economic Trends

IOU’s: China Buys Treasury Debt

"China, meaning China’s central bank — the People’s Bank of China — started buying Treasury IOU’s again in March. It purchased $36 billion worth. It now holds over $1.2 trillion in Treasury IOU’s. China has now leaped ahead of Japan as the #1 foreign holder of U.S. government debt. Add Hong Kong to this: another $180 billion. In short, the Communists are subsidizing American consumers (cheap goods) and American politicians (low interest rates/more debt). The Chinese masses are paying for this: reduced wealth. Americans get this wealth. Communist politics + mercantilist economics = stupidity. It won’t go on forever. Enjoy it while you can." Continue reading →

Continue ReadingIOU’s: China Buys Treasury Debt

BRICS establish $100bn bank and currency pool to cut out West

"The group of emerging economies signed the long-anticipated document to create the $100 bn BRICS Development Bank and a reserve currency pool worth over another $100 bn. Both will counter the influence of Western-based lending institutions and the dollar. The new bank will provide money for infrastructure and development projects in BRICS countries, and unlike the IMF or World Bank, each nation has equal say, regardless of GDP size. Each BRICS member is expected to put an equal share into establishing the startup capital of $50 billion with a goal to reach $100 billion. The BRICS bank will be headquartered in Shanghai." Continue reading →

Continue ReadingBRICS establish $100bn bank and currency pool to cut out West

Cyprus: 16 months of capital controls, banks still pitifully capitalized

"It’s been over a year since the banking system in Cyprus officially went bust. On Friday, March 15, 2013, practically everyone in the country went to bed thinking that everything was just fine. Many had probably gone to the bank that very day to do business, or logged on to an Internet banking platform. Yet the very next morning, they woke to a completely new reality: the nation’s banks were broke, and the government was in no position to rescue them. All the promises they had been told about government guarantees and having a ‘well-regulated’, sound banking system turned out to be lies." Continue reading →

Continue ReadingCyprus: 16 months of capital controls, banks still pitifully capitalized

IMF pronounces Bulgaria’s banks safe, 2 weeks before bank run

"Earlier this summer, IMF bureaucrats went to Sofia, Bulgaria to study the country’s economic progress. And roughly a month ago, they released an official report which stated, among other things, that Bulgarian banks are 'stable and liquid.' Talk about epic timing. Because less than two weeks later, Bulgaria’s banking system was in the throes of a full-blown crisis. There was a run on two of the nation’s largest banks—several hundred million dollars had been withdrawn in a matter of hours. And the Bulgarian central bank had to step in and take over both of them or risk a collapse in the entire system." Continue reading →

Continue ReadingIMF pronounces Bulgaria’s banks safe, 2 weeks before bank run

Bill Bonner: The Dumbest Investment Mistake You Can Make

"There could be a 15-day cooling off period… which could be extended by the Fed, in the interest of market stability. Economists don’t know what will work because no one can know what the future will bring. But we all know what won’t work: central financial planning. Likewise, investors can’t consistently choose good investments; because they don’t really know the future. All they can know is what isn’t true and, knowing that, avoid bad investments. That’s why investing is often called a 'loser’s game.' You don’t win by choosing winning investments; you win by not losing. You don’t win by pretending to know what is true; you win by knowing what is false." Continue reading →

Continue ReadingBill Bonner: The Dumbest Investment Mistake You Can Make

The Logical Conclusion of the Modern, Monetary Argument

"One of the most terrible things about the globalization of finance, money and industry is that it homogenizes booms and busts. There is literally nowhere to go. As economic centralization continues, these cycles will only worsen. These days in the West – and certainly in Washington – Republicans are sure they can mandate a technocratic interest-rate rule that will restrain the Fed from doing inordinate damage to the economy. Ironically, Democrats argue for more flexibility and less government interference regarding money. This would be admirable from a free-market standpoint except that they are arguing on behalf of a MONOPOLY facility. As usual, both parties get it wrong." Continue reading →

Continue ReadingThe Logical Conclusion of the Modern, Monetary Argument

Fed looks at imposing exit fees on bond funds

"Federal Reserve officials have discussed whether regulators should impose exit fees on bond funds to avert a potential run by investors, underlining concern about the vulnerability of the $10 trillion corporate bond market. US retail investors have pumped more than $1 trillion into bond funds since early 2009. This has created a boom environment for fixed income money managers, but raises the prospect of a massive disorganized flight of money out of the industry should interest rates rise sharply in the coming years. Exit fees would seek to discourage retail investors from withdrawing funds, thereby making their claims less liquid and making a fire sale of the assets more unlikely." Continue reading →

Continue ReadingFed looks at imposing exit fees on bond funds

The Feds Step Up Utility Growth

"Federal regulators’ recent move to change the criteria used to calculate regulated utilities’ allowed returns may be a small victory for income investors. Over the past few years, regulators pared utility profits in response to ultra-low Treasury rates. But investors and energy executives have long argued that these historically low rates are a market distortion created by Federal Reserve stimulus and, therefore, do not accurately reflect utilities’ actual operating environment. The order in late June by the Federal Energy Regulatory Commission (FERC), the agency that regulates the transmission and wholesale sale of electricity in interstate commerce, finally acknowledged this reality." Continue reading →

Continue ReadingThe Feds Step Up Utility Growth

The Fed Chairs Have a Habit of Hazing

"Paul Volcker took over as Chair of the Fed in August 1979. A recession officially began five months later. This was the worst recession since the Great Depression. In August 1987 Alan Greenspan took over the Fed. Two months later 'Black Monday' occurred on October 19, 1987, when the Dow dropped 22.6% that day alone–the worst one-day crash in history. In February 2006 Ben Bernanke became Fed chair. The worst recession since the Great Depression officially began in December 2007, and you may recall there was some trouble in the financial markets in September 2008… In January 2014 Janet Yellen became Fed chair." Continue reading →

Continue ReadingThe Fed Chairs Have a Habit of Hazing

Bill Bonner: There Is No Security in Bonds Right Now

"Debt is always and everywhere a worry and a threat. It must be repaid. The more of it there is outstanding, the more cause for worry. Who won’t be able to pay? And if he doesn’t pay, will his creditors still be solvent? What if the currency goes down? What if inflation goes up? Debt raises questions… and makes the financial system fragile. As the quantity of debt increases, in other words, the quality should go the opposite direction. It doesn’t make sense for the amount of debt to increase as the price of it increases, too. It is contrary to the most basic law of supply and demand. And yet, yesterday, the price of debt went up… even as the supply of debt worldwide reaches epochal levels." Continue reading →

Continue ReadingBill Bonner: There Is No Security in Bonds Right Now