Rosenberg

A fantastic history of the reasons for, and the creation of, the Federal Reserve, courtesy of Murray Rothbard and our friends at Mises Institute, with the article originally appearing in Quarterly Journal of Austrian Economics, Vol. 2, No. 3 (Fall 1999), pp. 3–51. It is also reprinted in A History of Money and Banking in the United States and as a monograph. This is a must read for anyone who is curious why the Federal Reserve (with or without Goldman) is the sole organization responsible for not only perpetuating the interests of a select few of financial oligarchs, but in essence shaping monetary, fiscal, financial and political policy in the entire developed world. If after reading this, one is not convinced that the Fed screams a need for at least some supervision or accountability, one is likely a borderline-corrupt Senator who is on the payroll of Citi, Bank of America and/or Goldman Sachs (or, what may be worse, infinitely naive).

Friedrich von Hayek might have thought so. Hayek worried that during times of crisis the government would assume so much control that it would eventually have a negative impact on the economy and eventually turn all the people into serfs. My hope it that through sites like Zero Hedge we can help wake people up and avoid such an undesirable fate.

This is aimed at those banking execs that believe that they will be better off hiding losses than taking them now and preempting the guaranteed higher losses to come in the future. Yes, the US is Japan - the "19 year" lost decade, redux!

A startling observation out of David Rosenberg is that with the current unemployment number (whatever it may be: 10.2%, 17.5%, 90%), even assuming an end to workforce outflows, there is a buffer equivalent to almost 11 million people, consisting of increased worker productivity and massive newly-created temporary positions, that can be drawn upon before even one person of those laid off recently, has to be rehired. This is disastrous for the Obama administration, especially at a time when it is actively speculating on Stimulus #2 in order to spur any kind of job creation ahead of mid-term elections.

"If the USA were to go back to a 40% ratio of gold reserves to money supply (using the monetary base), where it was a century ago when the Fed was first created, from 17% currently, that would equate to three years’ supply of bullion, and alone take the gold price up to $2,750/ounce, based again on our research on price sensitivities to central bank buying activity." - David Rosenberg

• Rosenberg: unemployment to hit 13% (Bloomberg)
• Wall Street record bonuses return as Big 3 may pay $30 billion (Bloomberg)
• Tackling the US economic data manipulation: Economists seek to fix a defect in data that overstates that nation's vigot (NYTimes)
• Kraft makes new, lowered bid for Cadbury (AP)
• Citigroup asset guarantees may cost US taxpayers, panel says (Bloomberg)
• Geithner saying "be like Buffett" can't make JPMorgan lend more (Bloomberg)

"One can almost see the stirrings of cyclical discontent within the market. Risk trades are
looking increasingly vulnerable and correlations are beginning to break down. Investors
should focus on the nominal quantities, which continue to wither on the vine." - Albert Edwards, SocGen

In our latest piece (within a series of analyses that detail both the technical and fundamental landscapes of gold, silver, copper, oil, the CRB (Commodity Index), the US Dollar, the EURO and the remaining major currencies of the G8 in relation to one another), we at Fibozachi present an initial look into the technical composition of gold.

When two months ago we discussed the IMF's selling of one eighth of its gold reserves of which as most know by know half was recently acquired by India, we came to the conclusion that the IMF's proposed naive and subjective purpose for this disposition which was framed as "safeguarding against disruption in the gold market" would instead end up with "rioting in goldbugland." Based on gold price action over the past 3 days, we have been so far correct. And the concern for the IMF (and all Central Banks as well) is that India's example will be promptly followed by China, Russia and other sovereigns who are seeking to flee from their dollar holdings courtesy of continued madman-like behaviour out of the 3rd sub-basement at the Federal Reserve where all the Heidelberger Druckmaschinen are kept.

Yesterday's "blowout" ISM reading of 55.7 (on 53 in consensus) was enough to lead to a big market rally, at least temporarily. Yet, just like CfC and the overall Q3 GDP took early credit for massive stimulus payments (whose cost will be felt more gradually over the next decade), it appears the same principle of "borrowing from the future" is applicable to the ISM reading as well. And if David Rosenberg is correct, and the ISM, along with all other stimulus indicators, holds the seeds of its own destruction inside of it, look for this to be an ISM top, potentially until such time as the next stimulus is invoked.

"How much of the rebound in real GDP was due to the fiscal stimulus, and where do we stand in terms of the effects of stimulus thus far? Although precise answers are impossible at this juncture, several aspects of the report are consistent with our estimates that the fiscal package enacted in mid-February as the American Recovery and Reinvestment Act (ARRA) would have accounted for virtually all of the growth reported for the third quarter." - Goldman Sachs

Yesterday, the market moved on what was the double whammy of the government's own rather fluid favorable interpretation of what was essentially the government's very own stimulus. Yet others can play, and unwind, the number fudging game too. According to David Rosenberg, absent the now declining impact of the massive governmental stimulus, GDP would have been flat if not negative. So much for bickering over whether GDP was 2.7% or 3.5%: at the end of the day, on a normalized, non-stimulus inflated basis, GDP was flat, and if the equity market cared about isolating non-recurring items such as excess government spending driving a collapsing economy, the stock market reaction would have been quite the opposite.

He came, he saw, and he couldn't believe his eyes... or ears. It is almost painful to watch David Rosenberg smack the Managing Partner of Seygem Asset Management like the puppet doll the formerly insightful anchor has become. The same goes for the balance of his CNBC colleagues as they proceed to ask highly (ir)relevant question after question.

Now, most of you know what happened to the oil prices, and where that lead us. Now multiply that by 10, and you will have a pretty good picture of the economy we will have IF, yet another time, a dark side of that what constitutes Humanity wins.

It was interesting to see the bears all come out of their caves today after the move yesterday. What's even more interesting is that non-bears joined the negative talk, with Bill Gross calling basically for a 30% sell-off in equities and arguing housing was overvalued by 50% from 2007 highs (by the way if the latter is true, the stock market should then correct by a lot more than 30%, more like 75%), and GS and BOAML came out with bearish outlooks on housing. Given upbeat equity predictions by the latter two firms (helps to have replaced Rosenberg with a bull!) it's all the more intriguing.