Surging rates on dollar Libor contracts are rapidly tightening conditions across large parts of the global economy, incubating stress in the credit markets and ultimately threatening overvalued bourses….Fear that the US Federal Reserve may have to raise rates uncomfortably fast is leading to an acute dollar shortage, draining global liquidity.
This unprecedented shift in capital away from active managers and toward passive strategies has resulted in not only a chilling effect on the hedge fund industry…..but also concerns about a market in which “passive”, robotic, algo-driven decision makers are the marginal buyers and sellers of securities. And while it is the case that so far, the market has been spared an observation of how a largely passive investing crowd would respond during a downturn (and more importantly what happens to market liquidity), the time is drawing nearer with every passing day, and certainly as central bankers collectively try to prop up global yield curves.
There’s deep complacency in the U.S. regarding vulnerability to reduced monetary stimulus. The Fed wound down QE and implemented a rate increase without major market instability. I believe this was only possible because of the extraordinary monetary stimulus measures in play globally. “Whatever it takes” central banking, in particular from the ECB and BOJ, unleashed Trillions of liquidity (and currency devaluation) that certainly underpinned U.S. securities and asset markets. Prices of sovereign debt, including Treasuries, have traded at levels that assume global central banker support will last indefinitely. Markets have begun reassessing this assumption.
Central banks are obsessed with boosting inflation, but the “why inflation is good” arguments make no sense for households being ravaged by inflation. The basic argument is that inflation makes it easier for debtors to service their debts. But this is only true if income rises along with costs. If income stays flat while costs rise, households lose ground–debt remains a burden as the purchasing power of income plummets.
The unique moral revolution to which the Founding Fathers pledged their lives, their fortunes, and their sacred honor has little connection to the bastard term (usually capitalized as “American Exceptionalism”) that describes post-Cold War U.S. global behavior, by which policymakers in Washington assert both an exclusive “leadership” privilege and unsupportable obligation to undertake open-ended international missions in the name of the “Free World” and the “international community.” This is the counterfeit “Exceptionalism” of a tiny clique of bipartisan apparatchiki—GOP “neoconservatives” and Democrat “liberal interventionists” and their mainstream media mouthpieces—who have little regard for our country’s oldest traditions or the security and welfare of the American people.
A weekend marathon of talks between major oil producers failed to finalize plans to implement an output cut, threatening the viability of an agreement reached last month to reduce production by as much as 2%. The talks were also aimed at securing coordinated cuts with producers outside OPEC, such as Russia, the world’s largest oil producer. Instead, Iraq and Iran’s insistence on exemptions emerged as a big sticking point Friday as those members refused to agree to cut their burgeoning output.
For many years, progressives and the Democratic left have been clamoring for a constitutional amendment that would replace the antiquated Electoral College with a popular vote for president. Their argument is simple and persuasive—chiefly, that the institution is undemocratic and, as the 2000 election made clear, not necessarily a reflection of the popular vote.
On November 8th, voters in Arizona, Colorado, Maine, and Washington will decide on whether their respective states will raise the minimum wage for all workers…… American Action Forum (AAF) research has consistently shown that proposals to raise the minimum wage often hurt those they intend to help by increasing joblessness among low-skilled workers and failing to deliver income gains to those who actually need assistance. So, what would happen in these states if each measure were approved? These minimum wage increases would come at a total cost of 290,000 jobs.
Where do we go from here? If the monetary system is broken, how do we fix it so that the global economy can be mercifully released from the “dollar’s” gripping vise? ……. fully believe that as one of the first steps in restoring money and really monetary sanity would be to take the challenge head-on rather than to continue to deny complex reality. Scrap Basel and refocus on liabilities.
Another thing I could want to do is have to write a life insurance policy for Doug Band…..