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More Evidence Central Banks Running Out Of Bullets!

  • Written by Syndicated Publisher No Comments Comments
    July 13, 2012

    While U.S. investors have confidence the Fed can, and will, come to the rescue of the U.S. economy and therefore the stock market, global indications say otherwise.

    Last week it was the Bank of England and the European Central Bank that gave markets their wish, coming to the rescue by cutting interest rates, with the Bank of England also increasing the size of its QE3 stimulus effort. Markets got their wish but rolled over to the downside anyway.

    Last night the central banks of South Korea and Brazil slashed their interest rates again. The South Korea stock market plunged 2.2% in reaction, apparently now concerned that its central bank is panicking, that its economy is in even worst shape than thought.

    Last night Japan expanded its easy money policy further in an effort to re-stimulate its economy. The Japanese market plunged 1.5% last night in reaction.

    Last night Brazil’s central bank also slashed its benchmark interest rate. It will be interesting to see how Brazil’s market reacts today.

    It was already looking quite ugly as of yesterday’s close, its participation in the global June rally looking like it had already fizzled.


    The Fed must be uneasy to see the negative reactions to those latest attempts by central banks in Europe and Asia to come to the rescue of their economies and markets.

    After all, the Fed already has its benchmark interest rate at zero, and each of its other experimental rescue efforts, QE1, QE2, and ‘operation twist’, have had a diminishing impact, with the economic problems returning more quickly each time.

    Here’s one sure way to make economic problems disappear!

    Italy’s government statistics department, ISTAT, is threatening to stop releasing economic reports on Italy’s economy.

    ISTAT’s president Enrico Giovannini said yesterday, “From January on we will not issue any statistics on inflation, deficits, household income, or job data.”

    Just think how much better consumers and investors would feel about the U.S. economy if only the government would stop issuing those monthly jobs reports, dismal retail sales data, declining manufacturing indexes, and so on.

    Seriously, Italy won’t really stop issuing economic reports. It’s a threat by ISTAT to convince officials that it needs more funding for its operations. Giovannini says ISTAT’s ability to operate effectively has been hampered by its reduced budget, as Italy’s government spending cuts to reduce its national debt begin to take hold.

    Should we really be surprised?

    The 5-year statute of limitations for the SEC to bring charges related to the 2008 financial crisis, will soon run out, and the Wall Street Journal reports that has SEC officials concerned they may not make the deadline on some cases on which they want to file civil suits.

    The Journal quotes Arthur Wilmarth, a law professor at George Washington University, and a consultant to the Financial Crisis Inquiry Commission, as saying the possibility of wrongdoing going unpunished because U.S. officials run out of time “feeds on the public sense of cynicism.”

    Well, yeah.

    Gold is still looking negative.

    Our indicators remain on the Feb. 29 sell signal for gold.


    But it’s the U.S. stock market that looks the most interesting.

    Subscribers to Street Smart Report: In addition to the charts and signals in the premium content area this morning, there is an in-depth ‘U.S. Market Signals and Recommendations’ report in the subscribers’ area of the Street Smart Report website from yesterday. And an in-depth ‘Gold, Bonds, Dollar, Commodities’ update from Monday.

    To read my weekend newspaper column ‘Markets, Economies, Central Banks – All Out of Power’ click here.

    Images: Flickr (licence attribution)

    About The Author

    Sy Harding publishes the financial website www.StreetSmartReport.com and a free daily Internet blog at www.SyHardingblog.com. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beat the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!