Posts Tagged ‘international trade’

Federal Reserve Officials: Americans Are Saving Too Much Money So We Need To Purposely Generate More Inflation To Get Them Spending Again

Federal Reserve Officials: Americans Are Saving Too Much Money So We Need To Purposely Generate More Inflation To Get Them Spending Again

Courtesy of Michael Snyder at Economic Collapse 

Some top Federal Reserve officials have come up with a really bizarre proposal for stimulating the U.S. economy.  As unbelievable as it sounds, what they actually propose to do is to purposely raise the rate of inflation so that Americans will stop saving so much money and will start spending wildly again.  The idea behind it is that if inflation rises a couple of percentage points, but consumers are only earning half a percent (or less) on their savings accounts, then there will be an incentive for consumers to spend that money as the value of it deteriorates sitting in the bank. 

Yes, that is how bizarre things have gotten.  It is not as if U.S. consumers are even saving that much money.  Several decades ago, Americans typically saved between 8 and 12 percent of their incomes, but over this past decade the personal saving rate got down near zero a number of times as Americans were living far beyond their means. Once the recession hit, Americans very wisely started saving more money, and so now the personal saving rate has been hovering around the 5 to 7 percent range.  This is well below historical levels, but the folks at the Fed apparently are eager for Americans to pull that money out and start spending it again.

In an article entitled "Fed Officials Mull Inflation as a Fix", Wall Street Journal columnist Sudeep Reddy described this bizarre new economic approach that some over at the Federal Reserve are now advocating….   

"But as the U.S. economy struggles and flirts with the prospect of deflation, some central bank officials are publicly broaching a controversial idea: lifting inflation above the Fed’s informal target."

Does increasing inflation as a way to stimulate the economy sound like a good idea to any of you?…
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Winners And Losers

Winners And Losers

Courtesy of Michael Snyder at Economic Collapse 

When you mention the word "globalism" to most people, they think of something that is going to happen someday in the future.  But the truth is that globalism is already here.  At this point we essentially already have a one world economy.  Goods and services flow across national borders more freely today than at any other point in human history.  A major economic event on one side of the world instantly affects financial markets on the other side of the world.  Labor has become a truly global commodity.  You can go to the exact same fast food restaurant or buy the exact same iPod on six different continents.  A whole host of international trade agreements are making national borders economically irrelevant. 

Today our "big box" stores and shopping malls are jammed full with products that have been made overseas and it is becoming increasingly difficult to find American-made products.  The reality is that it has now become undeniable that globalism has arrived and we are now part of a world economy that is integrating at lightning speed.  Unfortunately, all of this globalism has created some very clear winners and losers.  But most middle class Americans are in such a deep sleep that they don’t even realize that they are the losers.

The sad truth is that as work has become a global commodity, middle class American workers have been placed in direct competition with the cheapest labor in the world.  For years the U.S. economy was so strong that nobody really noticed that it was bleeding thousands of jobs every single month.  But now that 14 million Americans are unemployed and the U.S. economy is literally hemorrhaging jobs people are starting to sit up and take notice.

Let’s take a look at one recent example.  Ford Motor Company has just announced the closure of a facility that produces the Ford Ranger in St. Paul, Minnesota.  Approximately 750 good paying jobs are going to be lost.

But isn’t Ford doing better these days?

Sure.

Don’t people still need Ford Rangers?

Of course they do.

Minnesota Governor Tim Pawlenty even offered Ford a multi-million dollar incentive package full of tax cuts…
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Repairing China’s financial system

Repairing China’s financial system

Courtesy of Michael Pettis of China Financial Markets

BEJING SHOW BEIJING CHINA

The stock market had a bad day today, with the SSE Composite down 3.62%, mainly on rumors that banks will be seeking to raise equity capital next year in response to their loan surge this year.  On Tuesday Bloomberg reported that the five largest banks were supposed to have submitted plans to regulators for raising money, after unprecedented lending eroded their capital.

I would argue that a more compelling reason to raise capital is the almost-certain surge in NPLs over the next three or four years.  In fact I am pretty surprised that these rumors caught the market by surprise.  Every time that banks have engineered a policy-induced surge in lending, they have followed up with a surge in NPLs [non-performing loans], and it would be pretty extraordinary if this time were any different.  A refusal to raise capital levels would have been very imprudent, and it is pretty clear that the PBoC and the CBRC are already worried about the impacts of the credit expansion on the banking system.

Raising capital by selling equity is one way for banks to protect themselves from the consequences of bad lending, but I have been arguing for a long time that the main way banks have been recapitalized in the past has been the very wide spread between the PBoC-mandated lending and deposit rates.  This was more or less confirmed in an interesting but perhaps little noticed speech last week by Governor Zhou.  According to an article in Reuters,

China needs to maintain a certain spread between deposit and lending rates in order for banks to be able to support the economy, Zhou Xiaochuan, the governor of the People’s Bank of China, said on Friday. The central bank sets a ceiling on the rates banks may pay depositors and a floor on their lending rates. The built-in margin is a rich source of profit for Chinese banks that strengthens their balance sheets.

Lujiazui Finance and Trade Zone, Pudong, Shanghai, China

Speaking at a forum, the central bank chief also said China must ensure that its pro-investment policies do not lead to overcapacity, which he said was already plaguing some sectors.

The low deposit rates mean that Chinese savers are effectively being taxed to replenish bank capital.  Although this may be…
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China Requests Debate on Reserve Currency at G14 Summit

China Requests Debate on Reserve Currency at G14 Summit

Le Café AméricainCourtesy of Jesse’s Café Américain

China is proposing a new reserve currency regime less dependent on the dollar, along with other BRIC countries, and the US and its financial allies in the status quo will resist change because it is in their short term interest to do so.

China can take ‘pre-emptive’ action by diversifying its holdings ahead of any change, and there are some indications that it is doing so already. But while the dollar is the prime medium of international trade, China must buy dollars to support its mercantilist industrial policy. Its own alternative is to boost its domestic consumption and ‘grow a middle class’ which in some minds erodes the power of the narrow political elite which rules the country.

The US needs to stand firm in some areas, and acquiesce in others. Standing firm with regard to the yuan being free of a peg and currency controls is one area that ought to have been sine qua non when first Clinton and then Bush gave China its openings as a preferred trading partner even while maintaining de facto industrial subsidies through its currency and markets.

The first line of negotiation will be to agree on a dollar substitute, which will probably be the SDR. The US will resist and delay this as long as is possible.

British EmpireThe fallback position then will be the composition of the SDR, and a long phasing of the change in the primacy of the dollar and a few G7 currencies. China will seek more diversity and the inclusion of gold and silver, which is anathema to the Wall Street banking cartel.

The US must change or face more seismic, involuntary dislocations. As Britain surrendered its far flung colonial Empire, so the US must downsize its financial sector, restore balance to its own economy and its place in the world economy, and relinquish the primary reserve currency status which has become a powerful instrument of manipulation by the Wall Street banking cartel.

The dollar is the last, the mother of bubbles. Few understand this even now.

The epic US credit expansion was enabled by the preferred position of US debt instruments as the reserve currency of the world. The bond and the dollar are the absolute foundation of that debt pyramid.

Those days are undeniably over.


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Zero Hedge

Pound Tumbles 1% In Weekend Markets After Brexit Vote Delayed

Courtesy of ZeroHedge View original post here.

With Boris Johnson's plan to pass the Brexit vote this weekend unexpectedly rejected, after the Prime Minister was once again let down by a Parliamentary majority demanding the vote be delayed, cable has predictably tumbled, and after spiking as high as 1.2967 on Friday amid rampant speculation that a passage of the Brexit deal was virtually assured, which prompted a violent short squeeze, moments ago UK spread betting company IG noted that cab...



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Phil's Favorites

Facebook's Libra cryptocurrency can still take off and revolutionise money

 

Facebook's Libra cryptocurrency can still take off and revolutionise money

Poring Studio / Shutterstock.com

Courtesy of Gavin Brown, Manchester Metropolitan University and Richard Whittle, Manchester Metropolitan University

Facebook’s Libra cryptocurrency has suffered a few setbacks recently. As well as facing ...



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Chart School

Gold Stocks Review

Courtesy of Read the Ticker

Gold stocks are swinging back forth between the range, and a break out swing higher is due. Gold stocks are holding a near perfect Wyckoff accumulation pattern. All should get ready to play this sector. Yet we must recognize that gold stocks are a one of the most crazy rides at the stock market fair, so play very carefully.

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GDX PnF chart from within the video

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Important channels around the HUI.
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The Technical Traders

Treasuries Pause Near Resistance Before The Next Rally

Courtesy of Technical Traders

Our research team believes the US Treasuries and the US Dollar will continue to strengthen over the next 2 to 6+ weeks as foreign market and emerging market credit and debt concerns outweigh any concerns originating from the US economy or political theater.  Overall, the major global economies will likely continue to see strength related to their currencies and debt instruments simply because the foreign market and emerging markets are dramatically more fragile than the more mature major global economies.

We believe the US Treasuries may surprise investors by rallying from current levels, near price resistance, to levels above $151 on the TLT chart. 

Our belief ...



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Insider Scoop

48 Biggest Movers From Yesterday

Courtesy of Benzinga

Gainers
  • Hepion Pharmaceuticals, Inc. (NASDAQ: HEPA) shares climbed 43.2% to close at $3.58 on Thursday after the company announced the publication of a research article, "A Pan-Cyclophilin Inhibitor, CRV431, Decreases Fibrosis and Tumor Development in Chronic Liver Disease Models," in the peer-reviewed Journal of Pharmacology and Experimental Therapeutics.
  • Synthesis Energy Systems, Inc. (NASDAQ: SES) rose 26.9% to close at $9.20 after surging 12.24% on Wednesday.
  • Assembly Biosciences, Inc...


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Kimble Charting Solutions

Bank Index Breakout? Stock Market Bulls Sure Hope So

Courtesy of Chris Kimble

One of the most important sectors of the stock market is the banking industry and bank stocks.

When the banks are healthy, the economy is likely doing well. And when bank stocks are participating in a market rally, then it bodes well for the broader stock market.

In today’s chart, we look at the Bank Index (BKX).

As you can see, the banks have been in a falling channel for the past 20 months. As well, the banks have been lagging the broader market during this time as well – see the Ratio in the bottom half of the chart above.

That said, th...



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Digital Currencies

Zuck Delays Libra Launch Date Due To Issues "Sensitive To Society"

Courtesy of ZeroHedge View original post here.

Authored by William Suberg via CoinTelegraph.com,

Facebook is taking a much more careful approach to Libra than its previous projects, CEO Mark Zuckerberg has confirmed. 

“Obviously we want to move forward at some point soon [and] not have this take many years to roll out,” he said. “But ...



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Lee's Free Thinking

Look Out Bears! Fed New QE Now Up to $165 Billion

Courtesy of Lee Adler

I have been warning for months that the Fed would need new QE to counter the impact of massive waves of Treasury supply. I thought that that would come later, rather than sooner. Sorry folks, wrong about that. The NY Fed announced another round of new TOMO (Temporary Open Market Operations) today.

In addition to the $75 billion in overnight repos that the Fed issued and has been rolling over since Tuesday, next week the Fed will issue another $90 billion. They’ll come in the form of three $30 billion, 14 day repos to be offered next week.

That brings the new Fed QE to a total of $165 billion. Even in the worst days of the financial crisis, I can’t remember the Fed ballooning its balance sheet by $165 bi...



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Biotech

The Big Pharma Takeover of Medical Cannabis

Reminder: We are available to chat with Members, comments are found below each post.

 

The Big Pharma Takeover of Medical Cannabis

Courtesy of  , Visual Capitalist

The Big Pharma Takeover of Medical Cannabis

As evidence of cannabis’ many benefits mounts, so does the interest from the global pharmaceutical industry, known as Big Pharma. The entrance of such behemoths will radically transform the cannabis industry—once heavily stigmatized, it is now a potentially game-changing source of growth for countless co...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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