Janet Yellen

Westerners aren't used to the kind of inflation levels, government confiscation, and currency volatility so common in places like India; and so the need to own gold as protection isn't fully appreciated in the West. Westerners pay lip service to gold's being "an inflation hedge" or "a currency" or "a safe asset", but these terms are used in an extremely abstract way by the vast majority of the investing public, who see gold as mostly just another trading vehicle. India's love affair with gold is well-understood in Asia but completely misunderstood in the West — a phenomenon we have always found fascinating — but recently it has become abundantly clear that this disconnect is widening almost daily as the Western fixation with 'The Gold Price' and the Eastern obsession with 'The Price of Gold' take ever more divergent paths... In short, Asians like their gold to be heavy, shiny, and made of ... well, gold.

With the recent adoption of explicit forward guidance as a stimulative policy tool by the major European central banks, virtually every major central bank is now using the tool in some form. The potential benefits and dangers of such policies as central bank communications have evolved are unclear as "the form of guidance" matters. As Robin Brooks notes, and is so well illusrated below in the example of the Riksbank's and Norges Bank's 'failures', "[In terms of implications for rates] the jury is still out on how well forward guidance works. What is clear, though, is that markets prefer 'deeds' to 'words'."

If you believe that there is high inflation in the United States, you are just imagining things.  That is the message that the U.S. government and the Federal Reserve would have us to believe. Of course anyone that shops for groceries or that pays bills regularly knows what a load of nonsense the official inflation rate is.  The U.S. government has changed the way that inflation is calculated numerous times since 1978, and each time it has been changed the goal has been to make inflation appear to be even lower. But if the mainstream news actually reported 'the real' number, everyone would be screaming and yelling about getting inflation under control.  Instead, the super low number that gets put out to the public makes it look like the Federal Reserve has plenty of room to do even more reckless money printing.  It is a giant scam, but most Americans are falling for it.

JPMorgan, Pimco, and now BlackRock, the world's largest asset manager, all join the bubble warning chorus. From Bloomberg:

• FINK SAYS IT'S "IMPERATIVE" THAT THE FED BEGIN TO TAPER
• FINK CALLS MARKET `OVER-ZEALOUS' 
• FINK SAYS THERE ARE "REAL BUBBLE-LIKE MARKETS AGAIN"

So... when the three largest banks/asset managers in the US say that Ben Bernanke has blown the largest asset bubble in history and that the time to taper has come, will Janet Yellen once again turn a blind ear to warnings that come not just from the "tinfoil" blogosphere but the "respected" legacy financial institutions made up of serious people, and after the cataclysm admit that, just like last time, she "never saw it coming?"

The NYSE Composite is indicating some uncomfortable symmetry currently. As NewEdge's Brad Wishak notes, the index (which represents 61% of the market capitalization of globally listed companies) has risen about the same amount over the same period as in the run-up of the last debt-fueled bubble (only this time the valuations are notably richer). Will Janet Yellen make sure this time is different...? Or is the right question, 2007 USA or 2006 Zimbabwe?

As Rand Paul grows more vociferous with regard the Janet Yellen nomination, he and his father are once again pressing for more transparency into what really occurs at the Fed. While some argue that there has never been a more 'transparent' Fed as we are plagued with volumes of double-speak (projections and prognostications), Ron Paul explains in this brief clip that "the big stuff is done in secret," including international central bank bailouts. His hope, based on the fact that Janet Yellen is a self-described agent of transparency that "the time is ripe," to truly audit the Fed.

As Alan Greenspan described this week, in an interview with John Stewart on “The Daily Show,”

“We really can't forecast all that well. We pretend that we can but we can't. And markets do really weird things sometimes because they react to the way people behave, and sometimes people are a little screwy.”

Which means they don’t necessarily go along with your central planning, no matter how good you think it is. But still economists insist that, if they are allowed to monkey around with it, they can make an economy better. And therefore, the Fed, which has lived by the sword of QE, will probably die by it too.

While no longer actively engaged in politcs, one of Ron Paul's crowning achievements while in Congress, was to bring some much needed sunlight to the balance sheet, the activities, and secret bailouts of the Fed, and according to some, was being responsible for the "transaprency, openness, and forward guidance" approach to monetary policy. The paradox here, as the whole Taper - Non Taper shocking episode provied, is that the Fed itself is now caught in a  reflexive Catch 22, and no longer can "renormalize" and extricate itself from its policy through "guidance" without in the process destroying everything it has achieved during the prior period of central planniing. Still, despite Ron Paul's unsung accomplishments there is much more to be done to expose just how actively the NY Fed's trading desk participates in the fixing of the S&P500's closing price day after day. For that, he will need the help of his son, Rand. Which is why as the Sunshine State News reports, "Sen. Rand Paul, R-Ky., is ramping up his opposition to President Barack Obama’s nomination of Janet Yellen to chair the Federal Reserve. Paul is teaming up with the Campaign for Liberty, chaired by his father former U.S. Rep. Ron Paul, R-Texas, to stand in opposition to Yellen and push legislation taking aim at the Fed."

Last week, Peter Schiff began his epic take-down of the myth of Janet Yellen's forecasting ability. As proof of her wisdom supporters had pointed to speeches she delivered in 2005 and 2006 in which she supposedly issued clear warnings about the dangers then building in the frothy real estate markets.  Without any attempt at reasonable fact checking, these claims have been parroted by the media.. and that is what Schiff so diligently destroyed. However, Schiff notes in this follow-up, there is a key statement she makes (in justifying the 'fundamentals' behind the housing bubble) that relates to credit and speculative leverage that is crucial to understand the way she sees the world and thus - what to expect from her Fed.

Money put into the system would, in normal times multiply aggressively in use (e.g. Fed to bank, bank to business, business to consumer, consumer to restaurateur, restaurateur to farmer, farmer back to bank etc etc.) In reality, as Citi notes, there are often even more legs to this multiplier. However when QE puts artificial support under the Equity and Bond market you get misallocation of capital and no velocity of money. If ever there was a chart of the gross misallocation of capital caused by QE, this has got to be it...

Alasdair explains how his "Fiat Money Quantity" (FMQ) is derived, as well as what it can tell us about the true levels of fiat money supply. In the case of the dollar, it reveals that levels are far above what is commonly appreciated – so far, in fact, that a currency crisis could arrive sooner than even many dollar bears expect... and how horribly mispriced gold remains.

In this exclusive interview with Birch Gold Group, former Congressman Ron Paul shares his opinions on a number of topics, including investing in physical gold and silver, the future of the U.S. dollar and the role of the Federal Reserve.

“The longer [Quantitative Easing] lasts, the worse the correction will be when eventually people give up on our dollar and give up on our debt.”

The Fed has painted itself into an almighty corner with QE, and it looks as though we are finally getting to the point in the process where that fact begins to (a) occur to people and (b) matter. Bill Fleckenstein has often spoken about the Fed's reaching the point where it "loses control of the bond market", and it is quite possible that we are rapidly approaching that point (the signs have certainly been strong in Japan). We may be there already. But, as Grant Williams notes in his most recent note, we won't know until we can look in the rearview mirror; but the nonvirtuous circle the Fed has created is extremely clear...

In one sense, the past couple of weeks’ debt ceiling debate was just one more in a long line of annoying-but-otherwise-pointless pieces of bad political theater. But in another sense it was a turning point, one that may have put the democrats completely in charge. Once the civil war costs the republicans control of the House of Representatives (November 4, 2014), the democrats will be relieved of the need to fool the middle about their commitment to fiscal sanity. The incoming Clinton administration and its congressional majorities will ramp up domestic spending and finance it with higher taxes, more borrowing and way more money printing. Janet Yellen (the perfect Fed chair for this transition) will expand QE and make it permanent. The Fed’s balance sheet will grow in trillion-dollar chunks as it buys up all the bonds issued by the government and the mortgage packagers and pretty much anybody else with paper to sell. Could there be a better environment for gold?

When President Obama nominated Janet Yellen to be the next Chair of the Federal Reserve Board the praise he offered was similar to what had already poured in from around the country. In their assessments of Ms. Yellen's long career, Congressman, editors, and academics have underscored how her prescience and caution distinguish her from the reckless overconfidence that have plagued her male colleagues at the Federal Reserve. As proof of her wisdom supporters have pointed to speeches she delivered in 2005 and 2006 in which she supposedly issued clear warnings about the dangers then building in the frothy real estate markets.  Without any attempt at reasonable fact checking, these claims have been parroted by the media.  However, a brief review of the speeches in question reveals that she issued no such warnings at that time.