Implode-Explode Heavy Industries news feed http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us iehi-feed-64946 Tue, 17 Sep 2019 03:02:12 GMT U.S. charges JPMorgan metals traders over alleged precious metals market manipulation http://implode-explode.com/viewnews/2019-09-16_USchargesJPMorganmetalstradersoverallegedpreciousmetalsmarketman.html The Department of Justice charged two current and one former JPMorgan Chase & Co executives on Monday with alleged racketeering and manipulating prices of metals such as gold, silver, platinum and palladium between 2008 and 2016

...

In a statement and in the indictment, prosecutors described how the trio executed "thousands" of unlawful trading sequences that included "layering" deceptive orders at different prices in rapid succession. Prosecutors also described attempts to influence market prices toward specific price points to trigger or avoid triggering options.

]]>
iehi-feed-64941 Sun, 15 Sep 2019 23:24:23 GMT The Trump Admin's Fannie and Freddie "Reform" Plan is A Cronyism Rehash http://implode-explode.com/viewnews/2019-09-15_TheTrumpAdminsFannieandFreddieReformPlanisACronyismRehash.html It's official: The Trump administration has a plan to deal with mortgage giants Fannie Mae and Freddie Mac -- by returning them to the same quasi-governmental form that set them up for failure in the 2008 financial crisis. If executed, it's likely to be a win for a small coterie of hedge funds, and a big loss for everybody else.

...

There are better options. For example, Fannie Mae and Freddie Mac could be merged into a single, fully government-owned corporation that would transfer most of its credit risk to private investors, retaining just the catastrophic risk that only the government can bear. This would get private capital involved without letting it so easily shift risk to taxpayers. Pricing the guarantee correctly would be easier. This in turn would promote more competition from completely private lending channels. As it happens, Fannie Mae and Freddie Mac have already been moving in this direction, issuing special credit-risk-transfer securities and creating a common mortgage-securitization platform.

]]>
iehi-feed-64935 Fri, 13 Sep 2019 15:56:05 GMT Gold tallies a back-to-back gain after ECB unleashes basket of easy-money measures; Fed under pressure http://implode-explode.com/viewnews/2019-09-13_GoldtalliesabacktobackgainafterECBunleashesbasketofeasymoneymeas.html Gold futures marked a second consecutive gain Thursday after the European Central Bank cut eurozone interest rates and delivered a batch of measures intended to boost the region's sluggish economy -- bullish moves for bullion. The ECB cut its deposit rate further into negative territory, decreasing it by 10 basis points to negative 0.5%, while also announcing it would restart its monthly bond-buying program as it attempts to juice inflation and European expansion.

"Gold certainly welcomed the ECB stimulus," said Craig Erlam, a senior market analyst at Oanda. "Ultimately, global easing like we're seeing now has been bullish for gold and that's exactly what we're seeing right now."

December gold on Comex gained $4.20 an ounce, or 0.3%, to settle at $1,507.40 an ounce ... Silver for December delivery, meanwhile, added nearly a penny, or 0.04%, at $18.177 an ounce...

"Central banks around the world have been easing, and will continue to do so, and that's why gold has been making such strides higher with only modest corrections along the way," Erlam said in a market update.

]]>
iehi-feed-64934 Fri, 13 Sep 2019 15:25:57 GMT Trump Is Pushing the U.S. Toward Negative Interest Rates http://implode-explode.com/viewnews/2019-09-13_TrumpIsPushingtheUSTowardNegativeInterestRates.html ... what Trump is saying is, "Boneheads, lower the interest rates down to zero so that we can refinance the United States' debt and feel wealthier. In fact, lower the rate down to negative." So that's his whole purpose first of all. Treasury debt under Trump has grown by around $2.6 trillion already.

You might know that I have an opinion that under every eight-year president in the United States, the national debt doubles. It's been that way roughly back to Reagan. So we'll see if that holds true with Trump. He's well on his way

... the interest rate should compensate you for the risk of loaning to the nation. And now those rewards for loaning money have gone down so low that they've actually gone negative where it's a privilege to loan money to a country.

I'm not so sure that in the long run that holds up. But it is the case right now. And I think the U.S. is going to be the next one to follow.''

]]>
iehi-feed-64931 Thu, 12 Sep 2019 15:25:12 GMT From CryptoKitties To Cardi B: Warner Music Joins $11 Million Investment In Ethereum Replacement http://implode-explode.com/viewnews/2019-09-12_FromCryptoKittiesToCardiBWarnerMusicJoins11MillionInvestmentInEt.html Now that Warner Music Group has mastered streaming, generating $2 billion in revenue from the technology, the music giant behind Cardi B, Ed Sheerhan and Bruno Mars has set its sights on blockchain, joining an $11.2 million investment in Dapper Labs, best known for making the viral blockchain game, CryptoKitties.

...

So as part of the investment from Andreessen Horowitz, Digital Currency Group, Union Square Ventures, Venrock and others, Bronikowski says Warner Music's blockchain team will work with Dapper Labs to create digital assets using a new public blockchain revealed today, called Flow, that is capable of handling transaction volumes many times more than ethereum, even while expanding on a number of other blockchain projects.

]]>
iehi-feed-64930 Thu, 12 Sep 2019 15:11:53 GMT ECB Blinks; Revives QE and Cuts Rates Deeper Below Zero http://implode-explode.com/viewnews/2019-09-12_ECBBlinksRevivesQEandCutsRatesDeeperBelowZero.html The European Central Bank cut interest rates further below zero and revived bond purchases after President Mario Draghi overcame critics of his stimulus policies to make a final run at reflating the euro-area economy.

The ECB reduced the deposit rate to minus 0.5% from minus 0.4%, and said it'll buy debt from Nov. 1 at a pace of 20 billion euros ($22 billion) a month for as long as necessary to hit its inflation goal.

...

The ECB changed its guidance on interest rates to say they'll stay at present or lower levels until the outlook for inflation "robustly" converges to its goal of just below 2%. It previously expected borrowing costs to stay unchanged until mid-2020. It also scrapped a 10-basis point rate premium previously attached to its long-term loan program.

The actions prompted U.S. President Donald Trump to tweet that the ECB is "acting quickly" while the Federal Reserve "sits, and sits, and sits." That's in line with his strategy of calling on the Fed to cut rates aggressively. The Fed is likely to lower borrowing costs next week for the second time this year, as central banks around the world ease to combat the spreading weakness.

Apparently no recessions will be allowed. Astounding.

]]>
iehi-feed-64921 Thu, 05 Sep 2019 20:01:11 GMT Alan Greenspan says negative rates will spread to US; Hat-tips Gold http://implode-explode.com/viewnews/2019-09-05_AlanGreenspansaysnegativerateswillspreadtoUSHattipsGold.html It will not be long before the spread of negative interest rates reaches the U.S., former Federal Reserve Chairman Alan Greenspan said.

"You're seeing it pretty much throughout the world. It's only a matter of time before it's more in the United States," Greenspan told CNBC's "Squawk on the Street" on Wednesday, adding investors should watch the 30-year Treasury yield.

...

He added that gold prices have been surging recently because people are looking for "hard" assets they know are going to have value down the road as the population ages. Gold futures are up more than 21% in 2019 and are trading around levels not seen since 2013.

]]>
iehi-feed-64898 Tue, 27 Aug 2019 02:10:58 GMT The Next Recession Will Destroy Millennials http://implode-explode.com/viewnews/2019-08-26_TheNextRecessionWillDestroyMillennials.html Cost pressures have also made it difficult or impossible for Millennials to save or invest. The share of Americans under the age of 35 who own stocks has meandered down from 55 percent in 2001 to 37 percent in 2018, in part because employers are less likely to offer retirement-savings plans and in part because Millennials have nothing left over at the end of the month to put away. Virtually all members of the cohort are "not saving adequately," experts warn, and two-thirds of Millennials have zero retirement savings. This means that Millennials have benefited not a bit from the decade-long boom in stock prices, as their parents and grandparents have.

...

The next recession--this year, next year, whenever it comes--will likely make that Millennial disadvantage even worse. Already, Millennials have put off saving and buying homes, as well as getting married and having babies, because of their crummy jobs and weighty student loans. A downturn that leads to higher unemployment and lower wages will force Millennials to wait even longer to start accumulating wealth, making it far harder for them to accumulate any wealth at all. (Compound interest is magic, after all.) Their trajectory, already terrible, might get even worse.

And Millennial suffering won't just hurt Millennials. There is accumulating evidence that the economy is more sclerotic and slower-growing than it might be if the Millennials were able to buy homes, have families, start businesses, and spend like other generations--if the young were not existing just to pump up asset values for the old. Which reminds me--there's one generation that might fare even worse than Millennials: Generation Z.

]]>
iehi-feed-64894 Fri, 23 Aug 2019 22:14:38 GMT Negative interest rates are coming and they are downright terrifying http://implode-explode.com/viewnews/2019-08-23_Negativeinterestratesarecomingandtheyaredownrightterrifying.html ... negative rates are being normalized by economists, bankers, and commentators. Worst, I have a funny feeling this will end badly. Negative interest rates have all the hallmarks of serious trouble for the financial markets; an anomaly growing in scale which seemingly came out of nowhere that is under-recognized, poorly understood and dismissed as not consequential. (Flashing red lights here.)

In the U.S. we aren't particularly aware of negative rates because they haven't made their way to our shores ... perhaps yet.

...

in Europe, it was postulated that negative rates would never fly in the consumer sphere in terms of banks paying back depositors less than they put in their savings accounts, but that's now changing. Banks in Denmark and Switzerland are now charging customers to hold deposits. And on the flip side, and also in Denmark, mortgages with negative rates are available. That's right, you get a mortgage from the bank, and the bank essentially pays you each month. A three-year adjustable rate mortgage priced at negative .28% there recently.

...

What would happen if rates go negative in the U.S.? Who knows. Allianz Chief Economic Adviser Mohamed El-Erian, for one, says he would sound the alarm if treasury yields dip into negative territory. "If we do I'm going to be really worried because negative yields in the U.S., the world's biggest financial market, will break things," he told Yahoo Finance.

... [and] there are some pretty serious negatives, certainly from the standpoint of uncertainty. A recent note by JPMorgan lays out nine unintended consequences; including lower bank profitability, lower credit creation, paradoxically higher rates in some instances (banks need to make up for lower income), reduced liquidity and functionality of credit markets, increased deficits in pension funds, and even exacerbation of wealth and income inequality.

A negative-yielding mortgage -- sounds kind of nice, until you realize that with such a positive-feedback loop for borrowing to buy property, that will tend to blow insane housing bubbles...

]]>
iehi-feed-64892 Fri, 23 Aug 2019 20:42:23 GMT Why Even Meritocracy Hasn't Saved Us From Our Winner-Take-All Economy http://implode-explode.com/viewnews/2019-08-23_WhyEvenMeritocracyHasntSavedUsFromOurWinnerTakeAllEconomy.html The elite should not--they have no right to--expect sympathy from those who remain excluded from the privileges and benefits of high caste. But ignoring how oppressive meritocracy is for the rich is a mistake. The rich now dominate society not idly but effortfully. The familiar arguments that once defeated aristocratic inequality do not apply to an economic system based on rewarding effort and skill. The relentless work of the hundred-hour-a-week banker inoculates her against charges of unearned advantage. Better, then, to convince the rich that all their work isn't actually paying off.

...

Elites naturally resist policies that threaten to undermine their advantages. But it is simply not possible to get rich off your own human capital without exploiting yourself and impoverishing your inner life, and meritocrats who hope to have their cake and eat it too deceive themselves. Building a society in which a good education and good jobs are available to a broader swath of people--so that reaching the very highest rungs of the ladder is simply less important--is the only way to ease the strains that now drive the elite to cling to their status.

How can that be done? For one thing, education--whose benefits are concentrated in the extravagantly trained children of rich parents--must become open and inclusive. Private schools and universities should lose their tax-exempt status unless at least half of their students come from families in the bottom two-thirds of the income distribution. And public subsidies should encourage schools to meet this requirement by expanding enrollment.

A parallel policy agenda must reform work, by favoring goods and services produced by workers who do not have elaborate training or fancy degrees. For example, the health-care system should emphasize public health, preventive care, and other measures that can be overseen primarily by nurse practitioners, rather than high-tech treatments that require specialist doctors. The legal system should deploy "legal technicians"--not all of whom would need to have a J.D.--to manage routine matters, such as real-estate transactions, simple wills, and even uncontested divorces. In finance, regulations that limit exotic financial engineering and favor small local and regional banks can shift jobs to mid-skilled workers. And management should embrace practices that distribute control beyond the C-suite, to empower everyone else in the firm.

... Nevertheless, there are grounds for hope. History does present one clear-cut case of an orderly recovery from concentrated inequality: In the 1920s and '30s, the U.S. answered the Great Depression by adopting the New Deal framework that would eventually build the mid-century middle class. Crucially, government redistribution was not the primary engine of this process. The broadly shared prosperity that this regime established came, mostly, from an economy and a labor market that promoted economic equality over hierarchy--by dramatically expanding access to education, as under the GI Bill, and then placing mid-skilled, middle-class workers at the center of production.

]]>
iehi-feed-64889 Fri, 23 Aug 2019 18:28:03 GMT After Trump broke his promise to eliminate the national debt, GOP senators say ‘next term' http://implode-explode.com/viewnews/2019-08-23_AfterTrumpbrokehispromisetoeliminatethenationaldebtGOPsenatorssa.html iehi-feed-64874 Thu, 08 Aug 2019 21:42:24 GMT Is Pimco Right That Negative Yields Make Sense? http://implode-explode.com/viewnews/2019-08-08_IsPimcoRightThatNegativeYieldsMakeSense.html ``It's still too soon to say his final conclusion -- that people are "willing to accept a negative interest rate" to transfer purchasing power to the future -- will stand the test of time. It's true that bonds with sub-zero yields have been around for years and that the pile has now grown to a staggering $15 trillion. But as I wrote recently, much of that debt was issued with a positive interest rate, and those buyers have seen sharp price appreciation as a result. The true test is still to come when countries and even companies try to sell securities that pay no interest at a price above face value, guaranteeing a loss if held to maturity.''

This argument is logical in the sense that, with financial economies so unstable, people might actually be able to pay a premium to "transfer purchasing power into the future". After all, that's pretty much the same as paying the carrying costs to hold cash (i.e., a bank account fee on a zero-yield checking account, or vault fees for cash), or storage fees for gold that, on average "goes nowhere". But what about inflation? This all assumes there's no inflation -- but at a minimum, the premium people are willing to pay implicitly must have an inflation rate subtracted from it. So if one is willing to take a 2% negative interest rate, one is likely assuming 0% inflation (or perhaps one would really be willing to pay a 4% negative interest rate, if it were not for 2% assumed inflation). The point being: if inflation really starts heating up in a general sense, these consumer-accepted negative interest rates will disappear real fast.

]]>
iehi-feed-64871 Wed, 07 Aug 2019 00:21:17 GMT Can the Fed Prop Up The "Everything Bubble" Forever? http://implode-explode.com/viewnews/2019-08-06_CantheFedPropUpTheEverythingBubbleForever.html iehi-feed-64869 Tue, 06 Aug 2019 22:53:08 GMT Today From the "What We All Already Knew" File: Jared Kushner Saw Trump Presidency As Chance to 'Dig Himself Out Of' Debt: Report http://implode-explode.com/viewnews/2019-08-06_TodayFromtheWhatWeAllAlreadyKnewFileJaredKushnerSawTrumpPresiden.html iehi-feed-64868 Tue, 06 Aug 2019 15:18:41 GMT Is a US Recession Coming? Yield Curve Loudest Warning Since 2007 http://implode-explode.com/viewnews/2019-08-06_IsaUSRecessionComingYieldCurveLoudestWarningSince2007.html iehi-feed-64867 Mon, 05 Aug 2019 16:36:13 GMT Dow plunges 600 points after China devalues its currency http://implode-explode.com/viewnews/2019-08-05_Dowplunges600pointsafterChinadevaluesitscurrency.html iehi-feed-64864 Sat, 03 Aug 2019 14:38:41 GMT MIT's AI Lab Analyzed 200,000 Bitcoin Transactions. Only 2% Were 'Illicit' http://implode-explode.com/viewnews/2019-08-03_MITsAILabAnalyzed200000BitcoinTransactionsOnly2WereIllicit.html Blockchain analytics firm Elliptic collaborated with researchers from the Massachusetts Institute of Technology (MIT) to publish a public dataset of bitcoin transactions associated with illicit activity... Only 2 percent of the 200,000 bitcoin transactions in the data set were deemed illicit as part of Eliptic's initial work. While 21 percent were identified as lawful, the vast majority of the transactions, roughly 77 percent, remained unclassified. (To date, there have been an estimated 440 million bitcoin transactions since the network's launch in 2009.)...

Sometimes, Robinson added, software was able to find patterns that would be difficult to describe yet still matched with known entities, based on pre-existing data from darknet markets, ransomware attacks and other criminal investigations.

]]>
iehi-feed-64863 Fri, 02 Aug 2019 17:24:32 GMT Who Will Hold The Bag For the Treasury As Social Security Runs Out? http://implode-explode.com/viewnews/2019-08-02_WhoWillHoldTheBagFortheTreasuryAsSocialSecurityRunsOut.html Ten years later, the Board of Trustees now projects that Social Security's primary trust fund will run out money in 2034.

That's five years earlier than they projected back in 2009. And it's only 15 years away....

Every worker who is legally employed in the United States currently pays roughly 15% of his/her wages each month to help fund Social Security and pay benefits to retirees.

But there are now so many people receiving Social Security benefits that all the payroll tax revenue is no longer enough.''

]]>
iehi-feed-64862 Fri, 02 Aug 2019 17:22:30 GMT Why Was Trumponomics a Flop? http://implode-explode.com/viewnews/2019-08-02_WhyWasTrumponomicsaFlop.html Obviously Powell couldn't say in so many words that Trumponomics has been a big flop, but that was the subtext of his remarks. And Trump's frantic efforts to bully the Fed into bigger cuts are an implicit admission of the same thing.

To be fair, the economy remains pretty strong, which isn't really a surprise given the G.O.P.'s willingness to run huge budget deficits as long as Democrats don't hold the White House. As I wrote three days after the 2016 election -- after the shock had worn off -- "It's at least possible that bigger budget deficits will, if anything, strengthen the economy briefly." And that's pretty much what happened: There was a bit of a bump in 2018, but at this point we've basically returned to pre-Trump rates of growth.

...

And there's a good case to be made that Trump's tariffs have actually hurt U.S. manufacturing. For one thing, many of them have hit "intermediate goods," that is, stuff American companies use in their production processes, so the tariffs have raised costs.

Beyond that, the uncertainty created by Trump's policy by whim -- nobody knows what he'll hit next -- has surely deterred investment. Why build a manufacturing plant when, for all you know, next week a tweet will destroy your market, your supply chain, or both?

... think of the missed opportunities. Imagine how much better shape we'd be in if the hundreds of billions squandered on tax cuts for corporations had been used to rebuild our crumbling infrastructure. Imagine what we could have done with policies promoting jobs of the future in things like renewable energy, instead of trade wars that vainly attempt to recreate the manufacturing economy of the past.

... pundits who think that Trump will be able to win by touting a strong economy are almost surely wrong. He most likely won't face a recession (although who knows?), but he definitely hasn't made the economy great again. So he's probably going to have to do what he's already doing, and clearly wants to do: run on racism instead.

]]>
iehi-feed-64855 Wed, 31 Jul 2019 22:55:07 GMT Jim Rickards on U.S. National Debt and Limits of MMT http://implode-explode.com/viewnews/2019-07-31_JimRickardsonUSNationalDebtandLimitsofMMT.html Data discredits the idea that we can grow our way out of our debt burden, he added, and we cannot borrow our way out of it either. The only solution becomes inflation, but the Fed has been trying to produce significant inflation for the last 10 years and has failed.

"What the MMT people are ignoring is the psychological limit, not the legal limit," Rickards said. "It is true that the Fed can borrow as much as it wants, but there's a psychological limit. This is what physicists call a critical threshold or a phase transition. ... I'm not saying inflation is an attractive option. I am saying it might be the only option and we can't get the inflation, so we're just heading for default with slow growth along the way to make it even worse."

]]>