Federal Reserve

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Guest Post: Culture Of Ignorance - Part I

The kabuki theater that passes for governance in Washington D.C. reveals the profound level of ignorance shrouding this Empire of Debt in its prolonged death throes. Ignorance of facts; ignorance of math; ignorance of history; ignorance of reality; and ignorance of how ignorant we’ve become as a nation, have set us up for an epic fall. It’s almost as if we relish wallowing in our ignorance like a fat lazy sow in a mud hole. The lords of the manor are able to retain their power, control and huge ill-gotten riches because the government educated serfs are too ignorant to recognize the self-evident contradictions in the propaganda they are inundated with by state controlled media on a daily basis.

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Austrian Economics Hits Mainstream Media

One has to wonder if somewhere deep down a change is occurring in America. While stock prices soar to record highs, it is clear a growing number of 'real' people are realizing the nonsense that watching a 'market' as anything indicative of reality has become. The latest 'shift' is the appearance on New Orleans local TV of a two-minute primer on an "alternative" school of economic thought - Austrian Economics. While the anchor is careful to add the caveat that the mainstream economists think the world would be a terrible place if they didn't help us along, the brief clip begins with some useful common sense, "the market alone should decide the value of products and services. If a company is not successful, it should go bankrupt." Indeed...

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The Google Unemployment Index

With even the Federal Reserve throwing doubt on the veracity (or usefulness) of the 'official' unemployment data (having finally caught on to the reality we have highlighted for a number of years), Petr Pinkhasov has created a more 'real' unemployment index reflecting the reality of every day for the average American...

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Guest Post: Two Forces And Three Bears

In these climax years of industrial technocratic society, two opposing forces shape the destiny of government: the desperate effort to control everything versus the decline of the ability to carry out that effort. The result will be the loss of legitimacy and the collapse of government from the highest levels, moving downward until the real power to make anything work re-sets at a feasible and appropriate level — probably very local. This dynamic is seen very clearly in three spectacles du jour: the “national security” (spying) mess, government-sponsored accounting fraud in finance, and the ObamaCare rollout.

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Frontrunning: October 28

  • Budget deficit priorities people: U.S. NSA spied on 60 million Spanish phone calls in a month (Reuters)
  • Stuck in countless scandals, Obama does what he does best: speak. Obama To Speak At Installation Of FBI Director James Comey (TPM)
  • Five killed as car ploughs into crowd in Beijing's Tiananmen Square (Reuters)
  • U.K. Storm Brings Power Cuts, Snarls Transport in South (BBG)
  • China Signals ‘Unprecedented’ Policy Changes on Agenda at Plenum (BBG)
  • Sandy's Legacy: Higher Home Prices (WSJ)
  • Merkel Enters Concrete SPD Talks as Finance Post Looms (BBG)
  • Keep arming those Syrian al-qaeda rebels: Car bombs kill scores in Baghdad, in sign of crisis in Iraq (WaPo)
  • J.P. Morgan's Mortgage Troubles Ran Deep (WSJ)
  • Detroit’s public library contains story of city’s decline (FT)
  • Argentina elections: President loses in Buenos Aires province (BBC)
  • Phone-hacking: trial of Andy Coulson and Rebekah Brooks to begin (Guardian)
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Guest Post: Rediscovering The Price Of Money... When Things Can't Get Any Worse

How do we get a fundamental change away from this extend-and-pretend which prevails not only in Europe but also the world? History tells us that we only get real changes as a result of war, famine, social riots or collapsing stock markets. None of these is an issue for most of the world - at least not yet - but on the other hand we have never had less growth, worse demographics, or higher unemployment since WWII. This is a true paradox that somehow needs to be resolved, and quickly if we are to avoid wasting an entire generation of youth. Policymakers try to pretend we have achieved significant progress and stability as the result of their actions, but from a fundamental point of view that’s a mere illusion..

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Behold The Face Of Central Banker Hubris

March 18, 1996. It was the height of the dot-com boom years. And gracing the cover of Fortune magazine was a photo of a rather smug looking Alan Greenspan, then Chairman of the US Federal Reserve.  The headline across the top-- "It's HIS economy, stupid". The inside story was entitled "In Greenspan We Trust".  And the article went on to suggest that, no matter WHO won the presidential election that year between Bill Clinton and Bob Dole, Greenspan would still be running the economy. And handily.  This is a major testament to the state of our financial system. We award a tiny banking elite nearly totalitarian control over our money supply... and by extension, the economy.  We're just supposed to trust that they're good guys. Competent guys. That they know what they're doing.  Fast forward almost two decades. Long Term Capital Management. The NASDAQ bubble. The real estate bubble. The credit crunch. The mortgage crisis. The banking crisis. The sovereign debt crisis.

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Fire And Brimstone: John Mauldin Edition

Now that the prevailing mainstream media consensus has finally caught up with our "tinfoil" view, which for years was mocked by the same media, usually on an ad hominem basis, and even the Fed has realized (confirmed by the latest Jackson Hole symposium) it is in a trap as it understands it has to end the market's dependency on monetary heroin but has no idea how to do it without in the process undoing five years of central planning, we have seen some spectacular opinion flip flops take place. Which aside from the occasional headscratcher such as David Rosenberg going bull-retard (we once again wonder: just what does Ray Dalio serve in his cafeteria?) have been almost exclusively from optimistic to pessimistic, or as we call it, realistic. And as the case may be, such as with John Mauldin and his latest missive to potential clients, A Code Red World, a very deep and red shade of pessimistic.

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Guest Post: The ‘No Exit’ Meme Goes Mainstream

Once the economy's capital structure is distorted beyond a certain threshold, it won't matter anymore how much more monetary pumping the central bank engages in – instead of creating a temporary illusion of prosperity, the negative effects of the policy will begin to predominate almost immediately. Given that we have evidence that the distortion is already at quite a 'ripe' stage, it should be expected that the economy will perform far worse in the near to medium term than was hitherto widely believed. This also means that monetary pumping will likely continue at full blast, as central bankers continue to erroneously assume that the policy is 'helping' the economy to recover.

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To Boldly Go Where No Socialist Has Gone Before: Venezuela Creates Ministry Of Supreme Happiness

If one (such as everyone at the Federal Reserve) thought that the world's greatest artificial "wealth effect" would also generate the world's happiest people, one would be dead wrong.

Take Venezuela - Hugo Chavez' socialist paradise, which was recently inherited by Nicolas Maduro, when he proceeded to not only completely devalue the local currency but to engineer, through such exquisite central-planning that even the Politburo at the Marriner Eccles building is green with envy, the highest returning stock market on earth in 2013. Alas, either the locals are not quite as impressed with the Caracas' "stock market" YTD return of over 300% (which doesn't quite cover the loss in purchasing power for what things one can actually purchase in Venezuela), or the chronic toilet paper shortages remind them that the phrase socialist utopia is the world's greatest oxymoron. As a result, president Maduro has decided to boldly go where no socialist has gone before and has unveiled a new Vice Ministry of Supreme Social Happiness, whose primary purposes will be to enforce "happiness." In other words,  something along the lines of the beatings will continue until happiness returns...


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The New Normal?

This artificial prosperity plan for Wall Street has the added benefit of allowing the captured politicians in Washington D.C. to continue their $1 trillion per year deficit spending with no consequences for their squandering of future generations’ wealth. Bernanke and Yellen will never taper, because they can’t. The Fed balance sheet will continue to grow by at least $1 trillion per year until they crash the financial system again. Except this time, there will be no money printing solution. We are all trapped like rats in this monetary experiment being conducted by evil mad scientists. No one will get out alive. Welcome to the new normal. Now eat your cheese.

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An Open Letter To Russell Brand

Russell Brand's excited exchange with stoic Brit Jeremy Paxman this week is a must-see "exchange of new ideas vs old." Among Brand's clearer moments were "stop voting, stop pretending, wake up. Be in reality now, time to be in reality now. Why vote, we know it's not going to make any difference, we know that already." The excellent discourse has prompted this open letter supporting the comedian.. concluding so legitimately nowadays, with Upton Sinclair's infamous quote "It is difficult to get a man to understand something, when his salary depends upon his not understanding it."

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Guest Post: The Fed Can Only Fail

The basic predicament we are in is that the current crop of leaders in the halls of monetary and political power do not appear to understand the dimensions of our situation. The mind-boggling part about all this is that it's not really all that hard to grasp. Our collective predicament is simply this: Nothing can grow forever. Sooner or later everything must cease growing or it will exhaust its environs and thereby destroy itself.  The Fed is busy doing everything in its considerable power to get credit (that is, debt) growing again so that we can get back to what they consider to be "normal." But the problem is -- or the predicament I should more accurately say -- is that the recent past was not normal.

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60% Of 401(k) Participants Accumulated More Debt Than Retirement Savings

The average 401(k) and other defined contribution (DC) plan participant now defers over 8% of their annual income toward retirement savings through their plan and social security taxes, making it one of the largest expenses for households. However, as HelloWallet found, retirement readiness remains stubbornly low: the typical worker near retirement only has about 2 years of replacement income saved, or about 15 years short of the median lifespan post-retirement. One explanation for the stubbornly low retirement readiness of workers may be an increase in household debt. With more household income going to pay off debt, households may have less money to save and face higher costs of living in retirement. In fact, over 60% of workers accumulated more debt than they contributed to retirement savings between 2010 and 2011.

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Guest Post: 4 Things To Ponder This Weekend

It has been a very interesting week as the Government shutdown/debt ceiling debate debacle moves into the background.  The focus has now turned back towards the fundamentals of the market, economic environment and the ongoing Federal Reserve interventions.  What is becoming increasingly evident is that market participants are once again potentially throwing "caution to the wind" betting on a belief that the Fed's ongoing Q.E. programs will continue to trump valuations and economics.  After all, that has seemingly been the case up to this point.  The problem is that no one really knows how this will turn out.  However, as we discussed earlier this week, it is likely that we are close to finding out answer. In the meantime, here is our weekly list of "things to ponder this weekend."

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