Whalen Warns Of “Imminent Insolvency Of Large Industrial Nations”

Tuesday, July 30, 2019
By Paul Martin

by Chris Whalen
Tue, 07/30/2019

With the end of Q2 2019 earnings in sight, there is good news and bad news. The good news is that the rate of change in US bank funding costs is slowing, from 50-60% year-over-year rates of increase to 30-40% or so this past quarter. Indeed, even though the middle of the Treasury yield curve has essentially collapsed, there is no indication that funding costs are following suit. Interest rates in the US remain buoyant outside of the government bond market.

Across the Atlantic, the European Central Bank is preparing to make another futile round of asset purchase operations as Britain prepares to crash out of the European Union. For those of you who missed the spectacle, former Goldman Sachs banker Mario “Whatever it Takes” Draghi, who is leaving the ECB in October, wants to provide more stimulus to Europe’s flagging economy.

“The European Central Bank on Thursday made clear it stands ready to cut rates and deliver “highly accommodative” monetary policy,” reports Market Watch, “including additional asset purchases, in its effort to push stubbornly low inflation back toward its target amid signs of deteriorating economic conditions in the eurozone.”

Despite growing evidence that negative interest rates are injurious to economic growth, housing affordability and employment, among other things, economists at the various central banks persist in calling for more of the same bad medicine. How many times must we hear central bankers express “surprise” that inflation remains low when they are busily transferring resources from private savers to public sector debtors?

The only people who seem to be in favor of a resumption of asset purchases (aka quantitative easing or “QE”) are increasingly worried equity managers. Writing in the Financial Times over the weekend, Merryn Somerset Webb, editor in chief of MoneyWeek, boldly chastises BlackRock (BLK) executives for suggesting that the ECB should start to buy equities. She writes:

“Our senses have been dulled by increasingly extreme monetary policy over the past decade, so we must try to look afresh. What is being suggested here is that the ECB, a publicly owned institution, prints money and uses it to buy equity stakes in private companies. In other words, the only way to save capitalism is to begin to nationalize it.”

The Rest…HERE

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