The Only Thing That Grows Is Debt - The Automatic Earth

The Only Thing That Grows Is Debt

Two months ago, there was a referendum in Holland about an association agreement between the EU and Ukraine. A relatively new Dutch law states that with an X amount of signatures a referendum can be ‘forced’ by anyone. Before, during and -especially- after the vote, its importance was -and is actively being- pooh-poohed by both the Dutch government and the EU. That in itself paints the issue better than anything else. Both the call and the subsequent support for the referendum stem from resistance against exactly that attitude.

The Dutch voted No to the EU/Ukraine agreement. It was with a turnout not much above the validity threshold, but a large majority of those who did vote agreed they want no part of the deal. This puts Dutch PM Rutte in an awkward position, he can’t be seen ignoring the population. Well, at least not openly. The EU can’t validate the agreement, and with Holland still holding the chair of the Union until July 1, a meeting on the topic has been pushed forward until the last weekend of June. With Rutte still in charge, but only just, and with the June 23 UK Brexit vote decided.

Brussels is frantically looking for a way to push through the agreement despite the Dutch vote, and likely some sort of bland compromise will be presented, which Rutte’s spin doctors will put into words that he can -with a straight face- claim honor the vote while at the same time executing what that same vote specifically spoke out against.

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Why The Fed Is Trapped: A 1% Increase In Rates Would Result In Up To $2.4 Trillion Of Losses | Zero Hedge

Why The Fed Is Trapped: A 1% Increase In Rates Would Result In Up To $2.4 Trillion Of Losses

A funny thing happened as every central bank around the world rushed to stimulate their economy by devaluing their currency in a global FX war that is now 7 years old and getting more violent by the day: with bond yields plunging, and over $10 trillion in global debt now having a negative yield, every fixed income investor starved for yield was pushed into the long end of the bond curve where whatever yield is left in the world of "safe" bonds is to be found. As long as interest rates never go up, this strategy is relatively safe. However, a major risk emerges when central banks start tightening.

To be sure, banks have been eager to front-run any concerns about the Fed's rate hike by cheering higher rates as precisely what they need to be more profitable, and the market has so far believed and rewarded bank stocks the higher rate hike odds rose. Just this Thursday, speaking at an investor conference James Dimon said that if short-term and long-term rates were to move up by 1 percentage point simultaneously, 70% of the benefit would come from the move in short-term rates. The reason for this is that even if long-term rates remain under pressure, and the curve flattens further, an increase in short-term rates provides an immediate boost to bank profits. That is because many loans are automatically priced against short-term benchmarks like LIBOR and Prime.

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IF GOVERNMENT WERE A PERSON « The Burning Platform

IF GOVERNMENT WERE A PERSON