"Interest is an essential component of human action and the charging of interest rates an integral component of human cooperation on markets. Abolishing interest rates or depressing them through policy intervention will never make markets work better, will never make financial markets more stable, and will never make society more prosperous." Continue reading →
"Federal Reserve Vice Chairman Janet Yellen said the central bank may hold the benchmark lending rate near zero even if unemployment and inflation hit its near-term policy targets. U.S. central bankers are focusing the full force of monetary policy on reviving growth and reducing 7.9 percent unemployment, using near-zero interest rates and a program of unprecedented bond buying. Yellen’s comments reflect the view of some policy makers that there is a risk of damaging the expansion by raising rates too early." Continue reading →
"Central bankers will be taught how to trade gold at a three-day seminar on 'gold reserves management' to be held in March at the University of California at Berkeley and co-sponsored by the World Gold Council. Apparently modern 'gold reserves management' involves a lot more than making sure that the metal is safe in a vault, even if whether and how a central bank should account to the public for its gold trading do not seem to be subjects for discussion at the seminar." Continue reading →
"The world's central banks last year bought 534.6 tons of gold in 2012, the most since 1964, as global gold demand hit a record value level, the World Gold Council said Thursday in a quarterly report. Purchases by central banks for the full year rose 17% compared with 2011, while fourth-quarter purchases of 145 tons marked a 29% rise from the same period a year earlier. In value terms, total gold demand in 2012 was $236.4 billion, an all-time high, the council said" Continue reading →
"As if any more evidence were needed (see my CB post earlier this week) that the Fed has succeeded, either through ignorance or design, in igniting new asset bubbles throughout the economy, the Federal Reserve Bank of Kansas City just released a survey of bankers that confirms a continuing rise in U.S. farmland prices. The chart below from the report by the Kansas City Fed puts this stunning trend in temporal perspective and reveals that it extends across all farmland, including irrigated cropland and ranchland." Continue reading →
"As the chart below shows, while California foreclosure activity is collapsing, things in other places are starting to indicate that the second housing bubble blown by Bernanke in 5 years, is finally starting to crack. In other words, ignore the sad and very much artificial reality of California where the real estate market is no longer indicative of what happens in a free market, and instead keep a close eye on those states where all artificial attempts to crush foreclosure starts and completions have been used up, and where reality is about to come back with a bang." Continue reading →
"Nearly 11 million borrowers are underwater on their mortgages, owing more than their homes are worth, according to CoreLogic, and yet home equity lines of credit are suddenly on the rise again. Blackwell pointed to increased consumer confidence, meaning borrowers now feel better about their ability to repay these loans. Both factors fueled a 19 percent jump in originations of home equity lines of credit at the end of last year, according to Equifax. In 2008, as housing was crashing, home equity line originations dropped 55 percent. With home prices up 8 percent year-over-year in December, homeowners are regaining home equity at a fast clip." Continue reading →
"Former U.S. Securities and Exchange Commission staffers who now work in the private sector may have helped derail last year's effort to reform the $2.6 trillion money market fund industry, a report said. The case study on money market fund lobbying is part of a 60-page report by the Project on Government Oversight (POGO). It is one example within a broader review by the non-profit government watchdog that examines in detail how the 'revolving door' at the SEC may have impacted policy and enforcement decisions over a 10-year period." Continue reading →
"U.S. Realtors and mortgage bankers say they hope President Barack Obama’s call for streamlined mortgage rules in his State of the Union speech will help them persuade regulators not to set a strict minimum down payment for home loans. At issue is the so-called qualified residential mortgage rule, which six banking regulators including the Federal Deposit Insurance Corp. and the Federal Reserve are aiming to complete this year. The regulators drew protests in 2011 when they released a preliminary draft requiring lenders to keep a stake in mortgages with down payments of less than 20 percent and those issued to [debt-laden] borrowers." Continue reading →
"Here’s the big question for Mary Jo White: If she becomes chairman of the Securities and Exchange Commission, where will her interests lie? With the public that pays her salary? Or with the people handing her the big bucks? White is the white-collar defense lawyer and former U.S. attorney nominated by President Barack Obama to lead the SEC. Upon leaving New York-based Debevoise & Plimpton LLP, the law firm will give her $42,500 a month in retirement pay for life, or more than $500,000 a year. This means she has a direct interest in Debevoise’s future profits, and therefore an incentive to help make sure only good things come the firm’s way." Continue reading →