On the heels of crazy trading in Bitcoin as the Germans buy gold and problems in Europe and the US emerge, here is what you need to know…
By Peter Boockvar, author of the Boock Report
November 13 (King World News) – Here is what Peter Boockvar wrote as the world awaits the next round of monetary madness: Credit growth slowed in October in China as total loans extended totaled 1.04T yuan…Also of note was the 8.8% y/o/y increase in the M2 money supply. That was below the estimate of 9.2%, down from 9.2% growth in September and the slowest pace of gain since records were kept in 1996…
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Bottom line, I guess acknowledging a problem is the first step in dealing with it and the Chinese authorities fully understand the credit problem that has been created. Managing its unwind (or credit growth slowdown) though is what is difficult because of the desire for 6.5% type growth where it takes more and more debt to generate that 1 yuan of economic output. This said, I still believe China remains an exciting story for those with long term time horizons but they’ve got quite a debt problem on their hands.
Fun With Bitcoin
…If you were bored over the weekend and wanted some action, you should have tuned into the price of Bitcoin. It closed at $7,120 Thursday, traded down by 7.5% on Friday, got as low as $5,605 around 6pm last night and right now is trading at $6,650 as of this writing. That is a 25% crash between Friday’s early high and yesterday’s low. Have fun.
Meanwhile, In The UK & Europe
This is not at all moving the needle today for UK interest rates or the pound (which is down over new Brexit concerns) but BoE member and chief economist Andy Haldane is at least acknowledging the inflation problem on their hands. He said today:
“The rise in inflation through this year has already generated such a squeeze on many households’ purchasing power. This is not something the bank, or someone else, should wish to see continuing for years to come, hence the nudge up in interest rates.”
We also heard from Mario Draghi’s consigliore Vitor Constancio who is sounding as dovish as Draghi himself as to be expected.
“We aren’t yet fulfilling our mandate and that is why monetary policy will have to continue to be very accommodative, assuring favorable financial conditions to foster growth and spur wages and prices.”
He also pushed back on German complaints of ECB policy. He and other central bankers in Europe, Japan, the US and elsewhere still are under the fallacious belief that QE, ZIRP and NIRP can create self sustaining recoveries that can withstand the eventual accommodation exit.
Germans Go For The Gold
By the way, the Germans are a major buyer of gold according to the recent report from the World Gold Council. From the WGC:
“Germany has established itself as a 100t-plus per year market for bars and coins, and a vibrant domestic ETC market has developed: during Q3 2017, German-listed ETC AUM hit an all-time high of 252.1t, equivalent to €9.8bn…German investors have an acute awareness of the wealth- eroding effects of financial instability. Hyper-inflation in the 1920s lingers on in the collective memory but, perhaps more importantly, German investors have seen fiat currencies come and go: in the past 100 years, Germany has had eight different currencies.”
Finally, The Fed’s Conundrum
Lastly, Fed voting member Patrick Harker said with respect to the December FOMC meeting, “I still have another 25 bps rate increase penciled in for this year, although perhaps I should say, ‘lightly penciled in.’” He’s sticking with the tight labor market theme and that it will eventually lead to higher inflation but also said “inflation is still below the Fed’s target rate and is the one area that not only continues to elicit caution, it even constitutes a conundrum.” Mr. Harker, why is it such a ‘conundrum’ to understand why some prices go down (technology, efficiency and competitively driven) and some go up (anything that government is involved in like housing and healthcare)?
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