What Could Possibly Go Wrong

Bloated Fed Balance Sheet Propelling Market Rally

"Like preceding surges, the rally's latest chapter is disconnected from the real economy's fundamentals. Instead, what we are witnessing is the direct result of an unprecedented expansion of the Fed's balance sheet. Recently, it has become clear just how addicted the stock market is to easy money policies, as even the slightest hint of the Fed tapering its asset-purchasing program sends the markets into a frenzy. When the Fed might actually rein in its money printing is anyone's guess, but if the chart above is any indication, there's only one direction the market is headed once its life support is yanked away." Continue reading →

Continue ReadingBloated Fed Balance Sheet Propelling Market Rally

Kirby Cundiff: Why Do Banks Keep Going Bankrupt?

"During the recent crises in Cyprus, proposals were seriously considered to ignore the 100,000 EUR deposit insurance and seize a fraction of even small depositors’ money. Most depositors lost access to their accounts for over a week and large depositors are still likely to lose a large fraction of their assets. Most depositors still believe that deposit insurance will cover any possible losses. If banks are to become more stable, the amount of equity relative to debt in the banking system must be drastically increased to something resembling what it would be without government deposit insurance, central bank subsidies, and treasury bailouts." Continue reading →

Continue ReadingKirby Cundiff: Why Do Banks Keep Going Bankrupt?

Bill Bonner: Alan Greenspan’s Shock Revelation

"We know from bitter experience that trying to force economies to do what you want is a thankless task. Markets are fundamentally based on free exchange, cooperation, trust and trade. Force them in one direction or another and you are just asking for trouble. As Alan Greenspan described this week, in an interview with John Stewart on 'The Daily Show,' people are a little 'screwy' from time to time. Which means they don’t necessarily go along with your central planning, no matter how good you think it is. But still economists insist that, if they are allowed to monkey around with it, they can make an economy better. This is occasionally true." Continue reading →

Continue ReadingBill Bonner: Alan Greenspan’s Shock Revelation

FINTRAC collecting too much info on innocent Canadians: privacy watchdog

"By law, Canadian banks, casinos and thousands of other businesses are required to report all financial transactions over $10,000, and any movement of money they suspect may be linked to terrorism or laundering the proceeds of crime. But in a special report to Parliament today, Privacy Commissioner Jennifer Stoddart complains that an investigation of the Financial Transactions Reports Analysis Centre, known as FINTRAC, found found everyday financial transactions of ordinary Canadians — things such as down payments for homes and cars, and wire transfers from families overseas to their children studying here. FINTRAC has amassed over 165 million reports." Continue reading →

Continue ReadingFINTRAC collecting too much info on innocent Canadians: privacy watchdog

Attempts To Eliminate Cash Are More Than A Privacy Disaster

"Politicians are suggesting that cash should be gradually replaced by credit card transactions and direct bank transactions, making every single movement of money trackable, seizable, and reversable. This is not just a privacy disaster, it’s also a resilience disaster. I had the privilege of having a long conversation with the Chief Security Officer of one of the larger European banks, and he told me the outcome was a given – there will always be some kind of cash. Whether it’s issued by a central bank is completely beside the point; if central-bank cash isn’t readily available, people will create a way to trade between them without involving a third party." Continue reading →

Continue ReadingAttempts To Eliminate Cash Are More Than A Privacy Disaster

Plans for Political Union Unravel in Europe

"Advocates of tighter integration believe that the euro zone needs to go further by borrowing elements from the American system of federalism. Many proposals reflect a belief that the euro zone needs to partially mimic the U.S., where the dollar works well across all states partly because of budgets, bonds, financial oversight and depositor protection at the national level. Over the past year, however, the political winds have shifted. Interviews with more than a dozen officials across Europe reveal how plans for deeper integration have run aground as financial markets have calmed and mistrust has simmered between power centers including Berlin, Brussels and Paris." Continue reading →

Continue ReadingPlans for Political Union Unravel in Europe

Marc Faber: Bond Burglars to Bring Bears Out of Hibernation

"The probability that we have embarked on permanent asset purchases by the Fed is very high (until QE99 — or at least until the system breaks down, as just outlined). To Mr. Bernanke’s credit, and to be fair to him, I need to point out that his economic sophism is shared by most central bankers around the world. We can see that the global monetary base has exploded more than fourfold since 2003. These universally common monetary policies are, of course, applauded by fund managers, bankers and the investment community, all of which benefit (including myself) from rising asset prices." Continue reading →

Continue ReadingMarc Faber: Bond Burglars to Bring Bears Out of Hibernation

Alan Greenspan Sees ‘Double Digit’ Inflation Ahead

"Alan Greenspan, the former Federal Reserve chairman, has largely avoided public comment on the Fed’s efforts to stimulate the economy, but he has said enough to make it clear that he is not a fan. It’s been a long time since anyone accurately predicted higher inflation. Instead, inflation has sagged to the lowest levels on record. But here’s why Mr. Greenspan is worried. Each time the Fed buys a bond, it pays the bank that sells the bond by creating money and putting it into an account that the bank keeps at the Fed. Mr. Greenspan’s inflation prediction is based on his estimation of the consequences as that money flows out into the economy." Continue reading →

Continue ReadingAlan Greenspan Sees ‘Double Digit’ Inflation Ahead

Faber: Fed could up QE to $1 trillion a month

"Marc Faber, publisher of The Gloom, Boom & Doom Report, told CNBC on Monday that investors are asking the wrong question about when the Federal Reserve will taper its massive bond-buying program. They should be asking when the central bank will be increasing it, he argued. 'The question is not tapering. The question is at what point will they increase the asset purchases to say $150 [billion], $200 [billion], a trillion dollars a month,' Faber said in a 'Squawk Box' interview. Faber has been predicting so-called 'QE infinity' because 'every government program that is introduced under urgency and as a temporary measure is always permanent.'" Continue reading →

Continue ReadingFaber: Fed could up QE to $1 trillion a month

Federal Reserve Policy Failures Are Mounting

"One possible reason why the Fed have consistently erred on the high side in their growth forecasts is that they assume higher stock prices will lead to higher spending via the so-called wealth effect. The Fed's ad hoc analysis on this subject has been wrong and is in conflict with econometric studies. The studies suggest that when wealth rises or falls, consumer spending does not generally respond, or if it does respond, it does so feebly. During the run-up of stock and home prices over the past three years, the year-over-year growth in consumer spending has actually slowed sharply from over 5% in early 2011 to just 2.9% in the four quarters ending Q2." Continue reading →

Continue ReadingFederal Reserve Policy Failures Are Mounting