.6400.

BofAML say that now is the time to turn bullish on EUR/GBP with potential for a 5% gain.

Commodities

Goldman Sachs says 2014 will be another tough year in metals and mining.

Brazil’s exports of copper ore and cathodes rose in November as more material was sent to Asia and Europe, according to figures from the country’s trade ministry.

– Copper ore exports rose 0.6% year-on-year in November, totaling 70,324 tonnes.

Iranian negotiators halted nuclear talks with major powers to return to Tehran for consultations after Washington blacklisted a dozen companies and individuals for evading US sanctions, state media reported.

Other press reports indicated that the EU says that further work is needed on Iran, P5+1 nuclear deal implementation.

* * *

DB’s Jim Reid concludes the overnight summary

As markets currently take a small but nervy backward step due to fears of the Fed removing some of its bond buying next week, it is worth reminding ourselves that on Monday it will be exactly 5 years since the Fed made the historic move to drive interest rates to zero (well, 0-0.25%) where they have remained ever since. In the same announcement the Fed reaffirmed its commitment to purchase large quantities of agency debt and mortgage-backed securities, a policy that after numerous changes also continues to this day. It’s fair to say  that the Fed have created a marvellous environment for virtually all assets even if this remains one of the weakest economic recoveries on record in the US and through virtually all of the DM world. Only Greek equities (-24%) in our sample have seen negative returns. The standout asset class over the past 5 years has been high-yield corporate bonds, with total returns in Europe of 151% and in the US of 142%. We did a back of the envelope calculation to work out where European HY yields would have to go to see returns of 150% over the next 5 years. The answer was around -47% – although we’d warn you that the calculation did break our computer and it is very dependent on the path of yields. Anyway, it’s not going to happen so no need to get bogged down in the calculations. DM and EM equity has also performed strongly with the US leading the way. The S&P 500 has returned 120% compared to the MSCI EM return of 103% (albeit increasingly under-performing DM over the last couple of years). European equities have lagged (but are catching back up) given the sovereign crisis. Core markets have still seen strong returns though with the FTSE and the DAX both up more than 90% whilst most peripheral markets have still seen positive returns with Spain’s IBEX (+37%) and Italy’s MIB (+12%) higher. Nevertheless the peripherals have under-performed with Greek equities still negative as discussed at the top. Commodities have also performed well over the 5-year period but with most of the returns front-loaded in the first half of the period. Overall copper (+145%) is leading the way with gold something of a middling performer up +47% after a fairly sharp decline from the peak.

Within the DM fixed income universe, HY has been followed (in order of performance) by Fin Sub Debt (around +70%), IG and Fin Sen Corporate Debt (+50%) and finally government bonds (Gilts +34%, Bunds +23% and Treasuries +12%). When you see the scale of returns seen in these assets it’s hard to imagine that withdrawing QE or ZIRP will be particularly easy for assets.

We’ve been getting a very small taste of this over the last few days as markets are adjusting to the possibility that the Fed might start to withdraw liquidity as soon as next week. After a week of losses Asian markets were mixed overnight with the Nikkei outperforming on the back of USDJPY weakness, up +1%, whilst the Hang Sang is up +0.1%, however the Shanghai composite is down 0.31% as we type. This action comes as the US House passed its first bipartisan budget deal in four years yesterday, with the vote being won 332-94 today as 169 Republicans and 163 Democrats voting for the voting for the deal. Also overnight AUDUSD hit a three and a half month low after RBA governor Stevens said that fair value for the currency is 0.85 to the dollar. The mixed tone in overnight Asian markets came after a third straight day of losses on Thursday which saw Equity markets across the board down; with the S&P down -0.38%, FTSE down -0.96%, the DAX down -0.66% and the IBEX down 0.93%. In government bond markets US 10Y rates rose almost 3bps to 2.87% whilst European Main and Xover were 2 and 5 bps wider respectively.

The trigger for these moves appeared to be the above consensus advanced retail sales figure which came out at +0.7% MoM vs +0.6% consensus which added to concerns the Fed may begin to taper after its 17-18 December next week. Listening to DB Chief Economist Peter Hooper yesterday on the World Outlook call he argued that this data point taken alongside the recent run of stronger data in the US certainly increases the chances the Fed may taper at the December meeting. He argued that three of four criteria for the Fed to start tapering now look to be met: (1) a significant improvement in the labour market (met), (2) confidence that the economic recovery is self  sustaining (very close, especially with recent data), (3) inflation on target (not met yet as inflation remains on a worryingly low trend) and (4) the removal of fiscal uncertainty (the deal over the past week has lessened concerns significantly). As Peter notes, the only criteria he sees not having been met is on inflation. This puts some importance on the US PPI numbers today with consensus expecting them to be flat MoM after falling 0.2% at the previous release. More important will be next Tuesday’s CPI numbers which come out on the day the FOMC meeting begins. Peter doesn’t think the Fed have made their final decision yet so maybe the inflation data will contribute towards it.

In other news yesterday the Spanish government promised to block a Catalan independence vote which the Catalan President had announced just minutes earlier to be held on November 9th next year. Spain’s struggles in recent years have increased support for independence in Catalonia, which is one of the country’s most developed regions,
accounting for about a fifth of Spain’s economic output. Opinion polls suggest that Catalans are roughly evenly split on the question of independence.

As we’ve already flagged the key event data release today will be US PPI, which comes out at 13.30 GMT.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/eUqM3GL_jB4/story01.htm Tyler Durden

Submitted by Michael Krieger of Liberty Blitzkrieg blog,

Meet Mike Caldwell. He is the maker of what seems to be the most popular physical bitcoins on the market, the Casascius coin. All Mr. Caldwell does is have people who want the coins produced send him a certain quantity of bitcoin and then for a $50 fee he puts the private key on a physical coin and sends them back. For this horrible crime of ingenuity and creativity, the U.S. government naturally, has decided to target him. Because they are too busy ignoring the real financial crimes happening out out there…

 

From Wired:

Mike Caldwell spent years turning digital currency into physical coins. That may sound like a paradox. But it’s true. He takes bitcoins — the world’s most popular digital currency — and then he mints them here in the physical world. If you added up all the bitcoins Caldwell has minted on behalf of his customers, they would be worth about $82 million.

 

Basically, these physical bitcoins are novelty items. But by moving the digital currency into the physical realm, he also prevents hackers from stealing the stuff via an online attack. Or at least he did. His run as the premiere bitcoin minter may be at an end. Caldwell has been put on notice by the feds.

 

Just before Thanksgiving, he says, he received a letter from the Financial Crimes Enforcement Network, or FINCEN, the arm of the Treasury Department that dictates how the nation’s anti-money-laundering and financial crime regulations are interpreted. According to FINCEN, Caldwell needs to rethink his business. “They considered my activity to be money transmitting,” Caldwell says. And if you want to transmit money, you must first jump through a lot of state and federal regulatory hoops Caldwell hasn’t jumped through.

But HSBC launders billions for Mexican drug cartels and they can continue their operations no problem.

Caldwell doesn’t accept U.S. dollars or any type of fiat currency. You send him bitcoins via the internet, and he sends you back metal coins via the U.S. Postal Service. To spend bitcoins, you need a secret digital key — a string of numbers and letters — and when Caldwell makes the coins, he hides this key behind a tamper-resistant strip.

 

So long as you can keep your Casascius bitcoins safe, nobody can learn the key. To date, Caldwell has minted nearly 90,000 bitcoins in various denominations. That’s worth about $82 million at today’s exchange rate.

 

Because he runs a bitcoin-only business, Caldwell says there’s no Casascius bank account for authorities to seize. But he adds that he has no desire to anger the feds, whether he agrees with them or not. So he’s cranking out his last few orders and talking to his lawyer. He says this may spell the end of Casascius coins. “It’s possible. I haven’t come to a final conclusion,” he says.

What a complete and total joke this government is. Don’t they have anything better to do?

Full article here.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/wqEjg9rgB0o/story01.htm Tyler Durden

Submitted by Michael Krieger of Liberty Blitzkrieg blog,

Meet Mike Caldwell. He is the maker of what seems to be the most popular physical bitcoins on the market, the Casascius coin. All Mr. Caldwell does is have people who want the coins produced send him a certain quantity of bitcoin and then for a $50 fee he puts the private key on a physical coin and sends them back. For this horrible crime of ingenuity and creativity, the U.S. government naturally, has decided to target him. Because they are too busy ignoring the real financial crimes happening out out there…

 

From Wired:

Mike Caldwell spent years turning digital currency into physical coins. That may sound like a paradox. But it’s true. He takes bitcoins — the world’s most popular digital currency — and then he mints them here in the physical world. If you added up all the bitcoins Caldwell has minted on behalf of his customers, they would be worth about $82 million.

 

Basically, these physical bitcoins are novelty items. But by moving the digital currency into the physical realm, he also prevents hackers from stealing the stuff via an online attack. Or at least he did. His run as the premiere bitcoin minter may be at an end. Caldwell has been put on notice by the feds.

 

Just before Thanksgiving, he says, he received a letter from the Financial Crimes Enforcement Network, or FINCEN, the arm of the Treasury Department that dictates how the nation’s anti-money-laundering and financial crime regulations are interpreted. According to FINCEN, Caldwell needs to rethink his business. “They considered my activity to be money transmitting,” Caldwell says. And if you want to transmit money, you must first jump through a lot of state and federal regulatory hoops Caldwell hasn’t jumped through.

But HSBC launders billions for Mexican drug cartels and they can continue their operations no problem.

Caldwell doesn’t accept U.S. dollars or any type of fiat currency. You send him bitcoins via the internet, and he sends you back metal coins via the U.S. Postal Service. To spend bitcoins, you need a secret digital key — a string of numbers and letters — and when Caldwell makes the coins, he hides this key behind a tamper-resistant strip.

 

So long as you can keep your Casascius bitcoins safe, nobody can learn the key. To date, Caldwell has minted nearly 90,000 bitcoins in various denominations. That’s worth about $82 million at today’s exchange rate.

 

Because he runs a bitcoin-only business, Caldwell says there’s no Casascius bank account for authorities to seize. But he adds that he has no desire to anger the feds, whether he agrees with them or not. So he’s cranking out his last few orders and talking to his lawyer. He says this may spell the end of Casascius coins. “It’s possible. I haven’t come to a final conclusion,” he says.

What a complete and total joke this government is. Don’t they have anything better to do?

Full article here.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/wqEjg9rgB0o/story01.htm Tyler Durden

By: Chris Tell
at http://capitalistexploits.at/

 

 

In late 2011 I started shorting the Japanese Yen. I spoke about it here, here and again here. I even tried to employ my skills in evaluating private equity deals to evaluating Japan. I was coming up empty.

I’ve employed a basic position of long the USD/JPY cross, long XAU/JPY cross and then taking small amounts of speculative capital buying long-dated puts on FXY. The results have been pretty average thus far. The USD long is working well, the long gold trade is slightly above water, while the puts on FXY have been miserable.

Timing is everything and I’m cognizant of that fact. I do however want to be positioned, because I remain unconvinced of the ability of central bankers to hold the ship together with monetary bailing twine, jawboning and any other measure they dream up.

I took the positions mentioned, not because I had carefully calculated the planetary alignments and noted that the Yen was going to get smashed as soon as Jupiter was in Mars. Frankly, like most market participants I didn’t know. What I did know was that the fundamentals supported a weaker yen, and importantly the political will to push the Yen lower was in the cards. Shinzo Abe campaigned on that very platform. From a risk/reward standpoint the risks were low while the reward was potentially very high. A speculators wet dream.

At the time we felt that establishing a core position in this trade was so important that we published a free report outlining various ways to play what we believe will be a very profitable trade. Feel free to grab a copy here.

On the 28th November our good friend and “trader extraordinaire” Brad Thomas alerted our readers in a trade alert that the Yen looked like it was turning.

Specifically he said:

The USDJPY is in a primary bull trend, has worked off an overbought condition over the last 7 months, and is now in the process of reconfirming the up-trend.

I think the USDJPY is in the process of “mean reverting” at least back to the level it was trading at just prior to the onset of the GFC in 2007 (120 level). This would be about a 20% rise from current levels, which is rather material.

Brad is easily the smartest trader I know, but what has made Brad so successful has been his implementation of his views. This can make all the difference. In the trade referenced above, his strategy has been to place multiple option trades across 12 months of expiry. Namely 120,000 options expiring in 12 different time frames over the next year. (note: not long after this ZH put out a trade overview using similar principals)

At the time Brad put the alert out, all 12 trades of 10,000 USD/JPY options would have cost approx US $3,400. As of today the USD/JPY cross sits at 102.82 and the respective 12 call options across 12 months net out at US $4,198.

Whatever strategy one uses I believe that being positioned for a substantially weaker Yen is an intelligent move.

We’ll be hearing more from Brad on how he plays this as well as his many other trade ideas long into the future.

To receive Brad’s alerts (complimentary for a while longer), click here.

– Chris

Excerpted from Steven Drobny’s, The New House Of Money:

“Drobny: You’re on the tape saying that dollar/yen is going to 200.

Kyle Bass: If I’m right, it will go much further than that. I don’t think it will hit 500, but in crises, currencies swing too far.”

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/LsEUd3vLnAg/story01.htm Capitalist Exploits

Perhaps not so United States?

…how can 2 of the nation’s favorite cities be so painfully different?

 

(h/t @Not_Jim_Cramer)

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/UXrqqq8omC8/story01.htm Tyler Durden

Economic history is pockmarked with policies instigated with the full intention of improving economic performance which have eventually turned out to do real damage. From the Napoleonic Wars to Weimar and up to the present day gold standards and Keynesianism, Deutsche’s Jim Reid notes all too often economic institutions allow themselves to be stuck in intellectual cul-de-sacs at their peril. Such a risk appears alive and well today in the halls of the Federal Reserve. The outlook for tapering is mired in a continuing war between an institutional framework which sees QE as an emergency measure that has gone on far longer then was desired and an economy whose self-sustaining momentum is far from secure. The following statements from the FOMC members shows the tight-rope of uncertainty they are treading…

What The FOMC members have said about Taper…

The FOMC came very close to tapering at the September 2013 meeting. It seems likely that if (a) Congress hadn’t been on the brink of another bout of fiscal-political grandstanding and (b) markets (especially rates) hadn’t reacted quite so strongly to the comments Bernanke made in May/June earlier in the year then the Fed would have started tapering at the meeting, irrespective of the failure of the US economy to press on in the middle of 2013.

The FOMC will be slightly more hawkish in 2014 – and even more so if Stan Fischer is added…

So how biased will the Fed committee in 2014 continue to be against QE? One way to try and take a view on this is to see the relative balance of power of FOMC doves and hawks in 2014, with an eye to their 2013 predecessors

In conclusion, Deutsche believes there is a chance that the Fed’s institutional biases lead it to taper earlier then the economic data might suggest is optimal. Whilst Yellen may be able to push against some of these biases, 2014 will still see a tightrope balancing act at the Fed as economics and institution bias battle it out and increasing noise is made for forward guidance to replace QE as the main tool of monetary policy activism.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/wWssBXS60bU/story01.htm Tyler Durden

Submitted by Simon Black of Sovereign Man blog,

The IMF just dropped another bombshell.

After it recently suggested a “one-off capital levy” – a one-time tax on private wealth as an exceptional measure to restore debt sustainability across insolvent countries – it has now called for “revenue-maximizing top income tax rates”.

The IMF’s team of monkeys has been working around the clock on this one, figuring that developed nations can increase their overall tax revenue by increasing tax rates.

They’ve singled out the US, suggesting that the US government could maximize its tax revenue by increasing tax brackets to as high as 71%.

Coming from one of the grand wizards of the global financial system, this might be the clearest sign yet that the whole house of cards is dangerously close to being swept away.

Think about it– solvent governments with healthy economies don’t go looking to steal 71% of people’s wealth. They’re raising this point because these governments are desperate. And flat broke.

The ratio of public debt to GDP across advanced economies will reach a historic peak of 110% next year, compared to 75% in 2007.

That’s a staggering increase. Most of the ‘wealithest’ nations in the West now have to borrow money just to pay interest on the money they’ve already borrowed.

This is why we can only expect more financial repression from desperate governments and established institutions.

This means more onerous taxation. More regulation. More controls over credit and capital flows.

And that’s only the financial aspect; the deterioration of our freedom and liberty will continue at an accelerated pace.

Can a person still be considered “free” when 71% of what s/he earns is taken away at the point of a gun by a bankrupt, bullying government? Or are you merely a serf then, existing only to feed the system?

This is why we often stress having a global outlook and considering all options that are on the table.

Because the other side of the coin is that while some countries are tightening the screws and making life more difficult, others are taking a different approach.

Whether out of necessity or because they recognize the trend, many nations around the world are launching new programs to attract international talent and capital.

I’ve mentioned a few of these already– economic citizenship programs in places like Cyprus, Malta, and Antigua (I met a lot of these programs’ principals at a recent global citizenship conference that I spoke at in Miami).

Then there are places like Chile and Colombia which have great programs for entrepreneurs and investors. Other places like Georgia and Panama have opened their doors to nearly all foreigners for residency.

Bottom line– there are options. Some countries are really great places to hold money. Others are great to do business. Others are great places to reside.

The era we’re living in– that of global communications and modern transport– means that you can live in one place, your money can live somewhere else, and you can generate your income in a third location.

Your savings and livelihood need not be enslaved by corrupt politicians bent on stealing your wealth… all to keep their destructive party going just a little bit longer.

The world can truly be your playground. You just need to know the rules of the game.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/MDDFXbKJ4VM/story01.htm Tyler Durden

Thanks to the “pulling forward” of future production in the channel-stuffing-based inventory build of Q3, consensus estimates for the growth of the US GDP in Q4 2013 has collapsed to new lows for this cycle at a mere 1.5%. However, the “escape-velocity” recovery remains just around the corner as estimates for Q1 and Q2 2014 remain unimpacted by such nuance as reality…

 

Consensus GDP hits new lows for Q4 2013 – but 2014 will be just fine…

 

…just like 2013 was supposed to be in 2012…AND 2011… AND 2010…

Chart: Bloomberg and Deutsche Bank

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/Cs8mQUqfquI/story01.htm Tyler Durden

Of the nine passengers aboard the small Makani Kai Air plane flight that crashed off the shore of Molokai Wednesday night, eight survived. The lone fatality was Loretta Fuddy, infamous for her “I have seen the original records” confirmation of the long-form birth certificate of the US President in 2011. Fuddy, who was 65 years old and had served as Hawaii’s state health director since January 2011, is described as “selfless, utterly dedicated, and committed” is a “terrible loss for the state“.

 

 

Via USA Today,

The plane, carrying a pilot and eight passengers, went down Wednesday in the water a half mile off the Hawaiian island of Molokai, the Maui Fire Department said. The lone fatality was Loretta Fuddy, who has served as state health director since January 2011.

 

Fuddy, 65, made national news in April 2011 when she verified the authenticity of certified copies of President Obama’s birth certificate. Obama had requested the release to curb claims by so-called “birthers” that he was born in Kenya and not eligible to be president.

 

…

 

Makani Kai Air President Richard Schuman told Honolulu-based KITV that he spoke with the pilot of the single-engine turboprop Cessna Grand Caravan after the crash.

“What he reported is after takeoff … there was catastrophic engine failure,” Schuman said. “He did the best he can to bring the aircraft down safely and he got everybody out of the aircraft.”

 

Schuman said the cause of the engine failure had not yet been determined.

 

Coast Guard Petty Officer Melissa McKenzie said a Coast Guard helicopter got three passengers out of the water while Maui fire crews picked up five people. One person swam ashore.

Paging Donald Trump…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/iIUmbKFonB4/story01.htm Tyler Durden

Submitted by F.F.Wiley of Cyniconomics blog,

Earlier this year the notion that the Fed might modestly taper its purchases drove significant upheaval across financial markets. This episode should engender humility on all sides. It should also correct the misimpression that QE is anything other than an untested, incomplete experiment.

– Former FOMC Governor Kevin Warsh, writing in the Wall Street Journal on November 13.

If I may paraphrase a sainted figure for many of my colleagues, John Maynard Keynes: If the members of the FOMC could manage to get themselves to once again be thought of as humble, competent people on the level of dentists, that would be splendid. I would argue that the time to reassume a more humble central banker persona is upon us.

– Dallas Fed President Richard Fisher, speaking in Chicago on December 9.

I fault the Fed for its lack of intellectual leadership on the economy and, in particular, Bernanke’s lack of forthrightness about the limits of the Fed’s ability to address slow growth and fiscal disequilibrium.

– Former St. Louis Fed President William Poole, speaking in Washington D.C. on March 7.

Does anyone else see a common theme?

Last month, we offered a plain language translation of the Warsh op-ed, because we thought it was too carefully worded and left readers wondering what he really wanted to say. Translation wasn’t necessary for Fisher’s speech, which contained a clear no-confidence vote in the Fed’s QE program. Poole’s comment was from a seminar question-and-answer session earlier this year, but it reached our inbox only last week in a transcript published in the latest Financial Analysts Journal. The Q&A was attached to an article that I’ll discuss here, because it makes claims we haven’t heard from others with FOMC experience.

Here’s an example:

Ben Bernanke talks a lot about risk management and the tradeoff between benefits and costs; he maintains that the need to balance these two issues justifies proceeding with the current policy. But Bernanke does not discuss the risk of political intervention in Fed policy despite numerous examples of the Fed giving in to political pressure and waiting too long to change its policy, which results in a detrimental outcome for the economy.

 

…

 

Essentially, pressure on the Fed will come from inside the government and may not be very visible; it may be limited to a few op-ed articles from the housing lobby. [FFW – presumably, Poole intended “it” to refer to the visible part of the pressure.] The true amount of political pressure will be largely hidden.

Poole is more or less saying that we have no idea what’s truly behind the Fed’s decisions. But he doesn’t stop there. He’s willing to make a prediction that you wouldn’t expect from an establishment economist:

[T]he real issue is the politics of monetary policy … I believe that the Fed will not successfully resist the political winds that buffet it. I am not a political expert or a political analyst by trade. My qualification for speaking on this topic is that I have followed the interactions between monetary policy and politics for a very long time. As with all things political, the politics of the Fed means that realities often fail to match outward appearances … I believe the Fed is likely to overdo its current QE policy of purchasing $45 billion of Treasuries and $40 billion of MBSs per month.

So there you have it: a 10-year FOMC veteran wants us to know that central banking isn’t all about the latest hot research on the wonders of unconventional measures.  On the contrary, monetary policy is no different than other types of policymaking; it’s guided by hidden political forces.

If you don’t mind our saying so, we feel a bit vindicated. Our very first Fed post ten months ago included the following:

As for the flip-flop [the Fed’s commitment to lifting the stock market through QE so shortly after claiming no responsibility for stock prices in recent bubbles], it’s easy to find a logical explanation. The banks want QE. Influential political and economic leaders want QE. Therefore, the path of least resistance is to give them QE. On the other hand, market manipulation to prick the Internet and housing bubbles would have been widely unpopular. Therefore, policymakers rejected the idea that they should manipulate markets and prick bubbles. No one likes to be unpopular.

 

More generally, QE seems to me to be explained by Bernanke (and his colleagues) being unable to sit still. This is natural behavior when you have to continually justify decisions. It’s not easy to explain to Congress, the media or public why you’re doing nothing but waiting for past policies to work. It won’t be long before people portray you as weak and indecisive and tell you to “Get to work, Mr. Chairman.” But once you start implementing new policies, especially if they’re in a direction that’s expedient for everyone in the short-term, then those criticisms go away. They’re replaced by adjectives like bold and proactive. And who doesn’t want to be known as bold and proactive?

We haven’t returned to this theme often, partly because it can’t be tested like we can test the Fed’s economic beliefs. Regular readers know that we do quite a lot of empirical work. We try our best to follow David Hume’s maxim that: “A wise man, therefore, proportions his belief to the evidence.”

As we see it, the Fed’s economic beliefs are proportioned more closely to political factors than real-life evidence. You might replace Hume with Upton Sinclair, who said “it is difficult to get a man to understand something when his salary depends on him not understanding it.”

In other words, politics and personal incentives are a huge part of the picture, and not just in central banking but in the economics profession more generally.

The theories underpinning current policies, which have built up over the last 80 years or so, can’t be properly understood without thinking through the motivations behind key developments. Some of the motivational factors are obvious, while others are more subtle, but I won’t clutter this post with our musings on the hidden drivers in economics. Detlev Schlichter offered a nice summary in his book, Paper Money Collapse:

It would be naïve to simply assume that the exalted position of [mainstream economic] theories in present debate is the result of their superiority in the realm of pure sciences. This is not meant as a conspiracy theory in the sense that professional economists are being hired specifically to develop useful theories for the privileged money producers in order to portray their money printing as universally beneficial. But it would be equally wrong to assume that the battle for ideas is fought only by dispassionate and objective truth-seekers in ivory towers and that only the best theories are handed down to the decision makers in the real world, and that therefore whatever forms the basis of current mainstream discussion must be the best and most accurate theory available. No science operates in a vacuum. The social sciences in particular are often influenced in terms of their focus and method of inquiry by larger cultural and intellectual trends in society. This is probably more readily accepted in the other major social science, history. What questions research asks of the historical record, what areas of inquiry are deemed most pressing and how historians go about historical analysis is often shaped by factors that lie outside the field of science proper and that reflect broader social and political forces.

 

Moreover, ever since mankind began writing its histories they have served political ends. History frequently provides a narrative for the polity that gives it a sense of identity or purpose, whether this is justified or not, and the dominant interpretations of history can be powerful influences on present politics. Similarly, certain economic theories have become to dominate debate on economic issues because they fit the zeitgeist and specific political ideologies. This is not to say that economics cannot be a pure, objective science. It certainly can and should be. Whether theories are correct or not must be decided by scientific inquiry and debate, and not in the arena of politics and public opinion. But it is certainly true that many economists do depend for their livelihoods on politics and public opinion, and that they cannot operate independently of them.

Schlichter is one of many authors and bloggers willing to discuss the awkward realities lurking behind economic theory and central banking. But these ideas are considered taboo by most mainstream media outlets. They’re not discussed in establishment venues or spoken by establishment figures.

Or so I thought.

Poole’s refreshingly honest take on the Fed’s inner workings – from someone who truly knows what goes on behind the curtains – is more than welcome.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/hRkL5rvMW3g/story01.htm Tyler Durden