End-of-week top gold news

Friday, 30-Jan-2015

Kim Hjelmgaard (USAToday) Win for Greece’s far-left Syriza party sows fresh fears for eurozone “Fresh concerns about the future of the eurozone resurfaced to unsettle markets Monday after Greece’s far-left Syriza party swept to power supported by voters opposed to the terms of the nation’s international bailout.”

Note: The Syriza win was not much of a surprise, they were leading in the polls even before the previous government failed. Now it remains to be seen what the broader implications are of the win, not just for Greece, but for the whole EU experiment.

Kenneth Rapoza (Forbes) Meet The New Bubble: The U.S. Dollar “The U.S. dollar is the single most powerful herd dynamic in global financial markets today. And financial markets are unlikely to let a good bubble go to waste, emerging market asset manager the Ashmore Group said in a report on Monday.”

Note from JK: The one constant between all bubbles is that they eventually pop. Will the US Dollar buck the trend? Doubt it. And where do you want your assets to be when it happens? Euros? Yen? HA! I for one would choose the only currency that can’t be printed or debased by a central bank: GOLD

Rhiannon Hoyle (Wall Street Journal) Russia, Kazakhstan Acquire More Gold; Netherlands Also a Buyer, Says IMF “Emerging markets again dominated gold-market activity among central banks in December, continuing a trend that emerged in recent years as expanding economies sought to diversify their assets amid turbulence in global markets.”

Note: Out of dollars and euros and into gold. Sounds like a pretty prudent diversification strategy to me.

(Platts) Central bank gold buying expected to continue in 2015: Macquarie “Global central banks are forecast to continue to be net buyers of gold in 2015, following the pattern seen over the past few years, investment bank Macquarie said Wednesday.”

Note: A prudent diversification strategy that is expected to continue…

Julian D.W. Phillips (GoldSeek) The end of Currency ‘Safe-havens’ “gold has never forfeited its role as a ‘safe-haven’ for long. It is distinguished by the fact that there is no lasting link between gold and national governments and their national currencies. What gold has always had is the respect and the belief that it is money ‘in extremis’. For governments, through institutions to individuals, gold is always money, even between enemies.”

Note: Even the traditional safe-haven currencies are doing everything in their power to discourage inflows, primarily by cutting rates into negative territory. If they don’t want your assets, gold is becoming the increasingly logical choice. It is the safest of the safe-haven assets because it can not be debased.

Joseph Richter & Joseph Deaux (Bloomberg) Gold Rises From Two-Week Low as U.S. Expansion Trails Forecast “Gold rebounded from a two-week low after U.S. government data showed the economy expanded at a slower pace than forecast in the fourth quarter, reigniting demand for the metal as a haven.”

Note: The economy is slowing faster than expected and many of the Fed watchers continue to expect a rate hike. Gold has been suppressed by that expectation, when the expected rate hike doesn’t come to pass, gold may well release to the upside like a coiled spring.

Lefteris Papadimas & Renee Maltezou (Reuters, via BusinessInsider) Greece says it won’t cooperate with its bailout financiers “Greece’s government will not cooperate with the EU and IMF mission bankrolling the country and will not seek an extension to the bailout program, its finance minister said on Friday.”

Note: And there ya go: The Greeks aren’t playing. This sets up an interesting confrontation when the bailout money runs out at the end of Feb.

Posted in Gold News, Gold Views |

U.S. stocks routed in final hour, end month in the red

30-Jan (MarketWatch) — U.S. stocks ended a turbulent Friday trading session with big losses, as selling on Wall Street accelerated in the final hour.

Investors grappled with downbeat gross domestic product data, less-than-stellar earnings that overshadowed a bounce in crude-oil futures.

A slower-than-expected economic growth number resulted in a flight to quality, with investors flocking into havens such as Treasurys and gold and unloading equities.

[source]

PG View: Gold closed on its intraday highs, up more than $20. The 10-year Treasury yield closed at 1.64% (-11 bps).

Posted in Markets |

U.S. National Debt: $18,085,063,837,781.82

Posted in Debt |

U.S. Retail Sector Begins Massive Collapse

by Jeff Nielson
30-Jan (ZeroHedge) — The quick-and-easy way to categorize the retail sector of the U.S. economy would be to use the metaphor of “falling off a cliff”. However, such a characterization would be overly simplistic. A more accurate analogy would be to consider someone sliding halfway down the side of a mountain – and then falling off a cliff. This represents the retail sector of the largest “consumer economy” the world has ever seen.

As explained previously; a “consumer economy” is (by definition) a dying economy. Consumption is not an activity which contributes to the productivity of any nation. Rather, “consumption” is our means of harvesting the fruits of previous labours. As a matter of elementary logic; such “harvesting” cannot continue over any extended period, or one will simply run out of anything to harvest.

At that point; the consumer economy becomes a debtor economy, meaning a Deadbeat Economy, since it now lacks the productive capacity to pay for what it consumes. Our economies have become a cartoon, and our governments have become a Cartoon Character, specifically Wimpy, from the old “Popeye” cartoons.

“I’ll pay you on Tuesday for a hamburger today.”

Children laugh at the cartoon, because everyone knows that Wimpy can never pay for the hamburger on “Tuesday”, but rather when it comes time to pay for his consumption he will simply seek to do more mooching. That is the “consumer economy”. That is the U.S. economy.

[source]

PG View: And yet consumer sentiment is running at levels not seen since 2004, which has largely been driven by tumbling energy prices.

Posted in Economy |

Greece Sets Up Cash Crunch for March Telling EU Financial Bailout Is Over

30-Jan (Bloomberg) — Finance Minister Yanis Varoufakis said Greece won’t seek an extension of its bailout agreement, setting the government on course to enter March without a financial backstop for the first time in five years.

Greece won’t engage with officials from the troika of official creditors who have been policing the conditions of its rescue since 2010. It’s five-day-old government wants a new deal with the European Union that allows for more spending, Varoufakis said at a joint press conference with Eurogroup Chief Jeroen Dijsselbloem in Athens, Friday.

“We don’t plan to cooperate with that committee,” Varoufakis said. “The Greek state has a future, but what we won’t accept has a future is the self-perpetuating crisis of deflation and unsustainable debt.”

The standoff could see Greek banks effectively excluded from European Central Bank liquidity operations and the government with no source of funding, having rejected EU aid while still shut out of international markets.

[source]

PG View: S&P announced this morning that the credit ratings of Greek banks are being reviewed for possible downgrade.

Posted in European Debt Crisis |

GDP growth cools to 2.6% annual rate in fourth quarter

Economic growth unexpectedly slowed sharply in the fourth quarter of last year to a modest 2.6% annual rate after a strong six-month stretch raised hopes the U.S. recovery finally was accelerating toward normal.

The data released Friday by the Commerce Department came in well below analyst expectations but still indicated the economy was growing at a solid pace as many nations around the world continue to struggle in the wake of the Great Recession.

[source]

Posted in Economy |

The Daily Market Report: Gold Rebounds on Greece Concerns, Slower U.S. Growth


30-Jan (USAGOLD) — Gold rebounded smartly on Friday, amid heightened concern over Greece. While the yellow metal still appears poised for a lower weekly close, most of Thursday’s losses have been retraced.

The new Greek government had there first meeting with representatives from the EU today, and many were hopeful that some compromise could be reached. Apparently the Greeks are digging in their heels.

Finance Minister Yanis Varoufakis said Greece would not seek to extend the bailout program when the current agreement expires at the end of February. “We don’t plan to cooperate with that committee,” Varoufakis said.

This sets up a showdown between the Tsipras government and the troika over bailout funds that have already been disbursed. The EU remains adamant the Greece abide by the terms of the agreement.

Both sides may be bluffing to some degree, but the bond market is not amused. Greek interest rates surged more than 150 bps to exceed 19% as news of the decision came out. Meanwhile yields in less risky government bonds tumbled to new cycle lows. The U.S. 10-year rate tumbled to 1.65%, a level not seen in nearly two-years.

The advance report for U.S. Q4 GDP missed expectations this morning, coming in at +2.6%. Expectations were for a rise of 3.3% on the heels of the 5.0% pace in Q3. With the economy slowing, uncertainty in Europe, war in Ukraine, one has to wonder if the Fed is really still contemplating a rate hike in the first half of the year. Recent bond market activity alone suggests expectations for that first rate hike are getting pushed further into the future.

The flight to quality has had a positive influence on gold as well, driving the yellow metal back above 1270.00. Nearly half of the retreat off of last week”s high at 1307.59 has already been retraced and the trend since the beginning of the year remains positive.

Posted in Daily Market Report, Gold News, Gold Views |

BOOM: SGE Withdrawals Week 3, 2015: 71 tonnes!

by Koos Jansen
30-Jan (BullionStar) — As I wrote last time on data from the Shanghai Gold Exchange (SGE), in week 2 of 2015 withdrawals from the vaults of the SGE (that equal Chinese wholesale demand) came in extremely high at 70 tonnes; the third highest amount ever. In week 3 (January 19 – 23), though, the Chinese withdrew even more at 71 tonnes, up 0.89 % w/w, and a new third highest amount ever. Year to date 202 tonnes have been withdrawn fro the SGE vaults, up 15 % y/y. Like last week, this was happening while the price of gold was rising sharply, staggering numbers.

[source]

Posted in Gold News, Gold Views |

Building Toward Another Mortgage Meltdown

By Edward Pinto
28-Jan (Wall Street Journal) — The Obama administration’s troubling flirtation with another mortgage meltdown took an unsettling turn on Tuesday with Federal Housing Finance Agency Director Mel Watt ’s testimony before the House Financial Services Committee.

Mr. Watt told the committee that, having received “feedback from stakeholders,” he expects to release by the end of March new guidance on the “guarantee fee” charged by Fannie Mae and Freddie Mac to cover the credit risk on loans the federal mortgage agencies guarantee.

Here we go again. In the Obama administration, new guidance on housing policy invariably means lowering standards to get mortgages into the hands of people who may not be able to afford them.

[source]

Posted in all posts |

Henry Kissinger, Mikhail Gorbachev separately warn about Ukraine crisis blowing out of control

30-Jan (NationalPost) — As Russian-backed rebels scored another victory is Eastern Ukraine Thursday, two giants of 20th-century geopolitics issued separate warnings about the crisis, suggesting it could evolve into a deeper, direct conflict between the United States and Russia with dangerous consequences.

Testifying at a U.S. Senate Armed Services Committee hearing, Henry Kissinger, an ardent Cold Warrior who was Richard Nixon’s main foreign policy advisor, stopped short of endorsing a call by the committee chairman, Republican Senator John McCain of Arizona, to provide defensive weapons to Ukraine’s military as it battles Russian-backed separatists.

“I’m uneasy about beginning a process of military engagement without knowing where it will lead us and what we’ll do to sustain it,” the 91-year-old Mr. Kissinger said.

Mr. Kissinger, chairman of Kissinger Associates, said Ukraine should be an independent state and Russian troops should be withdrawn.

[source]

PG View: While the war in Ukraine has been nudged off the front pages, it seems the conflict has escalated significantly in recent weeks:

Ukraine battle rages for key town of Debaltseve

Bodies in streets as shelling rocks Ukraine city of Donetsk

Posted in Geopolitical Risks |

Gold on the rise intraday as Greece FinMin says they will not seek to extend bailout agreement with troika when it expires 28-Feb.

Posted in European Debt Crisis, Gold News, Politics |

Greece says it won’t cooperate with its bailout financiers

30-Jan (Reuters, via BusinessInsider) – Greece’s government will not cooperate with the EU and IMF mission bankrolling the country and will not seek an extension to the bailout program, its finance minister said on Friday.

Jeroen Dijsselbloem, head of the euro zone finance ministers’ group who is in Athens for talks with the new government, said the two sides would decide what would happen next before the program ends on Feb. 28.

“This platform enabled us to win the confidence of the Greek people,” Finance Minister Yanis Varoufakis told reporters after their meeting. “Our first action as a government will not be to reject the rationale of questioning this program through a request to extend it.”

[source]

Posted in European Debt Crisis, Politics |

Greece really might leave the euro

30-Jan (WashingtonPost) — The world’s worst portmanteau is back: Grexit.

That’s short for “Greek exit,” as in Greece leaving the euro. And it’s once again a possibility now that the left-wing, anti-austerity party Syriza has won power in the latest elections. The risk, as I’ve said before, is that the rest of Europe is in good enough shape that Germany finally thinks it can let Greece leave, and Greece’s budget is in good enough shape that it finally thinks it can leave too. Neither of them wants that, but neither of them doesn’t want it so much that they’d do anything to avoid it—so both might call each other’s, as it turns out, non-bluffs if Syriza tries to force Germany to renegotiate Greece’s gargantuan debt.

Cue the market freakout in three, two, oh, it’s already here? Why yes, yes it is. Greek stocks fell 11 percent on Tuesday, another 9.2 percent on Wednesday, before stabilizing up 3.2 percent on Thursday. Three-year borrowing costs shot up to 16.9 percent. And worst of all, Greek banks collapsed between 30 and 45 percent in just the last week. That’s enough, as we’ll see in a minute, to make it much more likely that Greece leaves the euro.

[source]

PG View
: Even after Greece’s talks today with the EU, bond yields continue to march higher, exceeding 19%.

Posted in European Debt Crisis, Politics |

University of Michigan sentiment revised down to 98.1 in Jan, above expectations of 98.0, vs 98.2 preliminary print and 93.6 in Dec.

Posted in Economic Data |

Chicago PMI rose to 59.4 in January, above expectations of 57.9, vs 58.8 in Dec.

Posted in Economic Data |

Gold Rises From Two-Week Low as U.S. Expansion Trails Forecast

30-Jan (Bloomberg) — Gold rebounded from a two-week low after U.S. government data showed the economy expanded at a slower pace than forecast in the fourth quarter, reigniting demand for the metal as a haven.

A widening trade gap limited expansion for gross domestic product as imports climbed three times faster than exports, Commerce Department figures showed. Gold is heading for the biggest monthly gain since July 2013 amid speculation that weaker foreign economies will be a drag on American growth, prompting the Federal Reserve to wait longer before raising interest rates.

Investors are returning to precious metals, with assets in exchange-traded products backed by gold climbing for 10 straight sessions to the highest since October, data compiled by Bloomberg show. Gold tumbled 2.4 percent on Jan. 29, the most since 2013, after the Fed a day earlier raised its assesment of the U.S. economy and labor market.

“Gold has found a bit more of a bid with the lower-than-expected GDP number,” David Meger, the director of metal trading at HighRidge Futures LLC in Chicago, said in a telephone interview. “The story that’s playing out on this is that the Fed can be more patient in raising rates, and that’s supportive for precious metals.”

[source]

Posted in Gold News, Gold Views |

The Index That Timed The 2008 Crash Perfectly Just Slumped To A Three-Decade Low

30-Jan (BusinessInsider) — The Baltic Dry Index just hit a 28-year low. The index famously mapped the financial crisis, going through the floor as the global economy tanked in 2008, but it’s just slumped to an even lower level.

The index measures shipping costs for dry bulk commodities (minerals and metals like coal and iron, as well as grain and other foods).

It plunged by more than 90% in just a few months in 2008 as the global crisis unrolled. Then, it was an impressive bellwether for the global situation.

…It’s now dropped by more than 50% in less than three months.

[source]

Posted in Economy |

Russia buys record amounts of gold


29-Jan (Financial Times) — Russia accounted for about one-third of central banks’ gold purchases last year as the country spent more on the metal than at any time since the break-up of the Soviet Union amid escalating tensions with the west and a collapse in the value of the rouble.

Central banks around the world bought a net 461 tonnes of gold in 2014 — 13 per cent higher than the previous year and the second-highest level since the collapse of the gold standard in 1971 — as they continued to diversify their currency reserves following the financial crisis. They have added 1,800 tonnes to their holdings in the past six years.

[source]

Posted in Gold News, Gold Views |

US advance Q4 GDP + 2.6%, below expectations of +3.3%, vs +5.0% in Q3.

Posted in Economic Data |

Gold higher at 1264.32 (+3.61). Silver 16.96 (-0.007). Dollar better. Euro lower. Stocks called lower. US 10yr 1.70% (-5 bps).

Posted in Markets |

Eurozone Consumers Expect Prices to Fall

29-Jan (Wall Street Journal) — The European Central Bank‘s battle to persuade households and consumers that inflation will pick up over coming months and years just got a little tougher.

The ECB last week ushered in a new era by launching an aggressive bond-buying program that will flood the eurozone with more than €1 trillion in newly created money.

Consumer prices started to fall from their year-earlier levels in December, and that will likely continue until midyear, if not later.

What the ECB fears most of all is that consumers and businesses will grow accustomed to falling prices, and adjust their behavior accordingly. Many economists and central bankers believe that falling prices don’t by themselves constitute deflation. For that chronic condition to take root, consumers and businesses have to cut back on spending because they expect prices to fall further, the outcome being a decline in output and employment that pushes prices even lower.

In announcing the launch of its program of quantitative easing, ECB President Mario Draghi made it clear that changing expectations was a key goal.

[source]

PG View: “Changing expectations” via QE hasn’t really worked for 20-years in Japan. Yet Draghi seems to think he can do it better…

Posted in Central Banks, Deflation, Monetary Policy, QE |

Declining Population Could Reduce Global Economic Growth By 40%

14-Jan (Wall Street Journal) — Declining population growth that shrinks the pool of available labor over the next 50 years will reduce by 40% the rate of growth in global economic output for the world’s 20 largest economies compared to the past 50 years, according to a new study.

The report from the McKinsey Global Institute says that to compensate for the drop in the growth of the labor force, productivity needs to accelerate 80% from its historical rate to keep global growth in gross domestic product from slowing.

Over the past 50 years, global growth increased six-fold, and average per capita income nearly tripled. McKinsey researchers estimate that around half the increase stemmed from gains in productivity and half from the growing labor force.

Now, the workforce isn’t going to grow nearly as fast, and it could peak in most of the 20 countries analyzed in the report over the coming 50 years.

[source]

PG View: If this is even a somewhat accurate forecast, global central banks are pushing on a string. But push they will, with ever-easier policy…

Posted in Economy |

The Daily Market Report: Gold Corrects Amid Fed Optimism on U.S. Economy


29-Jan (USAGOLD) — Gold has come under additional pressure on the heels of the Fed’s optimistic outlook on the U.S. economy. The yellow metal has fallen to a two-week low of 1251.10.

The Fed declared on Wednesday that “economic activity has been expanding at a solid pace. Labor market conditions have improved further, with strong job gains and a lower unemployment rate.” That heartened investors that are expecting that first Fed rate hike in H1. Yet, despite the optimism, the FOMC is still prepared to be “patient”.

“Capitalism depends on hope –- rational hope that an investor gets his or her money back with an attractive return,” he wrote. “Without it, capitalism morphs and breaks down at the margin. The global economy in January of 2015 is at just that point with its zero percent interest rates.” — Janus’ Bill Gross

Seven-years of near-zero rates and I’m not entirely sure the optimism expressed is heartfelt. Certainly the rest of the world — as evidenced by ever-easier monetary policy — remains quite pessimistic.

In fact, the Danish central bank cut rates even deeper into negative territory today. It was the third cut in 10-days, as the Danske Bank continues to defend their currency’s ceiling against the euro.

The appearance of the phrase “currency war” has seen a marked increase in the financial press of late. If I’m posting something on this page having to do with central banks, naturally choose the ‘Central Banks’ tag, but as a matter of course these days I also choose the ‘Currency Wars’ tag. The goal of easier policy is to weaken one’s currency.

While the more hawkish Fed watchers got some fresh wind in their sails yesterday, the fundamentals are likely to make it very difficult for them to actually pull the trigger. Morgan Stanley’s chief U.S. economist, Ellen Zentner, doesn’t think the Fed will hike until March of 2016.

On BloombergTV this morning, Zentner said, “Core goods prices in the U.S. have collapsed in the last two-months. Absolutely collapsed.” She sees core PCE falling further through much of 2015, and not bottoming until October. How could they possibly hike rates in an environment where inflation moving further away from their own target?

The pullback in the price of gold may prove to be an opportunity for those investors that were surprised by the strong rise in the yellow metal seen earlier in the month. Sure some traders may be taking profits, but with the currency war clearly escalating, now may be the time for long-term, wealth preservation minded, physical buyers to be boosting their positions.

Posted in Daily Market Report, Gold News, Gold Views |

Gold falls 1% as Fed’s upbeat outlook boosts dollar

29-Jan (Reuters, via CNBC) — Gold prices dropped for the fourth session in five on Thursday, losing as much as 1 percent as the dollar firmed after the Federal Reserve signalled it was on track to lift interest rates this year.

In Wednesday’s policy statement, the Fed said the U.S. economy was expanding “at a solid pace”. It reiterated, however, that it would be “patient” in deciding when to increase benchmark borrowing costs from zero.

Gold had been boosted by increased central bank liquidity and low interest rates in the years after the 2008 credit crisis. The prospect of higher U.S. rates could encourage investors to withdraw money from the metal, a non-interest-bearing asset.

[source]

PG View: Gold continues to slip intraday, but read some of my earlier posts; there’s a pretty compelling argument building that the Fed is not going to hike this year.

Posted in Gold News, Gold Views |

The next shot in the currency war will be fired by…

29-Jan (CNBC) — The currency war is getting out of control.

A snapshot of the week so far in central banking:

The Monetary Authorty of Singapore surprised markets Tuesday night with a policy switch to pursue a slower pace of currency appreciation, its main policy tool.

Wednesday afternoon, New Zealand’s Reserve Bank kept policy unchanged, but significantly altered its language, saying it expects to see a “further significant depreciation” for the kiwi and that “the exchange rate remains unjustified in terms of current economic conditions.”

Hungary’s central bank struck a decidedly dovish note, hinting at easier policy ahead.

The moves follow surprise policy changes from Denmark, India Canada and Switzerland earlier this month. That includes the European Central Bank. Despite a great deal of anticipation, Mario Draghi managed to surprise and impress financial markets with the ECB’s trillion-euro bond purchase program.

[source]

PG View: And we’re to believe the Fed is hiking rates this year?

Posted in Central Banks, Currency Wars, Monetary Policy |

US Fed policy comes under question

29-Jan (Financial Times) — Among central banks, one stands apart: the US Federal Reserve sits in splendid isolation as others take action, but is coming under pressure from both critical government bond traders and a rising currency.

In recent weeks, central banks around the world have been cutting borrowing rates, abolishing currency pegs, as in Switzerland, and in the case of the European Central Bank, announcing a massive bond buying programme.

Such actions are designed to pump up economic activity and a successful reflation of the global economy would provide a hefty tailwind for US officials keen on ending more than six years of near-zero interest rates.

…The message being sent by financial markets thus increasingly appears at odds with the optimistic outlook on the economy and the desire for normalising interest rates at the US central bank.

Zach Pandl, senior portfolio manager at Columbia Management, says: “The US is not an oasis of prosperity” and he believes “either the global economy recovers or the Fed abandons its plans to raise rates this year”.

…Another key element has been the ongoing appreciation of the US dollar. A collection of blue-chip US companies has weighed down the equity market this week after revealing how the strong dollar and weaker global growth has hampered their fourth-quarter earnings.

Posted in all posts, Central Banks, Monetary Policy |

The end of Currency ‘Safe-havens’

by Julian D.W. Phillips

29-Jan (GoldSeek) — In the past [even the recent past] investors have often ‘parked’ their funds in a ‘safe-haven’ currency, when fears about the dollar or other currencies rose. The leading candidates have always been the Swiss Franc and the Yen, with gold, in the last three years usually being excluded, because of its declining trend against the dollar and the limited amount of stock relative to the availability of these currencies. While gold’s trend seems to have changed to the upside now, the developed world is still ‘out of gold’.

But gold has never forfeited its role as a ‘safe-haven’ for long. It is distinguished by the fact that there is no lasting link between gold and national governments and their national currencies. What gold has always had is the respect and the belief that it is money ‘in extremis’. For governments, through institutions to individuals, gold is always money, even between enemies.

In the last 40 years and more, the world led by the U.S., has sought to sideline gold as money, but inevitably it has proved its worth, most notably when currency crises appear.

[source]

Posted in Currency Wars, Gold News, Gold Views |

Denmark cuts deposit rate for third time in two weeks

29-Jan (MarketWatch) — The Danish National Bank on Thursday cut its deposit rate by 15 basis points to negative 0.5% in an effort to prevent the krone from strengthening too much against the euro. It’s the third time in less than two weeks the central bank has slashed its deposit rate, following persistent upward pressure on the krone’s peg to the euro. The krone has been strengthening after the European Central Bank launched a quantitative-easing program and the Swiss National Bank ditched its euro cap. The Danish central bank said Thursday’s rate cut came after making purchases in the foreign-exchange market. “By lowering the interest rate again, the central bank hopes investors will find it less attractive to hold Danish kroner,” Steen Bocian, chief economist at Danske Bank, said in a note. “The rate cut emphasizes once again that the fixed-exchange rate policy will be defended. This defense will go on as long as necessary,” he said.

[source]

PG View: Rhetoric about defending the peg for “as long as necessary” sounds exactly like what the SNB was saying before they stopped defending the Swiss franc peg.

Posted in Central Banks, Currency Wars, Monetary Policy |

Greece’s New Leaders Act Swiftly to Reverse Austerity

28-Jan (Wall Street Journal) — Greece’s new leaders moved swiftly to reverse the reform course imposed on the country by its creditors, dashing hopes in Europe that the leftist government would soften its approach and triggering a steep selloff in Greek stock and debt markets.

Within hours of taking office, government officials said they would stop the planned sale of the state’s majority stake in Greece’s largest port and dominant utility. They also pledged to rehire thousands of public-sector workers and reopen the country’s state broadcaster, which had been shut down by the previous government.

The moves scuttled the expectations of some European officials that Greece’s new leadership would retreat from its radical campaign platform after attaining power. Greek stocks plummeted more than 9%, with the country’s four main banks falling more than 25%. The yield on two-year debt rose by 2.63 percentage points—an enormous move by bond-market standards—to 16.5% as Greek bond prices tumbled.

…Investors worry that the country’s leadership under Prime Minister Alexis Tsipras is steering Athens toward a dangerous confrontation with Germany and other European powers that could end with the country stumbling out of the euro.

[source]

Posted in European Debt Crisis |

Fed Must Change Rate Hike Rhetoric Soon: Ellen Zentner

29-Jan (Bloomberg) — Ellen Zentner, senior U.S. economist at Morgan Stanley, talks about why the Federal Reserve must delay hiking interest rates until early 2016 and looks at the impact of a strong U.S. dollar and the lack of wage growth in the United States.

“Core goods prices in the U.S. have collapsed in the last two-months. Absolutely collapsed.” — Ellen Zentner

[video]

Posted in Central Banks, Currency Wars, Monetary Policy |