Friday, December 26, 2014

Just where has the recent London housing boom really come from?

QE addiction has made us too complacent

Deutsche Bank round- up of market prospects for 2015 : “If it was a free market and central banks were not allowed to intervene any more then we would be very bearish. However central banks do exist and at a global level will buy more assets in 2015 than they did in 2014.” and "This massive central bank credit has in turn fueled dramatic asset price inflation, with the combined valuation of world equity markets (before the very recent jitters) reaching almost $75 trillion – a not-entirely-coincidental threefold increase from the March 2009 low of $25  trillion. Charts plotting the rise in equity markets against the increase in central bank balance sheets show an almost perfect correlation".

Posted by britishblue @ 04:09 PM (3398 views)
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5 thoughts on “Just where has the recent London housing boom really come from?

  • No mention of the connection with rising inequality (“growing debt burden” – who owes whom?), austerity and ‘structural reforms’ i.e. ‘labour market reform’, i.e. downward pressure on wages and more part-time workers with fewer benefits.

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  • At the bottom end the FLS cash, and at the top end cheap foreign cash, mostly from China and Japan.

    However central banks do exist and at a global level will buy more assets in 2015 than they did in 2014.” and “This massive central bank credit has in turn fueled dramatic asset price inflation,

    This shows the complete failure of central banks and the greater chance of systemic currency crisis. More and more central support is needed as the global economy continues to weaken, until in the end, the burden will simply prove too much.

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  • A major part of that central support is the manipulation downwards of the prices of precious metals in order to support the dollar and its reserve status at a time when fundamentals (QE oversupply of $$, trade and budget deficits) say the currency should be weakening. The Fed and its agents use uncovered futures contracts to sell gold and silver during periods of the day when it’s known there’ll be very light trading (periods when the trading floor closes and trading is exclusively electronic). It’s getting more blatant – there are large tranches of sell orders during such periods for gold and silver when there’s no news about that affects other markets and the only reason for selling is to force down bullion prices.

    And US QE hasn’t ended. The Fed is rolling over the interest and principal payments from its $4.5 trillion bond portfolio into purchases of more bonds. The Fed-friendly banks use the $2.6 trillion in their cash on deposit with the Fed to purchase bonds. The money the Fed paid the banks for bonds will now be used by the banks to support the bond price by purchasing bonds.

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  • A major part of that central support is the manipulation downwards of the prices of precious metals

    The central bank devaluation includes anything that resembles money, and yes of course, gold and silver are definitely on the list. Although, paper manipulation is something quite different to the actual physical substance; this is indicated by the negative GOFO rate. We now have the silly situation in which when the price drops, the shortage of the real thing actually increases. It isn’t really possible to buy significant quantities of physical gold at the moment – few coins and that’s it.

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  • And US QE hasn’t ended. The Fed is rolling over the interest and principal payments from its $4.5 trillion bond portfolio into purchases of more bonds. The Fed-friendly banks use the $2.6 trillion in their cash on deposit with the Fed to purchase bonds. The money the Fed paid the banks for bonds will now be used by the banks to support the bond price by purchasing bonds.

    When they started this little game, there is absolutely no way that they though that 7 years later then would still have to keep doing the same thing. Worldwide currency crisis is now the only possible outcome.

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