Best of the Week
Most Popular
1.The Gallery of Crowd Behavior: Goodbye Stock Market All Time Highs - Doug_Wakefieldth
2.Tesco Meltdown Debt Default Risk Could Trigger a Financial Crisis in Early 2015 - Nadeem_Walayat
3.The Trend Every Nation on Earth Is Pouring Money Into - Keith Fitz-Gerald
4.Do Tumbling Buybacks Signal Another Stock Market Crash? - 26Mike_Whitney
5.Could Tesco Go Bust? How to Save Tesco from Debt Bankruptcy Risk - Nadeem_Walayat
6.Gold And Silver Price - Respect The Trend But Prepare For A Reversal - Michael_Noonan
7.U.S. Economy Faltering Momentum, Debt and Asset Bubbles - Lacy Hunt
8.Bullish Silver Stealth Buying - Zeal_LLC
9.Euro, USD, Gold and Stocks According to Chartology - Rambus_Chartology
10.Evidence of Another Even More Sweeping U.S. Housing Market Bust Already Starting to Appear - EWI
Last 5 days
Pretium - Canadian Golden Elephant - 31st Oct 14
What USA Today Got Wrong About the Stock Market Fear Gauge - 31st Oct 14
Election Result - Labour Wins South Yorkshire Police and Crime Commissioner - 31st Oct 14
Gold Price Falls, Stocks Record Highs as Japan Goes ‘Weimar’ - 31st Oct 14
EUR/USD - Double Bottom Or New Lows? - 31st Oct 14
More Downside Ahead for Gold and Silver - 31st Oct 14
QE Is Dead, Now You Tell Me What You Know - 31st Oct 14
Welcome to the World of Volatility - 31st Oct 14
Stocks Bear Market Crash Towards New All Time Highs as QE3 End Awaits QE4 Start - 31st Oct 14
US Mortgages, Risky Bisiness "Easy Money" - 30th Oct 14
Gold, Silver and Currency Wars - 30th Oct 14
How to Recognize a Stock Market “Bear Raid” on Wall Street - 30th Oct 14
U.S. Midterm Elections: Would a Republican Win Be Bullish for the Stock Market? - 30th Oct 14
Stock Market S&P Index MAP Wave Analysis Forecast - 30th Oct 14
Gold Price Declines Once Again As Expected - 30th Oct 14
Depression and the Economy of a Country - 30th Oct 14
Fed Ends QE? Greenspan Says Gold “Measurably” “Higher” In 5 Years - 30th Oct 14
Apocalypse Now Or Nirvana Next Week? - 30th Oct 14
Understanding Gold's Massive Impact on Fed Maneuvering - 30th Oct 14
Europe: Building a Banking Union - 30th Oct 14
The Colder War: How the Global Energy Trade Slipped From America's Grasp - 30th Oct 14
Don't Get Ruined by These 10 Popular Investment Myths (Part VIII) - 29th Oct 14
Flock of Black Swans Points to Imminent Stock Market Crash - 29th Oct 14
Bank of America's Mortgage Headaches - 29th Oct 14
Risk Management - Why I Run “Ultimate Trailing Stops” on All My Investments - 29th Oct 14
As the Eurozone Economy Stalls, China Cuts the Red Tape - 29th Oct 14
Stock Market Bubble Goes Pop - 29th Oct 14
Gold's Obituary - 29th Oct 14
A Medical Breakthrough Creating Stock Profits - 29th Oct 14
Greenspan: Gold Price Will Rise - 29th Oct 14
The Most Important Stock Market Chart on the Planet - 29th Oct 14
Mysterious Death od CEO Who Went Against the Petrodollar - 29th Oct 14
Hillary Clinton Could Be One of the Best U.S. Presidents Ever - 29th Oct 14
The Worst Advice Wall Street Ever Gave - 29th Oct 14
Bitcoin Price Narrow Range, Might Not Be for Long - 29th Oct 14
UKIP South Yorkshire PCC Election Win is Just Not Going to Happen - 29th Oct 14
Evidence of New U.S. Housing Market Real Estate Bust Starting to Appear - 28th Oct 14
Principle, Rigor and Execution Matter in U.S. Foreign Policy - 28th Oct 14
This Little Piggy Bent The Market - 28th Oct 14
Global Housing Markets - Don’t Buy A Home, You’ll Get Burned! - 28th Oct 14
U.S. Economic Snapshot - Strong Dollar Eating into corporate Profits - 28th Oct 14
Oliver Gross Says Peak Gold Is Here to Stay - 28th Oct 14
The Hedge Fund Rich List Infographic - 28th Oct 14
Does Gold Price Always Respond to Real Interest Rates? - 28th Oct 14
When Will Central Bank Morons Ever Learn? asks Albert Edwards at Societe General - 28th Oct 14
Functional Economics - Getting Your House in Order - 28th Oct 14
Humanity Accelerating to What Exactly? - 27th Oct 14
A Scary Story for Emerging Markets - 27th Oct 14
Could Tesco Go Bust? How to Save Tesco from Debt Bankruptcy Risk - 27th Oct 14
Europe Redefines Bank Stress Tests - 27th Oct 14
Stock Market Intermediate Correction Underway - 27th Oct 14
Why Do Banks Want Our Deposits? Hint: It’s Not to Make Loans - 26th Oct 14
Obamacare Is Not a Revolution, It Is Mere Evolution - 26th Oct 14
Do Tumbling Buybacks Signal Another Stock Market Crash? - 26th Oct 14
Has the FTSE Stock Market Index Put in a Major Top? - 26th Oct 14
Christmas In October – Desperate Measures - 26th Oct 14
Stock Market Primary IV Continues - 26th Oct 14
Gold And Silver Price - Respect The Trend But Prepare For A Reversal - 25th Oct 14
Ebola Has Nothing To Do With The Stock Market - 25th Oct 14
The Gallery of Crowd Behavior: Goodbye Stock Market All Time Highs - 25th Oct 14
Japanese Style Deflation Coming? Where? Fed Falling Behind the Curve? Which Way? - 25th Oct 14
Gold Price Rebounds but Gold Miners Struggle - 25th Oct 14
Stock Market Buy the Dip or Sell the Rally - 25th Oct 14
Get Ready for “Stupid Cheap” Stock Prices - 25th Oct 14
The Trend Every Nation on Earth Is Pouring Money Into - 25th Oct 14 - Keith Fitz-Gerald
Bitcoin Price Decline Stopped, Possibly Temporarily - 25th Oct 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Stocks Epic Bear Market

Overpriced Assets Reaching Their Peak

Stock-Markets / Financial Markets 2013 Feb 25, 2013 - 06:27 PM GMT

By: Andrew_McKillop

Stock-Markets

START WITH SOVEREIGN DEBT
Leading financial and economic statistics for major nations tell us all we need to know: zerohedge.com/sites/default/files/images/user3303/imageroot/2013/01/20130201_Macro.jpg

As a direct result there is no way QE or quantitative easing can end, despite anything that might have been said, implied or read into the minutes from the most recent 30 January meeting of the US Federal Reserve’s Open Market Committee. federalreserve.gov/newsevents/press/monetary/20130130a.htm


Acting with pr7edictable and even amusing delayed response, financial market operators - the word 'operators' having all its meanings in this case - sold off stocks, slashed at gold prices, and even toyed with talking down oil prices, for a few days, well after the event. By this week, starting 25 February, they were well on their way to overcoming their supposed attack of "nervousness", and they even talked gold up a little from its recent doldrums.

The nervousness was adduced by market commentators to arise from official notes to the US FOMC meeting, casting "potential or possible doubt" on the US Federal Reserve holding true and firm to its open-ended $85 billion-a-month debt monetization program, called ‘quantitative easing’. Some of the most nervous and least realistic believed out loud that "inflationary risks" could be created not by maintaining the open-ended buying of mostly worthless "debt securities and instruments" by the Fed, but by abandoning it!

TORTURED LOGIC, TWISTED MARKETS
Inflationary risk was not on the FOMC's dinner table menu; restoring inflation was and is. An extract from the Notes to the meeting tells us what we need to know:  "To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month".

Inflation needs to be at a "consistent rate", which we can translate as a "persistent rate". Without it, things do not look too good, in fact they look even worse than they are already, in Bernanke Vision, shared by Central Bank governors of all major nations, and recently with dramatic intensity by Japan's bank governor. Pretending this money printing is "not without costs and risks" is a thing to murmur while stirring the coffee, after the dessert and the floorshow. A really nice aside, polite also.

The main problem is dramatically simple: how can we offload these assets in the future? And to who?

Above all, the really fundamental reason why QE cannot ever stop, the slightest trace of action to start liquidating these "comfort and confidence assets" will create market panic. At that time, interest rates will have to rise. This will be Armageddon. Between times the absence of inflation, even "troubling signs of deflation" provide a radically precious and possibly unexpected prop to QE.

The game of "maintaining confidence", which is the only role of central banks, has massively slopped over and outside the brimming cup of central bank money manipulation. All financial markets, of every kind are now affected: stocks, gold, oil, metals, soft commodities, even the price of palm oil or rubber. Apart from sovereign debt, the very close linked major market that is obligatorily manipulated to "maintain confidence" is the foreign exchange currency market. Operators, here, can and will take ever more reckless bets due to QE and the ideology, or mentality that runs alongside it.

NO RISK, UNLIMITED RISK
The quickest look at key favoured markets for increasingly naked and brutal manipulation, including oil and gold, can be explained, by some, by market operators in these markets "being unable to price risk". They only have to bet that oil prices will rise and gold prices will fall. Where the betting is run by the Banksters, in any "asset space", including sovereign debt as well as oil or gold, and stocks, they know that risk no longer exists. If they fail - they do not fail. They are TBTF. Since 2008, they have a permanent armlock round the neck of governments and their central banks. Against this backdrop, market participants are not interested in pricing risk. They have a permanent green light to pump up the nominal value of anything, as long as its tradable, possibly even including gold.

Any talk about an "instant stop" to QE would, just as instantly, reveal the woeful and system-wide distortion and unreality of prices for almost all and any assets. The near obligation, not just probability  of central banks raising interest rates, if they stopped QE, would be the ultimate Death Cross for the economy. Their tinkering with "stealth devaluation" of all major moneys would spiral into runaway and real Currency Wars. All the talk about this being High Keynes and the Guided Economy is as laughable as it is unreal: like a killer drone guided by a defective cellphone with an idiot video game playing.

Just as laughable, supposed claims of instant fixes and silver bullet solutions including an instant stop to QE would be an atom bomb for the global economy, today. These nice asides to a central bankers' dinner party are at least 5 years out of date.

IN GOOD COMPANY, IN TERRIBLE COMPANY
As we know Everybody is Doing It. The US Fed has "created" about $1.9 trillion, the ECB has created about $1.4 trillion, and Japan's BOJ has created nearly $1 trillion in new ‘reserves’ since the now mythologized, supposed key event of the Lehman Bros bank collapse. Certainly in the case of Europe and Japan, centralbankers will have to increase the rate of growth of their 'reserve' creation, due to the "underperforming" real economy.

Central bankers, more than ever, have to believe they are defending national moneys, therefore defending the economy, and that they defend the general public which in their bankster view is as helpless as it is witless. As we know, along with governments, the central banks are destroying national moneys, as well as the economy, even if the general public stays witless. The Bad Company of the bankers is of course still a selected company, but the circle is now wide: all market operators of any size believe they can and do influence the central bankers. And vice versa.

The one-way nature of central banker "management" of the economy, through money printing, has since 2008 either created new, or recreated old asset bubbles but with added venom. This is a problem of their own bureaucratic making, based on faith and fantasy, called received wisdom. It is divorced from the real economy and the real world. Brave talk by politicians, sometimes even by the central bankers themselves, that "deleveraging of debt" is taking place albeit slowly, completely ignores the basic fact of private banks, large corporations, and above all the State being totally dependent on nearly-zero interest rates: cheap credit.

From the List of Shame table at the start of this article (Fiscal balances and economic performance) the truly amazing or fantastic situation of Japan stands out like a sore thumb on a heavily mauled hand. Japan was the first country forced into zero-interest policy, and the first to run ‘quantitative easing’ over 20 years ago, but has been upstaged on that score since 2008 by several Western central banks. The LDP government of Shinzo Abe takes an extreme political approach to the nation's central bank, from the choice of its new governor to all public statements coming out of the BOJ. This certainly shows which way the wind is blowing for central bankers.

The headwinds are blowing, and could switch to gale force overnight. Central bankers are now full-time players in the sombre farce of global economic meltdown by policy decision. To some perhaps, this is make-or-break, a time for courage, and other reassuring slogans but what we know is that central bankers almost never, ever pay the price of their mistakes, and never change course until too late.

By Andrew McKillop

Contact: xtran9@gmail.com

Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

Co-author 'The Doomsday Machine', Palgrave Macmillan USA, 2012

Andrew McKillop has more than 30 years experience in the energy, economic and finance domains. Trained at London UK’s University College, he has had specially long experience of energy policy, project administration and the development and financing of alternate energy. This included his role of in-house Expert on Policy and Programming at the DG XVII-Energy of the European Commission, Director of Information of the OAPEC technology transfer subsidiary, AREC and researcher for UN agencies including the ILO.

© 2013 Copyright Andrew McKillop - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisor.

Andrew McKillop Archive

© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014