Wednesday, June 08, 2016

Bank of America Credit Analyst Loses It! 
"Central Banks Created A Fantasy Land"
"With manufacturing still struggling, despite slightly better data, and a weaker consumer, we would argue that the macro landscape is as bad or worse than when investors were forecasting imminent recession ..  Alternatively, perhaps the Fed overlooks this last month’s data and Chair Yellen sounds (and acts) more hawkish than pundits expect. Perhaps the British referendum results in a leave vote. Perhaps the general election this November causes market panic. Perhaps global growth wanes and the deflation/disinflation fears once again take hold. Perhaps, we awake in October with a hike in the bag, oil back to $39 and our first negative jobs print. Perhaps oil spikes and damages households. Perhaps corporate earnings fall after their decent Q1, economic growth continues its decline and the consumer begins to rein in spending .. We think there is a distinct possibility that we could live through a period of time when companies could even fire more than they hire without being in a recession, as consumer balance sheets are relatively healthy. In fact, without a banking crisis and housing crisis, we think the driving force behind the next leg in the economic slowdown is likely to be driven by households pulling back on spending as job security becomes an issue. Only unlike housing, which unraveled quickly, the consumer boom/bust cycle is likely to be slower and longer as the negative feedback loop of lower employment to reduced spending, reduced corporate profits, and more layoffs and liquidations may look less Fisherian than 'glacierian.'"
- Michael Contopoulos
LINK HERE to the article

1 comment:

Anonymous said...

Gold: Welcome To The Weimar Death Spiral
Second, a colleague of mine told me he knows why the stock market is up today – because it’s open. That’s not entirely a joke. But what is a joke is the underlying cause: rampant global money printing disguised as “quantitative easing – or Central Bank asset monetization.”

Goodbye Keynes, hello Havenstein. The Fed and the ECB have resorted to Weimar-style money printing. The lack of transparency makes it easy for them to impose various forms of disguise to hide the outright money printing. Today the ECB rolled out its program to buy corporate bonds. It prints money and buys the bonds of U.S. and European corporations. The disguised name is “quantitative easing.”

It’s a meaningless description. It’s printing money and giving that money to banks and corporations to spend. It may not increase the official tabulation of the money supply, but effectively it balloons the supply of money. After all, money is spending or lending power. That money sitting on bank balance sheets translates into “high powered” reserve credit. It multiplies the spending power by 10. That’s the real supply of “money” in the system.

The precious metals market understands this truth.