The Federal Reserve is
expected to announce its first move to taper its $85 billion in monthly
bond buying when its two-day meeting ends Wednesday. While the Fed is
seen curbing bond purchases by an initial $10 to $15 billion — a
relative baby step compared to the massive amount of stimulus applied —
it sends an important message that the Fed is moving toward a
normalization of rates and expecting a more normal economy.
“We have come a long way, and we often forget how far we’ve come. At the heart of the crisis, people didn’t think there was a tomorrow. Now we know, there’s a tomorrow. We just don’t know how strong it is,” said Diane Swonk, chief economist at Mesirow Financial. “Sometimes the cure has its own dangers and you have to look at those tradeoffs. That’s where the Fed is. Is the cure good enough for the risks?”
The Fed’s bond buying, which has ballooned its balance sheet to $3.6 trillion, has been criticized for adding too much easy money to the economy and over-inflating the stock market. Just talk of a pullback in the Fed’s quantitative easing program prompted a swift move up in Treasury yields, and also mortgage rates. Stocks reacted negatively at first to the higher rates, but the pain across emerging markets was much more intense as capital took flight. U.S. stocks have largely recovered, with the S&P 500 now just about 1.2 percent from its all-time high.
“We have come a long way, and we often forget how far we’ve come. At the heart of the crisis, people didn’t think there was a tomorrow. Now we know, there’s a tomorrow. We just don’t know how strong it is,” said Diane Swonk, chief economist at Mesirow Financial. “Sometimes the cure has its own dangers and you have to look at those tradeoffs. That’s where the Fed is. Is the cure good enough for the risks?”
The Fed’s bond buying, which has ballooned its balance sheet to $3.6 trillion, has been criticized for adding too much easy money to the economy and over-inflating the stock market. Just talk of a pullback in the Fed’s quantitative easing program prompted a swift move up in Treasury yields, and also mortgage rates. Stocks reacted negatively at first to the higher rates, but the pain across emerging markets was much more intense as capital took flight. U.S. stocks have largely recovered, with the S&P 500 now just about 1.2 percent from its all-time high.
(Read more: Dow logs its best week since January as traders brace for Fed)
Whither Markets?
Traders believe much of the market moves around this first step in unwinding policy may have already taken place, but there is still concern the actual news could bring a volatile reaction if it doesn’t go just right.
…
“I think the stock market is still too nonchalant about this rise in interest rate. We’ve already seen an immediate reaction to the rise in rates. Everything’s not better in the economy,” said Boockvar. “I don’t agree with the stock market here. The key for next Wednesday is not the $10 to $15 billion. It’s how they circle around that with their language. The only weapon the Fed has left in controlling rates is how they jawbone short-term rates.”
http://www.cnbc.com/id/101033818
The 441 TRILLION Dollar Interest Rate Derivatives Time Bomb
Do you want to know the primary reason why rapidly rising interest rates could take down the entire global financial system? Most people might think that it would be because the U.S. government would have to pay much more interest on the national debt. And yes, if the average rate of interest on U.S. government debt rose to just 6 percent (and it has actually been much higher in the past), the federal government would be paying out about a trillion dollars a year just in interest on the national debt. But that isn’t it. Nor does the primary reason have to do with the fact that rapidly rising interest rates would impose massive losses on bond investors. At this point, it is being projected that if U.S. bond yields rise by an average of 3 percentage points, it will cause investors to lose a trillion dollars. Yes, that is a 1 with 12 zeroes after it ($1,000,000,000,000). But that is not the number one danger posed by rapidly rising interest rates either. Rather, the number one reason why rapidly rising interest rates could cause the entire global financial system to crash is because there are more than 441 TRILLION dollars worth of interest rate derivatives sitting out there. This number comes directly from the Bank for International Settlements - the central bank of central banks. In other words, more than $441,000,000,000,000 has been bet on the movement of interest rates. Normally these bets do not cause a major problem because rates tend to move very slowly and the system stays balanced. But now rates are starting to skyrocket, and the sophisticated financial models used by derivatives traders do not account for this kind of movement.
So what does all of this mean?
It means that the global financial system is potentially heading for massive amounts of trouble if interest rates continue to soar.
http://theeconomiccollapseblog.com/archives/the-441-trillion-dollar-interest-rate-derivative-timb-bomb
BAML Warns “If The US Economy Does Not Significantly Accelerate Now, It Never Will”
Significant monetary stimulus, the end of fiscal austerity, a booming housing market, a cheap dollar, record corporate cash balances… BofAML warns - if the US economy does not significantly accelerate in coming quarters, it never will.
Crucially, they note, asset prices will not do as well in the next 5 years, no matter what the “nouveau bulls” say. Central banks will be less generous, corporations less selfish. And when excess liquidity is removed it will get “CRASHy” as we discussed previously. In the meantime, five years after Lehman, Wall Street has soared, but Main Street has soured.
After Lehman…
An unprecedented financial and economic crisis, crystallized by the September 15th 2008 bankruptcy of Lehman Brothers, was followed by an unprecedented monetary policy response, which in turn has been followed by unprecedented bull markets in bonds, stocks and now real estate. Wall Street has soared, but Main Street has soured. The exceptional “sweet spot” engendered by generous central banks and selfish corporations has been great for owners of capital, but bad for labor.
Wall Street vs Main Street
http://www.zerohedge.com/news/2013-09-14/baml-warns-if-us-economy-does-not-significantly-accelerate-now-it-never-will
Joe Friday…Friday the 13th 2013 could be near an important price point!
CLICK ON CHART TO ENLARGE
What does the 1974 Low, 1987 Crash, 2000 High have in Common? Are they some of the most memorable highs and lows over the past 40 years? Yes, Yes & Yes!
Do they have anything else in Common? Yes! Each of these important highs/lows took place 13-years apart.
Joe Friday….Friday the 13th 2013 could be near another important/memorable price point in history!
http://blog.kimblechartingsolutions.com/2013/09/joe-friday-friday-the-13th-2013-could-be-near-an-important-price-point/
In this news brief we will discuss the latest news on the economic collapse. We look to see if things are really that different. The central bank will not stop at just confiscating your wealth they will want your life. They want to enslave the people.
The Quote Of The Day!!
Whither Markets?
Traders believe much of the market moves around this first step in unwinding policy may have already taken place, but there is still concern the actual news could bring a volatile reaction if it doesn’t go just right.
…
“I think the stock market is still too nonchalant about this rise in interest rate. We’ve already seen an immediate reaction to the rise in rates. Everything’s not better in the economy,” said Boockvar. “I don’t agree with the stock market here. The key for next Wednesday is not the $10 to $15 billion. It’s how they circle around that with their language. The only weapon the Fed has left in controlling rates is how they jawbone short-term rates.”
http://www.cnbc.com/id/101033818
The 441 TRILLION Dollar Interest Rate Derivatives Time Bomb
Do you want to know the primary reason why rapidly rising interest rates could take down the entire global financial system? Most people might think that it would be because the U.S. government would have to pay much more interest on the national debt. And yes, if the average rate of interest on U.S. government debt rose to just 6 percent (and it has actually been much higher in the past), the federal government would be paying out about a trillion dollars a year just in interest on the national debt. But that isn’t it. Nor does the primary reason have to do with the fact that rapidly rising interest rates would impose massive losses on bond investors. At this point, it is being projected that if U.S. bond yields rise by an average of 3 percentage points, it will cause investors to lose a trillion dollars. Yes, that is a 1 with 12 zeroes after it ($1,000,000,000,000). But that is not the number one danger posed by rapidly rising interest rates either. Rather, the number one reason why rapidly rising interest rates could cause the entire global financial system to crash is because there are more than 441 TRILLION dollars worth of interest rate derivatives sitting out there. This number comes directly from the Bank for International Settlements - the central bank of central banks. In other words, more than $441,000,000,000,000 has been bet on the movement of interest rates. Normally these bets do not cause a major problem because rates tend to move very slowly and the system stays balanced. But now rates are starting to skyrocket, and the sophisticated financial models used by derivatives traders do not account for this kind of movement.
So what does all of this mean?
It means that the global financial system is potentially heading for massive amounts of trouble if interest rates continue to soar.
http://theeconomiccollapseblog.com/archives/the-441-trillion-dollar-interest-rate-derivative-timb-bomb
BAML Warns “If The US Economy Does Not Significantly Accelerate Now, It Never Will”
Significant monetary stimulus, the end of fiscal austerity, a booming housing market, a cheap dollar, record corporate cash balances… BofAML warns - if the US economy does not significantly accelerate in coming quarters, it never will.
Crucially, they note, asset prices will not do as well in the next 5 years, no matter what the “nouveau bulls” say. Central banks will be less generous, corporations less selfish. And when excess liquidity is removed it will get “CRASHy” as we discussed previously. In the meantime, five years after Lehman, Wall Street has soared, but Main Street has soured.
After Lehman…
An unprecedented financial and economic crisis, crystallized by the September 15th 2008 bankruptcy of Lehman Brothers, was followed by an unprecedented monetary policy response, which in turn has been followed by unprecedented bull markets in bonds, stocks and now real estate. Wall Street has soared, but Main Street has soured. The exceptional “sweet spot” engendered by generous central banks and selfish corporations has been great for owners of capital, but bad for labor.
Wall Street vs Main Street
http://www.zerohedge.com/news/2013-09-14/baml-warns-if-us-economy-does-not-significantly-accelerate-now-it-never-will
Joe Friday…Friday the 13th 2013 could be near an important price point!
CLICK ON CHART TO ENLARGE
What does the 1974 Low, 1987 Crash, 2000 High have in Common? Are they some of the most memorable highs and lows over the past 40 years? Yes, Yes & Yes!
Do they have anything else in Common? Yes! Each of these important highs/lows took place 13-years apart.
Joe Friday….Friday the 13th 2013 could be near another important/memorable price point in history!
http://blog.kimblechartingsolutions.com/2013/09/joe-friday-friday-the-13th-2013-could-be-near-an-important-price-point/
In this news brief we will discuss the latest news on the economic collapse. We look to see if things are really that different. The central bank will not stop at just confiscating your wealth they will want your life. They want to enslave the people.
The Quote Of The Day!!
“Just look at us. Everything is backwards; everything is upside down.
Doctors destroy health, lawyers destroy justice, universities destroy
knowledge, governments destroy freedom, the major media destroy
information, and religions destroy spirituality.” — Dr. Michael Ellner
Hat Tip To: What Really Happened
Hat Tip To: What Really Happened
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