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Pound Rallies Against Dollar Boosted by Upbeat UK GDP Data, Lower US Yields

The Sterling pound fell against the dollar fueled by the upbeat UK Q4 GDP data released in the early London market as the greenback remained largely weak. The GBP/USD currency pair also benefitted from the elevated investor risk appetite that…

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The Sterling pound fell against the dollar fueled by the upbeat UK Q4 GDP data released in the early London market as the greenback remained largely weak. The GBP/USD currency pair also benefitted from the elevated investor risk appetite that drove riskier currencies and assets higher at the dollar’s expense.

The GBP/USD currency pair rallied from a low of 1.3716 in the late Asian market to a high of 1.3811 in the American session and was trading near these highs at the time of writing.

The currency pair’s initially fell driven by the weak market sentiment as investors waited for the UK data. The release of the upbeat UK Q4 GDP report triggered the pair’s rally. According to the Office for National Statistics, the country’s GDP grew 1.3% in Q1 compared to Q4, beating analysts’ estimates of 1% growth. The positive British total business investment data for Q4 also contributed to the pair’s rally. The upbeat UK Q4 current account balance also fueled the pound’s rally. The downbeat UK Nationwide housing prices index for March had a muted impact on the pair.

During the American session, the cable edge higher after the US ADP employment change report came in at 517,000 jobs missing consensus estimates of 550,000 jobs. The pullback in US 10-year Treasury yields also drove the pound higher. The upbeat ISM Chicago Business Barometer had a muted impact on the pair.

The currency pair’s future performance is likely to be affected by geopolitical events and US dollar dynamics, given tomorrow’s empty UK dockets.

The GBP/USD currency pair was trading at 1.3785 at 18:25 GMT after rallying from a low of 1.3716. The GBP/JPY currency pair was trading at 152.63, having risen from a low of 151.56.


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Precious Metals

Why Authoritarianism Must Prevail

Why Authoritarianism Must Prevail

Authored by Robert Wright via The American Institute for Economic Research,

Freedom anywhere is a threat…

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Why Authoritarianism Must Prevail

Authored by Robert Wright via The American Institute for Economic Research,

Freedom anywhere is a threat to authoritarianism everywhere. That is why authoritarians must destroy all freedom and why liberty lovers, and even the merely “lib-curious” (liberty curious), must not just resist blatant authoritarianism, but reject it in all its guises. The fate of the nation, and the world, again hangs in the balance.

To the extent that any freedom persists, authoritarian diktat can be subverted, albeit at a cost. History is rife with examples of bizarre entities, like nonbank banks (I kid you not!), rent-a-banks (ditto!), and gold caches, designed to work around branching restrictions, usury laws (maximum interest rates), the criminalization of holding gold, and sundry other attempts to limit financial freedom. (See my Financial Exclusion for details.)

To squelch “undesirable” activity, like increasing bank competition, voluntarily lending/borrowing small amounts of money at rates commensurate with the attendant costs and risks, or trying to protect one’s family against fiat money inflation, government must outlaw the workarounds too. To get their way, statists must suppress all unapproved activities, which ultimately means forcing would-be innovators to obtain permission before they can lawfully engage in any new activities.

Consider, for example, recent calls to allow the IRS to monitor essentially all bank accounts in the country. Maybe Americans will accept it, if, as claimed, the power is only used to enforce current tax laws. But if tax rates rise appreciably, as it seems they will, given the current administration’s policy goals, or if the transaction information is used for partisan political purposes, or to shame or coerce people into buying this, or not buying that, Americans will begin to search for workarounds. To the extent that the workarounds prove successful, government will be forced to outlaw the workarounds too.

For instance, if workers ask their employers to pay them in Federal Reserve Notes or Bitcoin because they believe that the transaction costs of making payments in those media will be less burdensome than giving some party hack access to the most intimate details of their lives, the government may well force employers to pay workers only in USD and only via bank transfer. It might even ban cryptocurrencies entirely, or at least try to.

Workers might then make one payment per month, to a “bill paying service” that for a fee will pay their bills for them, out of its one, giant bank account. Oh, but that sounds like an unregulated bank taking uninsured deposits so those services will have to be suppressed as well, or perhaps replaced by the central bank.

People may then begin paying everything by credit card, and even direct their employers to repay their credit card issuers directly. Next thing you know Uncle Sam will want to see your credit card statements too. Ditto PayPal, Venmo, and any other fintech apps used to make or receive payments. Thus a seemingly innocuous request to see bank accounts for tax purposes becomes the excuse for full-blown financial repression. This will, as always, hurt the poor the most.

Employers might work around those laws, along with the tax code and vaccine mandates by converting their employees into volunteers and donating payroll to a nonprofit charity with the singular mission of ensuring that the “volunteers” receive “donations” that happen to match the value of their former compensation. Imagine the chaos if every employer simultaneously did that! Government would have to respond by tightly regulating, if not outright outlawing, charities and volunteer work. Our liberty would be truly lost at that point, and again the poor would suffer most.

Corporations shouldn’t be taxed, but they are. Many of the largest have engaged in (international) tax arbitrage by adroitly shifting headquarters, production facilities, and charters between different states, provinces, and countries. Governments are now fighting back by establishing a global minimum corporation tax. How long before some entity begins to offer oceanic or orbital (then moon, then Martian) charters as tax havens? Soon after, though, private space flight and oceanic colonization will likely be banned or heavily restricted.

Everyone should be aware that if an international gold ETF issuing bearer shares, Honeypot.xxx (a sex worker-owned substitute for OnlyFans), a parallel university system, or anything else of import that runs against the woke or statist grain begins to gain commercial traction, regulatory hammers will swiftly bludgeon the innovators into compliance, or out of existence.

Were that all! When statist solutions to perceived “problems” create real problems, the call inevitably goes out for yet more government. When pressed about how to pay for UBI (various universal basic income) schemes, for example, schemes that are purportedly needed to solve a nearly nonexistent income disparity “problem,” proponents will sometimes argue for the establishment of a Sovereign Wealth Fund (SWF, or a giant investment fund owned by a government), the dividends and realized capital gains of which can be divided equally among the citizenry. 

UBI proponents are not sure where the money to fund the SWF will come from, or if it is a good idea to concentrate all that economic and political power in one decision maker’s hands, but if you want to see their true colors, ask them why individuals cannot simply invest their own money for themselves. Turns out that elites believe that most Americans don’t know how to invest properly, in the “right” (which is to say Left) companies. So look for a push to outlaw individual investment in favor of a SWF-funded UBI, or at least a narrowing of choice to SEC-approved ESG funds. You may still own something in 2030, but it seems increasingly unlikely you will be happy.

America and the rest of the West have been sliding down the slippery slope of statism for so long that they are now rapidly approaching the precipice that ends in rock bottom. Will liberty be crushed and a new dark age commence? Or will the masses then finally see governments as the problem, rather than as the solution?

Tyler Durden
Fri, 10/22/2021 – 21:00






Author: Tyler Durden

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Economics

The ‘Maestro’ Is Why Jay Powell Keeps Seeing (inflation) Ghosts

See, this is backward. And while it may seem overly pedantic, getting it right is actually a crucial insight (lack thereof) into pretty much everything….

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See, this is backward. And while it may seem overly pedantic, getting it right is actually a crucial insight (lack thereof) into pretty much everything. Its purpose is to maintain a different sort of money illusion (the original relates to how workers focus on nominal rather than real levels of compensation). This other money illusion relates to the hidden nature of money itself.

We’re told central bankers are it, therefore everything must be related to central bank monetary policy. If the dollar’s falling, the Fed accommodated. If it’s rising, Fed tightening. Rates go down because, everyone says, Jay Powell bought bonds. Yields go up because of rate hikes after the bond buying is over.

You go to the bathroom in the middle of the night, the FOMC must’ve voted for it.

It all goes back to before Greenspan, though it was the “maestro” who most clearly articulated the gross illiteracy and unsupported conceits behind much of Economics.

CHAIRMAN GREENSPAN. It’s really quite important to make a judgment as to whether, in fact, yield spreads off riskless instruments—which is what we have essentially been talking about—are independent of the level of the riskless rates themselves. The answer, I’m certain, is that they are not independent.

Risky spreads are, according to this view, in a sense controllable from monetary policy even from only the short end. Why? Because all riskless rates, Greenspan also said, were nothing more than a “series of one-year forwards.”

It was, in theory, all so easy and neat; the Fed from its single position could conduct all the instruments in the symphony as it wished, however and whenever wished. Thus, maestro.

Why, then, all the constant “conundrums” and “inflation puzzles” ever since? Dear Alan said he was certain, and he’s certainly been wrong.

The yield curve is no series of one-year forwards, nor are risky spreads utterly dependent upon hapless Economists at the Fed (see: swap spreads, as a start). Those at the Fed instead have repeatedly shown they have no idea how even short run interest rates work (see: SOFR) which means they can’t be literate in money like economy.

What do they do?

Influence public opinion via financial media. To wit:

The unquestioned assumption embedded here is palpable anyway; nominal rates are rising (“worst year for fixed-income since 2005” BOND ROUT!!!!) because inflation is “hot enough.” Reported like its some foregone conclusion, this inflation certainty dictated to the bond market via a suddenly hawkish Federal Reserve.

This is, at best, incomplete; most often, just plain backward. Thanks, Maestro. 

Had the yield curve behaved recently like it had earlier in this same year, this would be plausible. The yield curve, on the contrary, is performing very differently negating any chance for this to be the case.


Bond yields aren’t reacting to anything; they’ve helpfully sorted CPI’s for us all along. As I wrote earlier today, the yield curve has expertly, consistently interpreted the money Economists and central bankers can’t understand so as to accurately predict – for longer than a century – what is and will be inflation.

This often leads to conflict; central bankers say it’s one thing and bonds declare another, often the opposite. This differing viewpoint not just a post-2007 development, either, also noted today, bonds vs. Economists has been a one-way contest going back before 1929.

Our current case, therefore, very much like previous cases.

A flattening yield curve, conspicuously so, is the bond market recognizing: 1. It isn’t inflation, just transitory price factors, meaning lack of heat in the economy; 2. Policymakers repeatedly have shown they have no clue how or where to even begin figuring one way or the other; 3. Because they are clueless, they have likewise displayed a consistent tendency to make egregious forecast errors, such as 2018 or 2013; 4. Therefore, very much independent of the Fed, bond yields are instead disagreeing with Powell’s mistake by pricing a scandalously flattening yield curve with nominal rates already contradictorily low (tight money).

Bonds – not the Fed – have already sorted the inflation question. The problem is, as usual, the answer isn’t to the liking of mainstream Economics which can only interpret yields from the “certitude” of Greenspan. In that sense, inflation is a foregone conclusion. In the dream-world of media, the theme this year is solidly inflation. In monetary reality, unambiguously deflationary.

Just in time for Halloween, Jay Powell is back to seeing ghosts.

 










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Economics

US stock close mixed on Powell’s hawkish remark

Dow Jones closed higher while S P 500 and Nasdaq drifted on Friday October 22 after Fed Chair Jerome Powell s tapering remarks weighed on investors…

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Dow Jones closed higher, while S&P 500 and Nasdaq drifted on Friday, October 22, after Fed Chair, Jerome Powell’s tapering remarks weighed on investors’ sentiment. However, the optimism over the robust earnings has pushed the indices towards their third consecutive week of gains.

The S&P 500 was down 0.11% to 4,544.90. The Dow Jones Industrial Average increased by 0.21% to 35,677.02. The NASDAQ Composite Index fell 0.82% to 15,090.20, and the small-cap Russell 2000 was down 0.21% to 2,291.27.

On Friday, the Federal Reserve Chair, Jerome Powell said that the central bank should start dialing back its asset-buying program soon while suggesting that the interest rate shouldn’t be increased as of now. While the strong earnings results have lifted the investors’ confidence in recent weeks, the remarks from the Fed Chair raised concerns of the investors.

The Fed has reassured that the interest rate will be kept at the “near-zero” level until the economy returns to its expected employment and the inflation would come under the Fed’s expectation level of 2%. Meanwhile, the supply-chain disruptions and the rising costs of the raw materials indicated that inflation is likely to stay above the level for some time.

The financial and the real-estate sector topped the S&P 500 index on Friday, with communication services and consumer discretionary sectors as the bottom movers. Eight of the 11 critical sectors of the S&P 500 index stayed in the positive territory.

The stocks of Cleveland-Cliffs Inc. (CLF) gained 12.10% in intraday trading, after reporting better-than-expected quarterly earnings on Friday, before the bell. The company has reported record revenue of US$6 billion in Q3, FY21, while its net income came in at US$1.28 billion.

The shares of American Express Company (AXP) rose 5.50% after the company has reported strong quarterly earnings results as more people used their cards for traveling, dining, and other leisure activities. The total revenue of the company surged around 25% YoY to US$10.92 billion, while its net income was up 70% from the previous year’s same quarter to US$1.82 billion.

The stocks of Honeywell International Inc. (HON) plunged 2.90% after the company has lowered its full-year sales forecast due to the bottleneck supply constraints. The company’s sales rose 9% YoY to US$8.47 billion in Q3, FY21, while its EPS was up 68% YoY to US$1.80 apiece. However, the company has lowered its sales forecast to be between US$34.2 billion and US$34.6 billion from its previous forecast of US$34.6 billion and US$35.2 billion.

In the financial sector, JP Morgan Chase & Co. (JPM) increased by 1.15%, Bank of America Corporation (BAC) rose 1.27%, and Morgan Stanley (MS) surged 1.54%. Citigroup, Inc. (C) and Goldman Sachs Group, Inc. (GS) gained 1.28% and 1.65%, respectively.

In real-estate stocks, American Tower Corporation (AMT) advanced 1.86%, Equinix, Inc. (EQIX) jumped 1.52%, and Public Storage (PSA) soared 1.21%. Digital Realty Trust, Inc. (DLR) and SBA Communications Corporation (SBAC) ticked up 1.03% and 1.71%, respectively.

In the communication sector, Alphabet Inc. (GOOGL) decreased by 3.13%, Facebook, Inc. (FB) fell 5.91%, and Walt Disney Company (DIS) declined by 1.10%. Twitter Inc. (TWTR) and Snap Inc. (SNAP) plummeted 4.15% and 25.99%, respectively.

Also Read: Roper (ROP) & Seagate (STX) stocks rally after Q3 reports

Also Read: Top 7 REITs with over 50% YTD returns to explore

Overall, eight of the 11 stock segments of the S&P 500 index stayed in the positive territory.

Also Read: 5 industrial stocks with over 40% YTD returns to explore

Futures & Commodities

Gold futures were up 0.71% to US$1,794.60 per ounce. Silver increased by 0.86% to US$24.378 per ounce, while copper fell 1.24% to US$4.5018.

Brent oil futures increased by 1.55% to US$85.92 per barrel and WTI crude was up 2.06% to US$84.20.

Bond Market

The 30-year Treasury bond yields was down 2.47% to 2.075, while the 10-year bond yields fell 1.91% to 1.643.

US Dollar Futures Index decreased by 0.17% to US$93.602.









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