KOO: The US Is In A ‘QE Trap’ And Both The Markets And The Media Missing It
Nomura economist Richard Koo is out with his first comments since Janet Yellen’s first FOMC meeting last week.
Remember, Yellen briefly spooked markets with what some perceived to be a hawkish tone, mostly owing to the specificity with which she talked about the timing of the first rate hike.
According to Koo, the US is in a "QE Trap" and both the market and the media are missing it. This trap, he says, explains the hawkish bent.
The argument is essentially that risks of very hot inflation are much higher now than they would be if we were coming out of a normal slump that didn’t require QE. But because we did QE, and there are all these excess reserves in the system, the potential for very rapid loan growth and very hot inflation are now significant, and thus the Fed has no choice but to be more hawkish than it otherwise would be at this stage in the recovery.
This is a contrarian stance that’s not in line with most thinking, but then Koo rarely is.
Markets and media unaware that US is in QE trap
Nevertheless, it was easy enough to predict that the Fed would have to move in this direction when it began normalizing policy after years of quantitative easing. The media’s criticism of her dialog with the market and market participants’ complaints about the lack of further accommodation tells us that most of them have yet to realize the US economy has fallen into the QE trap. Their ignorance is of far greater concern, in my view. Market participants and members of the media simply do not understand that an economic recovery in a country that has undertaken QE is going to be very different from a recovery in a country that has not.
Russia’s actions in Crimea ‘completely understandable’ – German ex-chancellor
Published time: March 26, 2014 17:57
Moscow’s actions in the Crimea are comprehensible, former German chancellor, Helmut Schmidt said, criticizing the Western reaction to the peninsula’s reunification with Russia.
President Vladimir Putin’s approach to the Crimean issue is “completely understandable,” Schmidt wrote in Die Zeit newspaper where he’s employed as an editor.
While the sanctions, which target individual Russian politicians and businessmen, employed by the EU and the US against Russia are “a stupid idea,” he added.
The current restrictive measures are of symbolic nature, but if more serious economic sanctions are introduced “they’ll hit the West as hard as Russia,” Schmidt warned.
He also believes that the refusal of the Western countries to cooperate with Russia in the framework of the G8 is a wrong decision.
Russian Sanctions Have Been Pointless, but the Next Ones Could Hurt the U.S. More
By Polly Mosendz March 25, 2014 3:33 PM
Since Russia’s annexation of Crimea, the United States has been issuing a series of retaliatory sanctions, all against particular Russian individuals. Moscow has responded in kind, with for tit-for-tat restrictions on American lawmakers. While they serve as useful shows of diplomatic strength, they have been largely toothless. Perhaps that’s because if more restrictions come, they could be just as bad for the West as they are for Russians.
The original U.S.-led sanctions were against 11 executives and politicians — specifically, Vladimir Putin’s innermost circle — a development that most Russian politicians found vaguely amusing. A Russian official joked, "So what if I can’t get a visa to the United States? I didn’t want to go there anyway."
Amidst criticism from the EU and other nations, the U.S. Treasury has updated their sanctions list, bumping it up to twenty Russian officials. The sanctions include sixteen government officials, including Putin’s chief of staff, Sergie Ivanov; the speaker of the State Duma, Sergey Naryshkin; and Viktor Ozerov, chairman of the security and defense committee of the parliament’s upper house. The Treasury has also prevented United States banks and individuals from doing business with Bank Rossiya, as the bank is associated with Putin’s inner circle. Still, no actual trade sanctions were issued against the country as a whole.
The European Union also joined in, sanctioning a total 33 officials, banning visas and freezing assets. Dmitry Rogozin, Deputy Prime Minister of Russia, was unfazed:
Paul Craig Roberts – The Greatest Crisis In Mankind’s History
Today former US Treasury official, Dr. Paul Craig Roberts, warned King World News that the world is now facing the greatest crisis in the history of mankind. Dr. Roberts also warned that the United States is in danger of being wiped off the face of the Earth. The interview also contains an ominous warning for humanity. Below is what Dr. Roberts had to say in this remarkable and timely interview.
Dr. Roberts: “That government (in Ukraine) is conducting extraordinary propaganda against Russia, claiming that Russian troops are massed on the border and are going to invade Ukraine. So they are creating this image which helps foment war. Here’s the great danger in all of this….
Jim Sinclair’s Commentary
The most interesting part of GEAB #83’s report is note 10 where they talk about Europe’s political elite. Europe has no political elite (though politicians might disagree). Their elite is a mix of old nobility and banksters whose primary goal is the collapse of the current sovereign states to implement a true EU at all levels. I believe this is the underlying truth to what happened with Ukraine. Even the TTIT treaty is just another tool to get there: once the old colonies have been sufficiently plundered, their dollar will go the way of the dodo anyway so putting Europe in the dollar zone for a while is of no concern. Europe’s current states getting too friendly with Russia on the other hand is a totally different matter. It may also be the reason Mrs. Merkel is given speeches to read that make a sane observer question a lot of things.
The U.S. Can’t Really Undermine Russia by Exporting Gas
No matter how fast export facilities for liquefied natural gas are approved, it will be years before the U.S. can challenge Russia’s position as a dominant supplier.
By Mike Orcutt on March 18, 2014
Why It Matters
Russia’s position as dominant supplier of natural gas to Europe gives it a significant geopolitical advantage.
The crisis in Crimea has prompted calls for the U.S. to ramp up natural gas exports to Europe by quickly approving new facilities capable of liquefying the fuel and sending it overseas. The argument is that this could undermine Russia’s strategic power by reducing Europe’s heavy reliance on Russian gas.
The numbers on natural gas exported to Europe show just how simplistic this argument is. Russia dominates the market, and regardless of the speed of the approval process, it will take several years and tens of billions of dollars of investment for the U.S. to come close to Russia’s exports.
In 2012, pipelines carrying Russian gas supplied 34 percent of all the natural gas sold in the European Union by non-E.U. countries. Several nations, including Bulgaria, Lithuania, and the Czech Republic, rely on Russia to supply over 80 percent of their natural gas needs. Around 80 percent of the gas exported to Europe travels by pipeline; the rest arrives as liquefied natural gas (LNG).
UK to start directly buying Russian gas
Published time: March 24, 2014 11:02
Edited time: March 24, 2014 18:51
Britain will begin buying Russian gas directly this year, while the rest of Europe is attempting to cut its reliance on supplies from Moscow amidst the crisis in Ukraine.
Under a deal signed in 2012 the UK’s biggest utility company Centrica will start importing Russian gas from October this year, Reuters reports.
The deal remains in the pipeline, despite EU calls to move away from energy reliance on Russia. On Friday European Union leaders discussed the possible ways to diversify, as they say Crimea’s annexation by Russia made them more determined to take action.
UK domestic gas production is falling by about 7 percent annually, and the country is looking for alternative sources to fill the gap.
Supplies of Russian gas, which already provide a third of Europe’s needs, reach Britain through the central and south eastern parts of the continent, rather than directly. Most of Britain’s imports comes piped from Norway and liquefied natural gas (LNG) shipments from further afield.
Most Russian supplies have recently been from storage in Germany.
Document: JPMorgan Chase Bets $10.4 Billion on the Early Death of Workers
By Pam Martens and Russ Martens: March 24, 2014
(Left) JPMorgan’s European Headquarters at 25 Bank Street, London Where Gabriel Magee Died on January 27 or January 28, 2014 Under Suspicious Circumstances
Families of young JPMorgan Chase workers who have experienced tragic deaths over the past four months, have been kept in the dark on many details, including the fact that the bank most likely held a life insurance policy on their loved one – payable to itself. Banks in the U.S., as well as other corporations, are allowed to make multi-billion dollar wagers that their profits from life insurance policies on employees will outstrip the cost of paying premiums and other fees. Early deaths help those wagers pay off.
According to the December 31, 2013 financial filing known as the Call Report that JPMorgan made with Federal regulators, it has tied up $10.4 billion in illiquid, long term bets on the death of a large segment of its employees.
The program is known among regulators as Bank Owned Life Insurance or BOLI. Federal regulators specifically exempted BOLI in passing the final version of the Volcker Rule in December of last year which disallowed most proprietary trading or betting for the house. Regulators stated in the rule that “Rather, these accounts permit the banking entity to effectively hedge and cover costs of providing benefits to employees through insurance policies related to key employees.” We have italicized the word “key” because regulators know very well from financial filings that the country’s mega banks are not just insuring key employees but a broad-base of their employees.
Just four of the largest U.S. banks, JPMorgan Chase, Bank of America, Wells Fargo and Citigroup hold over $53 billion in investments in BOLI according to 2013 year-end Call Reports. Death benefits from life insurance is purchased at a multiple to the amount of the investments, meaning that $53 billion is easily enough to buy $1 million life insurance policies on 159,000 employees, and potentially a great deal more. Industry experts estimate that the total face amount of life insurance held by all banks in the U.S. on their employees now exceeds half a trillion dollars.
Jim Sinclair’s Commentary
These guys are geniuses.
Kiev Moves to disarm Ukrainians with Russia at the door
By Conor Higgins, Communities Digital News
WASHINGTON, March 24, 2014 — According to a report from the New York Times, the government of Ukraine has ordered any of its citizens in possession of “illegal guns” to turn them in to the authorities. This move is being heralded by the European Union, which has made this step a provision of membership. Kiev believes that disarming Ukrainians will go a long way to end the escalating destabilization and the ever present threat of violence that has risen with the formation of “self-defense groups.” Others see this as a superficial power grab, and meddling politics on behalf of Europe.
It is dangerous at this point to demand that Ukrainians disarm. It is dangerous for a number of reasons. First, the grip of the new government on the country is tenuous. Crimea has already been lost, with Ukrainian troops currently pulling out of their bases there in the wake of Russia’s decision to annex the peninsula.
Kiev is not up to the task of both courting the EU and the West, while fending off the Russian wolf prowling at their door. The Ukrainian government cannot afford to alienate themselves from the boots-in-the-square civilians who put them in power. Calling for disarmament has the potential of only further destabilizing the region. Second, it would be difficult to believe after weeks of taking machine gun fire during their protests that Ukrainians have any desire to be weaker than the government again.
Indeed, they were disarmed years ago, when President Obama urged and assisted Ukraine in collecting some 400,000 small arms from the country in an effort to lead them away from conflict. These people faced the machine guns and riot police of Viktor Yanukovych and won. They overthrew him, they believe they gained their freedom, and they armed themselves to make sure that they would not be taken advantage of again. It was the will and courage of the Ukrainian people that won the new Ukrainian government their seats, and it was the will and courage of the Ukrainian people that they are in a position to bargain with the E.U. Neither the Ukrainian government nor the E.U. has the right to demand that those same people disarm.
UBS Said to Suspend FX Traders in New York, Zurich and Singapore
By Liam Vaughan, Ambereen Choudhury and Gavin Finch
UBS AG suspended foreign-exchange traders in the U.S., Singapore and Switzerland as its investigation into the alleged rigging of currency markets widened, according to a person with knowledge of the matter.
They include Onur Sert, an emerging markets spot trader based in New York, and at least three more worldwide, said the person, who asked not to be identified because of the probe. Sert and Dominik von Arx, a spokesman for UBS in London, both declined to comment on the move.
Switzerland’s largest bank opened a review of its currency operations last year after Bloomberg News reported in June that traders in the industry had colluded to rig the WM/Reuters rates, a benchmark used by investors and companies around the world.
Sert, 30, previously worked for Standard Chartered Plc. UBS suspended Niall O’Riordan, its co-chief dealer, last year after regulators announced they were probing the $5.3 trillion-a-day market. The Zurich-based firm has also banned employees from taking part in instant-message groups involving other banks.
Authorities in three continents are investigating whether traders at some of the world’s largest banks sought to manipulate the WM/Reuters rates in their favor by pushing through trades before and during the 60-second windows when the benchmarks are set.