Question about the origin of a specific E.J. quote

[sgominator]

Re: Question about the origin of a specific E.J. quote

For example, unlike a car if you turn an airplane it stays turned, except that the turn impulse decays gradually over time

Unless it's an Airbus in Normal Law at a bank angle of 33 degrees or less.

[Southernguy]

Re: Question about the origin of a specific E.J. quote

"Today the Fed has to raise raise rates in 2015 as the output gap closes even though the Fed has via reflation policy created the most gigantic asset bubbles in the history of the world."
Why?
I understand that it is so because as the output gap closes loose monetary policy stokes inflation...is that right?

[vinoveri]

Re: Question about the origin of a specific E.J. quote

Something has gone seriously wrong in the engine room.
Oil is crashing as if the world economy was well into a severe recession.
Gold, too, has corrected but only modestly as it will in anticipation of reflation via currency depreciation
as occurs toward the end of recession when currency/fiscal/monetary stimulus reflation is starting to take hold.
I'm starting to think that the reason I am having such a hard time with this next article is that the data point to a conclusion that is too repugnant and nausea inducing for me to countenance. I keep going back to it and it keeps saying the same thing.

What if the central bankers have no idea what they have done when they started messing with the long end of the yield curve and we're totally screwed?

What if they have taken us all to the edge and leave us here because there's no plan?

Think about it. What if Ka-Poom "Theory" just got real?

Wow, and I was just coming around to the idea that coordinated and global intervention and cooperation by central banks and sovereigns could keep the ship on a relatively steady course - hey evidence from the past 6 yrs is there.

Haven't we seen this story before, albeit in a different groups of assets -
So we have WTI drops to $50, junk bonds and emerging markets tank, currencies start to go haywire, and then, overnight
The FED, IMF, ECB, with tacit cooperation from China, Russia, OPEC announce "they will do whatever it takes" i.e., print as much money, use swap lines and what have you to stabilize the markets and voila - all assets recover their upward journey (priced in newly depreciated currency of course)

Why is this time any different?

[jk]

Re: Question about the origin of a specific E.J. quote

looks like the russian interest rate hike is not propping up the ruble.

[shiny!]

Re: Question about the origin of a specific E.J. quote

What if the central bankers have no idea what they have done when they started messing with the long end of the yield curve and we're totally screwed?

If "totally screwed" does come to pass, how will it manifest on a day-to-day basis? Normalcy bias keeps me from visualizing this. The most radical departure from "normal" I can recall were the odd/even fill-up days and lines at the gas pumps during the oil embargo of the 70's. It wasn't so bad.

[bill]

Re: Question about the origin of a specific E.J. quote

How long before they use up 430 dollar reserves?

http://www.wsj.com/articles/russian-...ise-1418715476

12-16-2014
With the economy already heading for recession next year, the central bank had appeared hesitant in recent months to raise rates steeply for fear of further depressing growth.
At the same time, the bank limited its sales of dollars on the currency market in an apparent effort to husband its $430 billion in reserves in case the political tensions and oil-price weakness last into next year and beyond. The official RIA-Novosti news agency on Tuesday quoted a Kremlin spokesman as declining to comment on the rate move.

“This was a move reflecting just how far the CBR had got behind the curve,” Standard Bank analyst Tim Ash wrote of the rate hike. “In a situation where a central bank allows its currency to depreciate by 10% in a day, the message is that they have lost control, and their very credibility is at stake.” With the ruble giving up some of its early gains Tuesday, he wrote, “The CBR cannot allow this move to fail, they will now have to come back with a big, big FX intervention, or yet more rate hikes.”
Traders and analysts said the central bank likely would have to back up the huge rate increase with further moves to limit the availability of rubles, as well as significant sales of dollars to pressure the market lower.

“Russia is in the midst of a perfect storm,” said Julius Baer’s Emerging Market Strategist, Heinz Rüttimann. “Western sanctions hurt, the oil price is down, interest rates high and the economy falling back into recession. It cannot get much worse for Russia. The final step for the perfect storm would be the introduction of capital controls.”

[jk]

Re: Question about the origin of a specific E.J. quote

How long before they use up 430 dollar reserves?

http://www.wsj.com/articles/russian-...ise-1418715476

anyone know offhand about russian foreign debt levels?

a quick google search gets this:
External Debt in Russia remained unchanged at 678.40 USD Billion in the third quarter of 2014 from 678.40 USD Billion in the third quarter of 2014. External Debt in Russia averaged 656.61 USD Billion from 2011 until 2014, reaching an all time high of 732 USD Billion in the fourth quarter of 2013 and a record low of 545.40 USD Billion in the fourth quarter of 2011. External Debt in Russia is reported by the Central Bank of Russia.



presumably that's all denominated in dollars.

another quick google gets this:

1. Assuming year-end 2013 prices for crude oil ($111.76/bbl) and natural gas ($66.00/FOE* bbl) the total revenue of Russia's petroleum industry is $662.3 billion (26.5% of GDP), and Russian's oil and gas export earnings are $362.2 billion, or 14.5% of GDP.
   
   
   of course that's using energy prices that are approximately double current ones. so let's say russian energy earnings ON EXPORTS is now about $180billion/year. with that income they've got to service their debt AND pay for any imports.
   
   russian imports:
   

   $358.1 billion (2012 est.) so now russian energy exports roughly cover HALF of russian imports and leave nothing left over for debt service. anyone care to carry this analysis further??

   (sorry about the screwy formatting- i can't seem to fix it.)

[thriftyandboringinohio]

Re: Question about the origin of a specific E.J. quote

Seems to have taken a pause in its plunge

[vinoveri]

Re: Question about the origin of a specific E.J. quote

Bloomberg Alert: CBs buying oil futures, equity futures, selling gold futures - Herd to follow

Behind closed doors, one official was overheard saying, "I think we've shown Russia who's the boss", "We chose this point to stabilize oil as we thought it would be an effective price point"; "Some of our cabal wanted to take oil down to $25, but cooler heads prevailed; after all we want cooperation, not war."

[thriftyandboringinohio]

Re: Question about the origin of a specific E.J. quote

Bloomberg Alert: CBs buying oil futures, equity futures, selling gold futures - Herd to follow

Behind closed doors, one official was overheard saying, "I think we've shown Russia who's the boss", "We chose this point to stabilize oil as we thought it would be an effective price point"; "Some of our cabal wanted to take oil down to $25, but cooler heads prevailed; after all we want cooperation, not war."

Fascinating. When I hear of such Byzantine plots, I take them with a grain of salt but I do pay attention.
If CBs can control global oil prices and have arranged this recent drop in oil, they can push oil upwards too.
Should they want to increase inflation, they could raise oil prices, which should be as effective as raising interest rates.
Just a thought.

[vinoveri]

Re: Question about the origin of a specific E.J. quote

Fascinating. When I hear of such Byzantine plots, I take them with a grain of salt but I do pay attention.
If CBs can control global oil prices and have arranged this recent drop in oil, they can push oil upwards too.
Should they want to increase inflation, they could raise oil prices, which should be as effective as raising interest rates.
Just a thought.

Yes, of course.
Who knows what really goes on? I know I don't, but have come to understand that the top down command and control is much more comprehensive and effective then I had ever imagined, and these are anything but free markets based primarily on supply and demand (excluding CB demand). This is geopolitics.

[bill]

Re: Question about the origin of a specific E.J. quote

Russia corp debt servicing without central banks help could force asset (Russia oil company’s offshore holdings?) liquidation.

http://blogs.wsj.com/moneybeat/2014/...d-as-it-seems/

Rolling over the dollar-denominated debt has become an increasingly painful headache for Russia’s companies, faced with reduced access to global capital markets because of Western sanctions, and following that precipitous declines in the ruble. To meet the steady repayment schedule, companies have continued to stock up on the U.S. currency, but have been faced with an increasingly high cost for each dollar.
“If you have currency debts, you must be wondering how you are going to pay them off now,” said Timothy Ash at Standard Bank.
But for companies facing debt repayments in dollars, there could be one small piece of good news that official data is masking.
The Russian central bank’s data suggest about $40 billion of dollar-denominated debt needs to be rolled over by Russian entities in the first half of 2015, and $77 billion in the full year. But Oleg Kouzmin, Russia economist at Renaissance Capital, suggests that the figure is likely to be closer to $24 billion and $46 billion respectively. Still substantial, of course, but at least slightly smaller. The central bank declined to comment on the data.
Why the difference? Well Russian companies often finance themselves using offshore vehicles or subsidiaries, which means certain portions of debt can be offset, rather than repaid.
“On our estimates, around 40-45% of total Russian external debt could be attributed to these types of transactions,” Mr Kouzmin said.
It’s possible companies could get a helping hand from Russia’s central bank, which can lend dollars to companies, taking their bonds as collateral. Russia’s Economy Minister Alexei Ulyukayev said in a recent interview that Russia is able to pay off all of its foreign debt in a year if needed. Central bank forex reserves were $373.66 billion on Dec. 1. But those reserves are also in demand thanks to the falling ruble. The central bank has spent about $80 billion to defend the ruble since the start of the year and the currency is continuing to fall.

[EJ]

Re: Question about the origin of a specific E.J. quote

but within a few years everyone will say they saw it coming.

Last two times, yes. Shortly afterwards everyone else claimed they had it right, too. But I think this time around the timing and form of the next crisis will take everyone by surprise, so "I saw it, too" will be more difficult to claim.

What I've done this past year is simulate the Fed's models and, having ascertained their decision process, believe I can accurately time of the Fed policy induced next crisis give or take a quarter.

The timing is supposed to be the hard part but as I think I demonstrated in March 2000 and December 2007 it isn't. Also the last two times characterizing the crisis and the response was relatively simple, given historical precedent and a plethora of literature that indicated likely policy responses.

But this time there's no Fed Deflation Playbook nor independent papers such as alerted me to the Foolproof Way in 2006. It's all uncharted territory.

Outside the U.S. the global economy has so little momentum that it won't take much to push it into a mid-gap recession. If an externality such as a Russian Bond Crisis redux occurs then the Fed can delay a disruptive policy move. Otherwise the Fed is on the hook to raise rates, current course and speed, in 2016.

If the actual unemployment rate falls below "natural unemployment rate" and inflation rises to
the future inflation expectations level then the Fed will start to raise rates.

[rlskaggs2003]

Re: Question about the origin of a specific E.J. quote

If "totally screwed" does come to pass, how will it manifest on a day-to-day basis? Normalcy bias keeps me from visualizing this. The most radical departure from "normal" I can recall were the odd/even fill-up days and lines at the gas pumps during the oil embargo of the 70's. It wasn't so bad.

I suppose it will depend somewhat upon where one exists along the socio-economic strata. On the Drudge Report today: 13.5mm millenials live in poverty.....46mm Americans on food stamps......65% of children live in households on federal aid programs. What happens here if we are "totally screwed"? Will the bankers be able to hop on their jets in time to avoid the angry masses and make it to their private caribbean sanctuaries?

[thriftyandboringinohio]

Re: Question about the origin of a specific E.J. quote

... Will the bankers be able to hop on their jets in time to avoid the angry masses and make it to their private caribbean sanctuaries?

Yes.