Sixteen years ago today, Alan Greenspan spoke the now infamous words "irrational exuberance" during an annual dinner speech at The American Enterprise Institute for Public Policy Research. Much has changed in the ensuing years (and oddly, his speech is worth a read as he draws attention time and again to the tension between the central bank and the government). Most critically, Greenspan was not wrong, just early. And the result of the market's delay in appreciating his warning has resulted in an epic shift away from those same asset classes that were most groomed and loved by Greenspan - Stocks, to those most hated and shunned by the Fed - Precious Metals. While those two words were his most famous, perhaps the following sentences are most prescient: "A democratic society requires a stable and effectively functioning economy. I trust that we and our successors at the Federal Reserve will be important contributors to that end."
Judging by how the SkyNet formerly known as "the market" has been trading in the past three weeks (and years), one may get the impression the "smart money", hiding behind Bloomberg terminals for 9 hours each day, has gone full lunatic retard. Yet not even said Bloomberg terminals users are completely insane, as confirmed by a just released poll of Bloomberg Professional users, who were asked on their opinion for the two next probably Bernanke replacements: one Larry Summers, best known, together with Robert Rubin, Alan Greenspan and everyone in Congress and Senate over the past 30 years, for destroying the US economy, as well as one Janet Yellen, currently vice chair of the Fed, and almost certain replacement for the Chairsatan once his term expires in early 2014. The verdict: nay to both, but a resounding hell no to the man who destroyed the US banking system, then crushed the Harvard endowment, and finally brought the US consumer and economy to a state of complete ruin.
Rand Hated Libertarians ... and Many Libertarians Despise Rand
Politics and economics, or the better term, political economics, for the most part rules our lives: the political activity of the nation as a collective of economic groups and super- wealthy individuals, whatever the defining orthodoxy turns out to be. As the United States enters the final days in the much-hoped resolution of its “fiscal cliff,” there are a number of prominent individuals from both present and past – politicians, economists and business leaders – who regale us with their two-cent worth of admonition and advice. For the most part, that’s what the value is really worth. Meantime, here is the American citizenry reverting to their pre-recession days, with the highest confidence level in four and a half years, starting to spend beyond their capacity to produce thanks to that misplaced confidence, the resurgence of home equity loans, and the promise of governing politicians that things are on the mend... when they really are not, and the job market continues to decay for jobs with a living wage.
"After six years of declines, lending for so-called Helocs will rise 30 percent to $79.6 billion in 2012, the highest level since the start of the financial crisis in 2008, according to the economics research unit of Moody’s Corp. Originations next year will jump another 31 percent to $104 billion, it projected."
Watching Barack Obama and Mitt Romney duel in the presidential campaign should have convinced the spectators that we live in an age of illusionists. Few of the assertions and conjectures thrown around have been subjected to what the political chattering classes deem to be the indignity of factual verification. This brings us to the sharp pencil people in the Obama administration, specifically the OMB. They claim to know what the relative size of the federal government will be in 2016, at the end of President Obama’s term. According to the OMB’s plans, the federal government, as a percent of GDP should be 22.5%. That’s a 1.8 percentage point drop from the current level. Given that President Obama’s first term recorded a record growth in the relative size of the federal government, and that the President campaigned on a platform of more big government, it is doubtful that he will come close to meeting his own OMB forecasts, in his second term. Yes, the illusionists, not the President’s sharp pencil people, will probably carry the day. What will make the President’s task even more onerous is money – as in the money supply. Thanks to Basel III, the U.S. money supply isn’t the only one creating growth headwinds. Europe faces significant money supply deficiencies. Will Asia continue to be the world’s locomotive? We will have to wait and see. At present, though, one thing is certain – an age of illusionists has arrived.
If the just released 2013-2016 latest re-re-revised budget out of the Athens Finance Ministry (whose basement was forever memorialized in the following picture) is all Greek to you, it's because it is. But even it wasn't, it would still be absolute gibberish and yet another failed study in the analysis of animal entrails in order to predict the future. Why? We have extracted merely one data series: the brand new debt/GDP (ignoring for a second the -4.5% 2013 GDP forecast - already 0.5% worse than the just released IMF forecast for Greece for the same period and certainly worse than the May forecast of 2013 "growth"), and have compared it to the Debt/GDP "forecast" as of May 2010, when the first Greek bailout was announced. The numbers speak for themselves.
If you often wonder why ‘free market capitalism’ feels like it is failing despite universal assurances from economists and political pundits that it is working as intended, your intuition is correct. Free market capitalism has become a thing of the past. In truth free market capitalism has been replaced by something that is truly anti-free market and anti-capitalistic. The diversion operates in plain sight. Beginning sometime around 1970 the U.S. and most of the ‘free world’ have diverged from traditional “free market capitalism” to something different. Today the U.S. and much of the world’s economies are operating under what I call Monetary Fascism: a system where financial interests control the State for the advancement of the financial class. This is markedly different from traditional Fascism: a system where State and industry work together for the advancement of the State. Monetary Fascism was created and propagated through the Chicago School of Economics. Milton Friedman’s collective works constitute the foundation of Monetary Fascism. Today the financial and banking class enforces this ideology through the media and government with the same ruthlessness of the Church during the Dark Ages: to question is to be a heretic. When asked in an interview what humanities’ future looked like, Eric Blair, better known as George Orwell, said “Imagine a boot smashing a human face forever.”
Don't Read This ... It's Totally Irrelevant, Old News, Who Cares, Americans Are Above the Law, We're Exceptional (and Anyone Who Criticizes anything our Government Does is a Commie Fascist Turruristicalist Moooooslim)
On this day (+1) in 1987 (that's 25 years ago, if you are burdened with a graduate degree), the NYSE had one of its most dramatic trading days in its 220 year history. It suffered its largest single day percentage loss (22%) and its largest one day point loss up until that day (508 points). No one who was on the floor that day will ever forget it. While it was an unforgettable single day, there were months of events that went intoits making. The first two-thirds of 1987 were nothing other than spectacular on Wall Street. From New Year to shortly before Labor Day, the Dow rallied a rather stunning 43%. Fear seemed to disappear. Junior traders laughed at their cautious elders and told each other to "buy strength" rather than sell it, as each rally leg was soon followed by another. One thing that also helped banish fear was a new process called "portfolio insurance". It involved use of the newly expanded S&P futures. Somewhat counterintuitively, it involved selling when prices turned down.
The Wars in the Middle East and North Africa Are NOT Just About Oil ... They're Also About GAS
From Albert Edwards: "In 2005 when Alan Greenspan was being hailed as a “maestro” I wrote that his policies would ruin the world and history would judge him to be “an economic war criminal”. I now think Ben Bernanke’s policies will prove even more ruinous than Sir Alan’s (yes unbelievably he still retains his honorary knighthood). Hence we are lowering our equity weighting to 30%, the minimum possible. The last time I did this was 8 May 2008.... I'm reading some insanely stupid stuff at the moment. Okay, I know some of my writing is pretty insane, but when I read direct quotes and commentary about Bernanke's policy of driving up asset prices in general and equity prices in particular, I almost want to cry over the ludicrousness of this position. The Fed is pursuing the same road to ruin as it did between 2003-2007. I'm becoming more and more convinced that, Gloom, Boom, & Doom's Marc Faber is right when he says that "the Fed will destroy the world."
What Do Economic Indicators Show? What Do Economists Say?
Meet the man, who many say (most of whom correctly) has been running pretty much everything from deep behind the scenes.
What Do the Experts Say? Are People Actually ACCEPTING Gold As Money?