Free Republic

Japan's central bank shocks markets with more easing as inflation slows By Leika Kihara and Tetsushi Kajimoto TOKYO Fri Oct 31, 2014 10:47am GMT (Reuters) - The Bank of Japan shocked global financial markets on Friday by expanding its massive stimulus spending in a stark admission that economic growth and inflation have not picked up as much as expected after a sales tax hike in April. BOJ Governor Haruhiko Kuroda portrayed the board's tightly-split decision to buy more assets as a preemptive strike to keep policy on track, rather than an admission that his plan to reflate the long moribund-economy...

[snip]The lowflation of being consistently below an already low target is bad in itself; the deflation it could easy lead to is even worse. There are several reasons. The belief that money made tomorrow will be worth less than money today stymies investment; the belief that goods bought tomorrow will be cheaper than goods bought today chokes consumption. Central bankers can no longer set real (that is, inflation-adjusted) interest rates low enough to restore demand. Wages, incomes and tax revenue all stall, undermining the ability of households, businesses and governments to pay their debts—debts which, in real terms, will grow...

Here we go again. Another sovereign debt crisis on the periphery of the EU is underway and many of the same factors that led to previous debt meltdowns are present. Germany is headed for a triple dip recession. Continent-wide deflation is nearly a reality. And many EU nations are smashing the debt limits demanded by treaty, thus threatening the Euro itself. All of this is impacting the percentage of debt in relation to GDP in several countries, making government bonds more expensive and debt servicing a nightmare. The Hill: Among Europe's most recent economic tremors has been the growing evidence...

'We are reaching the end game in Europe. If they don’t launch real QE soon, the consequences are too awful to contemplate,' warns RBS. A key gauge of deflation risk in Europe is flashing red, dropping to record lows on fears of fresh recession and lack of decisive action by the European Central Bank. The sudden lurch downwards came as Bank of America warned that France’s debt ratio could rocket to 120pc of GDP within five years, unless the EU authorities take radical steps to reflate the region’s economy. Italy’s debt could threaten 150pc even earlier. The 5-year/5-year forward swap...

Myles UdlandOctober 9, 2014Uber-bear Albert Edwards, a strategist at Societe Generale, is out with a new note to clients about market tops and expensive baskets. Edwards highlights the following comment from this weekend's Financial Times that said the following: Sir: The next financial apocalypse is imminent. I know this to be true because the (FT Weekend) House and Home section is now assuming the epic proportions last seen before the great crash. Twenty four pages chock full of adverts for mansions and wicker tea trays for $1,000. You’re all mad. Sell everything and run for your lives.(snip)

Tyler Durden 10/06/2014 In 2008, we projected that the crash in the market was in fact a mini-crash and that the day would come when a more major crash would occur - one that reflected the level of debt. In recent months, this prognostication has been gaining traction - that a second, more severe crash is inevitable. There are two primary camps amongst economists with regard to the economic direction that a crash will generate: inflationists and deflationists. Inflationists tend to feel that the governments of the world that are now in debt over their heads will do what governments...

August 17, 2014 DailyWealth Dr. Steve Sjuggerud writes: A new record was set in Germany yesterday... The interest rate on a 10-year government bond in Germany fell below 1%. This number is shocking... Interest rates have never been this low in German history. What does it mean? Why would people agree to lend money to a government for 10 years with almost no return on that money? What is the message that we should take from this? Aren't things supposed to be getting back to "normal"? And doesn't "normal" mean something like this: By 2020, the Federal Reserve has short-term...

I warned about this in part two of my 2.5 hour Economics Video Presentation back in November of ARSH 2012, and, sure enough, it has now happened. Because, as I have been saying all along, for anyone who knows ANYTHING about ANYTHING having to do with economics, finance and/or banking, and who does not have their brain bucket completely and firmly inserted up their rectal vault, it is obvious what is happening and how the chain of events will unfold. If a mouthy broad with a mere bachelor’s degree in animal husbandry from a land-grant university can see this stuff...

Tyler Durden 05/26/2014 For the last several years, nobody has been more outspokenly bearish on Japan than Kyle Bass. In a recent talk, Bass reiterated his doubts about Japan’s chances of averting a debt crisis. What’s more, he also said China’s economy will fall below expectations. Bass changed one aspect of his outlook on Japan. Instead of predicting a collapse of the Japanese bond market, he focused on a severe weakening of the yen – without predicting when that might happen. His predictions for China were equally distressing. He said that its banks will be saddled with non-performing loans and...

One of European Central Bank President Mario Draghi’s most important duties is watching his mouth. One ill-considered utterance is enough to sow panic on the financial markets. But during a press conference earlier this month, Draghi allowed himself a telling slip. Speaking to gathered journalists at the Spring Meetings of the International Monetary Fund and the World Bank, Draghi twice almost uttered a word he has been at pains to avoid. “Defla…”, Draghi began, before stopping himself and continuing with the term “low inflation.”Yet despite Draghi’s efforts, the specter of deflation was omnipresent in Washington during the meetings. And it...

The fear of deflation serves as the theoretical justification of every inflationary action taken by the Federal Reserve and central banks around the world. It is why the Federal Reserve targets a price inflation rate of 2 percent, and not 0 percent. It is in large part why the Federal Reserve has more than quadrupled the money supply since August 2008. And it is, remarkably, a great myth, for there is nothing inherently dangerous or damaging about deflation. Deflation is feared not only by the followers of Milton Friedman (those from the so-called Monetarist or Chicago School of economics), but...

Harry Dent predicts mild inflation, then massive deflation, then mild inflation.

Forget all the talk about CPI or as they call it in Europe HIPC (harmonized index of consumer prices) floating just under 1%. The true measure of inflation is credit expansion. And for the second month, credit contracted in the Eurozone. Reuters reports Euro zone lending contraction compounds ECB headache. Lending to households and firms in the euro zone fell again in January and money supply growth remained subdued, adding to pressure on the European Central Bank to take action next week to support the economy. The ECB has cut interest rates to a record low, pumped extra liquidity into...

If you repeat something completely inane enough times, do people, even economic writers, believe it?

Get ready for the next era in retail—one that will be characterized by far fewer shops and smaller stores. On Tuesday, Sears said that it will shutter its flagship store in downtown Chicago in April. It's the latest of about 300 store closures in the U.S. that Sears has made since 2010. The news follows announcements earlier this month of multiple store closings from major department stores J.C. Penney and Macy's. Further signs of cuts in the industry came Wednesday, when Target said that it will eliminate 475 jobs worldwide, including some at its Minnesota headquarters, and not fill 700...

One piece of the jigsaw puzzle is missing to complete the deflation landscape across the West: a slide in oil prices. This is becoming more likely each month. Turmoil across the Middle East and parts of Africa has choked supply over the past two years, keeping Brent crude near $110 a barrel despite a broader commodity slump. Cotton and corn prices have halved, as has the UBS index of industrial metals. Such anomalies rarely last. "We estimate that crude oil is now the mostly richly priced commodity in the world," says Deutsche Bank in a fresh report. Michael Lewis, the...

Forget the Federal Reserve — the real threat to gold’s price is deflation.That’s the argument over at Societe Generale this morning. No, not runaway, Depression-style deflation — but rather the threat of a stubborn resilience in the value of major currencies, which would be a clear negative for an “alternative currency” like gold. It would happen on account of investors’ unwillingness to behave like they usually do in economic normalcy. It would also happen as a result of stocks’ surging prices. At minimum, a lack of inflationary pressure of the sort investors are seeing lately, and may well see...

(Reuters) - The possibility that the Federal Reserve could finally start to trim its extraordinary stimulus for the economy could make this week an explosive one for financial markets. Though the odds still point to no major policy change when U.S. central bankers meet December 17-18, most of the recent domestic economic data suggest the beginning of the end of their massive bond-buying program is coming sooner than later. If it acts it may reflect as much a growth in confidence in the global economy, for whom the withdrawal of the flow of cheap dollars will be a shock, as...

Several economic indicators for the US show deceleration. Yet the stock market and house prices continue to grow. Here is a chart of three economic indicators with clear downward momentum: civilian labor force participation (blue), the US homeownership rate (red) and real median household income (green). homessss And Goldman Sachs just downgraded Q4 2013 real GDP growth to 1.3%. These downward indicators compliment the declining M1 Money Multiplier and M2 Money Velocity. m1m2vel120213 Why? There are enormous excess reserves in the Fed system that aren’t leaking out to Main Street. And The Fed’s Balance sheet has exploded! (in terms of...

Steen Jakobsen, Chief economist at Saxo Bank in Denmark, pinged me today with his thoughts on "the morning after" and "price discovery". In my opinion these two paragraphs of the FOMC Statement are the key ones: The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished, on net, since last fall, but the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market. The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic...