Tag: finance

Submitted by F.F. Wiley of Cyniconomics blog,

[A]sset purchases are not on a preset course, and the Committee’s decisions about their pace will remain contingent on the Committee’s outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases.
-March 19 FOMC statement

The excerpt above or some variation has appeared in every one of the Fed’s post-FOMC meeting statements since the beginning of QE3 in September 2012.

Unfortunately, it doesn’t give us much comfort. We don’t see evidence of the Fed’s economists accurately gauging QE’s “efficacy and costs,” notwithstanding its oh-so-slow wind down. On the contrary, history shows that these economists have an inflated view of what they can achieve with monetary policy.

Take the link between QE and jobs, for example. We were struck by the following question, asked recently by commenter “liongterm investor”:

How does a dollar (or trillion dollars) added to the Fed balance sheet create a job? This is a serious question; I am not trying to bait someone into an argument …  What I do understand about QE is how money the ends up [in] excess reserves earning interest from the Fed larger than what my deposits or short term treasuries earn. I also understand how the money can end up driving up equity prices. But job creation??

We don’t doubt that “liongterm investor” is aware of “wealth effects” – the idea that a booming stock market encourages happy investors to buy an extra luxury item or two, and this might eventually create a few positions at, say, Tiffany. But it’s not a very powerful effect, is it? Nor can we be sure that it won’t come back to bite us, for reasons we’ve written about in the past (see here, here, here or here).

What’s more, questions of what the Fed can and can’t achieve go beyond QE. We touched on the limitations of monetary intervention in recent research on where the economy stands today:

• “What Needs to Happen Before We See a Big Recovery?”
• “Corporate Capex Fallacies and Why You Shouldn’t Rely on CNBC”

We’ll build on that research below with a handful of charts showing that there are many things the Fed can’t do when it comes to manipulating the economy.

Household borrowing and spending: What the Fed can’t do

In a debt-saturated household sector, the Fed can’t prevent mortgage demand from stagnating:

Based on 40 years of history (and the fact that banks need to cover their costs), the Fed can’t shrink the spread between mortgage and deposit rates much further than it did in 2012:

Consequently, the Fed can’t push debt service costs much below current levels:

Nor can lower debt payments provide much of a subsidy in the first place, since falling debt service is matched by declining interest income:

More broadly, there’s a downwards trend in income after tax and financial obligations, and the Fed can do little about this:

Business borrowing and spending: What the Fed can’t do

The Fed can’t convince businesses to revert right away to the borrowing habits of recent bubbles:

Especially as net business debt is already at an all-time high:

And while the Fed can affect the amount of cash deposits, it can’t force businesses to make spending decisions based on those cash balances:

Consequently, business spending growth has slowed alongside consumer spending, and the Fed can do little about either of these developments:

Housing: What the Fed can’t do

The Fed can’t undo past overbuilding, and therefore, it can’t conjure up another residential construction boom (for awhile, at least):

What the Fed can do

On the other hand, here are a few developments that our central bank can accurately claim to have achieved:

1. Lifting prices on stocks, houses and other risky assets, which creates a wealth effect and boost for high-end consumption.
2. Creating windfall profits for financial firms aiming to exploit the bubble, then bust and then bubble again pattern in the housing market.
3. Creating windfall profits for primary dealers through the Fed’s Treasury and mortgage purchases (even as central bankers may occasionally discipline traders who aren’t careful).
4. Preserving the “heads I win, tails you (the taxpayer) lose” mentality in the financial sector that leads to reckless risk-taking.

What the Fed shouldn’t do

Another way to look at the data and observations above is to ask why the Fed’s achievements have been so limited (and of dubious value). It’s evident that the economy isn’t growing strongly because of conditions that central bankers themselves created, by encouraging excessive borrowing and disregarding moral hazard.

In other words, the problem isn’t so much that the Fed can’t deliver another debt-fueled boom, but that it shouldn’t be trying to cure a credit bust with more borrowing in the first place.

Sadly, though, this idea falls in the same category as the notion that the Fed’s balance sheet isn’t the right tool for job creation. It’s too damning a thought to be accepted by central bankers who’ve shackled themselves to a philosophy of ceaseless intervention. It’s also too basic for economists who prefer abstract theories and mathematical models over reality-based thinking.

Such straightforward concepts as not fighting a debt hangover with more debt just don’t enter into the Fed’s calculus about “efficacy and costs,” even as they make perfect sense to so many of the rest of us.

via Zero Hedge http://ift.tt/NLuP97 Tyler Durden

While Naftogaz (Ukraine’s gas pipeline operator) states that all gas transportation from Russia to Europe is running normally, Bloomberg reports that Russian natgas exports to Europe are declining. Shipments are down over 4% from the prior week and also lower to Ukraine. This ‘adjustment’ follows increased sanctions by the West as Medvedev’s notable statement this morning that Ukraine owes Russia $16bn.

NatGas output is tumbling

The good news:

Gazprom today said natgas transit to Europe via Ukraine, supplies for Ukrainian consumption  

But Pay Up…

Ukraine owes Russia $11b after collapse of 2010 deal, Russian Prime Minsiter Dmitry Medvedev says to President Vladimir Putin at Security Council meeting, according to transcript on Kremlin website.

 

Medvedev adds $3b Ukraine bonds bought in Dec., ~$2b debt to Gazprom for natgas supplies

 

NOTE: In 2010, Russia agreed to sell natgas at discount in exchange for extending lease to Black Sea naval port of Sevastopol in Crimea to 2042 from 2017

Or Else…

Russian natgas exports to Europe and Turkey, excl. former Soviet Union, declined to 405.3mcm as of March 22,  according to Bloomberg calculations based on preliminary data from Energy Ministry’s CDU-TEK unit.

 

Avg daily exports to region were ~457mcm in March, lower than yr earlier: calculations based on CDU-TEK data

 

Shipments March 16-22 were 3.04bcm, 4% decrease vs level in week ended March 15

It is too early to see a trend, but for now, the direction is not hopeful for Europe.

Furthermore, Gazprom has cut its Diesel output by the most in 7 months…

 

and then… (via NY Times),

Russia is now asking close to $500 for 1,000 cubic meters of gas, the standard unit for gas trade in Europe, which is a price about a third higher than what Russia’s gas company, Gazprom, charges clients elsewhere.

 

Russia says the increase is justified because it seized control of the Crimean Peninsula, where its Black Sea naval fleet is stationed, ending the need to pay rent for the Sevastopol base. The base rent had been paid in the form of a $100 per 1,000 cubic meter discount on natural gas for Ukraine’s national energy company, Naftogaz.

And if that’s not clear enough…

 

Source: Bloomberg

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Submitted by Ron Paul via The Ron Paul Institute,

It was almost ten years ago when, before the House International Relations Committee, I objected to the US Government funding NGOs to meddle in the internal affairs of Ukraine. At the time the “Orange Revolution” had forced a regime change in Ukraine with the help of millions of dollars from Washington.

At that time I told the Committee:

We do not know exactly how many millions—or tens of millions—of dollars the United States government spent on the presidential election in Ukraine. We do know that much of that money was targeted to assist one particular candidate, and that through a series of cut-out non-governmental organizations (NGOs)—both American and Ukrainian—millions of dollars ended up in support of the presidential candidate…

I was worried about millions of dollars that the US government-funded National Endowment for Democracy (NED) and its various related organizations spent to meddle in Ukraine’s internal affairs. But it turns out that was only the tip of the iceberg.

Last December, US Assistant Secretary of State Victoria Nuland gave a speech in which she admitted that since 1991 the US government has:

[I]nvested more than 5 billion dollars to help Ukraine…in the development of democratic institutions and skills in promoting civil society and a good form of government.

This is the same State Department official who was caught on tape just recently planning in detail the overthrow of the Ukrainian government.

That five billion dollars appears to have bought a revolution in Ukraine. But what do the US taxpayers get, who were forced to pay for this interventionism? Nothing good. Ukraine is a bankrupt country that will need tens of billions of dollars to survive the year. Already the US-selected prime minister has made a trip to Washington to ask for more money.

And what will the Ukrainians get? Their democracy has been undermined by the US-backed coup in Kiev. In democracies, power is transferred peacefully through elections, not seized by rebels in the streets. At least it used to be.

The IMF will descend on Ukraine to implement yet another of its failed rescue plans, which enrich the well-connected and international bankers at the expense of the local population. The IMF adds debt, organizes sweetheart deals for foreign corporations, and demands that the local population accept “austerity” in exchange for “reform” that never seems to produce the promised results.

The groundwork for this disaster has been laid by NED, USAID, and the army of NGOs they have funded over the years in Ukraine.

Supporters of NED and its related organizations will argue that nothing is wrong with sending US dollars to “promote democracy” overseas. The fact is, however, that NED, USAID, and the others have nothing to do with promoting democracy and everything to do with destroying democracy.

It is not democracy to send in billions of dollars to push regime change overseas. It isn’t democracy to send in the NGOs to re-write laws and the constitution in places like Ukraine. It is none of our business.

How should we promote democracy overseas? First, we should stop the real isolationists — those who seek to impose sanctions and blockades and restrictions that impede our engagement overseas. We can promote democracy with a US private sector that engages overseas. A society that prospers through increased trade ties with the US will be far more likely to adopt practices and policies that continue that prosperity and encourage peace.

In 2005, arguing against funding NED in the US foreign assistance authorization bill, I said:

The National Endowment for Democracy…has very little to do with democracy. It is an organization that uses US tax money to actually subvert democracy, by showering funding on favored political parties or movements overseas. It underwrites color-coded ‘people's revolutions’ overseas that look more like pages out of Lenin's writings on stealing power than genuine indigenous democratic movements.

Sadly, matters are even worse now. To promote democracy overseas, NED and all other meddling US government funded NGOs should be disbanded immediately.

via Zero Hedge http://ift.tt/1fbWqI7 Tyler Durden

Friday was an extremely volatile day with new record highs being achieved miraculously at the open only to be followed by free-fall in the market's most-loved momentum names into the close. It seems that the quad-witching was of particular interest to the algos as Nanex notes, a new record was set for most trades in a 1-second interval. What was even more unusual was the record number of 'unusual' price changes that occurred in the 3 seconds before the market opened and index futures expired. "Efficient" markets indeed…

 

Via Nanex,

On March 21, 2014, at 15:45:00, a new record was set for most trades in 1 second in NMS stocks (NYSE, NY-ARCA, NY-MKT and Nasdaq listed stocks and ETFs – approximately 8,000 symbols). The 3rd and 4th most active seconds were also set, at 15:50:00 and 15:55:00 respectively. The 2nd most active second was set at 10:00:00 on September 1, 2011.

1. NMS 1-second peak Trades per Second for each minute of the regular trading session (9:30 – 16:00).
Each day is drawn as a line, color-coded by age: from violet (oldest) to red (most recent). 

 

But that was nothing compared to the total manipulation that occurred in the few seconds before the US open and futures expiration… (via Nanex)

On March 21, 2014, a record number of stocks with unusual price changes occurred just 3 seconds before market open and the expiration of the March index futures contracts.

1. March and June Nasdaq 100 (NQ) and eMini (ES) futures contracts.
The March contracts expired at 9:30. Note the sudden jump at 9:28.

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2. Zoom of Chart 1.

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3. Comparing price moves in about 60 select symbols between 9:29:56 and 9:30:01

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4. Charts of individual stocks (mostly Nasdaq 100) between 9:29:55.500 and 9:30:01
Note the sudden price drop between 3 and 4 seconds before market open and then a recovery about 1 second before open. The large, black-filled circle is the Nasdaq official opening price.

Here is AAPL…

 

all 100 additional charts can be found here…

One thing we know for sure, Virtu made money….

via Zero Hedge http://ift.tt/1ptjXt3 Tyler Durden

Despite dismal PMIs from China and USA, stocks managed a miraculous 'pump' into the US open only to be unceremoniously dumped very soon after as MoMos and Biotechs had the rug pulled out. Weakness continued down to Nasdaq's 50DMA (and Biotech's 100DMA) and stabilized into the European close when soon after, via the magic of EURJPY, stock rebounded back to VWAP. Alas, it was not be the day for the bulls as VWAP-selling hit hard in the last hour… until the good fairy 330RAMP CAPITAL came along, and punched VIX in the mouth in a desperate attempt to regain green and get the Dow positive post-FOMC. Unlike many fairy tales though, this one ended sadly ever after. Stocks down, USD down, Gold down, VIX up, Yield Curve down to 2009 levels.

 

Despite the exuberant rebound in stocks…helped by the magic of VIX-crushing algos…

 

Stocks were unable to hold green on the day and remain red post-FOMC

 

USDJPY remained generally in charge (with some EURJPY thrown in soon after the EU close)…

 

A day in the life of an S&P 500 futures contract…

 

The Nasdaq has seen the biggest high to low drop in 2 days for 9 months…

 

But the most important chart of the day is the ongoing collapse of the term structure… this is the biggest 4-day slide in the curve since the US downgrade in summer 2011…

 

As the Treasury complex was mixed – 10s and 30s rallying and shorter-dated selling off further…

 

Even though the USD fell notably as a sudden rush out of USD and into EUR occurred around the EU close…

 

Gold and silver slipped (-1.8%)

 

Charts: Bloomberg

Bonus Chart: Nasdaq Biotecth Index bounced perfectly off its 100DMA

via Zero Hedge http://ift.tt/1eGgHsC Tyler Durden

Moments ago the CBO released its estimate of what S. 2124, aka “Support for the Sovereignty, Integrity, Democracy, and Economic Stability of Ukraine Act of 2014“, better known as the “Payment of Overdue Gazprom Invoices Act” – here is the verdict: “CBO estimates that enacting the bill would decrease direct spending by $373 million over the 2014-2024 period. S. 2124 would achieve that decrease mostly by rescinding funds that were provided as an emergency requirement. Certain sanctions, if enacted, would affect revenues, but CBO estimates that those effects would not be significant. Pay-as-you-go procedures apply because enacting the legislation would affect direct spending and revenues. CBO estimates that the statutory pay-as-you-go effects of S. 2124 (which, by law, do not including the effect of rescinding funds provided under the emergency designation) would be to increase the deficit by $320 million over the 2014-2024 period.” Of course, the total amount authorized is substantially higher at $1.3 billion, and will be met through various loan guarnatees, and other US-backed promises, which the CBO is assuming right now, will not result in outlays (they will).

 

Either way, one thing is certain: in order to enforce the fading Pax Americana in the Ukraine, and to keep the funding to the otherwise insolvent Ukraine flowing, which as everyone knows will be first and foremost used to pay Russia’s Gazprom, the US is about to send lots of money abroad. As in, not in the US.

So when it comes to priorities, whom does Putin have to thank for the billions in Western funds he is about to receive? Maybe he can start in Detroit, where the local utility is planning mass water shutoffs over $260M in delinquent bills.

In other words, while the US is enforcing some odd international law, according to which a democratic vote is not credible but a violent coup is, US citizens are about to have no drinking water over a paltry $260 million. From Detroit News:

The Detroit Water and Sewerage Department has a message for Detroit residents and companies more than 60 days late on their water bills: We’re coming for you. With more than half of the city’s customers behind on payments, the department is gearing up for an aggressive campaign to shut off service to 1,500-3,000 delinquent accounts weekly, said Darryl Latimer, the department’s deputy director.

 

Including businesses, schools and commercial buildings, there are 323,900 Detroit water and sewerage accounts; 164,938 were overdue for a total of $175 million as of March 6. Residential accounts total 296,115; 154,229 were delinquent for a total of $91.7 million. The department halts cutoffs through the winter because of complications associated with freezing temperatures, such as damaged pipes. But this spring, a new contractor has been hired to target those who are more than two months behind or who owe more than $150 — twice the average monthly bill of $75.

 

The department says it’s now ready to “catch up” with cutoffs halted because of the unusually harsh winter weather. DWSD is looking to show there are consequences associated with not paying water bills, Latimer said.

 

“Not everyone is in the situation where they can’t afford to pay,” he said. “It’s just that the utility bill is the last bill people choose to pay because there isn’t any threat of being out of service.”

 

People pay up more when they see the department out cutting off water to neighbors, and the statistics bear that out, officials said. In July, for example, before contractors started on the shutoffs, the department cut off 1,566 customers. That month, it collected $149,000 in water bills. Extra contractors started working on cutoffs last summer. Attheir peak in October — before cold weather caused a halt to the disconnects — 3,700 cutoffs occurred. The department collected more than $350,000 in overdue bills that month. That number of cutoffs translated to more than double for warm weather months compared to last year.

 

“We’re trying to shift the behavioral payment patterns of our customer base right now,” said Constance Williams-Levye, DWSD commercial operations specialist. “And so aggressively we’ll have a team of contractors coming in, in addition to our field teams.” Up to 20 additional contractor crews are expected to be employed working on the cutoffs, DWSD officials said.

 

The department bills monthly and sends out notices when bills are overdue. When an account is more than 60 days late, a notice goes out saying service could be cut, Latimer said.

 

Residents don’t necessarily have to move out but Latimer said there were instances, in the case of households with children, where the department of social services will come in and say the kids will be removed from the home if water is not restored.

 

“Usually folks will then come in and make some kind of arrangement,” Latimer said.

While we respect the DWSD’s “behavioral” experiment at making Americans accountable and taking responsibility for their action, such as paying for services rendered, it is far too late – the entire fabric of US society would tear apart, with disastrous and deadly consequences, if such an approach was taken at the wholesale level. Confused why? Just look at the $17.5 trillion in public obligations the US government is on the hook for, and which it will never repay, aka the “Minsky Moment” with the only footnote that for now the US is the world’s reserve currency, so the Fed can always print more $ and monetize even more debt. Sadly, this always ends in tears.

In the meantime, since everyone in the US is merely living from can kicking to another can kicking, one wonders: wouldn’t the $373 million in funds destined to pay off Putin’s oligarch buddies not be better used to pay overdue DWSD bills, which would then allow several tens of thousands of Detroit residents to have running water for a few more months?

Not that we advocate either course of action, but we do wonder: just who sets capital allocation responsibilities at the White House. Because last time we checked, Russian billionaire oligarchs don’t even vote in the US.

via Zero Hedge http://ift.tt/OSEv2s Tyler Durden

While Angela Merkel has publicly threatened that Russia risks “massive economic and political harm” if it doesn’t change course, Germany’s envoy to Russia, Gernot Erler, has more realistic concerns. As Bloomberg reports, Erler warned that US sanctions are counterproductive and probably won’t make Putin bow to Western demands.

The sudden German show of restraint is hardly surprising given their exposure to Russian energy provision and the fact that a stunning 54% of Germans believe the EU and US should accept Russia’s annexation of Crimea.

 

Erler goes in to note that “starting the spiral of sanctions reduces possibilities for dialogue,” and warned against completely excluding Russia from the G-8 (as Merkel had suggested a day earlier). 

Via Bloomberg,

U.S. sanctions on Russia are counterproductive and probably won’t make President Vladimir Putin bow to Western demands on Ukraine, said Gernot Erler, the German government’s coordinator for relations with Russia.

 

Erler’s comments in an interview in Berlin today reflect German restraint on punishing Russia for its annexation of Crimea and differ in tone from Chancellor Angela Merkel, who has said Russia risks “massive economic and political harm” if it doesn’t change course. Erler, whose Social Democratic Party is Merkel’s junior coalition partner, plans to travel to Moscow for talks with Russian officials on March 24-25.

 

Financial sanctions ordered by President Barack Obama yesterday and Russia’s response of denying entry to nine U.S. officials show that “we’re already seeing a spiral,” which makes “saving face” more difficult, Erler said.

 

“Starting the spiral of sanctions reduces possibilities for dialogue,” Erler, 69, said at his office two blocks from the Brandenburg Gate. “That’s regrettable. Based on experience, I have low expectations about the short-term effectiveness of sanctions.”

 

…

 

“Russia views itself as a world power at eye level with America,” he said. “We’re dealing with a very self-confident power, that won’t change its policy under outside pressure. That wouldn’t work with America, either.”

 

Erler also warned against “completely excluding” Russia from the Group of Eight nations, a day after Merkel said the forum “doesn’t exist anymore” for now. Still, Erler said there’s “a strong consensus” in German policy toward Russia.

 

…

 

Restricting Russian energy imports probably wouldn’t be among the sanctions, he said, citing Russian gas flows that “always worked” during the Cold War.

Good-sanctioner, bad-sanctioner?

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Submitted by Ramsey Su via The Acting Man blog,

Legal Mumbo-Jumbo

As promised, the Johnson/Crapo bill has finally arrived.  Here are the 442 pages of legal mumbo jumbo, guaranteed to cure all forms of insomnia and those suffering from low blood pressure.   

Allow me to provide a summary. 

The Bill calls for the elimination of FNMA and FHLMC.  It will be replaced by FMIC with a 5 member board appointed by the president.  There will be a 9 member advisory board to assist FMIC and the OCMA.  An internal OIG will be funded by the FMIC to inspect the FMIC.  The FMIC and the OCMA would update Congress on the MIF and audited by the Comptroller General.  FMIC can create any office but must establish the Office of Underwriting, Office of Securitization and the Office of Federal Home Loan Bank Supervision.  The OCMA would administer the Market Access Fund.  Of course, we cannot forget multifamily housing.  There will be an Office of Multifamily Housing.  As for regulations, FMIC starts with the Standard Form Credit Risk-Sharing Mechanism.  Then there will be rules for the Mortgage Insurance Fund.  FMIC would be exempt from SEC but there will be a Securitization Platform with a Platform Board.  Regulations to come include servicers, IDI, PMI and the authority to issue any regulation they desire ……… I am sorry, I need to stop here, I can't read any more.  My head is hurting too much, trying to compute the compliance cost.  (MND has a good summary for those interested.)

 

House Price Inflation and the Fed

Instead of wasting time on the details, I would like to approach Freddie and Fannie reform from a different perspective – the origination and loss recovery.  

In hindsight, it is clear that the agencies did not lead the sub-prime bubble but they were nevertheless dragged into the cesspool.  They never provided no-doc no-qualification NINJA loans, but cannot escape the simple maths of lending 95% LTV loans when the V (value) was artificially inflated by 40%-50%-or more, resulting in all the negative equity loans outstanding today.  Regardless of how qualified a buyer may appear to be at origination, if the property's value declines by, say 20%, all 95% LTV loans will be in trouble.  

Is double digit home price appreciation a reasonable expectation, when inflation (as imagined by the Fed) is non-existent, income growth is negligible and GDP growth is barely a couple of percent?  Is the bill going to prevent the new agency from insuring loans secured by inflated assets? 

It is unclear how the Fed justifies buying agency MBS when home prices are appreciating at an unsustainable pace and agency loans command 90% of the mortgage market.  Are they trying to use a housing bubble to rescue the economy?  Are the Fed's actions disregarding any consequences to the real estate market?  Is the purchase of agency MBS a real tool for monetary policy, or is it just something the Feds were allowed to do?  

Greenspan, Bernanke and Yellen all confessed that they were wrong about sub-prime.  They all underestimated the consequences.  Yet, they are still empowered to openly manipulate the real estate market, something they admitted that they know very little about.  For agency reforms to be meaningful, Congress should first remove the power of the Fed to buy agency MBS, allowing some type of orderly free market price setting mechanism to return.

 

Making Rules Up on the Fly

As regards loss recovery, there were Federal Laws, State Laws and local government ordinances, the rules and procedures that a lender must go through when a borrower defaults on a mortgage.  They have all been ignored during the aftermath of the sub-prime bubble.  Order has not been restored.  No one can really say what the rules will be if the industry suffers another down turn.  The Johnson/Crapo Bill adds to the confusion:

Sec.305. Authority to protect taxpayers in unusual and exigent market conditions.

 

If the Corporation, the Chairman of the Federal Reserve Board of Governors and the Secretary of the Treasury, in consultation with the Secretary of Housing and Urban Development, determine that unusual and exigent circumstances threaten mortgage credit availability within the U.S. housing market, FMIC may provide insurance on covered securities that do not meet the requirements under section 302 including those for first loss position of private market holders.

In other words, Section 305 explicitly states that if the Fed, the Treasury and HUD decide market conditions are "unusual and exigent", whatever that means, they can have taxpayers directly fund any bailout and change the rules as they see fit.  To have the gall to say they are protecting taxpayers is an insult to the intelligence of the taxpayers.  Hmmmm. "Intelligence of the taxpayers"?  I need to think about that one.

How can risk managers assess mortgage risk when the rules are moving targets, subject to changes that are dependent upon the prevailing political winds?

The agencies have been providing cheap financing to borrowers, courtesy of the Fed.  The agencies have been providing cheap and bullet proof insurance for bond investors, courtesy of the Treasury.  The Bill somehow expects some mysterious private capital will come in to insure the first loss position and the Government (including the FOMC) can gracefully exit its role in the mortgage monopoly. That is more than overly optimistic.  Can anyone quantify that in dollars as well as mortgage rates?

 

Conclusion:

In summary, the Bill is going to increase mortgage compliance costs.  It will confuse, rather than clarify, the mortgage application and approval process.  It is a disaster.  Fortunately, I opine the Bill has no chance of passing in its present form.

 

Alan Greenspan and Ben Bernanke – Clueless, but intervening anyway …

via Zero Hedge http://ift.tt/1oVG5xz Tyler Durden

Venezuela’s exchange rate is a Gordian Knot of rules and regulations meant to baffle onlookers with bullshit and, we suspect, hide the hyperinflation from prying eyes just a little longer.

Today’s launch of SICAD II, a new currency market which allows the free-market to bid for USD (in Bolivars), appears to be an effort to provide liquidity to a black-market for dollars. SICAD II priced at 55 Bolivars today – an 88% devaluation from the official rate of 6.29 (and another auction-based rate SICAD I – applicable to some firms – of 10.8).

 

This new SICAD II rate will replace SICAD I as the official tourist rate.

Confused? You should be – the bottom line is that Maduro and his cronies continue to suppress the reality of a hyperinflating currency as student marches grow ever more popular and outspoken.

 

The positive ‘spin’ is that SICAD II has lowered the black market rate but simply due to the additional liquidity and transparency that the platform provides – an 88% devaluation is nothing to be too excited about!!

 

Via Reuters,

“It is going to cover 7, 8 percent of real (dollar) demands, seeking equilibrium as regards the flow of foreign currency necessary for the functioning of the economy,” Maduro said in a speech on Friday.

 

Sicad 2 essentially revives a previous system, known locally as the “permuta” or “swap” market, which Chavez shuttered in 2010 after accusing speculators of manipulating it.

 

Opposition politicians have long criticized the government’s currency controls. Still, they are lambasting Maduro for what they call a “stealth devaluation” via the new system.

 

“Today will be ‘black Monday’. Sicad 2 is another devaluation for our currency,” Tweeted opposition leader Henrique Capriles. “Nicolas has also finished off the bolivar. Another blow to the poor.”

 

Venezuela’s annual inflation rate, currently at more than 56 percent, is the highest in the Americas.

As Bloomberg adds,

“This is a devaluation any way you look at this,” Tamara Herrera, chief economist at financial research firm Sintesis Financiera, said by phone. “The government is trying to bring down the black market rate with this new market, with the consensus that the dollar should be trading for about 50 bolivars.”

via Zero Hedge http://ift.tt/1gjijJW Tyler Durden