Financial Bubbles | - Part 3

What’s Wrong with Australia?

Via this item at Zero Hedge comes the chart below from Reuters depicting the state of the world, interest rate-wise, strongly suggesting that rate cuts are in the offing down under.

Of course, word came yesterday that the U.S. central bank is desperate to make a token interest rate increase in six weeks and, with everyone else going in the opposite direction, the unintended consequences of this action should be exciting to watch.

Confidence is High

Hoisting up this photo of Federal Reserve Chair Janet Yellen from this Fortune story today about how the central bank is, basically, flying blind when it comes to inflation since the Phillips Curve stopped working … well, it just seemed like a good idea this morning in advance of today’s expected non-action on interest rates from the Fed.

Here’s a simple suggestion – since it is now clear that newly created money from the Fed goes exclusively into financial instruments rather than anything that factors into consumer prices and, certainly, not workers’ wages (and “trickle-down” appears to be broken too), maybe the braintrust in the Eccles building should look more at stock prices (way up), bond prices (way up), home prices (way up), etc. to gauge whether or not they’ve done enough.

There’s also this rather embarrassing graphic via Marketwatch today:

Silicon Valley Housing Bubble 4.0?

I remember way back in 2000 when I began working for a tech company in Southern California that they had a rip-roaring housing bubble at that time up north, eyes popping amongst the Angelenos when we heard stories about how small, run-down houses routinely sold for a half million dollars, due to the original internet bubble. Counting the state-wide late-80s housing bubble and the mid-2000 nationwide home price surge, this makes four, but there are probably more if you go back a little further – all the way to the gold rush?

From this SF Gate story that serves as a timely reminder that the world is still kind of nuts.

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Dreading His Next Performance Review

More tarnish on the Deutsche Bank shine (i.e., rate rigging scandals, record fines, etc.) comes in the form of what was first reported as a “fat finger” mistake by a rookie trader, but later revised to a misunderstanding about “gross vs. net” according to Bloomberg.

Either way, it’s not going to be a fun day for the responsible individual when he goes in for his next performance review, that is, if he survives at Deutshe Bank between now and then.

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Liquor City R.I.P.?

The latest in the long and growing list of modern ghost towns in China is “Liquor City” as shown below via this NPR story the other day where we learn of another victim of the commodity boom gone bust – it seems that financing a liquor production center with coal revenues didn’t exactly work out as planned.

There is good news to report, however, in that the brand new $160 million airport (which doesn’t sound like nearly enough to build an airport) isn’t completely deserted – it gets three to five flights per day (wouldn’t be surprised if the planes are pretty empty).

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