Frisky Fed Hike-o-Matic

We haven’t commented on central bank policy for a while, mainly because it threatened to become repetitive; there just didn’t seem anything new to say. Things have recently changed a bit though. A little over a week ago we received an email from Brian Dowd of Focus Economics, who asked if we would care to comment on the efforts by the Fed and the ECB to exit unconventional monetary policy and whether they could do so without triggering upheaval in the markets and the economy**, so we are taking this opportunity to do just that.

 

Outside view of a famous crime scene: the building where the central planners of the fiat money regime gather to “steer” the economy.

 

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Putting on the Purple

 

Mayor: Drebin, I don’t want any more trouble like you had last year on the South Side. Understand? That’s my policy.

Drebin: Yes. Well, when I see five weirdos dressed in togas stabbing a guy in the middle of the park in full view of 100 people, I shoot the bastards. That’s my policy.

Mayor: That was a Shakespeare in the Park production of Julius Caesar, you moron! You killed five actors! Good ones.

– The Naked Gun

 

Laura Loomer, the first protester to rush the stage to interrupt the enactment of stabbing Donald “Caesar” Trump in a new version of Shakespeare’s play Julius Caesar. Apparently it has been transformed into some kind of leftist/ establishment/ Deep State wish fulfillment fantasy, which in turn has predictably triggered supporters of Mr. Trump. Since Ms. Loomer first rushed the stage, other protesters have followed her lead (see here for the back story on Loomer – thereafter protesters stormed the stage againand again…). In the meantime several companies have pulled their sponsorship of “Public Theater”, the group performing the play, presumably because the actual shooting of several Republican lawmakers by a deranged Bernie Sanders supporter made it seem like a truly major publicity fail in the making. We would note the following: Normally it is actually not a  good idea to publicly suggest that one would like to assassinate the POTUS – issuing such threats is illegal and will result in a visit by national security minions and quite likely a charge. Mr. Trump appears to have become the exception to this rule – there has been a veritable flood of death threats against him on social media and elsewhere, but we have yet to hear of anyone getting into trouble over this.

Photo credit: Fox News

 

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Pushing the Global Warming Scam

Two of Europe’s greatest contemporary enemies recently got together to compare notes and discuss how they were going to further undermine and destabilize what remains of the Continent’s civilization.  Pope Francis and German Chancellor Angela Merkel met on June 17, in the Vatican’s Apostolic Palace to discuss the issues which will be raised at a Group of 20 summit meeting in Hamburg, from July 7-8.

 

Preparing for the G-20 gab fest: Pope Francis and Angela Merkel, two of the most harmful busybodies and world improvers of modern times.

Photo credit: Credit Ettore Ferrari / European Pressphoto Agency

 

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Shrinking the Balance Sheet?

The big news last week came from the Fed, which announced two things. One, it hiked the Fed Funds rate another 25 basis points. The target is now 1.00 to 1.25%, and there will be further increases this year. Two, the Fed plans to reduce its balance sheet, its portfolio of bonds.

 

Assets held by Federal Reserve banks and commercial bank reserves maintained with the Fed – note that while asset purchases and bank reserve creation are connected, the connection is loose (there are other factors influencing movements in reserves as well). [PT] – click to enlarge.

 

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Down the Rabbit Hole

“The hurrier I go, the behinder I get,” is oft attributed to the White Rabbit from Lewis Carroll’s, Alice in Wonderland.  Where this axiom appears within the text of the story is a mystery.  But we suspect the White Rabbit must utter it about the time Alice follows him down the rabbit hole.

 

Pick a rabbit to follow…

 

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Don’t Be Fooled by These Calm Markets

What is happening in the world of money? Well – the most striking thing is: nothing.

It doesn’t seem to matter what happens. Dysfunction in Washington. Meltdown of the techs. No matter how rough the seas get, the markets glide along… scarcely noticing the storm-tossed waves below.

 

Thankfully the world’s central planners are so well-versed in egging on the creation of an ever greater mountain of debt and seemingly limitless asset price inflation with their “scientific” monetary policy that a complete blow-up of the the financial system only threatens now and then… most of the time we are in “moderation” mode. Nowadays we are in something that feels like a Valium-induced waking dream. It couldn’t be better… volatility has just served up its greatest disappearance act since the end of the last “moderation”.  What could possibly go wrong? – click to enlarge.

 

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Seasonax Event Studies

As our readers are aware by now, investment and trading decisions can be optimized with the help of statistics. After all, market anomalies that have occurred regularly in the past often tend to occur in the future as well. One of the most interesting and effective opportunities to increase profits while minimizing risks at the same time is offered by the event studies section of the Seasonax app.

 

A recent event that had quite an impact on certain markets… [PT]

 

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Maurice Jackson Interviews Jayant Bhandari

We are happy to present another interview conducted by Maurice Jackson of Proven and Probable with our friend and frequent contributor Jayant Bhandari, a specialist on gold mining investment, the world’s most outspoken emerging market contrarian, host of the highly regarded annual Capitalism and Morality conference in London and consultant to institutional investors.

 

As soon as Jayant touches down in London, he is accosted by microphone-wielding young women eager to hear what he has to say…

Photo via financialpost.com

 

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The Socialist Politician-Bureaucrat with the Worst Timing Ever

As most in the gold community know, the UK Chancellor of the Exchequer Gordon Brown announced on 7 May, 1999 that HM Treasury planned to sell gold. The dollar began to rise, from about 110mg gold to 120mg on 6 July, the day of the first sale. This translates into dollarish as: gold went down, from $282 to $258. It makes sense, as the UK was selling a lot of gold… or does it?

 

Former UK chancellor of the exchequer and later prime minister Gordon Brown, about to make a splash. He had a sense of market timing that is not exactly uncommon in political circles. In the UK market timing with respect to gold is a particularly sore point.  Before Brown sold 400 tons right at the 1999 bear market low, the UK government had already performed a large sale once – it sold 800 tons at $42/oz. shortly before Nixon defaulted on the US gold exchange obligation; over the next decade the dollar price of gold soared by nearly 2,500%. As a result, Brown’s decision to sell was like a giant bell ringing at a distance of about five feet –  even the deaf must have heard it. [PT]

Cartoon by Steve Bell

 

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The Crypto-Bubble – A Speculator’s Dream in Cyberspace

When writing an article about the recent move in bitcoin, one should probably not begin by preparing the chart images. Chances are one will have to do it all over again. It is a bit like ordering a cup of coffee in Weimar Germany in early November 1923. One had to pay for it right away, as a cup costing one wheelbarrow of Reichsmark may well end up costing two wheelbarrows of Reichsmark half an hour later. These days the question is how many wheelbarrows of US dollars one may need to pay for a bitcoin.

 

Is it real? (As our readers know, the nature of reality poses certain problems).  When we started writing this, bitcoin had just moved up by more than $600 in one week to its then level of $2,400 –  within a little more than a day it reached an interim peak of $2,760, then plunged to an interim low of around $1850 in just two trading days, only to rally to a new high of $2,930 over the next two weeks. Currently it trades at $2,750 (don’t hold it against us if these figures are no longer true by the time this post is published).

 

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[Ed. note: This article was originally posted in November of 2010 – we have decided to republish it with updated charts, as it has proved to be very useful as a reference – the mechanics of QE are less well understood than they should be, and this article explains them in detail.]

 

Printing Money

We have noticed that lately, numerous attempts have been made to explain the mechanics of quantitative easing.  They range from the truly funny as in this by now ‘viral’ You Tube video with two robotic teddy-bears discussing the Fed chairman’s qualifications (‘my plumber has a beard too’), to outright obfuscation such as the propagation of this ‘Bernanke explains he’s not printing money, it’s just an asset swap‘ notion. This was apparently repeated by NY Fed president William Dudley on one occasion as well.

 

Are they printing money? You bet they do.

 

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Mass Infusions of New Credit

 

“The bank is something more than men, I tell you.  It’s the monster.  Men made it, but they can’t control it.” – John Steinbeck, The Grapes of Wrath

 

Something strange and somewhat senseless happened this week. On Tuesday, the price of gold jumped over $13 per ounce.  This, in itself, is nothing too remarkable.  However, at precisely the same time gold was jumping, the yield on the 10-Year Treasury note was slip sliding down to 2.15 percent.

 

It looks hungry… once it is finished with this little Godzilla snack, it will probably come for the rest of us.

Illustration by Larry T Quach

 

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