Omicron Is an Economic Threat, but Inflation Is Worse, Central Bankers Say

Link:https://www.nytimes.com/2021/12/16/business/economy/omicron-inflation.html

Excerpt:

Facing surging inflation, three of the world’s most influential central banks — the Federal Reserve, Bank of England and European Central Bank — took decisive steps within 24 hours of each other to look past Omicron’s economic uncertainty.

On Thursday, Britain’s central bank unexpectedly raised interest rates for the first time in more than three years as a way to curb inflation that has reached a 10-year high. The eurozone’s central bank confirmed it would stop purchases under a bond-buying program in March. The day before, the Fed projected three interest rate increases next year and said it would accelerate the wind down of its own bond-buying program.

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Aside from Omicron, the central banks were running out of reasons to continue emergency levels of monetary stimulus designed to keep money flowing through financial markets and to keep lending to businesses and households robust throughout the pandemic. The drastic measures of the past two years had done the job — and then some: Inflation is at a nearly 40-year high in the United States; in the eurozone it is the highest since records began in 1997; and price rises in Britain have consistently exceeded expectations.

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The Federal Reserve and Bank of England are worried about the persistence of high inflation. For the European Central Bank, inflation in the medium term is too low, not too high. It is still forecasting inflation to be below its 2 percent target in 2023 and 2024. To help reach that target in coming years, the central bank will increase the size of an older bond-buying program beginning in April, after purchases end in the larger, pandemic-era program. This is to avoid “a brutal transition,” Ms. Lagarde said.

Author(s): Eshe Nelson

Publication Date: 16 Dec 2021

Publication Site: New York Times

Huge Credit Stress Starting in China May Easily Rock the Whole World

Link: https://mishtalk.com/economics/huge-credit-stress-starting-in-china-may-easily-rock-the-whole-world

Graphic:

Excerpt:

If funding stress signs don’t emerge, don’t conclude that there is no contagion. Contagion is playing out already if you know where to look.”

The mess in China does not stop with Evergrande. 

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Everglade shows the theft of wealth and money in a giant Ponzi scheme, not to be confused with real savings (i.e. net tangible assets at true market value)!

There is no savings glut. 

The alleged savings glut is nothing but a fiat Ponzi scheme where central banks have to keep money supply soaring to keep asset prices (based on debt) from imploding!

How much longer this setup can continue before it blows up in a currency crisis, war with China, or some other major economic disruption remains a key mystery.

Author(s): Mike Shedlock

Publication Date: 20 Sept 2021

Publication Site: MishTalk