What Could Possibly Go Wrong

John Hussman: Reversing the Speculative Effect of QE Overnight

"Last week, without taking any care to reduce the size of its balance sheet, the Federal Reserve instantly changed the monetary environment to one that is observationally equivalent to the one that prevailed in 2009. By raising interest rates artificially (through interest payments on reserves and reverse repurchases) and applying those payments to everything but currency in circulation, the Fed has neutralized the misguided speculative prop it created through 6 years of policy distortion, and it did so in one fell swoop. From the standpoint of investors, the overall effect is just as if the Fed had suddenly reversed every dollar of quantitative easing since 2009 ($1.7 trillion)." Continue reading →

Continue ReadingJohn Hussman: Reversing the Speculative Effect of QE Overnight

Bill Gross: Central bank ‘casinos’ to run out of luck

"Investors should cut risk heading into 2016 as central banks trying to pump up their respective economies make losing bets, bond guru Bill Gross says. Institutions like the Federal Reserve and the European Central Bank are like 'casinos' that create money instead of chips 'they'll never have to redeem,' said Gross, founder of bond giant Pimco who now runs the $1.4 billion Janus Global Unconstrained Fund. Furthering the gambling analogy, he said central bankers are using a familiar ploy — doubling down on losing bets until they break even. 'How long can this keep going on? Well, theoretically as long as there are financial assets (including stocks) to buy,' Gross said." Continue reading →

Continue ReadingBill Gross: Central bank ‘casinos’ to run out of luck

Ben Bernanke Was Incredibly, Uncannily Wrong [2009]

"We now have the diametrical opposite of the famous 'Peter Schiff Was Right' video (a compilation of 2006 and 2007 clips in which Schiff, a financial expert who subscribes to Austrian economics, predicted the deep recession that would follow the bursting of the housing bubble). The new, opposite video is a compilation of the 2005–2007 prognostications of Federal Reserve Chairman Ben Bernanke. In it, Bernanke is shown to have been just as embarrassingly wrong as Schiff was uncannily right. Could their differences in economic understanding have anything to do with this remarkable dichotomy?" Continue reading →

Continue ReadingBen Bernanke Was Incredibly, Uncannily Wrong [2009]

U.S. Banks to Face $120 Billion Shortfall in Fed Crisis Plan

"The largest U.S. banks would face a $120 billion total shortfall of long-term debt under a Federal Reserve proposal aimed at ensuring their failure wouldn’t hurt the broader financial system. Banks such as Wells Fargo & Co. and JPMorgan Chase & Co. will be required to hold enough debt that could be converted into equity if they were to falter, according to a Fed rule that was approved by a unanimous vote on Friday. The Fed’s proposal, which applies to eight of the biggest U.S. banks, requires debt and a capital cushion equal to at least 16 percent of risk-weighted assets by 2019 and 18 percent by 2022." Continue reading →

Continue ReadingU.S. Banks to Face $120 Billion Shortfall in Fed Crisis Plan

Who’s the Bear Driving Up the Price of U.S. Stock Options? Banks

"If you want to buy a put to protect against losses in the Standard & Poor’s 500 Index, often you’ll pay twice as much as you would for a bullish call betting on gains. New research suggests the divergence is a consequence of financial institutions hoarding insurance against declines in stocks. Deutsche Bank AG says in a Dec. 6 research report that the likeliest explanation may be that demand is being created for downside protection among banks that are subject to stress test evaluations by federal regulators. In short, financial institutions are either hoarding puts or leaving places for them in their models should markets turn turbulent." Continue reading →

Continue ReadingWho’s the Bear Driving Up the Price of U.S. Stock Options? Banks

Desperate Finland Set To Unleash Helicopter Money Drop To All Citizens

"With Citi's chief economist proclaiming 'only helicopter money can save the world now,' and the Bank of England pre-empting paradropping money concerns, it appears that Australia's largest investment bank's forecast that money-drops were 12-18 months away was too conservative. Over the last few months, in a prime example of currency failure and euro-defenders' narratives, Finland has been sliding deeper into depression. As The Telegraph reports, this is a deeper and more protracted slump than the post-Soviet crash of the early 1990s, or the Great Depression of the 1930s. And so, having tried it all, Finnish authorities are giving every citizen a tax-free payout of around $900 each month!" Continue reading →

Continue ReadingDesperate Finland Set To Unleash Helicopter Money Drop To All Citizens

The World’s First Cashless Society Is Here – A Totalitarian’s Dream Come True

"Central planners around the world are waging a War on Cash. In just the last few years: Italy made cash transactions over €1,000 illegal; Switzerland proposed banning cash payments in excess of 100,000 francs; Russia banned cash transactions over $10,000; Spain banned cash transactions over €2,500; Mexico made cash payments of more than 200,000 pesos illegal; Uruguay banned cash transactions over $5,000; and France made cash transactions over €1,000 illegal, down from the previous limit of €3,000. An increasing number of government restrictions are encouraging Swedes to dump cash. The pretexts are familiar…fighting terrorism, money laundering, etc." Continue reading →

Continue ReadingThe World’s First Cashless Society Is Here – A Totalitarian’s Dream Come True

John Hussman: Psychological Whiplash

"Investors who refused to take the speculative bait may have been the first casualties of the Fed’s policies. But now, it is investors who remain fully invested in obscenely overvalued equities and junk credit that have become the unwitting dupes in this game. If the Fed cannot force people to abandon saving behavior with zero interest rates, some members of the FOMC have openly talked about driving interest rates to negative rates to 'stimulate' spending. This is not economics, it is megalomaniacal sociopathy. Centuries of economic history warn that this speculative episode, too, will end in a collapse." Continue reading →

Continue ReadingJohn Hussman: Psychological Whiplash

Oligarchies Masquerading as Democracies

"The creation of the Federal Reserve System in 1913 was the re-establishment of the oligarchs' lender of last resort. That meant that the federal debt would become the foundation of the entire economy: debt purchased by the central bank to balloon the monetary base. To pay off the debt would create mass deflation and depression. The oligarchs now have immunity. Congress will not order an independent audit of the FED. The model is the Bank of England. It has been the chief insurance agency of the Anglo-American oligarchy ever since 1694. The 'Glorious Revolution' of 1688/89 was in fact the symbolic triumph of the oligarchs over the king." Continue reading →

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Yellen Says Negative Rates On The Table “If Outlook Worsened”

"As the market now diligently calculates the suddenly surging odds of a December rate hike, here's Yellen with a preview of what will happen once the rate hike cycle is aborted, just as it was aborted in Japan in August of 2000 when the BOJ also decided to send a signal how much stronger the economy is by hiking 25 bps, only to cut 7 months later and to proceed to monetize not only all net Japanese debt issuance a decade later, but to hold half of all equity ETFs. The good news: YELLEN SAYS SHE DOESN'T SEE NEED FOR NEGATIVE RATES NOW; YELLEN SAYS FED SEES ECONOMY ON STEADY PATH OF IMPROVEMENT; Because when have the Fed's forecasts before ever been wrong." Continue reading →

Continue ReadingYellen Says Negative Rates On The Table “If Outlook Worsened”