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Goldman sees more pain for iron ore

Goldman sees more pain for iron ore

The iron ore market can’t catch a break. The slowdown in china has already hammered prices by close to 50 percent this year and now Goldman Sachs has slashed its price forecast for the raw material used in steel-making. Seen as a key gauge of the global … Continue reading at

As Fed fog lifts, central bankers keep puzzling over China

Thomson ReutersA man reads newspaper in front of an electronic board showing stock information at a brokerage house in Beijing By Ann Saphir SAN FRANCISCO(Reuters) – The world's central banks are scrambling to assess the risk a slowing China poses to … Continue reading at


Galapagos webcast presentation of the partnership to be held on 17 December, 17.00 CET/11 AM EST/8 AM PST, +1 646 254 3361 access code 5852445, morecall number info further down MECHELEN, Belgium and FOSTER CITY, Calif., Dec. 17, 2015 (GLOBE NEWSWIRE … Continue reading at

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Economic Integration Of ASEAN Countries Fosters New Logistics Expansion Plans In Thailand, Finds Frost & Sullivan

BANGKOK, Dec. 17, 2015 /PRNewswire/ — Along with trade expansion and foreign capital inflows that are quickening the pace of Thailand’s economic growth, the logistics industry in the country too is establishing itself as a crucial contributor to national … Continue reading at

Oil at multi-year lows, precious metals firm after Fed hike

Oil prices remained at multi-year lows in Asia Thursday on the back of an interest rate hike from the U.S. Federal Reserve and higher crude oil stockpile data from the U.S. Energy Information Administration, underscoring vulnerability in the energy sector … Continue reading at

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PowerMoves: The lobbying wins and losses in the omnibus

The inside track on Washington politics. Be the first to know about new Budget stories from PowerPost. Sign up to follow, and we'll e-mail you free updates as they're published. You'll receive free e-mail news updates each time a new story is published. Continue reading at

Cerberus Nears Deal to Buy 80% of Avon’s North American Business

Cerberus Capital Management LP is nearing a deal to buy 80% of Avon Products Inc.’s North American business and take a nearly 17% stake in the famed cosmetics company, according to people familiar with the matter. The private-equity firm will pay $ 170 … Continue reading at

7 companies that we’d buy and hold for the next 20 years

Buy-and-hold investors need to be smart about their choices. (Photo: Getty Images/iStockphoto) Many traders hope to get rich quick in the stock market, but over time, the best performance has come from long-term investors who choose companies that can … Continue reading at

CPS’ borrowing could come at steep cost, experts say

After the Chicago school board approved more than $ 1 billion in long-term borrowing this summer, officials held off on proceeding with the plan while district officials sought to pressure state lawmakers for a bailout. During that time, the financial … Continue reading at

Zacks: Sonic Automotive Inc (NYSE:SAH) Given .00 Consensus Price Target by Analysts

Shares of Sonic Automotive Inc (NYSE:SAH) have been given a consensus broker rating score of 2.80 (Hold) from the five brokers that cover the stock, Zacks Investment Research reports. One investment analyst has rated the stock with a strong sell … Continue reading at

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Just a couple of episodes ago we talked about the importance of money supply. Today we've reached the letter Q and we are forced to cover the illegitimate cousin of money supply because Q stands for quantitative easing.

Governments and central banks love to interfere with markets. It helps them feel like they have a purpose in life. Time was when only fascist or communist governments would try to control the economy to achieve their warped political ends. Today, every developed nation on the planet has just as much central management of its economy as China or the Soviet Union at their worst. The only blessing is we don't have to listen to David Cameron reeling off five year plans for wheat production, iron ore mining or shipbuilding.
But we do have a generation of bureaucrats who genuinely believe they are in control of all the levers of supply and demand, inflation and deflation. The two thousand and eight crisis gave them the golden opportunity to play with all the toys in their nursery. They started with interest rates, lowering them to nought point five per cent as an emergency measure. A measure that is still in place almost a decade later.
Then they turned their hands to the broken banking system. When I spoke to QE expert James Ferguson recently he explained that the authorities thought the banks had a liquidity problem, so they started throwing cash at them. But what they actually had was a solvency problem, because they had made so many poor quality loans that were going bad that they became over-leveraged and effectively ran out of capital.
But central banks can't do much about insolvency. So they stuck with their original plan and turned the printing presses up to warp speed. Let's have a look at how Quantitative easing works.
The central bank purchases government securities such as treasury bonds or gilts or other securities from the market in order to increase the money supply. It floods financial institutions with capital in an effort to promote increased lending and liquidity. As I've mentioned, the banks had a solvency crisis so the last thing they wanted to do was make more loans.

So a lot of the money created by QE was left to shore up the banks' balance sheets as they sought to recover from the crisis. The rest of it has found its way into physical assets like real estate, works of art and classic cars. They've all seen asset bubbles forming as those with capital seek to maintain the value of their portfolio when interest rates remain low.

To give you some idea of the scale of money printing, America's Federal Reserve pumped four point five trillion dollars into the US economy between two thousand and eight and twenty fourteen. In Britain there was a mere three hundred and seventy five billion pounds of QE, while in Europe there is now a commitment to one point one trillion euros of bond buying, even though there's no such thing as a euro bond because each country has its own government bonds despite sharing a common currency. But the daddy of them all is Japan. Currently the Bank of Japan is creating seventy billion dollars worth of new yen each month, almost matching the peak in America despite having an economy only one third the size.

Those poor wage slaves relying on earned income have hardly benefitted at all from QE as wages have barely moved in a decade. Hence all the talk about income inequality and the need for more taxes on the rich. The real lesson in all this is that you need to move out of the working class and into the investor class.

Fiat currencies are now stretched to breaking point. Historically we've never gone this long without a currency collapse so we are on borrowed time. You need to examine your portfolio and see how well it will survive the inevitable fall out from QE. Most of the people whose opinion I respect are anticipating a painful period of contraction as these asset bubbles burst, especially in areas where property prices have inflated hugely. They then expect the end game to be inflation as prices and currencies adjust. They also hold a percentage of their portfolio in gold, the only form of money with a long term track record.

Of course no one can predict the timing of any of this. It may be tomorrow. We may limp through another five years. But there's one thing that we can be clear on. QE is the only weapon left in the Central Bank arsenal. As things unfold, I suspect Money Week's Tim Price may be right when he says 'we ain't seen nothing yet...'

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