Mish's Global Economic Trend Analysis |
- Mayor of Barcelona Prepares New Digital Local Currency
- As Draghi Hints at More QE, German Bond Yields Hit Record Low Negative Yields; Economic Madness
- Existing Home Sales Up 4.7% Following Last Month's 5% Decline; Home Price Weakness
Mayor of Barcelona Prepares New Digital Local Currency Posted: 22 Oct 2015 09:04 PM PDT The new mayor of Barcelona, Ada Colau, says Preparations Underway for New Local Digital Currency. The objective of the currency, whose name will be decided after a participatory process, is to "promote local businesses." Libre Mercado says the plan looks more like a publicity campaign for Barcelona. The Bank of Spain called the currency "impossible besides undesirable". I point out that Barcelona is the capital and largest city of Catalonia, the second-largest city in Spain and the center of one of the largest metropolitan areas in Europe. Please note the connection: Pro-independence parties in Spain won an outright majority in the recent Catalonia regional election. Reuters reported Victorious Separatists Claim Mandate to Break with Spain. I commented Pro-Independence Parties in Catalonia Unite to Form Government; Showdown with Madrid Coming Up That showdown now includes a new digital currency. Mike "Mish" Shedlock |
As Draghi Hints at More QE, German Bond Yields Hit Record Low Negative Yields; Economic Madness Posted: 22 Oct 2015 11:53 AM PDT Quantitative easing in the eurozone to the tune of €1.1 trillion has not raised consumer price inflation as the ECB had expected. But neither bureaucrats nor central planners ever evaluate the effectiveness of their programs. Rather, when something does not work, they do more of it, until it does work, with no regard for the economic bubbles or other negative consequences. Those expecting more monetary madness were rewarded today when the ECB Opens the Door to December Stimulus as expected. The European Central Bank signalled it would expand its €1.1tn quantitative easing programme in December and cut its deposit rate should the slowdown in emerging markets threaten the eurozone's economic recovery.With that, let's take a look at some currency and interest rate reactions. German 2-Year Bond Yield German 2-Year Bond Yield Weekly Italy 10-Year Bond Yield Spain 10-Year Bond Yield US 30-Year Bond Yield Euro/US Dollar In Europe, there were large interest rates swings in nearly every county. In Germany the move was primarily in short-term durations. In the peripheral countries, the swings were in longer term durations. In the US, treasury yields declined, but the move was muted. In Forex, Draghi got an oversized move where he wanted as the Euro sank vs. the US dollar. A strong US dollar has hurt US manufacturers so the Fed will likely not be pleased with this competitive currency debasement. Economic Madness Quite frankly it's nothing but economic madness to demand consumer price inflation. Nonetheless, central banks are not only bound and determined to achieve inflation, but with methods that failed for decades in Japan and more recently in both Europe and the US. My Challenge to Keynesians "Prove Rising Prices Provide an Overall Economic Benefit" is still unanswered. Mike "Mish" Shedlock |
Existing Home Sales Up 4.7% Following Last Month's 5% Decline; Home Price Weakness Posted: 22 Oct 2015 09:44 AM PDT Existing home sales bounced this month, coming in just above the high end of Econoday Economists' Estimates. Existing home sales bounced back very strongly in September, up 4.7 percent to nearly reverse the prior month's revised decline of 5.0 percent, a decline that now looks like an outlier. The month's annual sales rate, at 5.55 million, is just beyond Econoday's top-end forecast and the second best reading of the recovery. The year-on-year percentage gain, at plus 8.8 percent, is back where it was during the sales gains of the spring.Demand For New Homes That last statement by Econoday is amusing. For starters, new home sales are not all that strong, and it is new home sales that contribute most to GDP and family formations. You cannot sell what you don't start, so let's take a look at numbers from my October 20 article Housing Starts Surprise to Upside Led by Multi-Family, Permits Surprise to Downside Single-Family Starts That chart add quite a bit of needed perspective on the housing "recovery". Existing Home Sales Builders better be hoping that existing homes sales don't "catch up" to new home sales. And they also better be hoping that price trends in new homes don't match weakness in existing prices. Home Price Weakness
And what about optimism vs. actual buyer traffic? I'm glad you asked. Homebuilder Confidence Soars to Highest Level in 10 Years Despite Falling Traffic. Mike "Mish" Shedlock |
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