Monday, February 15, 2016

Today's Links

1---Japan's economy shrinks again as Abenomics is blown off course, Guardian


Economy shrank at an annualised rate of 1.4% in the last quarter of 2015 – a contraction that was more severe than many had forecast...

Private consumption, the driving force behind 60% of gross domestic product, slumped by 0.8% between October and December last year, a bigger fall than the median market forecast of 0.6%.

Some analysts, though, expect domestic spending to pick up ahead of a planned rise on the consumption (sales) tax, from 8% to 10%, in April 2017.

“However, this should be short-lived, as activity will almost certainly slump once the tax has been raised,” said Marcel Thieliant of Capital Economics. “The upshot is that the Bank of Japan still has plenty of work to do to boost price pressures

2--China imports and exports slump in January, FT

3--Why Kuroda’s ‘Bazooka’ May Be Out of Ammunition, WSJ

Mr. Kuroda dismissed claims that the introduction of negative interest rates were to blame for the recent stock market selloff. He pointed to global market volatility, and said the negative rates have had their intended effects, driving down yields on short- and long-term government bonds. “I believe those effects will steadily spread through the economy and prices going forward,” he said. Mr. Kuroda has also repeatedly rejected the notion that the central bank is running out of ammunition, insisting that there is “no limit” to its policy options. “If we judge that existing measures in the tool kit are not enough to achieve the goal, what we have to do is to devise new tools, rather than give up the goal,” he said


In short, what we should fear is not the slight impact of recent policy normalizations, but the violent, delayed, yet inevitable consequences of years of speculative distortions that are already fully baked in the cake. What we should fear are the Fed’s repeated and deranged attempts to achieve weak effects on the real economy, at the cost of speculative distortions that exact ten times the damage when they unwind. What we should fear is more of the same Fed recklessness that encouraged a yield-seeking bubble in mortgage debt, enabling a housing bubble that collapsed to create the worst economic crisis since the Great Depression. What we should fear is Fed policy that has encouraged a yield-seeking bubble in equities, debt-financed stock repurchases, and covenant-lite junk debt; that has carried capitalization-weighted valuations to the second greatest extreme in history other than the 2000 peak, and median equity valuations to the highest level ever recorded. That’s exactly what the Fed has done in recent years, and the cost of that unwinding is still ahead.

The fiat currency system, fractional reserve banking fraud, insane Keynesian fiscal policies, and consumer debt based consumption economy are mathematically unsustainable, so they won’t be sustained. The world is about to sit down to a banquet of consequences, served by deranged central bankers.

5--Deficit mania keeps economy in the doldrums

here on Planet Earth low interest rates and low inflation are a very good market signal that the economy could use much more demand (i.e. larger budget deficits). The Post actually seems to support this, but tells us about the Congressional Budget Office's (CBO) projection of higher deficits in future years. As we pointed out yesterday, those higher deficits are the result of CBO's projection that interest rates will rise sharply. They have a great track record of being badly wrong on this score six years in a row. I suppose seventh time could be a charm, but I wouldn't bet on it.

Anyhow, serious people would be worried about boosting the economy now and putting people back to work. People are suffering today and our children our suffering. This is both because we have plenty of money so that they don't have to drink lead and also because putting their parents out of work is a horrible thing to do to kids

6--Central Banks are out of ammo, FT

Intense correlations between oil and other markets are not a good sign. Seemingly unrelated assets move in lockstep like this only when investors have the heebie-jeebies....

One reason for the tightening grip of terror is that investors fear central banks are out of ammo. Investors are waking up to the realisation that policymakers are not superheroes. They can’t fly, they can’t fire lasers out of their eyes and they certainly can’t support global economies and global markets all by themselves. That even includes “Super” Mario Draghi, president of the European Central Bank, whose subtle-as-a-brick hints of further stimulus have failed to depress the euro, and the Bank of Japan, whose new sub-zero interest-rate adventures have proved powerless to squish the yen or support stocks.

Right now, fear is trumping faith at central banks. The euro and the yen are climbing precisely because investors are nervous and closing out bets funded in cheap currencies. Who can say how much worse the global outlook would be without central bank stimulus? Still, increasingly, investors think central banks will simply keep on cutting rates, in the hope that the remedy they have tried several times will suddenly start having the desired effect. Investors are really not so sure it will.

7--15-year mortgage rates drop below 3%

8--Is this the week central banks lost their market credibility?, MW

Has the “Yellen put” finally expired?

Financial markets are in the grips of a global rush to safety. Central banks, whose flood of liquidity have been given much of the credit for the sharp postcrisis rise in stocks and other asset prices, seem unable to stem the tide.

“This week may go down in financial history as the week when central bank planning died—the 2016 version of the fall of the Berlin Wall. It sounds worse than it is, as this was always coming,” said Steen Jakobsen, chief economist at Saxo Bank, in a Thursday note.

The ability of central banks to steer the market—or vice versa—was first dubbed the “Greenspan put,” then renamed the “Bernanke put,” and, finally, the “Yellen put.” A put option gives an investor the right to sell the underlying security at a preset strike price. In other words, bullish stock investors could count on central bankers to keep a floor under the market. That’s what some think is finally coming to an end.

“We have relied on central bankers to fix the world’s economic woes, when all they could really do was to get the global financial system back on an even keel,” said Kit Juckes, global macro strategist at Société Générale, in a note. “Keeping policy too easy, for too long and boosting asset markets in the vain hope that this would deliver a sustainable pickup in demand has meant that even a timid attempt at normalizing Fed policy has caused two months of mayhem.”

Now, amid a growing realization that central banks’ powers are on the wane, investors are rushing for havens, he said.

9--The reactionary Scalia

Arbitrary detention and torture. Scalia opposed the right of Guantanamo prisoners to habeas corpus, or the right to petition for judicial review of their detention. When the Supreme Court narrowly permitted some form of judicial review for Guantanamo cases, Scalia denounced the majority as traitors, whose decision “will almost certainly cause more Americans to be killed.”

The Constitution says nothing whatever about torture,” Scalia said in an interview with Swiss radio network RTS in 2014. In fact, the Eighth Amendment, part of the Bill of Rights, prohibits “cruel and unusual punishment.” However, according to a legal theory invented by Scalia, “torture is not punishment.” In similar comments in 2008, Scalia argued that it would be permissible to torture suspected terrorists, that it would be “absurd to say that you can’t stick something under the fingernails, smack them in the face.”

In 2014, Scalia infamously shrugged his shoulders at a question about the mass internment of Japanese Americans during the Second World War. “[Y]ou are kidding yourself if you think the same thing will not happen again," he said, invoking the Latin expression, “Inter arma enim silent leges” (roughly, in times of war the law is silent).

9--Hillary and the war machine, Jeffrey Sachs

10--Syrian Peace Groups: This is not a Civil War, it is a Set of Foreign Invasions

Many of those we met were quick to tell us Syria is not experiencing civil war but a foreign invasion...

Many Syrians are traumatized and in shock and ask ‘how did this happen to our country’? Proxy wars are something they thought only happened in other countries, but now Syria too has been turned into a war-ground in the geo-political landscape controlled by the western global elite and their allies in the Middle East....

Few Syrians we met were under the illusion that their elected (7O percent) leader President Assad, was perfect yet many admired him and felt he was much preferred to the alternative of the government falling into the hands of the Jihadists fighters, fundamental extremists with ideology that would force the minorities (and moderate Sunnis) to flee Syria (or many to get killed).

11--US agrees to keep Assad in power

While Turkey has been pushing for the removal of Syrian President Bashar al-Assad from power,....Testifying at a hearing at the US Congress on Wednesday, US President Barack Obama's envoy for the global coalition to counter ISIL, Brett McGurk, signaled that the US is in favor of keeping the Syrian regime in power for some time. According to a Western diplomat who spoke to Sunday's Zaman, the US and Russia have agreed on keeping Assad in power. The diplomat said despite knowing that Assad is not the best choice, the US understands now that he is not the worst choice.

12--Turkey threatens retaliation

“We will not let Azaz fall,” said Davutoğlu. “If they come close to Azaz once again, they will find the fiercest response.” 

Turkey will not allow the northern Syrian town of Azaz to fall into the hands of Kurdish People's Protection Units (YPG) and its fighters will face the "harshest reaction" if they approach it again, Prime Minister Ahmet Davutoğlu said on Monday.

"YPG elements were forced away from around Azaz. If they approach again they will see the harshest reaction. We will not allow Azaz to fall," Davutoğlu said.

He said Turkey would make the Menagh air base north of the city of Aleppo "unusable" if the YPG, which seized it over the weekend from Syrian insurgents, did not withdraw. He warned the YPG not to move east of the Afrin region or west of the Euphrates River, long a "red line" for Ankara.

13--Spring housing season kicks off with record short supply

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