Words matter, the way they are said can matter even more, yet what is just as important is the posture, and yes – that can include even your choice of attire. Agree or not with the policies, but the decision for that suit in our opinion was anything but a faux pas, it was intentional... It was sending a visual cue to all that we are not fiercely red, white, and blue. We are taupe.
This seems to be the biggest question in financial markets for me right now because the math just doesn`t add up any way you slice it.
"We find ourselves with the same anti-free market interventionist types who set up the Federal Reserve, the US Treasury and the US government running foreign policy in America and then go and intervene in the affairs of Libya, Syria, Egypt, Iraq or Afghanistan. And as can be expected, they mess up just about everything. I think the whole region will blow up and financial markets are not paying sufficient attention to this."
With the Federal Reserve ending their support of the markets by October, and as discussed yesterday, corporate share buybacks on the decline; two of the biggest supports of asset prices over the last couple of years is fading. What does this mean for investors going forward?
This won't last... here's 3 reasons to consider why...
The Fed causes a perverse outcome: gorging corporations and dehyradted startups.
HIGHLIGHTS > Gold reserves destination unknown after moved from Ottawa vault as part of Bank of Canada HQ renovation > Switzerland, the Netherlands and Sweden say they hold gold in Ottawa > Upcoming Swiss vote on gold repatriation could lead to gold repatriation from Bank of Canada > Bank of Canada only acts as gold custodian to four foreign central banks > Bank of Canada no longer a major gold custodian; Canada has virtually no gold reserves
While weather may affect the economy, the recent contraction has little to do with winter’s bitter cold; the US economy is far too diverse and complex. Instead, we are witnessing the ongoing effects of failed monetary and fiscal policies. As the Wickersham Commission noted years ago, “These laws [of economics] cannot be destroyed by governments, but often in the course of human history governments have been destroyed by them.”
David Rosenberg, in one of his recent missives, wrote: "...based on the current trend in the LEI and the level of the diffusion index, history suggests that the next recession is at least four years away." While anything is certainly possible, it is highly unlikely that the current economic environment is supportive of another four years of a "struggle along" economy. Given the artificial supports during recent years, the extreme extension in assets prices, record levels of margin debt and the chase for yield in "junk credits," it is highly possible that the next recessionary decline could be much larger than the historical average.
There's only one small problem with relying on artifice: we haven't actually fixed what's broken in the real world.
"Rather than trying to spur private-sector spending through asset purchases or interest-rate changes, central banks, such as the Fed, should hand consumers cash directly.... Central banks, including the U.S. Federal Reserve, have taken aggressive action, consistently lowering interest rates such that today they hover near zero. They have also pumped trillions of dollars’ worth of new money into the financial system. Yet such policies have only fed a damaging cycle of booms and busts, warping incentives and distorting asset prices, and now economic growth is stagnating while inequality gets worse. It’s well past time, then, for U.S. policymakers -- as well as their counterparts in other developed countries -- to consider a version of Friedman’s helicopter drops. In the short term, such cash transfers could jump-start the economy... The transfers wouldn’t cause damaging inflation, and few doubt that they would work. The only real question is why no government has tried them"...
Mark Spitznagel: "Mises will ultimately be right yet again about the inevitable final collapse of the current asset boom brought about by credit expansion. The term “black swan” (the surprising, unforeseen event) used for bursting financial bubbles has been and will remain a misnomer - we can and, indeed, should expect such tumults to occur at some point as a consequence of massive central bank intervention and economic distortion."
Ron Paul: "As to the unwinding of this mess, I’m convinced that when the current expansion ends it will be abrupt, gigantic, and worldwide. The 43-year expansion of Fed credit and debt, delivered to us by a fiat dollar standard, and held together artificially by an undeserved trust will end badly."
Despite all the massive monetary pumping over the past six years and the lowering of interest rates to almost zero most commentators have expressed disappointment with the pace of economic growth. This should not be surprising though, since, any policy, which artificially boosts demand, leads to consumption that is not backed up by a previous production of wealth. This means that monetary pumping leads to the squandering of real wealth. All this however, can be reversed by shrinking the size of the government and by the closure of all the loopholes of the monetary expansion.
In the rush to make QE’s taper and the follow-on “forward guidance” appear more data-related than of due concerns about the structural (and ultimately philosophical) flaws in the economy, the regressionists of the Federal Reserve have come up with more regressions - a 19-factor model to determine Yellen's 'labor market conditions'. What does this mathematical reconstruction of the labor market tell us about the labor market? If you believe the figures, this has been one of the best recoveries on record. No, seriously...
The popular view concerning the Fed is that it is apolitical. Anyone who considers the timing of the Fed’s actions knows this is false. However, for the vast majority of Americans, including financial professionals, the Fed is thought to be an apolitical entity focusing exclusively on economic and financial matters.