"Solutions to the world's problems are not produced in a meeting between Bill Gates and George Soros... Renewal has to come from below... Limiting the influence [of the richest] is of the utmost importance... so that today's upper-class, high-finance capitalism can once again revert to being a capitalism of the real economy and the societal center."
The question that remains to be answered is whether the economy and the financial markets are strong enough to stand on their own this time? The last two times that QE has ended the economy slid towards negative growth and the markets suffered rather severe correction...
Greenspan told the CFR that "gold is a good place to put money these days given it's value as a currency outside of the policies conducted by governments." "Gold has always been accepted without reference to any other guarantee." When asked where the price of gold was headed in the next five years he said “higher --- measurably" ...
And then there is BusinessWeek, which quite to the contrary, is urging its readers in its cover story, ignore common sense, and do more of the same that has led the world to dead economic end it finds itself in currently. In fact, it is, in the words of NYT's Binyamin Appelbaum, calling the world governments to become the slaves of a defunct economist. And spend, spend, spend, preferably on credit. Because, supposedly, this time the resulting crash from yet another debt-funded binge will be... different?
"Gold is a good place to put money these days given its value as a currency outside of the policies conducted by governments." ... "I don’t think it’s possible" for the Fed to end its easy-money policies in a trouble-free manner. ... "Effective demand is dead in the water" and the effort to boost it via bond buying "has not worked."
Congress gave the Fed a mandate to “promote maximum employment, production, and price stability”; it never explicitly authorized propping up stocks. Yet through a remarkable theoretical stretch called the “wealth effect,” that’s exactly what the Fed is doing.
The last time the stock market reached a fevered peak and began to wobble unexpectedly was August 2007. Markets were most definitely not in the classic “price discovery” business. Instead, the stock market had discovered the “goldilocks economy." But what is profoundly different this time is that the Fed is out of dry powder. Its can’t slash the discount rate as Bernanke did in August 2007 or continuously reduce it federal funds target on a trip from 6% all the way down to zero. Nor can it resort to massive balance sheet expansion. That card has been played and a replay would only spook the market even more. So this time is different. The gamblers are scampering around the casino fixing to buy the dip as soon as white smoke wafts from the Eccles Building. But none is coming. For the first time in 25- years, the Wall Street gamblers are home alone.
With this in mind we hope the Swiss people display their fierce independence and reject the advice of the "experts," many of whom got us into this mess, in favour of the policies that have kept them peaceful and prosperous for centuries ...
The old adage that if something is repeated often enough it is soon assumed to be true couldn’t be more apt with respect to the Fed’s 2% inflation target. That Keynesian central bankers peddle this nostrum with a straight face is amazing in itself, but it is at least understandable because it gives them a reason to keep the printing presses humming. That journalists repeat it with no questions asked is even more remarkable. It proves that the impending replacement of financial journalists with robo-writers may not be so bad after all. It won’t make any real difference.
Coincidence … Or Something More?
We have been discussing the widespread belief in "the narrative of central bank omnipotence" for a number of months (here and here most recently) as we noted "there are no more skeptics. To update Milton Friedman’s famous quote, we are all Bernankians now." So when Saxobank's CIO and Chief Economist Steen Jakobsen warns that "the mood has changed," and feedback from conference calls and speaking engagements tells him, there is a growing belief that the 'narrative of the central banks' is failing, we sit up and listen.
Copious amounts of monetary whiskey have been downed in the global economy and yet the recovery remains weak at best. The mother of all monetary hangovers awaits us all and will likely manifest in stagflation and sharply higher inflation.
For the US, it’s now shooting fish in a barrel – but just for now. The three-pronged plan the Fed has started to execute is plain for everyone to see... And it will have the rest of the world begging for mercy.
As we explained previously, the end-of-quarter catastrophe in reverse-repo window-dressing malarkey between The Fed and The Banks (that own it) shows the Fed simply has no idea (once again) how financial markets really work in the modern era. As Alhambra Partners Jeffrey Snider explains, “We don’t exactly know how it will work” should be stamped upon every message coming from the policymaking apparatus from this point forward, and then retroactively applied to every message in the age of risk and rate repression. Action in short-term money markets has heated up yet again, and that is not a positive statement toward vital function.
The Council on Foreign Relations may be concerned about the ramifications of China accumulating larger gold reserves than those that the U.S. has and the People’s Bank of China (PBOC) giving the yuan some form of gold backing. This would pose serious challenges to the dollar as global reserve currency and thus to U.S. hegemony.