Christina Romer

Bloomberg reported recently that Russia is now the world's biggest gold buyer, its central bank having added 570 tonnes (18.3 million troy ounces) over the past decade. At $1,650/ounce, that's $30.1 billion worth of gold. Russia isn't alone, of course. Central banks as a group have been net buyers for at least two years now. But the 2012 data trickling out shows that the amount of tonnage being added is breaking records. Based on current data, the net increase in central bank gold buying for 2012 was 14.8 million troy ounces – and that's before the final 2012 figures are in for all countries. This is a dramatic increase, one bigger than most investors probably realize. To put it in perspective, on a net basis, central banks added more to their reserves last year than since 1964. The net increase – so far – is 17% greater than what was added in 2011, which was itself a year of record buying. The message from central banks is clear: they expect the dollar to move inexorably lower. It doesn't matter that it's been holding up against other currencies or that the economy might be getting better. They're buying gold in record amounts because they see a significant shift coming with the status of the dollar, and they need to protect themselves against that risk. Embrace the messages central bankers are telling us – the ones they tell with their actions, not their words.

You've probably noticed the cookie-cutter format of most financial media "news": a few key "buzz words" (fiscal cliff, Bush tax cuts, etc.) are inserted into conventional contexts, and this is passed off as either "reporting" or "commentary" depending on the number of pundits sourced. Correspondent Frank M. kindly passed along a template that is "officially deny its existence" secret within the mainstream media. With this template, you could launch your own financial media channel, ready to compete with the big boys. Heck, you could hire some cheap overseas labor to make a few Skype calls to "the usual suspects," for-hire academics, hedge fund gurus, etc. and actually attribute the fluff to a real person.

The other day the Huffington Post ran an article by a Bonnie Kavoussi called “11 Lies About the Federal Reserve.” And you’ll never guess: these aren’t lies or myths spread in the financial press by Fed apologists. These are “lies” being told by you and me, opponents of the Fed. Bonnie Kavoussi calls us “Fed-haters.” So she, a Fed-lover, is at pains to correct these alleged misconceptions. She must stop us stupid ingrates from poisoning our countrymen’s minds against this benevolent array of experts innocently pursuing economic stability. Here are the 11 so-called lies (she calls them “myths” in the actual rendering), and Tom Woods and Bob Murphy's responses.

Most of human history conforms to established patterns, forming the basis of modern statistical analysis. Random walk extrapolation from any data series seems to hold up in the face of reality because the data series is extracted from the pattern itself, a sort of logical fallacy. Models constructed in this way “behave” rather well until the pattern and paradigm shifts. At that point, models should be recalibrated to the new pattern in order to maintain any kind of usefulness (or simply scrapped). This is especially true if the model failed to see the paradigm shift coming, a predictive capacity that is almost built-in since inflection points are not really points at all; they are an eventual slide into the new pattern. During the inflection “period”, models conditioned by the old pattern will increasingly look out of sync and render confusing results to their practitioners. But, due to human nature intruding into this “scientific” process, all too often these human practitioners look to rationalize and fit the wider world into their models, rather than see the paradigm shift for what it is. Combining this willful blindness with the simplifications that models have to incorporate just to function, the fact that they rarely see inflections is not at all surprising.

It is no secret that over the past two months, Goldman has commenced a full endorsement of Nominal GDP targetting as a method to stimulate the economy, not to mention Wall Street's bonus pool, after Ben Bernanke completely ignored Hatzius' advice to reduce the Interest on Overnight Excess Reserve rate as well as subsequent pleading for a start of MBS LSAP. Mathematics once again aside, and as we demonstrated, the math works out to an non-trivial incremental $10 trillion in debt through 2016 on top of what will be issued, to catch up with the GDP growth run rate and to eliminate the excess slack in the economy, the question is whether NGDP would achieve any tangible stimulus at all, or merely reduce the Fed's ever smaller arsenal of non-conventional means to boost the economy by one more approach. The attached rhetorical Q&A just released by Goldman seeks to answer that and any other left over questions one may have on NGDP as a policy measure, and further puts out the inverse strawman argument that it is not coming out any time soon. To wit: "We do not expect a move to an NGDP target anytime soon, although the probability would increase if growth and/or inflation slowed by more than we currently estimate." Then again, with the whole reverse psychology trademark inherent in every piece of Goldman public product, and considering the squid's previous advances to determine monetary policy have been snubbed, it may just mean that the next time the US economy implodes, this is precisely the method the Fed may use in early 2012 to guarantee another record year of Wall Street bonuses considering 2011 will be abysmal for so many Swiss and other offshore bank accounts.

Jobs? They don't need no stinkin' jobs ...

Excuse the rant. But Ms Romer is just misleading the country. We will pay a big price for her lies.

All you need to know.

First of all, Money McBags has to apologize for this column’s lack of timeliness but ever since he has gone to....

It just never changes:

• OBAMA AIDES SAID TO DISCUSS EMPLOYER PAYROLL TAX BREAK
• PAYROLL TAX BREAK FOR EMPLOYERS AMONG IDEAS TO BOOST HIRING
• ADMINISTRATION CONSIDERING MEASURES AS RECOVERY SLOWS

Bolded bullets aside, good luck passing another fiscal stimulus Dear President when you can't even issue debt without stealing money from government retirees.

Two and a half years ago, Christina Romer, then still employed by the Obama administration in the position of Chair of the Council of Economic Advisers penned "The Job Impact of the American Recovery and Reinvestment Plan" - a report predicting the impact of a fiscal "stimulus" that took out $787 billion from the pocket of American Taxpayers (subsequently discovered to cost even more) and put that money...somewhere. We are not sure where, because according to a chart now made legendary for its complete failure to predict the future, it sure did not go into creating jobs. Below we present the original chart that made the January 10, 2009 presentation, and superimpose upon it the reality of the past two and a half years. It is simply stunning. And while we are here, and discussing the abysmal failure of QE2 (the impending arrival of QE3 notwithstanding), it is amusing to hear the whimpering of the likes of one Richard Koo, who is now claiming that all along the money from the Fed's monetary stimulus should have been invested in the form of a fiscal one. Well, Dick, below is the impact of your fiscal stimulus....AND it also includes the impact of $2 trillion in incremental monetary stimulus. Combined, both fiscal and monetary stimulus has now missed the worst case projection for US unemployment for 30 months running. Here is the simple truth: both monetary and fiscal stimuli are abysmal failures, when the economy is mean reverting to a state where it was hijacked from courtesy of 30 years of "great moderation" - and there is nothing that can be done to stop it. Correction: there is one thing - the Fed can destroy the dollar in its attempt to disprove simple physics. And, ultimately, it will.

In the boardrooms of corporate America, profits aren't everything - they are the only thing. A JPMorgan research report concludes that the current corporate profit recovery is more dependent on falling unit-labor costs than during any previous expansion. At some level, corporate executives are aware that they are lowering workers' living standards, but their decisions are neither coordinated nor intentionally harmful. Call it the "paradox of profitability." Executives are acting in their own and their shareholders' best interest: maximizing profit margins in the face of weak demand by extensive layoffs and pay cuts. But what has been good for every company's income statement has been a disaster for working families and their communities. Obama's lopsided recovery also reflects lopsided government intervention. Apart from all the talk about jobs, the Obama administration never supported a concrete employment plan. The stimulus provided relief, but it was too small and did not focus on job creation.

Yesterday, when we presented the Bloomberg interview of Princeton economist and former Fed vice chairman Alan Blinder, we speculated that his statement that "more easing is necessary" was the first shot across the QE3 bow. Today, Goldman's Sven Jari Stehn has fired the second one in a paper just released titled: "Fiscal Adjustment without Fed Easing: A Tall Order" in which he basically takes our conclusion from the Blinder interview to the next level. As Blinder said previously, in order to improve the once again deteriorating labor picture, more fiscal stimulus would be necessary. That, however, is impossible, especially in a Congress where everyone is now promising $4 trillion of deficit cuts over the next few years. The only difference is how this cutting will be achieved: republicans want spending cuts, while democrats are demanding tax hikes for the richest. While neither approach will work in the US without the shock of a bond-crash induced austerity, Goldman conducts an thought experiment in which it evaluates the effectiveness of a tax-based and a spending-based fiscal consolidation. While finding that on average spending based deficit reduction is more effective, it only truly works in parallel with assistance from monetary policy: be it an interest rate decrease (impossible due to ZIRP) or further Large Scale Asset Purchase (QE) program. In other words, the only thing that can prevent an economic contraction in the next 2 years of semi-austerity, will be more monetary easing.

General Tommy Franks, the rather straight-talking former commander of the war in Afghanistan way back in 2001, once described US defense policy wonk Doug Feith as “the dumbest fucking guy on the planet.” Feith, a bumbling architect of the failed Bush Doctrine, now has an intellectual match in Christina Romer, the former Chairwoman of Barack Obama’s Council of Economic Advisors. Romer appeared Thursday on the Daily Ticker, leaving no doubt that she should be the undisputed frontrunner for the Nobel Committee’s much anticipated Doublethink Prize. Warning, do not watch this video while eating: food projectile WILL permanently damage your computer.

The key running theme this weekend is "the flood", specifically that soon to be left in the wake of the Federal Reserve, which is now facing the last days of its ignoble existence. Previously, Egon von Greyerz shared his outlook on why the Pompadour-esque cliche will soon lead to a complete destruction of the dollar, and all other paper currencies. Now, it is the turn turn of Diapason's Sean Corrigan, who in his note from Thursday shares his view on the Fed's "reprehensible policy": "When the Chuck Prince Charleston suddenly stopped in 2008, the initial impact was just as dramatic on the market for machine tools, ceramic magnets, and silicon wafers as it was on lumber, carpets, and dishwashers and, so, the shock hit the surplus nations every bit as hard as the deficit ones as they all realised, to their horror, that they had all become nothing more than imprudent, Rueffian tailors. Since then, of course, the game has been replayed at an even more frantic pace, with governments largely taking pole position as the drivers of deficits, the media of monetization and, hence, the inflamers of inflation...By the time this last blunder works its way through the system, it will not just be the world's tinpot tyrants and biddable client kings who will pay the price for the Fed's reprehensible policy of 'apres moi le deluge', but it will be the ordinary man and woman who will have occasion to rue a programme so replete with intellectual arrogance, power-worship, and a wilful blindness to its awful, unintended consequences that only a Krugman could approve of it."