Liquidity 02 incl QE, Twist, LTRO, APP etc (Jun 14 - Dec 25)

[winston]

Endless Stimulus is Doomed to Fail

Governments around the world collude with the largest financial institutions to keep the greatest debt and financial-asset bubble in modern history from busting after it started to do so violently in late 2008.

Their actions are nothing new.

They’ve colluded through low interest rates, stimulus and the “wealth effect” for decades. I’m talking since the creation of the Fed in 1913, the New Deal in 1934, the endless trade and budget deficits (and Nixon) that broke the gold standard in 1971, and in 2000 under a Republican president.

Will they succeed?

Not a chance.

You don’t mess with Mother Nature or the Invisible Hand.

If you want to read a book that will make you sick to the stomach with its detailed and astute analysis of the confluence of political and financial institutions to create a debt and financial bubble that makes the Roaring ’20s look like child’s play then read The Great Deformation by David Stockman.

There will not likely be a greater book than this one at this time on this subject, nor a timelier one. It covers the political side of this bubble from the eyes of an insider who was Reagan’s budget director and a trader at Salomon Brothers from 1985 and at the Blackstone Group recently.

This guy has seen, heard and done it all.

His book is long and detailed, but well worth the read, even if you just skim through it for the key events of most interest to you.

In fact, it’s very much like Niall Ferguson’s The Ascent of Money, in which he outlines the growth of financial leverage and bubbles over many centuries. Stockman does this over the last century and there is simply no other book to rival it in the political and financial realm.

My point is this: When you think you’re greater than larger, universal forces — like Mother Nature or the Invisible Hand — you’re cruising for a bruising.

Just ask the later Roman emperors… the mid-western real-estate speculators from the 1830s… the railroad tycoons and speculators of the early 1870s… the stock speculators of 1929… the gold speculators that sprouted up in 1980… the tech-stock traders of early 2000… the real-estate flippers from 2006… or the Wall Street wizards of leverage buyouts, mortgage-backed securities, collateralized debt obligations and credit default swaps of 2007.

Governments and their central banks have simply decided: “We won’t have another financial meltdown or Great Recession like we had in 2008 and 2009.” They won’t allow the greatest debt bubble in history to deleverage like such bubbles did from as early as the 1700s up to the 1930s.

They’re not willing to admit they conspired with major financial institutions to create the greatest bubble in modern history through the generation of unprecedented debt and leverage.

And now they’re “protecting” the everyday household by bailing out the very financial institutions that created the bubble with government’s great help.

This is the greatest BS story I’ve ever heard.

Governments never let markets correct the imbalances in debt and speculation. They’ve stepped in every time and supported the economy and markets by lowering interest rates and injecting more money where needed.

They give accolades to the Invisible Hand, but the truth is they don’t trust God, Mother Nature or the free markets at all, because they know there are consequences for their actions and they simply don’t want to accept them.

We don’t want our athletes to take steroids to perform better — although some of us secretly do — so why would we want to put our economy on steroids or crack? Such things never end well!

Have you ever seen someone die from overuse of steroids, or an overdose of crack or heroine? It’s ugly.

Back in the late ’90s, I watched an exercise trainer literally shrivel up and die within weeks. He’d been a weight-lifter who’d taken steroids for decades. It finally caught up with him, suddenly and painfully!

There will always be consequences for cheating by over-stimulating. Isn’t it enough that natural processes already grow exponentially, despite cyclical set-backs, as George Gilder AND our research clearly shows?

Do we need to stimulate the natural process even more?

Governments and financial institutions seem to think so.

I think they’re selfish, short-sighted greedy and stupid… like most of the people that elect them.

Governments can only fight natural forces so long. The “Great Reckoning” is coming. Expect it between 2015 and 2022.

Cheers to David Stockman, an intelligent realist in a world turned upside down!

Source: Economy & Markets

[winston]

New evidence says the world’s central banks have failed

by Chris Martenson

Source: Peak Prosperity

http://thecrux.com/controversial-post-i ... 37gMXBU%3D

[winston]

Forget what you've heard about the end of QE ...

Central banks are planning to flood the world with even more "stimulus" next year

Source: Bloomberg

http://thecrux.com/forget-what-youve-he ... 37gMXBU%3D

[winston]

China: PBOC urges banks to boost loans

China has told its banks to lend more in the final months of 2014 and relaxed enforcement of loan- to-deposit ratios to expand credit, sources said, as Beijing prepares to release data that may confirm the relentless slowing of its economy.

Figures on inflation, imports and fiscal spending in November have already undershot expectations since the People's Bank of China sprang a surprise interest rate cut on November 21, raising fears that the bid to boost lending could foreshadow more weak figures on industrial activity for the month, due today, and on lending, due in the next few days.

Two sources with knowledge of the matter said China's central bank increased the annual new loan target to 10 trillion yuan (HK$12.55 trillion) for 2014, up from what mainland media have said was a previous target of 9.5 trillion yuan.

Also, The Wall Street Journal reported that the PBOC had injected 400 billion yuan into the banking system. The injection to the country's banks started on Wednesday through the China Development Bank.

Banks have disbursed 8.23 trillion yuan of loans between January and October, so they will have to quicken the pace in the last two months if they are to meet the new target.

If upcoming data also proves worse than expected, some analysts say the PBOC could cut banks' reserve requirement ratio as soon as this weekend, allowing them to further lift lending.

The amount of new loans issued by mainland banks fell by more than a third in October.

Zhou Hao, an economist at ANZ in Shanghai who focuses on monetary policy, said the lending move showed that government is still hoping it could hit its 7.5 percent growth target for 2014.

So far, however, the central bank's stimulus efforts haven't shown up in economic performance, but instead appear to have put a speculative rocket under the country's previously underperforming stock markets.

Any cut in the RRR also carries the risk of giving more fuel to asset bubbles. Banks' reluctance to lend has been attributed by some to a shortage of liquidity resulting from sliding deposits.

China Securities Journal reported yesterday that the five state-owned commercial banks would raise their fixed deposit rates up to 20 percent above the benchmark rate at branches in first-tier cities.

Source: REUTERS

[winston]

China: Liquidity

Qu Hongbin, HSBC chief economist for Greater China, expects the People's Bank of China to cut interest rates twice by 25 points and lower banks' reserve requirement ratio by 50 points three times.

"There is a downward pressure on domestic demand and the stimulus policies had not carried through," said Qu.

"The central bank must work harder to put liquidity into the economy to ease deflation risks."

He also believed Beijing would expand its fiscal deficit to boost spending on infrastructure.

Source: The Standard HK

[winston]

The Truth about This “Meltdown” Indicator

http://totalwealthresearch.com/2015/01/ ... /#deeplink

[winston]

Why Not Give It to the People?

OK, so you know that I don’t think governments should go too far to counter the natural cycles of the economy.

Those cycles have their own innate logic as they meander toward creating greater innovations, income and wealth. Markets and economies need the polar opposite of boom and bust, inflation and deflation, innovation and creative destruction.

When governments go too far trying to counter those realities, they end up doing more harm than good. They can’t accept that growth isn’t possible without pain, so they do everything in their power to keep the hurt at bay. Only, doing that simply prolongs the inevitable… and always makes the outcome worse than if they’d just let the free market run its course.

And you know that I think government and central banks the world over have gone too far in their efforts to fight the natural winter season our economy is embroiled in until 2023. They’ve created more than $10 trillion — $3.5 trillion in the U.S. alone — out of thin air, all in the vain and delusional attempt to keep the tide at bay and the bubble going!

That’s just crazy.

Unfortunately, it gets crazier still… and this next part really makes me mad…

All of that money “created” has gone straight to financial institutions, where it’s been used to speculate and create an even greater bubble in debt and financial assets, and that only works to the advantage of the ultra-rich! I’m talking about the top 10% to 0.1%-plus here.

And we have special interest groups and lobbying in the areas of health care, military financial and education (in that order) to thank for that. They drive our political system. “Save the big banks, save AIG, save GM,” they chant.

But why not save the average household that has been suffering from one financial blow after another since 2000. Real wages have declined by more than 10% since then. Many are still living in homes that have less value than what they owe on the mortgage. Their standard of living hasn’t improved one iota, even with all the stimulus central banks have pumped into the system.

I think quantitative easing was the biggest mistake central banks could have made. Not only has it created yet another bubble that will crush millions more people when it bursts ahead, but such programs have done nothing to help the average household and even less to solve the underlying problems.

What those in charge should have done is actively work to restructure the massive debt build-up in the private sector, which outweighed government debt by three times at the crescendo of the bubble in 2008.

They could have done this through a collective Chapter 11 debt restructure, requiring banks to write down loans to fair value, while giving liquidity to the banks to avert a total meltdown. That $3.5 trillion could have gone into orchestrating as much as a $22 trillion write down in the 2000 U.S. bubble debt!

That would have helped the average citizen and the small or medium-sized businesses as much of their debt would have been written down.

Or… they could have just sent a check to every household (proportionate to the number of people in the house, of course). With that $3.5 trillion newly “printed” money, each household could have received about $30,000 each.

That would have stimulated demand where it could be of most value to the economy and have tilted the gains to the middle class, not the 1%.

But no! The foxes were brought into fix the henhouse and now we face possibly the biggest economic and market crisis in the last 90 years!

And with every day that passes, we hear new warnings and see new triggers that could be the one to bring the whole damn thing down.

There’s falling inflation and commodity prices, despite unprecedented stimulus.

China is slowing, even after the greatest over-stimulated government-driven bubble in history.

Southern Europe and Germany are being lead downhill by declining demographic trends.

Terror is growing around the globe, as expected when we consider the current Geopolitical cycle.

And falling oil prices have and will continue to burst the fracking bubble that developed over the last six years of QE.

All it will take is just one of those things to break the camel’s back… to be the last grain of sand that starts the avalanche.

Sadly, there’s nothing we can do about the missed opportunities. There’s nothing we can do to prevent central banks and governments from continuing to make foolish and damaging decisions.

Source: Economy & Markets

[behappyalways]

Easy Money Outweighs Fed to Fuel Record Debt Flows to Asia Haven
http://www.bloomberg.com/news/articles/ ... asia-haven

[winston]

b]Why You Should Be Scared![/b]

The major concern since the Fed and central banks around the world began printing unprecedented amounts of money has been inflation.

Naturally, we disagreed. We’ve been calling for low inflation and ultimately deflation since this craziness began. We also warned that no good would ultimately come of these activities. And so far, anyone that isn’t blind can see the dangers building! Today we have an even greater debt and financial bubble and it will burst, sooner rather than later.

All central banks have done is pervert the economy and the markets. The result has been greater speculation and greater bubbles. There will be a collapse more dramatic than what we saw in 2008 and 2009.

Thanks for nothing Bernanke, Yellen and company!

What could these people have been thinking?

Clearly, they were thinking more about the rich than the middle-class or poor as all unprecedented QE has done is drive up financial asset prices, not help the everyday household. Such money printing has been largely to save financial institutions that used increasingly cheap Fed-driven money to speculate in everything from risky loans to stocks to commodities to real estate to complex and very dangerous derivatives.

Now they are just doing that more than ever.

When the whole financial system was melting down (as in the early 1930s) the response was: We will save the banks and financial institutions at all costs. The Fed is, after all, not a public institution. It is owned by the banks.

But why do that? If they melt down, we can finally be rid of excess leverage and fat in the system. How can we expect banks to make good decisions in the future if they don’t fail when they make the riskiest loans in history? We could finally get into a position from which to grow again if we just exhaled and let these debt and financial bubbles burst. We’d have another great depression! And that’s exactly what they don’t want.

Pity for them, that’s what we’re going to get anyway… just ahead.

What central bankers seem to fail to understand is that you don’t get something for nothing. Surviving and growing takes constant effort, innovation and investment in the future… all of which is exactly the opposite of what we naturally strive for. We want to win the lottery; we want peace, not pain. We really do want something for nothing and we’ll go to great lengths to get it (even if, ultimately, we’re unsuccessful).

That’s what makes marketing and sales pitches so effective. They promise us great gains and results with little or no effort.

Guess what? We’ve just been sold the greatest something-for-nothing pitch in history: Quantitative Easing. And now we’re all going to pay the price: especially the ultra-rich and the financial institutions they’ve been supporting the most.

Source: Economy & Markets

[behappyalways]

The reserve accumulation adds money supply to the financial system -- each dollar purchase creates a corresponding amount of new local currency -- and helps stimulate the economy. Annual monetary base in China and Russia grew at an average 17 percent in the decade through 2013, data compiled by Bloomberg show. The expansion rate tumbled to 6 percent last year.

Once Over $12 Trillion, the World’s Reserves Are Now Shrinking
http://www.bloomberg.com/news/articles/ ... -shrinking