Debt is the great palliative that has enabled the US and other major economies to escape reality, at least for a time. Ayn Rand described such behavior:
You can avoid reality, but you cannot avoid the consequences of avoiding reality.
It is possible to steal from tomorrow to improve today but only at the cost of having less of a future. That is what both nations and citizens have been doing. The ability to continue doing so has about run its course.
The poor jobs number today saw gold surge from a low of $1,256.55/oz to a high of $1,272/oz prior to being beaten lower back below $1,258/oz. This is the second incident of peculiar trading on the COMEX this week which is fueling manipulation suspicions.
As we begin 2014, it is important to recognize the levels of INSANITY currently existent in the world enabling us to understand the apocryphal nature of the times we live in and prepare ourselves to meet the challenges it represents. The world is leveraged to an extent that has never before seen in history! Debt now masquerades as NOMINAL growth and REAL growth has ceased. Headline economic reports are now nothing more than POLITICALLY CORRECT HOAXES to FOOL the public at large and mask the betrayal of the public by the leaders who hold the reins of power. ECONOMIC Stagnation emerged after the 2008 Global financial crisis and in real terms has NEVER ENDED!
Alan Greenspan's Modest Proposal: Fix Broken Economic Models By... Modeling Irrational "Animal Spirits"Submitted by Tyler Durden on 01/02/2014 15:26 -0400
We leave it to everyone's supreme amusement to enjoy the Maestro's full non-mea culpa essay, but we will highlight Greenspan's two most amusing incosistencies contained in the span of a few hundred words. On one hand the former Chairman admits that "The financial crisis [...] represented an existential crisis for economic forecasting. The conventional method of predicting macroeconomic developments -- econometric modeling, the roots of which lie in the work of John Maynard Keynes -- had failed when it was needed most, much to the chagrin of economists." On the other, his solution is to do... more of the same: "if economists better integrate animal spirits into our models, we can improve our forecasting accuracy. Economic models should, when possible, measure and forecast systematic human behavior and the tendencies of corporate culture.... Forecasters may never approach the fantasy success of the Oracle of Delphi or Nostradamus, but we can surely improve on the discouraging performance of the past." So, Greenspan's solution to the failure of linear models is to... model animal spirits, or said otherwise human irrationality. Brilliant.
For the New Year, it seems that SOH, that last true refuge for pensive brooding bears, has been overrun with pompous bulls peddling & pumping a new 21st century high tech plateau of permanent prosperity, that would make even Irving Fisher's rose twittering cheeks blush. I wonder if old Irving would have Linked himself In or posted his rip roaring 20s rosy market views on a pretty pink Facebook page?
The US Senate moves toward the confirmation of Janet Yellen, now posited for next January 6th, as chair of the Federal Reserve System. Let us in this moment of recess reflect on eerily similar observations by two of history’s most transformational figures: John Maynard Keynes and Nicolas Copernicus. One of Keynes’s most often-cited observations, from his 1919 The Economic Consequences of the Peace, chapter VI, contains an indictment of policies very like those which the Federal Reserve System has been implementing for the past dozen, and more, years. These policies in slow motion are at the root of the very political, social, and cultural dysphoria — uneasiness or generalized dissatisfaction — predicted by Keynes.
The fraud that has been the US government and its effects on the Potemkin economy should be obvious by now. Yet our politicians continue to pretend the economy is growing and recovering. It is not. It is in a death spiral that their interventions caused and continue to feed. For years short-run corrections were avoided or mitigated by this falsifying of economic signals. The intent was to send false signals to economic actors, to encourage them to behave in ways that helped short-term results but were harmful long-term. The cost was to make the economy weaker and less efficient. The economy has been wasted. These short-term highs have place it in grave danger.
Saying we need continuous financial bubbles to keep full employment is such a flawed conception of economics, it belongs on an island of misfit philosophies. Krugman’s incessant promotion of statism is doing more harm to the economy than good. As an opinion-molder, he is perpetuating the economic malaise of the last few years. More bubbles won’t help the recovery, just harm it more. In the middle of a grease fire, Krugman calls for more pig fat. And the rest of us are the ones left burnt.
Last month, we offered a plain language translation of the Warsh op-ed, because we thought it was too carefully worded and left readers wondering what he really wanted to say. Translation wasn’t necessary for Fisher’s speech, which contained a clear no-confidence vote in the Fed’s QE program. Now William Poole is more or less saying that we have no idea what’s truly behind the Fed’s decisions. But he doesn’t stop there. He’s willing to make a prediction that you wouldn’t expect from an establishment economist... Poole’s refreshingly honest take on the Fed’s inner workings – from someone who truly knows what goes on behind the curtains – is more than welcome.
We warned here (and here most recently), the most insidious way in which the Fed's ZIRP policy is now bleeding not only the middle class dry, but is forcing companies to reallocate cash in ways that benefit corporate shareholders at the present, at the expense of investing prudently for growth 2 or 3 years down the road. It seems the message is being heard loud and very clear among 'some' of the FOMC members; most notably Richard Fisher:
"Without fiscal policy that incentivizes rather than discourages U.S. capex (capital expenditure), this accommodative monetary policy aimed at reducing unemployment (especially structural unemployment) or improving the quality of jobs is rendered flaccid and less than optimally effective... I would feel more comfortable were we to remove ourselves as soon as possible from interfering with the normal price-setting functioning of financial markets."
Perhaps Yellen (and others) will listen this time?
As H.L. Mencken opined, 'The most dangerous man to any government is the man who is able to think things out for himself, without regard to the prevailing superstitions and taboos. Almost inevitably he comes to the conclusion that the government he lives under is dishonest, insane, and intolerable.' It is no wonder that, according to a Gallup Poll conducted in early October, a record-low 14% of Americans thought that the country was headed in the right direction, down from 30% in September. That's the biggest single-month drop in the poll since the shutdown of 1990. Some 78% think the country is on the wrong track. Simply put, Faber explains, it is most unlikely that US economic growth will surprise on the upside in the next few years. It is more likely there will be negative surprises.
When the U.S. economy dipped into an inflationary recession in 1969, the Keynesian paradigm could not explain that phenomenon. Given the fact that both the George W. Bush and Barack Obama administrations (not to mention Congress) have followed the Keynesian playbook, the sorry results should be enough to discredit Keynesianism, this time for good. Either a theory explains and predicts phenomena or it does not, and it should be clear that Keynesian theory has failed, but, alas, it seems that the Keynesian paradigm is more influential than ever. Here is a paradigm that claims there cannot be an inflationary recession, yet all of the recessions that have wracked the U.S. economy in recent decades have been inflationary. Alas, the academic “market test” really does not embrace the actual success or failure of a theory.
Hi! I’m Amy Johnson-Martinez, the 14-year-old girl who’s saving the earth from environmental destruction. A lot of people don’t understand how the destruction of the earth is connected to our addiction to economic growth. Actually, a lot of people don’t even realize that we’re addicted! Personally speaking, I think it’s kind of weird that economists don’t tell us about this. So I guess it takes a 14-year-old girl to tell you about it! Economists always say, “The economy has to keep growing or else it will collapse.” But it can’t grow forever, because the earth is running out of resources. Actually, it’s already starting to happen. That’s a big reason why the economy is getting worse.
Why China DOESN'T WANT the Yuan to Become the Reserve Currency
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.