Reserve Bank governor Glenn Stevens: rate cut ‘on the table’ but not automatic

‘Despite the doom and gloom and fulminations … business confidence has risen in recent months’

An interest rate cut is possible, but evidence of further economic weakness will not automatically trigger one, the governor of the Reserve Bank, Glenn Stevens, warns.

A period of somewhat disappointing, but hardly disastrous, economic growth and well-contained inflation has allowed the interest rate to be cut to very low levels, Stevens said at the annual Anika Foundation lunch in Sydney on Wednesday.

Related: RBA’s warning to the government: we can’t lift the economy alone

Related: Reserve Bank of Australia leaves interest rates unchanged at 2%

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Greek Prime Minister Asked Putin For $10 Billion To “Print Drachmas”, Greek Media Reports

Back in January, when we reported what the very first official act of open European defiance by the then-brand new Greek prime minister Tsipras was (as a reminder it was his visit of a local rifle range where Nazis executed 200 Greeks on May 1, 1944) we noted that this was the start of a clear Greek pivot away from Europe and toward Russia.

We further commented on many of the things that have since come to pass:

Europe, for one, will be most displeased that Greece has decided to put its people first in the chain of priority over offshore bidders of Greek assets. Most displeased, especially since the liquidation sale of Greece is part of the Greek bailout agreement: an agreement which as the Troika has repeatedly stated, is not up for renegotiation

But most importantly, even back then we explicitly said that in order for Greece to preserve its leverage (something it found out the hard way it did not have 6 months later), it would need a Plan B, one that involves an alternative source of funds, i.e., Russia and/or China, which could be the source of the much needed interim cash Greece needs as it prints its own currency and prepares for life outside the European prison.

The Germans were not happy: A German central banker warned of dire problems should the new government call the country’s aid program into question, jeopardizing funding for the banks. “That would have fatal consequences for Greece’s financial system. Greek banks would then lose their access to central bank money,” Bundesbank board member Joachim Nagel told Handelsblatt newspaper.

The American Nightmare: The Tyranny Of The Criminal Justice System

Submitted by John Whitehead via The Rutherford Institute,

How can the life of such a man
Be in the palm of some fool’s hand?
To see him obviously framed
Couldn’t help but make me feel ashamed to live in a land
Where justice is a game.—Bob Dylan, “Hurricane”

Justice in America is not all it’s cracked up to be.

Just ask Jeffrey Deskovic, who spent 16 years in prison for a rape and murder he did not commit. Despite the fact that Deskovic’s DNA did not match what was found at the murder scene, he was singled out by police as a suspect because he wept at the victim’s funeral (he was 16 years old at the time), then badgered over the course of two months into confessing his guilt. He was eventually paid $6.5 million in reparation.

James Bain spent 35 years in prison for the kidnapping and rape of a 9-year-old boy, but he too was innocent of the crime. Despite the fact that the prosecutor’s case was flimsy—it hinged on the similarity of Bain’s first name to the rapist’s, Bain’s ownership of a red motorcycle, and a misidentification of Bain in a lineup by a hysterical 9-year-old boy—Bain was sentenced to life in prison. He was finally freed after DNA testing proved his innocence, and was paid $1.7 million.

Mark Weiner got off relatively easy when you compare his experience to the thousands of individuals who are spending lifetimes behind bars for crimes they did not commit.

Weiner was wrongfully arrested, convicted, and jailed for more than two years for a crime he too did not commit. In his case, a young woman claimed Weiner had abducted her, knocked her out and then sent taunting text messages to her boyfriend about his plans to rape her. Despite the fact that cell phone signals, eyewitness accounts and expert testimony indicated the young woman had fabricated the entire incident, the prosecutor and judge repeatedly rejected any evidence contradicting the woman’s far-fetched account, sentencing Weiner to eight more years in jail. Weiner was only released after his accuser was caught selling cocaine to undercover cops.

In the meantime, Weiner lost his job, his home, and his savings, and time with his wife and young son. As Slate reporter journalist Dahlia Lithwick warned, “If anyone suggests that the fact that Mark Weiner was released this week means ‘the system works,’ I fear that I will have to punch him in the neck. Because at every single turn, the system that should have worked to consider proof of Weiner’s innocence failed him.”

The system that should have worked didn’t, because the system is broken, almost beyond repair.

In courtroom thrillers like 12 Angry Men and To Kill a Mockingbird, justice is served in the end because someone—whether it’s Juror #8 or Atticus Finch—chooses to stand on principle and challenge wrongdoing, and truth wins.

Unfortunately, in the real world, justice is harder to come by, fairness is almost unheard of, and truth rarely wins.

On paper, you may be innocent until proven guilty, but in actuality, you’ve already been tried, found guilty and convicted by police officers, prosecutors and judges long before you ever appear in a courtroom.

Chronic injustice has turned the American dream into a nightmare.

At every step along the way, whether it’s encounters with the police, dealings with prosecutors, hearings in court before judges and juries, or jail terms in one of the nation’s many prisons, the system is riddled with corruption, abuse and an appalling disregard for the rights of the citizenry.

Due process rights afforded to a person accused of a crime—the right to remain silent, the right to be informed of the charges against you, the right to representation by counsel, the right to a fair trial, the right to a speedy trial, the right to prove your innocence with witnesses and evidence, the right to a reasonable bail, the right to not languish in jail before being tried, the right to confront your accusers, etc.—mean nothing when the government is allowed to sidestep those safeguards against abuse whenever convenient.

It’s telling that while President Obama said all the right things about the broken state of our criminal justice system—that we jail too many Americans for nonviolent crimes (we make up 5 percent of the world’s population, but our prison population constitutes nearly 25% of the world’s prisoners), that we spend more money on incarceration than any other nation ($80 billion a year), that we sentence people for longer jail terms than their crimes merit, that our criminal justice system is far from color-blind, that the nation’s school-to-prison pipeline is contributing to overcrowded jails, and that we need to focus on rehabilitation of criminals rather than retribution—he failed to own up to the government’s major role in contributing to this injustice in America.

Indeed, while Obama placed the responsibility for reform squarely in the hands of prosecutors, judges and police, he failed to acknowledge that they bear the burden of our failed justice system, along with the legislatures and corporations who have worked with them to create an environment that is hostile to the rights of the accused.

In such a climate, we are all the accused, the guilty and the suspect.

As I document in my book Battlefield America: The War on the American People, we’re operating in a new paradigm where the citizenry are presumed guilty and treated as suspects, our movements tracked, our communications monitored, our property seized and searched, our bodily integrity disregarded, and our inalienable rights to “life, liberty and the pursuit of happiness” rendered insignificant when measured against the government’s priorities.

Every American is now in jeopardy of being targeted and punished for a crime he did not commit thanks to an overabundance of arcane laws. Making matters worse, by allowing government agents to operate above the law, immune from wrongdoing, we have created a situation in which the law is one-sided and top-down, used as a hammer to oppress the populace, while useless in protecting us against government abuse.

Add to the mix a profit-driven system of incarceration in which state and federal governments agree to keep the jails full in exchange for having private corporations run the prisons, and you will find the only word to describe such a state of abject corruption is “evil.”

Chinese Stocks Slide Into Red After Business Sentiment Crashes To 6-Year Lows

After a modesly positive open, Chinese stocks have pushed back into the red after Chinese business sentiment collapsed in July. The MNI China Business Indicator fell a straggering 8.8pts to 48.8 in July (below 50 signifying pessimism) – the lowest since January 2009. It appears the encouraging bounce after the massive creduit injections into June has been eviscerated and future expectations also dropped 6.4 to 54.1 in July (below the long-run average). While bad news is good news for much of the rest of the world, for China, as it continues to try to project a strong underlying economy to sustain its still extremely rich stock market, bad news is bad news.

US Economic ‘Hope’ Plunges To 10-Month Lows

57% of Americans see the US economy “getting worse,” according to Gallup's latest survey, sending 'hope' to its lowest since September. Overall economic confidence slipped once again, despite the Greek deal, now at its lowest since October. It appears rising gas prices trump the rising stock prices when it comes to the average joe in America.

GOP Enters Panic Mode: Des Moines Register Calls For Trump To Withdraw From Presidential Race

When Donald Trump announced he would give 2016 another try as a republican presidential candidate, the GOP saw him as a mild nuisance. Little did they appreciate just how big of a “nightmare” he would very soon become, a nightmare which now sees the flamboyant billionaire whose self-reported net worth fluctuates daily with a double digit percentage lead over his closest competitor Scott Walker.

Gold Warns Again

Submitted by Jeffrey Snider via Alhambra Investment Partners,

With all the problems right now beyond Greece and China, from Canada’s “puzzling” recession to Brazil’s unfolding disaster, and even the still-“shocking” US economic slump, it is interesting that gold garnered the most attention in early Monday trading. The fact that gold prices were slammed in Asian trading was certainly significant, but that really isn’t why gold is being highlighted all over the world. With gold prices at a five-year low, economists have some “market” indication that finally, they think, is moving in their favor, thus distracting, minutely, from all the global conflagration.

“We have breached significant support levels, we know U.S. rate hikes are coming, there is no inflation and there is no catalyst to hold gold when other markets are doing better,” Societe Generale analyst Robin Bhar said.

It is far more indirect than in 2013 when economists were positively crowing about the slams in gold, but the same basic setup remains even if almost coded; “U.S. rate hikes” are supposed to occur when the FOMC judges the US economy, and the globe by extension, quite sufficient so the drastic fall in gold is once more an indication, though indirect this time, that all will be well soon enough. You would think that after being so wrong about gold in 2013 that economists would be far more careful about appealing in that direction, and maybe they are since they have so far remained, as noted above, more muted than openly projecting great economic recovery with low gold prices this time.

ABOOK July 2015 Dollar Gold ind

That may itself be significant, in that while economists remain gold haters (literally) they aren’t, contra two years ago, declaring decisively its death as evidence of at the same time central bank omniscience. Of course, gold prices are not limited to simple-minded appeals upon interest rates or even differentials, as clearly mainstream commentary continues to have great trouble with gold behavior in any direction.

The exact reason for the selling was unclear. Recent strength in the U.S. currency and expectations for higher U.S. rates have undermined the case for holding gold and other precious metals, while analysts also noted that China imported a record volume of gold in 2013 that has created an oversupply situation. Still, the swiftness of the decline surprised traders and resulted in two separate trade halts in U.S. gold futures.

Again, 2013 provides a guide as to why gold prices may be declining in sharp moves, especially right at the open or in weaker trading hours, and it has very little to do with interest rates apart from fixed income suggesting the same factors about the “dollar.” Whether it is growing unease about the global economic picture or the “sudden” recurrence of financial irregularity almost wherever you wish to gaze, the “dollar” is once more wreaking havoc. This isn’t controversial at all, but somehow economists can miss that gold is global and universal collateral and when the eurodollar system is stressed it becomes activated in that manner. The correlations alone are strongly suggestive of these financial factors.

ABOOK July 2015 Dollar Gold Real

The relationship between gold and the real, for instance, is quite indicative of eurodollar financing trends. Apart from the sharp rise in gold just before the January 15 franc event, gold and the real have been almost inseparable in both timing and degree.

The damage extends beyond that affiliation, however, as the “dollar” (bank balance sheet factors) is again moving quickly. Copper has been pushed back under $2.50 and crude oil, at least at WTI spot, is nearly back into the $40’s again for the first time in months (despite recent drawdowns in both inventory and production).

ABOOK July 2015 Dollar Gold CopperABOOK July 2015 Dollar Gold WTI RecentABOOK July 2015 Dollar Gold WTI Less Contango

In other words, there was a brief respite once Greece slipped on its noose and the Chinese rewrote their stock market, but that short enthusiasm hasn’t at all disrupted the renewed wholesale retreat. Since early to mid-May, the “dollar” has been spotty in its effects, but those negative pressures have clearly started to unify into renewed irregularity in late June and early July. In that respect, Greece and China may have just been visible sideshows of all that.

ABOOK July 2015 Dollar Gold WTIABOOK July 2015 Dollar Gold RubleABOOK July 2015 Dollar Gold CHF

Even the Swiss franc has found its way below 0.963, a low not posted since April. The catalyst may be the FOMC’s increased publicity about its preferred intentions to get “markets” to reflect the recovery and economy that isn’t there, but even that is rather unclear as eurodollar futures aren’t really anymore suggestive of that potential then they were back in March.

ABOOK July 2015 Dollar Gold Euro Futures1ABOOK July 2015 Dollar Gold Euro Futures3

The futures curve had sunk to an unusual level in early July (maybe that was Greece), so recent trading has simply pushed the curve back into the same cluster as dominated in May. In other words, it doesn’t appear, and certainly not decisive, that “higher U.S. interest rates” is actually being predicted here, rendering the mainstream ideas about gold once more grasping at straws.

In my view, the “dollar’s” destructive tendencies here are more primal rather than exclusively policy-specific. I think in this accumulated view these “dollar” proxies suggest that regardless of the FOMC’s stated tendencies there is already more than a fair amount of volatility and disorder evident not just in these markets but in the global economy (“unexpected” only to economists). Thus, any perceptions about the FOMC raising rates (whatever they think they can) is just another element of amplification of that existing and underlying syndrome and distress.

The initial “dollar” behavior after the March FOMC meeting strengthens that reading as I think it amounted to not better fortune but rather just some less distant hope that the without a suicidal FOMC “dollar” pressures might on their own ease and abate – that without a forced policy shift the underlying torment might be able to in shorter order resume more stable behavior and existence free from further depressive influence. The “dollar” and fixed income world had grown so bearish especially after December 1 that it was due for at least a minor retracement on even the most marginal of hope. I really believe that was the animating factor of credit and “dollars” out of 2013; that gold correctly predicted growing eurodollar problems that were parallel and related to fomenting economic decay. The FOMC’s role was simply to further antagonize those concerns, which they did repeatedly on the flimsiest of narratives.

Yellen’s May 6 speech about stock bubbles and “reach for yield” was thus damaging in that respect; that the FOMC was instead going to push on with its amplification of negative pressure and send the world further into its tailspin regardless of how much discontent and disquiet was already evident.

The action in gold in 2013 was a warning about the “dollar”, a warning that went completely unheeded yet has been largely fulfilled. Current gold prices and the rest of the “dollar’s” proxies are, if only in smaller doses this time, suggesting the same tendency. In short, while the magnitude might be diminished now that is only because the time component is so much shorter and