BOJ’s Kuroda: need to stick with easing, watch price trend

Reuters/Stanley White/06-21-17

Bank of Japan Governor Haruhiko Kuroda said maintaining the current easy monetary conditions is appropriate because prices are lagging improvements in the economy and remain distant from the central bank’s inflation target.

…”Our economy is on firmer footing, but we are still distant from our 2 percent inflation target,” Kuroda said.

“It is appropriate to keep monetary conditions easy with our current market operations framework.”

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Posted in Central Banks, inflation, Monetary Policy |

Gold easier at 1243.86 (-1.28). Silver 16.43 (-0.094). Dollar lower. Euro higher. Stocks called mixed. U.S. 10-year 2.17% (+2 bps).

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Posted in Markets |

The Daily Market Report: Gold Edges Lower As FedSpeak Dismisses Concerns Over Waning Inflation


USAGOLD/Peter Grant/06-20-17

Gold edged to a new 7-week low, but the tone today is broadly consolidative. The yellow metal is underpinned, despite continued gains in the dollar.

The dollar index pushed to a 6-week high, as recent FedSpeak has struck a hawkish tone that is consistent with last week’s more hawkish than expected Fed policy statement. They are clearly trying to boost rate hike expectations for September; if for no other reason, to keep that option on the table.

Right now, the market is not buying it. Fed funds futures put the probability of a September rate hike at just 12.8%. The yield on the the 10-year note is 2.15%, down 30 bps from the beginning of the year amid mounting concerns about waning inflation pressures.

“I will say that the most recent inflation data made me a little nervous,” Chicago Fed President Charles Evans conceded today. However, most recent FedSpeak has been rather dismissive about inflation, even as oil prices continue to tumble.

Today’s drop in WTI below $43 clears the way for a challenge of $40. Given that energy prices are such a major input into the broader economy, the Fed should be more than a little nervous.

Evaporating inflation pressures may be providing some of the recent weight on gold, as the post-election reflation trade continues to get unwound. One should however keep in mind that gold is also a very effective hedge in times of disinflation, deflation and stagflation as well. Please see our special report on this topic by clicking HERE.

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

LAWRIE WILLIAMS: Russia adds another 21.8 tonnes to gold reserves in May


Sharps Pixley/Lawrie Williams/06-20-17

When we reported on last month’s comparatively small increase in Russia’s gold reserve in April of only 6.2 tonnes (See: Sharp drop in Russia’s gold reserve increase in April) we commented at the time that perhaps not too much should be read into this monthly fall in volume of reserve increases as being indicative of a slowing down of gold purchases yet, as the nation’s monthly reported increases can fluctuate substantially. Now the May figures are in we can see that we were correct as Russian gold reserves increased that month by some 700,000 ounces (21.8 tonnes) bringing the grand total of its reported gold reserves to around 1,708 tonnes. This keeps Russia in sixth place among global national holders of gold after China in fifth, but closing the gap given China seems to have ceased to report monthly gold reserve increases since last October. If this non-reporting by China continues and Russia continues to add to its reserves at the current rate then by the year end the gap between the two nations’ reported reserves to the IMF could be as little as 10 tonnes, or perhaps even less.

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Posted in Gold News, Gold Views |

Fed’s Evans says he’s nervous about inflation weakness

Reuters/Lindsay Dunsmuir/06-20-17

Chicago Federal Reserve Bank President Charles Evans said on Tuesday he is increasingly concerned that a recent softness in inflation is a sign the U.S. central bank will struggle to get price pressures back to its 2 percent objective.

“I will say that the most recent inflation data made me a little nervous about that. I think it’s much more challenging from here on out,” Evans said in an interview with broadcaster CNBC.

…If inflation remains in a slump, the Fed may require a shallower path of rate rises, he added.

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Posted in Central Banks, inflation, Monetary Policy |

Oil prices are tumbling more than 2% to $43 a barrel right now

CNBC/Tom DiChristopher/06-20-17

Oil prices continued to search for a bottom on Tuesday, falling more than 2 percent to fresh seven-month lows on signs of rising production in key parts of the world.

U.S. West Texas Intermediate crude oil futures were last down $1.19, or 2.7 percent, at $43.01. WTI fell on Tuesday to the weakest intraday prices since Nov. 14, when the contract hit $42.20 a barrel.

…Prices took the fresh leg lower on new signs of rising output from Nigeria and Libya, the two OPEC members exempt from a deal to cut production.

PG View: Oil is trading at new 7-month lows, with scope for a move back below $40.

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Posted in Markets |

Gold hovers near 5-week low; political tensions support

Reuters/Nithin ThomasPrasad/06-20-17

Gold inched higher on Tuesday, supported by global political uncertainties, after touching a five-week low earlier in the session as a key U.S.

Federal Reserve official reaffirmed the central bank’s hawkish stance on interest rate hikes.

Risk aversion due to Brexit, concerns over U.S. President Donald Trump’s ability to carry out financial reforms, election results in Europe and Middle East turmoil have provided some support for gold, said Mark To, head of research at Hong Kong’s Wing Fung Financial Group.

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Posted in Gold News, Gold Views |

Morning Snapshot: Gold better, despite firmer dollar, stocks

USAGOLD/Peter Grant/06-20-17

Gold is modestly higher to start the U.S. session. The yellow metal is better today, despite a higher dollar and another rise in stocks. These are factors that weighed on gold yesterday.

With political and geopolitical risks elevated, we may be seeing an uptick in demand for safe-havens. Firmer bonds offer some confirmation.

The U.S. Q1 current account gap widened to -$116.8 bln, inside expectations of -$123.6 bln, versus -$114.0 bln in Q4-16. That’s it for today’s economic calendar.

Boston Fed hawk Rosengren speaking at the Riksbank in Sweden warned that low rates put economies at risk and make fighting future recessions more difficult. This is reflective of my own explanation as to why the Fed is tightening policy into economic weakness. They are preparing for the next recession, that we all know is coming.

We’ll also hear Fedspeak from Fischer, Evans, Kaplan and Powell. I suspect the general theme will center on an effort to bolster confidence in at least one more rate hike this year.

This tweet from yesterday caught my eye. This too is consistent with my own views of FedSpeak. Don’t believe a word they say. The truth is in the data . . .

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Posted in Gold News, Gold Views, Snapshot |

U.S. Q1 current account gap widened to -$116.8 bln, inside expectations of -$123.6 bln, vs -$114.0 bln in Q4-16.

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Posted in Economic Data |

Gold higher at 1246.57 (+2.39). Silver 16.53 (+0.028). Dollar higher. Euro higher. Stocks called higher. U.S. 10-year 2.17% (-2 bps).

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Posted in Markets |

Gold books a loss as stocks, dollar rally

MarketWatch/Mark DeCambre/06-19-17

Gold prices finished firmly lower Monday, as the dollar strengthened and as investors favored assets perceived as risky, including stocks, over so-called havens. August gold finished off $9.80, or 0.8%, to settle at $1,246.70 an ounce. The precious yellow metal has closed down in seven of the past nine trading sessions and has been pressured down by a trio of factors: The Federal Reserve’s efforts to normalize U.S. interest rates, a climb in the Dow Jones Industrial Average and the S&P 500 index to records on the day, as well as a rising dollar . . .

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Posted in Gold News, Gold Views |

The Daily Market Report: Gold Defensive on Firmer Dollar and Stocks


USAGOLD/Peter Grant/06-19-17

Gold is edging lower, weighed by a firmer dollar and revived risk appetite, which has driven stocks higher. However, a number of factors continue to offer fundamental underpinnings to the market.

While NY Fed President Dudley reiterated today the optimism expressed in last week’s FOMC statement, one has to wonder if the central bank can really continue tightening with the anticipated fiscal stimulus stalled in Congress.

Senate republicans are acknowledging they are not even close to a deal on healthcare reform. “That impasse has held up work on a budget resolution, which is necessary to move tax reform and the annual appropriations bills,” according to The Hill.

GOP policymakers are reportedly considering cancelling the August recess in the hope of breaking the log-jam. However, the staunch political opposition and the ongoing investigations will continue to generate significant headwinds to the so-called reflation trade.

If the President’s agenda is well and truly dead in the water, and the Fed is committed to their tightening agenda, it seems like the stock market in particular is underestimating the risks to growth. “This is the most hideously overvalued market in history,” said David Stockman in an interview last week. Stockman sees potential for a 35% correction in the S&P 500.

“You want to pay twenty-five times earnings going into a world where the Fed yesterday said ‘we’re going to shrink the balance sheet by $2 trillion over the next several years?’ Where we have a government that is in total chaos. A president that they’re trying to unseat. A debt ceiling that can’t be raised. A tax bill that will never pass…” — David Stockman

Given the risks, it might be prudent to lighten-up on exposure to a grossly overvalued stock market, and reallocate that capital to an undervalued safe-haven. That haven is of course gold.

On top of all that, a U.S. fighter shot down a Syrian MiG yesterday. The Russian Defense Ministry called it a “massive violation of international law” and severely escalated the geopolitical risks in the region by saying they would start viewing U.S.-led coalition jets flying west of the Euphrates River in Syria as “targets.” If a U.S. plane is fired on by Russia or the Syrian military, all heck could break out in a big hurry.

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

Markets must grasp that the Fed is no longer their best friend


FT/Mohamed El-Erian/06-18-17

In hiking rates and, more notably, reaffirming its forward policy guidance and setting out plans for the phased contraction of its balance sheet, the Federal Reserve signalled last week that it has become less data dependent and more emboldened to normalise monetary policy. Yet, judging from asset prices, markets are failing to internalise sufficiently the shift in the policy regime. Should this discrepancy prevail in the months to come, the Fed could well be forced into the type of policy tightening process that could prove quite unpleasant for markets.

…the Fed is now more intent on gradually normalising both its interest rate structure and its balance sheet. As such, it is more willing to “look through” weak growth and inflation data.

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Posted in Central Banks, Economy, Monetary Policy |

Pound holds above lows as Brexit talks begin

FT/Michael Hunter/06-19-17

The extent to which the Brexit talks have any day-to-day influence on the market will become clear in the days and weeks ahead, as negotiators from the UK and the EU seek to draw up departure terms while investors look on.

…As trading on day one of the negotiations begins, the pound is 0.1 per cent weaker against the euro at £0.8767, within levels established over the last three sessions. It remains off the seven-month low it touched against the shared currency a week ago, on worries about political instability in Westminster in the run-up to the talks. Against the dollar, sterling is down 0.1 per cent at $1.2781.

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Russia to target any ‘flying objects’ over Syria where its aviation is active

Reuters/Maria Kiselyova/06-19-17

Russia’s Defense Ministry said on Monday it would view as targets any flying objects over Syria in the areas of the country where its air forces operate, Russian news agencies reported.

The statement followed after a U.S. warplane shot down a Syrian army jet on Sunday in the southern Raqqa countryside, with Washington saying the jet had dropped bombs near U.S.-backed forces and Damascus saying the plane was downed while flying a mission against Islamic State militants. [nL8N1JF0YG]

The Defense Ministry also said that it was suspending its interaction with the United States on preventing air incidents over Syria from June 19, the agencies reported.

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Posted in Geopolitical Risks |

Gold back to nearly one-month low as interest-rate path scrutinized

MarketWatch/Rachel Koning Beals/06-19-17
Gold prices eased Monday, flirting with setting nearly one-month lows, even as a major dollar index also softened.

Although metals prices rebounded slightly Friday, gold has been plagued with a downbeat tone in the wake of recent signals from the Federal Reserve for at least one more increase to interest rates this year. That view sent the yellow metal down for a second-straight week last week.

…“This happened before the Fed meeting, so net long positions are likely to have been further reduced in the meantime,” he said, adding, “Today sees the official start of Brexit negotiations in Brussels. The positions of the EU and the U.K. are still far apart. The presumably tough negotiations should contribute to solid demand for gold.”

Economic uncertainty could continue to hold sway over metals and currency trading, although few major economic data releases are due at the week’s start.

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Posted in Gold News, Gold Views |

Morning Snapshot: Gold starts the week under modest pressure

USAGOLD/Peter Grant/06-19-17

Gold is modestly lower to start the week, eking out a new 3-week low. The yellow metal is being weighed by a firmer dollar, and improved risk appetite that has lifted stocks.

Hawkish comments from NY Fed President Dudley, suggest that the Fed will continue on the tightening path. Despite recent soft data, Dudley said that “halting (the) tightening cycle would imperil the economy.”

Dudley believes that inflation will pick-up as the labor market continues to improve. However, the jobless rate hit a 16-year low in May at 4.3%. How much room for improvement is there really?

If Dudley’s comment are indicative of FedSpeak moving forward, it means they are trying to keep a September hike on the table. We’ll hear from Chicago Fed’s Evans this evening.

The U.S. economic calendar is empty today. In fact, this week is pretty quiet.

Brexit negotiations began today. In light of the recent political weakening of Theresa May, an event that was already fraught with uncertainty is now even more uncertain. This should help limit the downside in gold.

Additional underpinning for gold is found in the broad political and geopolitical uncertainty. With the Trump economic agenda foundering and the Fed proceeding with the removal of accommodations, the U.S. economy may be in considerable jeopardy.

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Posted in Gold News, Gold Views, Snapshot |

Gold lower at 1249.74 (-3.57). Silver 16.65 (-0.042). Dollar steady. Euro easier. Stocks called higher. U.S. 10-year 2.17% (+2 bps).

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Posted in Markets |

Amazon-Whole Foods deal deflationary?

Mish Talk/6-16-2017

“Amazon bought Whole Foods today. Widespread carnage in the grocery stock prices followed. Jim Cramer called it a major deflationary disruption saying stores cannot compete.”

MK note:  Interesting buzz on Amazon’s Whole Foods prospective acquisition.  Whenever the subject of deflation comes up, I think of gold’s stellar performance in the wake of the last crisis which, in fact, was disinflationary.  Disinflation, in turn, is a close cousin to deflation as discussed in some detail HERE and HERE, along with  gold’s historic relevance in protecting against either or both.

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The Daily Market Report: Gold Remains Underpinned by Ongoing Uncertainty


USAGOLD/Peter Grant/06-16-17

Gold heads into the weekend on a defensive footing, still reeling — albeit modestly so — from the Fed’s surprise hawkishness on Wednesday. I think the market is still trying to ascertain what the Fed might be seeing that nobody else seems to see. That being said, gold is only down 0.7% on the week.

In the meantime, the economic picture continues to deteriorate, quickly undermining that Fed optimism. Housing starts tumbled 5.5% in May, and permits fell 4.5%. Consumer confidence eroded in June as well.

Former Treasury Secretary Larry Summers charged yesterday that, “The Fed has been highly unrealistic in its forecasts for several years.” As a result, “The Fed is not credible with the markets at this point.”

Well, the Fed caused just enough uncertainty to give the market pause. However, the underlying uptrend in gold that has dominated this year remains intact. The yellow metal is up just over 9% YTD.

While the FOMC nudged their 2017 GDP forecast higher to 2.2% from 2.1% in March, regional Federal Reserve bank forecasts are moving in the other direction. The Atlanta Fed’s GDP Now model for Q2 moved lower to 2.9% today. That model was predicting 4% growth as recently as early-June.

The New York Fed’s NowCast revised its Q2 growth forecast to 1.86%, down from 2.25% on June 9. Their Q3 forecast was dropped to 1.54%, versus 1.8% on June 9.

What’s going to be really interesting is how growth expectations may continue to evolve if the Trump administration’s economic agenda remains mired in political uncertainty. Gold is presently trading about $20 lower than where it closed on election day. If hopes of the reflation trade continue to evaporate, gold is likely to appreciate further.

If the realities of our weak growth prospects and diminishing inflation pressures ultimately deflate the Fed optimism, to the point where the tightening cycle is paused (or even reversed), yields and the dollar will drop. When that happens, gold will finally reclaim the $1300 handle, which will then shift focus to the $1500 zone.

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

Gold steadies after rate hike sell-off

Reuters/Peter Hobson/06-16-17

Gold inched higher on Friday as investors judged that a sell-off sparked by a rise in U.S. interest rates this week had run its course and the dollar weakened, making bullion cheaper for holders of other
currencies.

…Gold was on track for a second weekly loss and has fallen more than 3 percent from a high of $1,295.97 on June 6 as investors braced for the U.S. Federal Reserve to raise interest rates and signal its policy outlook on Wednesday.

…”Gold has been spooked by the hawkish tone from the Fed, which triggered some long liquidation both in futures and exchange-traded funds,” said Saxo Bank analyst Ole Hansen.

PG View: I don’t know that the market was spooked so much as confused. They were expecting a more dovish tone based on recent data and the Fed seemed to be ignoring those data.

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Posted in Gold News, Gold Views |

University of Michigan sentiment (prelim) fell to 94.5 in Jun, below expectations of 97.2, vs 97.1 in May.

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Posted in Economic Data |

7 Signs You Should Add Gold To Your Portfolio Now

Forbes/Stephen McBride/06-16-17
Gold got crushed in the post-election rally, but a little over five months into 2017, the yellow metal is up 10.5%—making it one of the best-performing assets of the year so far.

While the outlook for the US economy is more positive than it was 12 months ago, if we zoom out for a moment, the big picture “ain’t so rosy.”

Gold has historically done well in times of uncertainty and panic… and with these seven worrisome signs, there could be plenty ahead.

#1: Interest Rates Are Still Near Record Lows
#2: Bonds Offer Measly Returns
#3: Dividend Stocks Aren’t What They Used To Be
#4: Economic Growth Is Anemic
#5: The Federal Debt Has Exploded
#6: The Dollar Has Lost 87% Of Its Value
#7: We Are Overdue For A Bear Market

…Gold bullion has proven to be a store of value and a reliable wealth preservation tool over many centuries… unlike the dollar. In the event of a stock selloff, it can serve as “portfolio insurance.”

PG View: Gold dropped nearly 12% from election day to the low in mid December on optimism that the Trump administration was going to stoke the U.S. economy with deregulation, tax cuts and infrastructure spending. Since then, the yellow metal has rallied back as the Trump reflation has been stymied at nearly every turn. As optimism fades, the chances of a recession and the overdue bear market for stocks becomes increasingly likely. Right now, gold remains quite inexpensive.

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Posted in Gold News, Gold Views |

Gold tips higher as dollar eases, but on track for back-to-back weekly loss

MarketWatch/Rachel Koning Beals/06-16-17

Gold prices on Friday crawled off the three-week lows struck a day earlier, but the week’s downbeat tone—in the wake of signals from the Federal Reserve for another increase to interest rates this year—set up the yellow metal for back-to-back weekly losses.

Gold gained modestly in the short term, in part as a closely watched dollar index slipped, making the metal more attractive to investors using another currency. Optimism for China’s economy after a round of monetary stimulus from its central bank underpinned gold trading on Friday as well.

…Analysts said the rate increase was fully expected, but the central bank’s more hawkish tone toward forward-looking policy was somewhat surprising as select inflation readings and other economic data in the latest round of releases have been softening. The Fed, looking ahead, believes inflation risks are lurking. Precious metals prices often drop when rates rise, as some investors back away from the metal because it doesn’t pay interest.

,,,“This would suggest to us that gold has some catching up to do ahead and current weakness presents a good opportunity to build positions at more attractive levels,” Teves said.

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Posted in Gold News, Gold Views |

Morning Snapshot: Gold firms modestly

USAGOLD/Peter Grant/06-16-17

Gold has firmed modestly ahead of the weekend, but appears poised to close lower for the week. At this point, the yellow metal is only down about 0.7% on the week.

U.S. housing starts plunged 5.5% to a 1.092M pace in May, below expectations of 1.218M, vs negative revised 1.156M in April. It was the third consecutive monthly decline, which has happened since January 2009. Permits tumbled 4.5% to 1.168M, which was well below expectations as well.

The preliminary University of Michigan consumer sentiment read for June comes out later this morning. A slight rise to 97.2 is expected. While consumer sentiment seems to remain fairly robust, the retail sales print from earlier in the week suggest they’re disinclined to actually consume anything.

Political and geopolitical risks remain elevated, which has helped underpin gold, despite this week’s more hawkish than expected Fed. Once the market starts discounting the Fed’s unfounded optimism, the yellow metal is likely to recover.

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Posted in Gold News, Gold Views, Snapshot |

U.S. housing starts -5.5% to 1.092M pace in May, below expectations of 1.218M, vs negative revised 1.156M in Apr.

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Posted in Economic Data |

Gold higher at 1256.52 (+2.30). Silver 16.80 (+0.041). Dollar lower. Euro higher. Stocks called lower. U.S. 10-year 2.17% (+1 bp).

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Posted in Markets |

New Bill Would Require Declaration of Digital Currency Holdings when Entering U.S.

DCEBried//06-15-17

A bipartisan group of Senators introduced a new bill late last month that would require travelers to declare their digital currency holdings at all ports of entry into the United States. Senate bill S.1241 – the “Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017” – was introduced by Iowa Senator Chuck Grassley, and was co-sponsored by Senators Sheldon Whitehouse, John Cornyn, and Diane Feinstein.

The bill includes language that directs the Secretary of the Department of Homeland Security to collaborate with the U.S. Customs and Border Protection agency to develop systems and strategies to identify and “interdict” cryptocurrency assets owned by travelers entering the United States:

“(c) Customs And Border Protection Strategy For Prepaid Access Devices.—Not later than 18 months after the date of enactment of this Act, the Secretary of Homeland Security, in consultation with the Commissioner of U.S. Customs and Border Protection, shall submit to Congress a report—

(1) detailing a strategy to interdict and detect prepaid access devices, digital currencies, or other similar instruments, at border crossings and other ports of entry for the United States; and

(2) that includes an assessment of infrastructure needed to carry out the strategy detailed in paragraph (1).”

Current U.S. law already requires travelers to inform Customs when they are carrying amounts greater than $10,000 – though that requirement does not apply when those holdings consist of overseas funds or precious metals held abroad. Proponents of this bill argue that it is necessary because digital currencies are technically carried with their owners at all times. Some critics have observed that the same can be said of today’s fiat currencies, thanks to the convenient nature of modern electronic banking.

PG View: Have no doubt, a government that is prepared to ditch $100 bills to impede money laundering and undesirable cash transaction is going to also go after cryptocurrencies.

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Greece: A Case Study in Capital Controls

WSJ/Nektaria Stamouli/06-15-17

When Greece imposed capital controls in the summer of 2015, the measures were a critical bulwark for banks left teetering after fears of a Greek exit from the European Union caused citizens to pull billions of euros in deposits.

Two years later, the country is a case study in capital controls. The measures prevented a collapse in the banking system, and predictions they would throw grit into the wheels of the economy haven’t materialized. Instead, controls have produced some surprising results, including helping Greece combat tax evasion, a perennial scourge.

As Greece’s creditors prepared to approve Thursday the final payment in the country’s up-to-€86 billion ($96.5 billion) bailout, there was no talk of lifting the measures—a reflection of the continued fragility of its battered economy.

PG View: So what pray tell happens when Greece runs through the last of the bailout money and is still a fiscal train-wreck?

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Posted in European Debt Crisis |

LARRY SUMMERS: ‘The Fed is not credible with the markets’

BusinessInsider/Pedro Nicolaci da Costa/06-15-17

Larry Summers isn’t mincing words when it comes to Federal Reserve policy: he thinks it’s way off.

In a stinging new post in the Washington Post’s Wonkblog, the former Treasury Secretary and Harvard economist says the central bank has lost crediblity with financial markets because of its consistently misguided optimism about growth prospects and the Fed’s ability to raise interest rates.

“The Fed is not credible with the markets at this point,” Summers writes. “Its dots plots predict four rate increases over the next 18 months compared with the markets’ expectation of less than two.”

…”The Fed has been highly unrealistic in its forecasts for several years,” he points out.

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Posted in Central Banks, Economy, Monetary Policy |