Here's a special holiday update of some key events and data you may want to know about today.
First up, the two largest American car makers have reported a strong December. General Motors reported an unexpected +10% rise in December, while Ford also beat forecasts. That will probably mean a record 2016 for US new car sales, beating the previous best set in 2015.
The US Fed released the minutes of their December rate increase meeting today. They now see the possibility that they will have to raise interest rates faster than the “gradual” pace that they have stressed for some time. The era of a predictable and boring American central bank may be over.
Adding to that sentiment, big US banks are set on getting Congress to loosen or eliminate the Volcker rule against using depositors' funds for speculative bets on the bank's own account, a test case of whether Wall Street can flex its muscle in Washington again. They are going to be aided by the appointment of a Goldman Sachs lawyer to head the SEC. Reuters is reporting that half a dozen industry lobbyists said they began meeting with legislative staff after the American election in November to discuss matters including a rollback of Volcker, part of the Dodd-Frank financial reform that Congress enacted after the financial crisis and bank bailouts. Banks now see opportunities to unravel reforms under President-Elect Donald Trump's administration and the incoming Republican-led Congress, which appear more business-friendly, lobbyists said.
Electric car maker Tesla Motors Inc has started mass production of lithium-ion battery cells at its gigafactory in Nevada, along with Japan's Panasonic Corp, the company said earlier today.
In India, an early sign that their crackdown on tax evaders is helping to swell Government coffers comes as they have lowered borrowing plans by NZ$3.8 bln.
In Europe, inflation seem sto be on the move too. The annual inflation rate hit 1.1% last month, according to official statistics agency Eurostat, a sharp jump from November's rate of 0.6%. The rate is the highest since September 2013, when inflation was also 1.1%.
Spain is in the middle of an impressive recovery. The core measure is unemployment and that is declining quickly. According to data released by the labour ministry earlier today, the number of registered employees rose by 540,655 over the past year, the highest in a decade. The number of unemployed Spaniards, meanwhile, fell by 390,534, the steepest fall on record.
In New York, the UST 10yr yield fell slightly on the release of the Fed minutes, now at 2.44%. However CDS spreads for investment grade corporate debt have fallen to their lowest level in eighteen months. And US LIBOR. the rate banks charge each other to borrow dollars for three months rose above 1% today for the first time since May 2009 as global interest rates extend their climb on expectations of accelerating growth and inflation.
The US benchmark oil price has recovered yesterday's fall and now just over US$53 a barrel, while the Brent benchmark is just under US$56.50.
The gold price is a tad higher too, now at US$1,165/oz.
The New Zealand dollar is pretty much unchanged and still at 69.6 USc, although it did fall away yesterday but has recovered overnight. On the cross rates it is stable at 95.6 AU¢, and 66.4 euro cents. The TWI-5 is still at 76.2.
The easiest place to stay up with event risk over the holiday period is by following our Economic Calendar here »
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LIBOR. the rate banks charge each other to borrow dollars for three months rose above 1% today for the first time since May 2009 as global interest rates extend their climb on expectations of accelerating growth and inflation.
Fed to follow unsecured short market rates higher?
The US Fed released the minutes of their December rate increase meeting today. They now see the possibility that they will have to raise interest rates faster than the “gradual” pace that they have stressed for some time.
As I have pointed out before, this is a completely bogus number. Much of it is owed to the US Fed and other government agencies. It could be cancelled with a journal entry. Owing yourself money is not real debt.
Then most of the rest is owed to US citizens and taxpayers.
Only about 20% is owed to foreign claimants. This is the bit that should be stressed over, and it is relatively small compared to most other indebted countries. (In NZ it is ~60%.)
The only use the US$20 tln number has is to score political points with the naive. It is typical zerohedge clickbait fare. Other than that, it is a useless benchmark.
No, it was real money that was spent into existence by the government, thus diluting the value of all dollars in existence at the time; the balancing debt was then auctioned off to the banks and later bought back from the banks at a premium price.
The reason it's confusing is because both sides of a double entry must be accounted for, not just one. So one side is the spending, the other is the debt that is sold to balance it (governments can just spend and not issue debt but that is inflationary so not done ... they just buy it back later to confuse us).
The situation reminds me of an episode of The Nanny:
Niles: Miss Fine, is it that time of the month again?
Nanny: Oh, I'm afraid so, Niles. Time to make my credit card payments. Oh, thank God I've got a system.
Niles: No, you don't.
Nanny: I'm tapped.
Niles: Not you.
Nanny: I have to pay my American Express because if I buy a piece of gum, the SWAT team storms the building. Meanwhile, I pay my Master card with my Discover card, my Discover card with my Optimer, my Optimer card with my City Trust Visa.
Niles: But doesn't that leave a very high balance on your Visa?
Nanny: Exactly. And that's why they give me an expresso machine, which I sell to pay my American Express. Thank you.
Niles: Miss Fine, you should be President of Mexico.
I'd like to see Fran Drescher make a run for President in 2020 - we might get an honest take on things. When you think about it, The Nanny was reality TV, and The Apprentice was a fraud.
The only use the US$20 tln number has is to score political points with the naive. It is typical zerohedge clickbait fare. Other than that, it is a useless benchmark.
Is that right? And just what is the level of direct US Treasury debt ownership associated with 99% of US taxpaying citizens versus the 1%?
Perhaps SH would support Keen's idea of having the government pay back some of our mortgage debt, and enjoy some form of reset. Imagine each home owner in the mortgagebelt getting 30k or more of their mortgage paid off.
http://www.smh.com.au/business/markets/steve-keen-rebel-economist-with-…
Banks now see opportunities to unravel reforms under President-Elect Donald Trump's administration and the incoming Republican-led Congress, which appear more business-friendly, lobbyists said.
Yes, but take very careful note of the use of language where "business-friendly" is used instead of "bank-friendly", suggesting everyone benefits by borrowing more. They are such a clever lot these bankers.
Interesting times when signs of rising interest rates are viewed favourably, either as an earlysign of general economic recovery, or at least as an indicator that global conditions can accommodate (just) a small interest rate rise.
Or maybe the cart is being put before the horse? The rises are introduced first to persuade all that recovery is about to come.
Some tentative rises, followed by 'recovery' cuts?
Interesting times when signs of rising interest rates are viewed favourably, either as an earlysign of general economic recovery, or at least as an indicator that global conditions can accommodate (just) a small interest rate rise.
Maybe there is a global shortage of US dollar funding/liquidity?
[EUR/USD] Basis swap premiums for obtained dollars have been falling steadily since the early days of 2014 when, among other things, CNY “unexpectedly” started lower and the ECB decided to “stimulate” with negative money market interest rates and more balance sheet expansion. Unlike 2011 or 2008, basis swaps are not lower all at once; it has been instead a slow burn, an almost steady withdrawal stretched out over just about three years and with no end yet in sight.
The direction of the negative basis swap premiums is the only suggestion necessary; the more negative the premium, the more desperate from the European perspective the European demand for dollars (really “dollars”). It was the spring/summer of 2015 where this imbalance, a systemic one no less, became especially difficult and disruptive. Given the results in the European economy throughout this time period as entirely different from the promises for it, it is safe to write that the ESRB was watching its money market indicator more closely than the cross currency basis swaps that presented European banks, and thus the European system, and thus Europeans, with funding risks primarily of “dollars” than euros. Read more
it would work if they let them crash instead of stepping in like last time. that is the whole premise of capitalism in a down turn the weak dissappear and the strong become stronger.
so clients would flock to the strong ones and the weak bankers would start leaping out of windows or jump in front of trains again
http://americablog.com/2014/02/twelve-deaths-eight-months-suicide-other…
Re: India and Tax evasion - In India, an early sign that their crackdown on tax evaders is helping to swell Government coffers comes as they have lowered borrowing plans by NZ$3.8 bln.
Here's a nice radio article from the BBC's Business Daily:-
A comedian's take on the biggest story in India in 2016
http://www.bbc.co.uk/programmes/p04mb9mg
The other side of increased lithium-ion battery production (and economic growth, mass production/consumption, "wealth", etc)
https://www.washingtonpost.com/graphics/business/batteries/graphite-min…
![[EUR/USD]](http://www.alhambrapartners.com/wp-content/uploads/2017/01/ABOOK-Jan-2017-ESRB-Basis-Swaps.png){kind=link}
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