The impetus for the February 2014 comes from the Austrian economist Mike Mish Shedlock report who wrote very critically ECB seriously considering negative interest rates. Via translation from El Economista, please consider Coeuré Benoit, a member of the European Central Bank government, said today that the ECB is 'seriously' considering negative interest rates.
Mario Draghi has repeatedly recognized that there is a debate within the ECB on the pros and cons of negative rates that would seek to force banks to lend. Forcing capital impaired banks to lend is blatantly stupid. The expected result is higher losses.
The revelation blasted both stocks and credit higher, driving the Interest Rate on the US Ten Year Note, ^TNX, lower to 2.71%.
1) ... Since February 1, 2014, credit investments had been losing value, as the bond vigilantes have been calling the Benchmark Interest Rate, ^TNX, higher from 2.67%; but that rate traded lower to close at 2.71%, on February 17, 2014, with the result that credit investments seen in the ongoing Yahoo Finance Chart of ORNAX, FAGIX, JNK, HYMB, BWX, and AGG; as well as other credit investments, as is seen in the ongoing Yahoo Finance Chart of SHY, PICB, LQD, and GOVT, traded higher.
2) ... The rally in equity investments, specifically World Stocks, VT, Nation Investment, EFA, and Global Financials, IXG, that commenced on February 3, 2014, continued higher, largely on a falling US Dollar, $USD,UUP, and a strengthening Euro, FXE, which closed at 135.92, and a awesomely stronger British Pound Sterling, FXB, which close at 164.28; this being seen in a number of equity investment charts such as,
the ongoing Yahoo Finance Chart of Financials, IXG, KRE, EUFN, RWW, IAI,
the ongoing Yahoo Finance Chart of Social Risk Sectors, IBB, BJK, SOCL, FDN, PNQI, PBS, PJP, PPA,
the ongoing Yahoo Finance Chart of Manufacturing Risk Sectors, FXR, RZV, PSCI, FPX, CSD,, XTN, GEX, RZG, IGN,
the ongoing Yahoo Finance Chart of Eurozone, EZU, Nations EWO, EWI, GERJ, EWN, EIRL, EWP, PGAL, GREK,
the ongoing Yahoo Finance Chart of the Most Toxic Nation Investments, ARGT, IDXJ, KROO, CAF, EWUS, VNM, EGPT, GULF, EDEN,
the ongoing Yahoo Finance Chart of Global Growth And Trade Sectors, SOXX, TAN, PICK, FLM, SLX, WOOD, IHI, MHK, CARZ,
the ongoing Yahoo Finance Chart of Consumer Sectors, XLY, RXI, IYC, PBJ, PSCC, XRT, KXI, PSCD. Of note Bloomberg reports Sales at US Retailers Decline by Most Since 2012: Economy Bloomberg and the Washington Post reports Cold snap continues for retail sales,
the ongoing Yahoo Finance Chart of Real Estate Sectors, DRW,TAO, KBWD, KBWY, FNIO, REZ, ROOF, REM,
the ongoing Yahoo Finance Chart of Yield Bearing Sectors, DTN, DFE, GRID, SEA, FIW, XLU, PSP, KBWD, IST,
and the ongoing Yahoo Finance Chart of High Yielding Debt, AGG, JNK, BDCS, VCLT, EU, HYXU,
The chart of the US Dollar, $USD, UUP, shows a close at $80; and that of Gold, $GOLD, which often trades inversely of the former at $1324.
4) ... There be no more economic tigers. The Celtic Tiger, the Asian Tiger, in fact all tigers are gone; these have been killed off by the extinction event of the rise in the Benchmark Interest Rate, ^TNX, from 2.48% on October 23, 2013, as the singular Beast Regime is effecting coup d etats, establishing regional economic fascism, manifesting in policies of regional economic governance and schemes of totalitarian collectivism.
Liberalism was based upon nation state governance, supporting liberal economic systems, such as Germany Capitalism, French Municipal Governance Socialism, Greek Clientelism, and banker regime schemes, consisting of credit and carry trade investing establishing the investor and investment choice. Liberalism featured wildcat finance, a Doug Noland term, where bankers waived magic wands of prosperity, providing all kinds of speculative leveraged investment opportunities.
The world pivoted from the paradigm and age liberalism into that of authoritarianism, with the death of fiat money on October 23, 2013, and the death of fiat wealth on January 22, 2014.
Destiny is operating and administrative oversight of all thing; it is strongly stimulating investors are derisking out of debt trades and currency carry equity trades, and bond vigilantes are once again calling the Benchmark Interest Rate, ^TNX, higher from 2.67%, forcing investors out of credit investment such as Emerging Market Local Currency Bonds, EMLC, and equity investors out of stock investments, on fears that the world central banks monetary policies have crossed the rubicon of sound monetary policy. These actions of the see-saw destruction of equity investments and credit investments, will increasingly stimulate economic destructionism, in particular economic deflation, thus quickening the introduction of paradigm and age of authoritarianism.
Bloomberg reports Deflation threat worries G-20 roiled by emerging markets. The Toronto Star writes Why deflation is a central banker's nightmare: Deflation can set off a spiral where, as prices fall, people delay purchases, leading to falling demand, a drop in output and falling wages.
Forbes reports Forbes explains Venezuela, Argentina Currency Devaluations Hit Consumer Staples Provider PG Expected Sales And Earnings;
Mike Mish Shedlock writes Italy's prime Minister Letta resigns under pressure; Party backs Renzi; Rise of the Oligarchy; Trial by fire coming up. Automatic Earth writes Coups and Constitutions. ZH posts Meet the Men with the plan behind Italy's bloodless coup. Oligarchy is the intermediary economic phase between liberalism and authoritarianism.
Under authoritarianism, regional leaders, providing mandates of public private partnerships are the transmission of economic activity, which organize the factors of production, underwrite lending, marshall banking resources, disburse fiscal spending, and appropriate private property for regional security, stability and sustainability, to counteract ever increasing destructionism. Regional economic fascism is the singular economic system, where regionalism asserts that regional property rights and establishes the debt serf and debt serfdom, replacing liberalisms economic systems such as crony capitalism.
Authoritarianism features technocrats yielding clubs of austerity in wildcat governance where leaders bite, rip, and tear one another apart in order to rise to be the top dog.
Liberalism's fiat money will increasingly be replaced by authoritarianism's diktat money, and requires oaths on the part of workers as Maud van Gaal of Bloomberg reports "'I swear that I will do my utmost to preserve and enhance confidence in the financial-services industry. So help me God.' The oath, the first of its kind in Europe, became binding on board members of Dutch banks last month as the government sought to rein in an industry with assets more than four times the size of the country's economy. All 90,000 Dutch bank employees must take the pledge, or a non-religious affirmation, starting the second half of this year. They'll be punished should they break new ethical rules, Banking Association Chairman Chris Buijink said."
Reutersreports Andrea Leadsom MP, co-chair of the Fresh Start Project and the APPG for EU Reform, argues that "The EU needs to understand that if it wants to have a future it needs to appreciate matters of principle, democracy, the right of taxpayers, the rights of sovereign governments."
Open Europe reports David McAllister, the CDU's lead candidate in the upcoming European elections, argues in a Die Welt Sunday Times interview that, "For the reinforcement of a citizen-friendly and democratically legitimate union, a repatriation of powers to a national level must be possible."
Authoritarianism's diktat money comes from the Brussels forge and mint of economic mandates. Open Europe relates Die Welt reports that German crafts trades are concerned about the European Commission's plans to facilitate access to skilled professions in all EU member states. The paper cites the President of German Confederation of Skilled Crafts Peter Wollseifer as saying that "the dual training [system] in Germany is endangered by the new plans from Brussels".
Theo Francis of Across The Curve posts A whiff of economic deflation, According to the WSJ, firms pinched by pressure to hold down their prices, keep a lid on prices, ceasing revenue growth and hindering recovery. Executives from companies as varied as General Electric, Kimberly Clark. and Royal Caribbean Cruises, said some prices slipped in the last three months of the year, sometimes significantly, amid intense competition, weaker demand and pressure from cost-conscious customers. Falling prices for adhesives weighed on Eastman Chemical, cheaper packaged coffee dragged on Starbucks, and "value and discounts" hit McDonald's in the fourth quarter in what the fast food chain called a "street fight" for market share. Xerox. is eyeing acquisitions that can "help us be more competitive on price pressure." Corporate revenues are showing the strain, whether from lower prices, weak demand or a combination of the two.
RT News reports Violent protests across Bosnia injure 150, as people demand government overhaul. The demonstrations began with a tipping point being controversial privatizations of key local industries, which since 2000 have resulted in eventual bankruptcies, leaving much of the working population unemployed. Bosnia is now considered the poorest country in the whole of the former Yugoslavia. But as protests have spread, so the demands have broadened. The demonstrators are now asking not just for better economic conditions, but for an overhaul of the political system. This has led to a televised address by the Bosnian tripartite government presidency's chairman, Zeljko Komsic. He asks for peace, while taking the blame as politician. "We are responsible for everything ... Nothing good will come from anarchy," he appealed to the country, promising to hold an emergency meeting of the leadership. Prime Minister Nermin Niksic, who held the meeting on Thursday, has recognized the validity of the protesters' complaints, but implored them to refrain from violence. According to non-profit Transparency International, Bosnians experience more corruption than any other Balkan state. A presidential election is scheduled for October.
Implode-o-Meter reports The uncomfortable truth in china's property market. Via Businessinsider.com The central government faces a dilemma. Rising discontent over house prices is a threat to the social and economic stability the Communist Party uses as justification for its one-party rule. But the real estate sector is also a major economic driver, supporting some 40 other industries and generating about 16 percent of the country's $8.5 trillion GDP. That has been important this year in supporting economic growth, which is expected to droop to a 23-year-low of 7.5 percent this year. And it is a major source of income for local governments, so if the central government clamped down too hard, it would cause problems for city authorities. Credit Bubble Stocks asks What has the dry bulk fleet been carrying?
The Automatic Earth reports The China Shadow Banking System is equal to 69% of GDP, so shrinking it by just 10% means having to replace 6.9% of GDP. On top of the huge expansion that's been happening in the past 5 years. There's no doubt that the PBoC and the government have scores of economists and other experts trying to figure out how to deal with this without having it blow up in everyone's face, but how do you cure an addict that needs more, not less, all the time? There's only so much methadone that will have an effect on a heroin junkie.
ZH writes Spot The Real Liquidity Bubble. In this context, the January number is precisely what it appears: the bank's logical response to a liquidity crunch as the Chinese regime finds itself in the same spot that the Fed has been in for the past 5 years - it must keep the monetary spice flowing, or else the party is over. And just like the Fed, and now the BOJ, so too does China not want to deal with the fall out if all it takes to create yet another quarter of increasingly subpar economic growth is another record of funny money conceived out of thin air.
Bloomberg reports China's imports of copper and iron ore climbed to a record in January as demand increased from buyers who used the commodities as collateral to get credit. Shipments of copper advanced 53% to 536,000 metric tons from a year earlier while purchases of the steelmaking ingredient increased 32% to 86.83 million tons... 'Financing could continue to drive significant imports as China's central bank is unlikely to abandon its tightening bias unless growth disappoints,' said Zijin Cheng, a commodities analyst at Barclays.
Francisco Marcelino of Bloomberg reports China's trust assets surged 46% in 2013 to a record 10.9 trillion yuan ($1.8 trillion), underscoring investor interest in products that pay more than bank deposits even as default risks mount. About 20 billion yuan of trust products had repayment difficulties in 2012, accounting for 0.27% of the industry's assets at that time, the China Trustee Association said. Asset quality is 'quite sound and systemic risks are impossible' with 9.06 billion yuan of reserves set aside, the association said.
Raj Chetty, Nathaniel Hendren, Patrick Kline, and Emmanuel Saez ask in Vox.EU What drives social mobility?We begin by showing that upward income mobility is significantly lower in areas with larger African-American populations. However, white individuals in areas with large African-American populations also have lower rates of upward mobility, implying that racial shares matter at the community (rather than individual) level. One mechanism for such a community-level effect of race is segregation. Areas with larger black populations tend to be more segregated by income and race, which could affect both white and black low-income individuals adversely. Indeed, we find a strong negative correlation between standard measures of racial and income segregation and upward mobility. Moreover, we also find that upward mobility is higher in cities with less sprawl, as measured by commute times to work. These findings lead us to identify segregation as the first of five major factors that are strongly correlated with mobility.
The second factor we explore is inequality. Commuting zones with larger Gini coefficients have less upward mobility, consistent with the "Great Gatsby curve" documented across countries (Krueger 2012, Corak 2013). In contrast, top 1% income shares are not highly correlated with intergenerational mobility both across zones within the US and across countries. Although one cannot draw definitive conclusions from such correlations, they suggest that the factors that erode the middle class hamper intergenerational mobility more than the factors that lead to income growth in the upper tail.
Third, proxies for the quality of the K-12 school system are also correlated with mobility. Areas with higher test scores (controlling for income levels), lower dropout rates, and smaller class sizes have higher rates of upward mobility. In addition, areas with higher local tax rates, which are predominantly used to finance public schools, have higher rates of mobility.
Fourth, social capital indices (Putnam 1995) - which are proxies for the strength of social networks and community involvement in an area -- are very strongly correlated with mobility. For instance, high upward mobility areas tend to have higher fractions of religious individuals and greater participation in local civic organizations.
Finally, the strongest predictors of upward mobility are measures of family structure such as the fraction of single parents in the area. As with race, parents' marital status does not matter purely through its effects at the individual level. Children of married parents also have higher rates of upward mobility if they live in communities with fewer single parents.
The Detroit News reports Delta to lay off 741 workers at Detroit Metropolitan Airport