Category: Countries & Regions

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QE Can’t Save the Day… We’ve Done a Version of It For Over 10 Years | ZeroHedge

While most commentators proclaim that QE is a completely new phenomenon, we have in fact seen a version of it in the form of the Fed’s and Asia’s (especially China’s) purchases of US Treasuries/ currency pegs over the last decade or so.

Indeed, today, the Fed, China, and Japan collectively hold 61% of the $10 trillion of US debt held by “the public.” When you add in the additional $4.6 trillion in US debt held by “intragovernmental holdings” (basically the Federal Government buying Treasuries by raiding Social Security and other pension funds) you find that Asia and the Feds have monetized $10.7 trillion of the US’s total $14.6 debt (roughly 73%) over the last 20 years.

via QE Can’t Save the Day… We’ve Done a Version of It For Over 10 Years | ZeroHedge.

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The Next Selling Wave Is About to Begin | Toby Connor | Safehaven.com

As the stock market moves down into the next daily cycle low and the selling pressure intensifies, this should drive the dollar index much higher. It remains to be seen if gold can reverse this pattern of weakness in the face of dollar strength, especially since the dollar will almost certainly be rallying violently during the intense selling pressure that is coming in the stock market.

via The Next Selling Wave Is About to Begin | Toby Connor | Safehaven.com.

 

When the dollar strengthens, gold normally falls. Except in times of high uncertainty (like the present), when demand for gold as a safe haven overcomes downward pressure from a stronger dollar. Buying gold at current prices is a bet that either Greece will default — a pretty safe bet — or that the Fed is again forced to use its printing press (not quite as certain).

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FRB: Press Release–Federal Reserve issues FOMC statement–September 21, 2011

The Committee continues to expect some pickup in the pace of recovery over coming quarters but anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets.

………The Committee discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability. It will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools as appropriate.

via FRB: Press Release–Federal Reserve issues FOMC statement–September 21, 2011.

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Fed Shifts Bond Portfolio – WSJ.com

The Fed is trying to ease financial conditions without taking the more controversial step of increasing the amount of money that it’s pumping into the financial system, since it will be using money already generated from other programs. A bond buying program the Fed completed in June was widely criticized internally and externally because it pumped $600 billion of newly printed money into the financial system, sparking fears of inflation……..

The more potent step of launching a new round of bond purchases that would further expand the Fed’s $2.867 trillion balance sheet remains a possibility, but inflation likely would need to slow much further to spur Fed officials to take that step……..

Economists aren’t so sure that the Fed’s latest gambit will do much to spur growth.

“The odds are ‘Operation Twist’ won’t work,” Anthony Sanders, a real-estate finance professor at George Mason University, said before the Fed action. The housing market has shown no reaction to interest rates that are already at record-low levels, he said. Freddie Mac’s latest survey finds the average rate on 30-year, fixed-rate mortgages at 4.09%, the lowest level in more than 50 years.

via Fed Shifts Bond Portfolio – WSJ.com.

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Of course it’s right to ringfence rogue universals – Martin Wolf

Thank you, UBS. As a member of the UK’s Independent Commission on Banking, under Sir John Vickers, I could not have asked for a better illustration of the unregulatable risks to which investment banks are exposed than Thursday’s announcement of a loss of $2bn in “unauthorised trading”. No sane country can allow taxpayers to stand behind such risks.

That is the kernel of the case for ringfencing of retail banking from investment banking, recommended in the ICB’s final report.

via Of course it’s right to ringfence rogue universals – FT.com.

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IMF Urges European Banks to Raise Capital – WSJ.com

European banks face about €300 billion about $409 billion in potential losses from the euro-zone debt crisis, the International Monetary Fund said Wednesday as it urged banks to raise capital to protect the global economy from more turmoil.The fund said fiscal strains emanating from weaker euro zone members have had a direct impact of about €200 billion on banks in the European Union since its debt crisis started last year. In addition to the holdings of government debt, lower bank asset prices raised credit risks between banks for an overall hit of €300 billion.

via IMF Urges European Banks to Raise Capital – WSJ.com.

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Barack Obama, Home Alone – Rich Lowry

In his new book on the Obama economic team, Ron Suskind quotes former administration official Larry Summers complaining: “We’re home alone. There’s no adult in charge. Clinton would never have made these mistakes.”

via Barack Obama, Home Alone – Rich Lowry – National Review Online.

Larry Summers “We’re home alone” comment could damage Barack Obama’s already slim chances of re-election. Already slim because there is little he can do that will create jobs before November next year.

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How to Prevent a Depression – Nouriel Roubini – Project Syndicate

The risks ahead are not just of a mild double-dip recession, but of a severe contraction that could turn into Great Depression II, especially if the eurozone crisis becomes disorderly and leads to a global financial meltdown. Wrong-headed policies during the first Great Depression led to trade and currency wars, disorderly debt defaults, deflation, rising income and wealth inequality, poverty, desperation, and social and political instability that eventually led to the rise of authoritarian regimes and World War II. The best way to avoid the risk of repeating such a sequence is bold and aggressive global policy action now.

via How to Prevent a Depression – Nouriel Roubini – Project Syndicate.

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