Economy

ECB: Bank With Us … and We’ll Charge You Interest

"This morning, the ECB took the radical stepof cutting its deposit rate to negative 0.1 percent. It also lowered its benchmark lending rate (similar to the federal funds rate the U.S. Federal Reserve has been raising and lowering for decades) to 0.15 percent from 0.25 percent. Furthermore, it tried to boost the mortgage and business loan businesses by offering to buy Asset Backed Securities (ABS) and by launching more Long-Term Refinancing Operations. While central banks in Sweden and Denmark took tentative steps in the direction of negative rates, the ECB’s move is unprecedented because no major world central bank has ever tried it before." Continue reading →

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Fed Money Pumping Brings Results: The Affluent Society Returns

"Once again, monetary inflation is being confused with high-end entrepreneurialism. Ludwig von Mises, the great Austrian economist, was not fooled about the wealth effect of modern finance and, indeed, with his colleague FA Hayek dealt a devastating blow to the ever-reoccurring idea that 'this time it's different.' It's not different. Never. It just depends on where you are in the business cycle. Like a bad penny, this dream often recurs when the Fed has dumped enough money into the economy. These funds slosh around in the recesses of commercial banks and financial firms and then gradually find their way into stock markets and thence into high-end real estate." Continue reading →

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Bill Bonner: This Should Make Every American Angry…

"When the price of money goes down banks’ profit margins go up; by moving to zero interest rates, the Fed handed them higher earnings. And by guaranteeing the debt of the weakest institutions, the Fed gave big bonuses to the worst managers. Now, the alcohol is taking effect. All around the world markets stagger. Economies slur their words. Investors have severe memory loss. Businessmen can’t tell up from down. And the poor consumer gets a headache every time he checks his bank balance. Some people have access to the free money. Others don’t. Those with the access tend to be in the financial elite. It is no wonder the rich get richer; the game is rigged." Continue reading →

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Lebanon’s financial sector prepares to open books to Uncle Sam

"The Lebanese banking sector has been preparing for FATCA like the teacher’s pet not because it is a major advocate of reining in tax havens — Lebanese law explicitly allows companies set up with offshore tax status — or greater taxation transparency and new tax laws in the country. Rather, the sector is exceedingly wary of international regulators, specifically of falling foul of the US Treasury. This is due to Lebanon’s immense exposure to American leverage: some 70 percent of local deposits are held in US dollars; [..] no one wants a repeat of the 2011 Lebanese Canadian Bank fiasco, when the bank was accused by the US of money laundering and subsequently closed its doors." Continue reading →

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77,000 Foreign Banks To Share Account Info With IRS

"Nearly 70 countries have agreed to share information from their banks as part of a U.S. law that targets Americans' assets overseas. Starting in March 2015, these financial institutions have agreed to supply the IRS with names, account numbers and balances for accounts controlled by U.S. taxpayers. The law requires American banks to withhold 30 percent of certain payments to foreign banks that don't participate in the program — a significant price for access to the world's largest economy. The withholding applies to stocks and bonds, including U.S. Treasurys. Some previously owned securities would be exempt from the withholding, but in general, previously owned stocks would not." Continue reading →

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Is It a Crash Yet?

"Nothing about these markets is normal – especially in the face of continued economic weakness. These markets are being shoved higher for a reason. In fact, the idea behind these nonsensical valuations is to convince investors to buy-buy-buy. Only when enough of them have entered again will markets ready themselves for a crash. We've stuck to our predictions of higher equity marts not because there are any underlying factors that justify these valuations – there are not. But our conviction remains that powerful players want a higher market – a sky-high market – because a crash from that elevation may be painful enough to produce a consensus for yet more market globalization." Continue reading →

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New York Fed Massively Disagrees With DOE’s Student Loan Default Data

"How high those delinquencies rates actually are, though, is an open question, which is turning into confusion on how to fix the problem. The most dire assessment is that one in three borrowers trying to repay student loans was late by 90 days or more at the end of 2012, according to The Federal Reserve Bank of New York in April. The U.S. Department of Education only publishes default statistics, and the official number of borrowers who default within two years of entering repayment is currently 10 percent. The default rate after three years is 14.7 percent. The default rates have been widely criticized for not giving an accurate picture of the number of student loan borrowers in distress." Continue reading →

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Here’s One Fight Uncle Sam Can’t Win

"Economic citizenship programs are proliferating. That’s something to celebrate. These programs are a bracing antidote to the increasing tendency of governments to impose travel restrictions against their citizens, using passports as weapons. This has long been the policy of authoritarian governments like North Korea and China. But in recent years, the US and UK have made much greater use of passport revocations and even involuntary loss of citizenship against persons they perceive as 'enemies of the state.' Is it really surprising that a market has arisen to deal with these draconian restrictions on one of humanity’s most basic rights, the right to leave one’s own country?" Continue reading →

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The US and China: A Difference in Approaches

"The threat from the US sheriff is very real. But presumably, this bullying approach would be less effective if attempted against one of the world's more powerful countries. If, for example, the US were to find itself in a situation such as the present one with China, in which the US appeared to be losing its battle over the dollar's power as the world's reserve currency, what would occur? Would the US sheriff attempt to bully China? And if the ploy did not succeed, would the US draw its six-guns and fire off a few rounds in the air for emphasis? And if the above were to take place, what would the Chinese reaction be?" Continue reading →

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The Strange Tale of Swiss Banking – And What It Means for You

"It is interesting that remaining private banks are switching from partnerships to corporations. Judicially enforced corporate personhood distorts markets and enables market behavior that would not otherwise be feasible or tolerated. What remains most puzzling is that this most powerful industry composed primarily of private Swiss banks allowed itself to be virtually ruined in a few years' time. The precedent has been set, however. One nation may indeed interfere judicially in the affairs of another and force compliance, part of a wider assertion of privilege by a US government that is attempting to turn banking systems around the world into part of the US tax collection effort." Continue reading →

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