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Leonard Misonne Waterloo Place 1899
Tons of 10-year Lehman stories. haven’t seen that many truly impressive ones.
• Central Banks Have Gone Rogue, Putting Us All at Risk (Ellen Brown)
The U.S. Federal Reserve, which bailed out General Motors in a rescue operation in 2009, was prohibited from lending to individual companies under the Dodd-Frank Act of 2010, and it is legally barred from owning equities. It parks its reserves instead in bonds and other government-backed securities. But other countries have different rules, and central banks are now buying individual stocks as investments, with a preference for big tech companies like Amazon, Apple, Facebook and Microsoft. Those are the stocks that dominate the market, and central banks are aggressively driving up their value. Markets, including the U.S. stock market, are thus literally being rigged by foreign central banks.
The result, as noted in a January 2017 article at Zero Hedge, is that central bankers, “who create fiat money out of thin air and for whom ‘acquisition cost’ is a meaningless term, are increasingly nationalizing the equity capital markets.” Or at least they would be nationalizing equities, if they were actually “national” central banks. But the Swiss National Bank, the biggest single player in this game, is 48 percent privately owned, and most central banks have declared their independence from their governments. They march to the drums not of government but of private industry.
Marking the 10th anniversary of the 2008 collapse, former Fed Chairman Ben Bernanke and former Treasury Secretaries Timothy Geithner and Henry Paulson wrote in a Sept. 7 New York Times op-ed that the Fed’s tools needed to be broadened to allow it to fight the next anticipated economic crisis, including allowing it to prop up the stock market by buying individual stocks. To investors, propping up the stock market may seem like a good thing, but what happens when the central banks decide to sell? The Fed’s massive $4 trillion economic support is now being taken away, and other central banks are expected to follow. Their U.S. and global holdings are so large that their withdrawal from the market could trigger another global recession. That means when and how the economy will collapse is now in the hands of central bankers.
We all do.
• Shiller Sees ‘Bad Times In The Stock Market’ Ahead (CNBC)
Nobel laureate Robert Shiller thinks investors ought to ignore the recent burst in corporate profits and focus on longer-term valuation, which he says carries foreboding news for the stock market. At a time when earnings are rising 25 percent a quarter, Shilller said that’s not indicative of what longer-term results in the market will be. History has shown that in previous times, particularly around World War I, the late 1920s approaching the time of the Depression, and in the high-inflation 1980s, profits could be strong but equity results not as much. In the present case, the recent surge in profits has been due to last year’s tax cuts, backed by President Donald Trump, that took the corporate rate from 35 percent to 21 percent.
“My own way of thinking is it looks like an overreaction,” Shiller said Friday at a conference in New York presented by the Wharton School. “We’re launching a trade war. Aren’t people thinking about that? Is that a good thing? I don’t know, but I’m thinking it’s likely to be bad times in the stock market.” Shiller cautioned that he is not predicting major calamity for the market but rather a much lower level of returns, in the 2.6 percent annual range, than investors have come to expect during the 9-year-old bull market. The longest rally in history has the S&P 500 up more than 335 percent since the March 2009 bottom. “It’s not like I’m predicting a crash,” he said. “This is a 10-year forward return. This is not going to be great, because we’re just too high at the present value.”
Really, these people think they saved the economy. By creating fake booms.
• Yellen: Fed Should Commit To Future ‘Booms’ To Make Up For Major Busts (R.)
The U.S. Federal Reserve should commit to letting economic booms run on enough to fully offset collapses like the 2007 to 2009 Great Recession, former Fed chair Janet Yellen said on Friday, urging the central bank to make “lower-for-longer” its official motto for interest rates following serious downturns. Yellen’s approach, which comes in the wake of complaints by the Trump administration about Fed interest rate hikes, could imply a looser monetary policy stance amid Fed officials’ concerns about tight labor markets and greater financial stability risks after a decade of low rates. Those concerns should not be shunted aside, Yellen said, in her most extensive remarks about monetary policy since leaving the Fed early in the year.
Elaborating on how the central bank should think about what to do if rates have to be cut to zero again in the future and can’t go any lower, she said the Fed should promise now that it will keep rates low enough to let a hot economy make up for lost time. “By keeping interest rates unusually low after the zero lower bound no longer binds, the lower-for-longer approach promises, in effect, to allow the economy to boom,” Yellen said in remarks delivered at a Brookings Institution conference. “The (Federal Open Market Committee) needs to make a credible statement endorsing such an approach, ideally before the next downturn.”
The trade wars affect Russia only slightly.
• Russia Central Bank Raises Key Rate To 7.5%, Extends Pause In FX Buying (R.)
The Russian central bank raised its key interest rate to 7.50 percent on Friday and said it would not make any foreign currency purchases until the end of the year, citing the risk of higher inflation and rouble volatility. It was the first time the central bank had raised the key rate since late 2014 when it had to step in to help stabilise the tanking rouble. The rouble firmed after the decision, trading at 67.88 versus the dollar compared with 68.41 shortly before. “The increase of the key rate will help maintain real interest rates on deposits in positive territory, which will support the attractiveness of savings and balanced growth in consumption,” the central bank said in a statement.
Analysts polled by Reuters had mostly expected the central bank to hold the rate at 7.25 percent, as it had done at three previous board meetings, but had not ruled out the possibility of a rate hike either. The bank’s decision to extend a pause in daily FX buying until the end of 2018 from the end of September will help curtail exchange rate volatility and its influence on inflation over the next few quarters, the central bank said. Explaining its thinking, the central bank said “changes in external conditions observed since the previous meeting of the Board of Directors have significantly increased pro-inflationary risks.”
7.5% in Russia, 24% in Turkey. Why? Because Turks borrowed so much in dollars.
• Turkey Raises Key Interest Rate To 24% In Bid To Curb Inflation (G.)
Turkey‘s central bank has raised its key interest rate to 24% in a dramatic bid to control rocketing inflation and prevent a currency crisis. Ignoring calls for restraint from President Erdogan, the bank raised its main short-term rate from 17.5% following weeks of pressure from international investors. Financial markets have grown increasingly concerned that Turkey is in danger of adding its name to the list of countries seeking a rescue loan from the IMF. Argentina agreed a loan earlier in the summer with the IMF and only last month called on the Washington-based lender to release the funds earlier to to ease concerns that the country would not be able to meet its debt obligations over the next year.
South Africa, Indonesia and Mexico are also among a group of emerging market economies that have seen their currencies tumble as investors desert countries that have grown quickly using large amounts of borrowed funds. The Turkish lira began to recover shortly after the rate hike, strengthening by 3% to 6.16 against the dollar. Inflation also soared this month to a 15-year high of almost 18%. The currency has plunged in recent months and even after Thursday’s rise was down almost 39% against the dollar this year.
Third world America.
The lamentation for the northern part of “flyover” America is an old story now. Nobody is surprised anymore by the desolation of de-industrialized places like Youngstown, Ohio, or Gary, Indiana, where American wealth was once minted the hard way by men toiling around blast furnaces. But the southeast states enjoyed a strange interlude of artificial dynamism since the 1950s, which is about three generations, and there is little cultural memory for what the region was like before: an agricultural backwater with few cities of consequence and widespread Third Worldish poverty, barefoot children with hookworm, and scrawny field laborers in ragged straw hats leaning on their hoes in the stifling heat.
The demographic shifts of recent decades turned a lot of it into an endless theme park of All-You-Can-Eat buffets, drive-in beer emporia, hamburger palaces, gated retirement subdivisions, evangelical churches built like giant muffler shops, vast wastelands of free parking, and all the other trappings of the greatest misallocation of resources in the history of the world. Like many of history’s prankish proceedings, it seemed like a good idea at the time. As survivors slosh around in the plastic debris in the weeks ahead, and the news media spins out its heartwarming vignettes of rescue and heroism, will there be any awareness of what has actually happened: the very sudden end of a whole regional economy that was a tragic blunder from the get-go?
It is probably hard to imagine Dixieland struggling into whatever its next economy might be. In some places, it’s not even possible to return to a prior economy based on agriculture. A lot of the landscape was farmed so ruinously for two hundred years that the soil has turned into a kind of natural cement, called hardpan or caliche. The climate prospects for the region are not favorable either, not to mention the certain cessation of universal air-conditioning and “happy motoring” that made the unwise mega-developments of recent decades possible.
I remember her meeting with Trump. She must feel deceived. Just not clear by whom.
• Days After 9/11 Tulsi Gabbard Slams Betrayal Of American People (ZH)
In a rare and unprecedented speech delivered on the House floor just two days after the nation memorialized 9/11, Democratic Hawaiian Congresswoman Tulsi Gabbard on Thursday slammed Washington’s longtime support to anti-Assad jihadists in Syria, while also sounding the alarm over the current build-up of tensions between the US and Russia over the Syria crisis. She called on Congress to condemn what she called the Trump Administration’s protection of al-Qaeda in Idlib and slammed Washington’s policies in Syria as “a betrayal of the American people” — especially the victims and families that perished on 9/11.
Considering that Congresswoman Gabbard herself is an Iraq war veteran and current Army reserve officer who served in the aftermath of 9/11, it’s all the more power and rare that a sitting Congress member would make such forceful comments exposing the hypocrisy and contradictions of US policy. She called out President Trump and Vice President Mike Pence by name on the House floor in her speech: “Two days ago, President Trump and Vice President Pence delivered solemn speeches about the attacks on 9/11, talking about how much they care about the victims of al-Qaeda’s attack on our country. But, they are now standing up to protect the 20,000 to 40,000 al-Qaeda and other jihadist forces in Syria, and threatening Russia, Syria, and Iran, with military force if they dare attack these terrorists.”
[..] Trump and Gabbard had even once met to discuss Syria policy at a private meeting at Trump Tower in November of 2016 just ahead of then president-elect Trump being sworn into office. At the time the two appeared to be in complete agreement over Syria policy, after which Gabbard said of the meeting, “I felt it important to take the opportunity to meet with the President-elect now before the drumbeats of war that neocons have been beating drag us into an escalation of the war to overthrow the Syrian government—a war which has already cost hundreds of thousands of lives and forced millions of refugees to flee their homes in search of safety for themselves and their families.”
Pacta sunt servanda.
• Acrimony As EU Denies False Report On Greek Pension Cuts Relief (K.)
The European Commission on Friday denied a report in the state-run Athens-Macedonian News Agency (ANA-MPA) that claimed Greece’s lenders had agreed to the non-implementation of pension cuts slated for January as they believe the country’s social security system has become viable. The agency, whose report was initially backed by government spokesman Dimitris Tzanakopoulos, also claimed that the institutions had informed opposition parties about their decision. But a government source told Kathimerini that the report was not true.
The EC was quick to refute the report with a statement urging Greece to deliver on the promises it has made to its international lenders under the bailout program. “Our position is crystal-clear: Pacta sunt servanda. This is the only position you need to look at,” Commission spokesman Alexander Winterstein told a news briefing, using a Latin proverb which means “agreements must be kept.” For their part, the institutions said they made the visit to Athens – the first since Greece’s exit from the bailout program in August – not to engage in negotiations but to monitor whether the government is sticking to agreed reforms.
Not a popular thing to say. But is it wrong? What he means is stop the wars and invasions first.
• Dalai Lama Says ‘Europe Belongs To Europeans’ (AFP)
The Tibetan spiritual leader, the Dalai Lama, said Wednesday that “Europe belongs to the Europeans” and that refugees should return to their native countries to rebuild them. Speaking at a conference in Sweden’s third-largest city of Malmo, home to a large immigrant population, the Dalai Lama – who won the Nobel Peace Prize in 1989 – said Europe was “morally responsible” for helping “a refugee really facing danger against their life”. “Receive them, help them, educate them… but ultimately they should develop their own country,” said the 83-year-old Tibetan who fled the capital Lhasa in fear of his life after China poured troops into the region to crush an uprising. “I think Europe belongs to the Europeans,” he said, adding they should make clear to refugees that “they ultimately should rebuild their own country”. .
Where’s all the water going to go?
• Florence Plows Inland, Leaving Five Dead, States Flooded (R.)
Florence had been a Category 3 hurricane on the five-step Saffir-Simpson scale with 120-mph winds as of Thursday, but dropped to a Category 1 hurricane before coming ashore near Wrightsville Beach close to Wilmington. The National Hurricane Center downgraded it to a tropical storm on Friday afternoon, but warned it would dump as much as 30 to 40 inches of rain on the southeastern coast of North Carolina and into the northeastern coast of South Carolina in spots. “This rainfall will produce catastrophic flash flooding and prolonged significant river flooding,” the hurricane center said. Atlantic Beach on North Carolina’s Outer Banks islands had already received 30 inches (76 cm) of rain, the U.S. Geological Survey said.
By Friday night the center of the storm had moved to eastern South Carolina, about 15 miles northeast of Myrtle Beach, with maximum sustained winds of 70 mph. North Carolina utilities have estimated that as many as 2.5 million state residents could be left without power, the state’s Department of Public Safety said. More than 22,600 people were housed in 150 shelters statewide, including schools, churches and Wake Forest University’s basketball arena. Officials in New Bern, which dates to the early 18th century, said over 100 people were rescued from floods and the downtown was under water by Friday afternoon. Calls for help multiplied as the wind picked up and the tide rolled in.
“These are folks who decided to stay and ride out the storm for whatever reason, despite having a mandatory evacuation,” city public information officer Colleen Roberts said. “These are folks who are maybe in one-story buildings and they’re seeing the floodwaters rise.”
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