Fed’s Key Lending

Fundamental News G20 Finance Ministers and Central Bank Governors reached an agreement to lift the funding resources of the International Monetary Fund by over $430 billion as the Eurozone debt crisis dent global growth. “This is the result of a broad international cooperative effort that includes a significant number of countries," the International Monetary and Financial Committee and the Group of 20 Finance Ministers and Central Bank Governors said in a joint statement issued in Washington late Friday. Bloomberg news reported that, the biggest gain in consumer spending in a year probably helped the U.S. economy keep expanding in the first quarter even as fuel costs climbed, economists said before a report this week. Gross domestic product, the value of all goods and services the ...

FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400) WORLD The dollar-positive afterglow from Friday’s strong US payrolls report lasted into the Asia session on Monday. EURUSD is now firmly back on the 1.30 handle, and both AUD and NZD are struggling. This is partly due to the absence of overnight drivers given the empty calendar. But there are forces at work too – it is becoming increasingly clear that the psychology around the US dollar is changing. The dollar no longer strengthens only in the presence of risk aversion and now stronger US economic data is just as likely to do the trick. This change in character paves the way for further dollar gains over the coming months as market expectations for further Fed easing recede. Friday’s IMM positioning data shows that a longer term structural ...

Dow down slightly yesterday. Oil falling further below $100. And gold still going up. What is most interesting is the movement in the price of gold. It seems to be heading up again — almost no matter what else is happening. So, let’s look at what might be going on… If investors sensed a recovery…they would expect banks to lend more freely…people to shop more freely…and prices to rise. This would raise consumer prices; the price of gold should go up. But if the market sees growth and inflation ahead, why is oil slipping? And why is the Baltic Dry Index — which measures shipping prices — at a 25-year low? And how come last month’s employment figures were disappointing? And why aren’t stock market prices going up? Most important, if the economy is really recovering, why is the 10-year ...

The Fed’s latest inflationary scheme sounds like a technocratic innovation. It lowered the costs of currency swaps between central banks of the world with the idea that the Fed would do for the globe what Europe, England, and China are too shy to do, which is run the printing presses 24/7 to bail out failing institutions and economies. In effect, the Fed has promised to be the lender of last resort for the entire global economy. It sounds new, but it is not. Following the Second World War, John Maynard Keynes pushed hard for a global paper currency administered by a global central bank. This was his proposed solution to the problem of national currency disputes. Let’s just take the inflation power away from the national state and give it to a world authority. Then we’ll never have to deal ...

In both Europe and America the financial sector has been on the edge of disaster for the last three years. Each time a crisis flares up, the fixers rush in with a remedy. Bailouts, TARPs, TALFs, ZIRPs, QEI, QEII and now the ‘twist’. In its latest effort, the Fed announced: “The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less. This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative.” Already, short-term lending rates are so low it is as if money-in-hand had less than zero value. Adjusted for inflation, you pay the US ...

Weekly Economic and Financial Commentary : 01/10/2011 U.S. Review Still a Mixed Picture Most of this week’s economic reports that dealt with the consumer continued to flash warning signals. Consumer confidence remains weak, income growth is lagging and home sales remain dead in the water. Reports from the factory sector were decidedly more upbeat with orders for nondefense capital goods rising solidly, Boeing shipping its first 787 Dreamliner to Japan and the Chicago Purchasing Managers Index rising 3.9 points to a solid 60.4 in September. Weekly jobless claims also posted a surprisingly large drop in late September. Consumers Remain Cautious Going into the 4th Quarter Consumers clearly remain frustrated with the economic recovery. For the fifth month in a row, consumers’ ...

Forex News and Events: FX markets are still digesting the Fed’s announcement to initiate “Operation Twist” with risk appetite lower at the start of the day. USD stayed in demand as the bearishness of the Fed’s analysis provided no respite from the current negative sentiment. In Asia, there are rumors of Asian central banks “smoothing” the topside with intervention estimated around $2.5bn according to a UK budge bank. The Fed’s “operation Twist” was basically in line with market expectations and will involved the buying of $400bn longer term treasuries (6-30 yrs) while simultaneously selling the equal amount of short term treasury securities of 3 years or less. In addition, the commute would maintain its current program of reinvesting principle from maturing security instruments. ...

The Dow rose 20 points yesterday…after a fabulous increase the day before. Gold went up $38. We’ve already given you our forecast. We think gold AND stocks are going down. But what do we know? The role of markets is to make fools out of market analysts. So, the shrewd forecaster has to be careful. He shouldn’t be too precise in his predictions. He can say what direction prices are going. Or he can say when. But not both. If we tell you that ‘stocks are going up,’ we’re sure to be proven right — if we wait long enough! Likewise, if we say ‘you’ll see gold hit a high this autumn’ we leave ourselves plenty of slack to shape events to fit our forecast. It’s bound to hit some kind of high during that period. But here at The Daily Reckoning, we have no reason to hedge. No reason to wiggle ...

What strange pass have we come to? The whole world is on the edge of its seat, this morning. Taking short breaths. People watch. They wait. They listen for a pronunciamiento that could mean trillions in losses…or gains. It could — in theory — push up the world’s growth rate…speeding up economies and bringing millions into the workforce, where they can earn money to pay for their wants and needs. At the margin, it could make the difference between life and death. Many millions of the world’s people live day to day, hand to mouth, barely getting enough food to eat. A downturn in the world’s economy hits them like a plague in the Dark Ages, pushing them over the edge into famine and death. And from whom will these precious words come today? They will come from Benjamin Shalom Bernanke, ...