We must be getting closer to the global asset bubble bursting or the end of central bank intervention, or both since the latter is likely to cause the former. How do I know? Central banks and the international agencies that support their policies have already begun the blame game, in order to deflect criticism from themselves when the bubble does burst.
European Central Bank President Mario Draghi started the process two weeks ago. With the troubles at Deutsche Bank, Germany’s largest bank, perhaps as his reference point, Draghi struck back at European bankers’ criticism of the ECB’s negative interest rate policies, which the banks blame for their difficulty in turning a profit. While accepting some of the responsibility for that, he instead said a good part of the blame belongs to the commercial banks themselves.
“Low-interest rates tend to squeeze net interest margins owing to downward rigidity in banks’ deposit rates,” Draghi admitted. “But over-banking is also a factor in the current low level of bank profitability. Overcapacity in some national banking sectors and the ensuing intensity of competition exacerbates this squeeze on margins.”
Last Monday, the International Monetary Fund (IMF) endorsed the inclusion of the yuan in the fund's Special Drawing Rights (SDR) basket effective on Oct. 1, 2016. The Chinese currency has now joined the elite global currency club and will be the fifth member alongside the US dollar, the euro, the sterling and the Japanese yen.
Beijing has long hoped that the renminbi (another name for Chinese currency) would enter the privileged short list of world currencies, and it finally succeeded last week. But, first and foremost they are celebrating a political victory.
Some experts doubted that the yuan could be judged as "freely usable," which is the main criteria for inclusion to the SDR, but the reality proves that the stronger one is right despite such obvious contradictions as tight currency control and shares sale ban. Continue reading ""Enter The Dragon" Starring … Gold"→
Was May's better-than-expected jobs report strong enough to convince the Federal Reserve to start interest rate liftoff in September?
Based on the market's reaction on Friday, the answer sure looks like yes. Yields on long-term U.S. Treasury bonds spiked to their highest levels since last October, and stocks were mostly lower.
But let's not carried away with one number and one report. Certainly the data-paralyzed Fed won't. If we get three solid months of positive economic statistics, then I’ll think there's a chance – albeit a slim one – the Fed will make a move in September. Until then, we'll have to wait and see.
Notice I've already written off next week's Fed meeting as the first interest rate increase. While the minutes of the Fed's April 28-29 monetary policy meeting "did not rule out" the possibility of raising rates at the June meeting, it was "unlikely" that economic data would justify doing so by then. Nothing's happened in the meantime to change that. Continue reading "Jobs Report Not Enough to Signal September Liftoff"→
This morning, Christine Lagarde, the boss of the International Monetary Fund, announced to the world that the Federal Reserve should hold off raising interest rates until 2016. I do not ever remember the head of the IMF ever saying anything like that before.
So the question begets, is she trying to save her own skin by doing a classic political move and pointing the finger at somebody else, in this case Janet Yellen, head of the Federal Reserve?
My advice on this, it's not going to be pretty and the IMF should take care of its own screw-ups (like Greece) before trying to fix the screw-ups in America.
With that said, let's take a look at what's really going on in the marketplace today. I'm going to look at the major indices with the Trade Triangle technology, which by the way is totally nonpartisan and unbiased, and just goes with the flow.