Chasing the Dragon

As is by now widely reported, China stocks have been on something of a tear in the past few weeks, with the CSI300, for example, up by around 20% in that time. The usual suspects have been at work as the PBOC has encouraged a renewed money flood into being and those desperate for an income – and possibly with little else to do, at present – are enticed back into what is merely the latest in the nation’s rolling series of mania and speculative booms. Continue reading

Don’t Bank On It

On April 13th, a financial pundit with a wide media following made the following (loosely transcribed) proposition about US banking stocks: Banks won’t rally because rates -long and short- are too low; Japan is our marker – banks there falling while their US/EZ peers rose pre-GFC and have not made any ground since; vis-à-vis their EZ peers, US bank returns have long been anomalous, ergo their out-performance won’t be repeated.  We demur in the main.

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Utterly Negative

Mario Draghi emerged last week from the much-awaited meeting of the ECB Governing Council meeting clutching a fairly bland official communiqué which extended the envisaged freeze on interest rates out to the latter part of next year (aka, ‘forward guidance’), pledged that there would be no shrinkage of the Bank’s securities portfolio (so-called ‘quantitative tightening’) for some considerable period after that ended, and gave details of the terms on which the next batch of loan socialization can be refinanced under the aegis of its TLTRO III programme. [First Published June 7th] Continue reading

China Banking: Pigs Might Fly

There must be something in the air this winter – something that is besides the whiff of climate cant and manufactured eco-hysteria emanating from Davos and all the other organs of bien pensanterie. For, everywhere you look, someone is going less than quietly insane, either cooking up or Swedish chef rehashing glaring errors of economic idiocy or sweet-shop window socialism. Bork, bork, bork!

[This article can be heard as a podcast on Soundcloud under ‘CantillonCH‘ or iTunes under ‘Cantillon Effects‘] Continue reading

The Turn of the Tide

Have we finally reached the high-water mark of the current bull run? Is all the good news in – and the last, most shaky, marginal buyer along with it, inveigled in by the bounce from February’s brief Vol-au-Vent? If so, what are the implications? Where are the trigger points? How will any weakness manifest itself?  Continue reading

Breaking China

For some months now, we have been warning of the stresses building in China’s credit structure and warning that, if unaddressed, they would lead to pain in asset markets and potentially to weakness out in the real economy. Here, we lay out the arguments in detail.

17-11-28 China

 

Busts are not ‘inevitable’

There are those who can display a solid grasp of the oft–misunderstood mechanics of credit and money generation by banks and who are also well aware of the episodes of endemic mistakes this entrains in in our system. Yet, perhaps because they possess a certain ideological bent, many such commentators cannot seem to steel themselves to take the next step and admit that very little of this has anything to do with a free market, or that those mistakes are decidely not an intrinsic feature of what they like to call ‘capitalism’.

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Banks DO Create Money

For those who will not take my word for it that banks do create deposits by lending money, let me quote you a little Roepke from a footnote (p113) to his 1936 work, ‘Crises & Cycles’:

“The process [of credit creation] is now clearly explained in any text-book on economics, banking or money (especially recommendable is Hartley Withers’ Meaning of Money). A fuller treatment may be found in the following books: R. G. Hawtrey, op. cit.; J. M. Keynes, A Treatise on Money, pp. 23-49 : C. A. Philips, Bank Credit, New York, 1920; W. F. Crick, “The Genesis of Bank Deposits,” Economica, June 1927, and F. A. von Hayek, Monetary Theory and the Trade Cycle, London,1933.”

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Money, Macro & Markets – The Archive

Regular readers will know that the articles published here are but a small subset of the detailed work I undertake to analyse economic and political developments and their effects on markets. In order to give some idea of the scope of this, presented below is an archive of past issues of the Austrian School-informed, in-depth monthly publication, ‘Money, Macro & Markets’ in addition to which I compile twice monthly updates as the ‘Midweek Macro Musings’ which are also made available on a complimentary basis to subscribers to the former letter.

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The Road to Canossa

That the artificial interest rates in evidence in our hugely distorted capital and money markets can be made negative in nominal as well as in real terms is, alas, the curse of the modern age. Though entirely at odds with natural order – as we have repeatedly tried to make plain – they are also a curse that we are unlikely to have lifted any time soon, especially not in a Europe where there is no effective restraint to be had upon the exercise of his awful powers by the likes of a fanatic like Draghi.

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