We can pretend fundamentals don’t matter and sure in the day to day profit taking of Citadel and the like they really don’t matter. But, while the PhDs may talk big about this new world economy where a move to universal welfare means jobs and wages don’t matter - well that is nonsense. Jobs and wages matter and they will always matter.
So the next round of experiments will probably feature bigger deficits and more aggressive public hand-outs. Which – since these have already been tried and failed – doesn’t give much hope for the future.
The ongoing misinterpretation and massaging of economic data to spin a positive view on the economy are fine and good. However, real economic recovery must start with the average American since consumption makes up nearly 70% of economic growth. While the current Administration and Federal Reserve promote policies that are supposed to create economic prosperity for all, the reality is that remains bottled up on Wall Street.
Distortions in financial markets keep growing, as central banks all over the world are desperately intensifying monetary pumping. What is currently happening in various bond markets as a result of this and other interventions is simply jaw-dropping insanity. It is not so much that it defies rational explanation – in fact, all of these moves can be explained. What makes the situation so troubling is the fact that investors seem to be oblivious to the enormous risks they are taking. They are sitting on a powder keg.
Moments ago the BLS reported Janet Yellen's favorite labor market indicator, the JOLTS survey, which showed that in June (recall this report is 1 month delayed to the payrolls report), the number of job opening rebounded from a revised 5.514 million to 5.624 million, modestly missing expectations of 5.675 million largely in line with the range.
The climate is changing just as it always has and always will and the rate of change is perfectly normal. Of course, that is not what the government, environmentalists, or the media promote and as a result most of the public believe. The misconception is deliberate and central to the exploitation of global warming and climate change as the vehicle for a political agenda.
As of this moment, absent a substantial pick up in wages and disposable income in general, US spending - that key driver of US GDP - is about to slow down sharply as the savings rate enters the red zone. As shown in the chart above, every time the savings rate hits about 5%, consumers slow down. The problem is that it comes just as spending in Q1 supposedly soared.
"...abandoning the low interest rate policy would likely trigger a severe recession... but, continuing this policy would distort and corrode the economic structure even more, which would jeopardize the business model of pension funds, insurers and banks, and further inflate the real estate and stock market bubbles. The low interest rate policy has rendered the system profoundly fragile, with central banks virtually in a lose-lose situation."
Last night, President Obama took a victory lap for his economic achievements while in office. With the 2016 Presidential Election fast approaching, this was one of the final chances the President will have to try and divert attention away from Hillary’s “trustworthiness” problem following continued revelations surrounding Benghazi, email scandals and the Clinton Foundation which is now under investigation by the IRS.The question is whether the majority of the voting public will agree with the President’s message? Let’s take a look at some charts...
The former Fed chairman says he believes another debt crisis is inevitable. He believes it will lead to high levels of inflation. His solution? Gold: “Now if we went back on the gold standard and we adhered to the actual structure of the gold standard as it exists let’s say, prior to 1913, we’d be fine. Remember that the period 1870 to 1913 was one of the most aggressive periods economically that we’ve had in the U.S., and that was a golden period of the gold standard.”