Much of the commentary from the more liberal leaning media has continued to tout that the rise in asset markets over the last few years are clear evidence of economic prosperity in this country. However, is that really the case? In order for rising asset prices to be reflective of overall economic prosperity, the "wealth" generated by those rising asset prices should impact a broad swath of the American populous. Let's take a look to see if that is the case.
Russia must get aggressive in the economic war. You can win this economic contest in 24 months, if certain special zones in Russia simply are allowed to copy Swiss banking rules and regulations, as wealth will always flow to secure locations where taxes are low. You know what banking privacy and security did for Switzerland, it made a poor country with few natural resources the wealthiest nation in the world.
With all deference to Dr. Richard Fisher, the surging dollar is not good for either the economy or ultimately a stronger labor market. This is particularly the case when the dollar is only stronger because the rest of the world is on the brink of recession and or deflation. The negative impact of a surging dollar in a weak economic environment will more than likely outweigh any positive inputs for the U.S. consumer. Time will tell, but the evidence is mounting that the we are likely closer to the end of the current economic cycle than the beginning.
So did Greece write the Greek reform memo or was it someone from the European Commission?
This past week has been a virtual tennis match watching the evolution of the Greek bailout negotiations. No Deal, Deal, No Deal, Deal. However, despite the fallout that would likely come from a Greek "exit," the markets have largely managed to ignore the risk and hit an all-time high this week. Market valuations, bullish sentiment and complacency are all pushing higher as the focus remains on the ignition of the ECB's QE program as a stimulus for the markets. In fact, this is so much the case that the net percentage of managers overweight Eurozone equities is at the highest level on record.
When you read about female doctors feeling forced to prostitute themselves to feed their children, about the number of miscarriages doubling, and about the overall sense of helplessness and destitution among the Greek population, especially the young, who see no way of even starting to build a family, then I can only say: Brussels is a bunch of criminals. And Draghi’s QE announcement is a criminal act. It’s a good thing the bond-buying doesn’t start until March, and that it’s on a monthly basis: that means it can still be stopped.
Joseph Goebbels had nothing on US and European media today.
That propaganda as a strategic and political instrument has been refined to a huge extent over the past 70-odd years since Goebbels first picked up on Freud’s lessons on how to influence the unconscious mind, and the ‘mass-mind’, as a way to ‘steer’ an entire people, not just as a means to make them buy detergent. These days, the media can make people believe just about anything, and they have the added benefit that they can pose as friends of the people, not the enemy. But there is a reason why such a large ‘industry’ has developed on the web with people writing articles that don’t say what the mass media say. That reason for is, obviously, first and foremost that not everybody believes whatever they are told. The problem is equally obvious: not nearly enough people are being reached to make a true difference, and to question the official narratives.
We live in a new world, and the Saudis are either the only or the first ones to understand that. Because they are so early to notice, and adapt, I would expect them to come out relatively well. But I would fear for many of the others. And that includes a real fear of pretty extreme reactions, and violence, in quite a few oil-producing nations that have kept a lid on their potential domestic unrest to date. It would also include a lot of ugliness in the US shale patch, with a great loss of jobs (something it will have in common with North Sea oil, among others), but perhaps even more with profound mayhem for many investors in US energy. And then we’re right back to your pension plans.
You almost have to step outside of economics, even out of the financial world as a whole, to pose what is the most elementary question about our economy today. That can’t be right. The most elementary question is not how we can achieve growth, it’s whether we need growth, and what we would need it for that is important enough to destroy our entire societies and economies for.... We’re in dire need of fresh blood and smart new ideas to clean up the mess the present ideologies and their puppets and puppetmasters have created.
We don’t see a whole lot of comprehension out there, so let’s try and link the obvious: employment to shale to plummeting oil prices to the debt the shale industry was built on (and which is vanishing). We know, people look at the US jobs report yesterday, and at the stock markets (Europe up some 2% across the board), and think salvation has landed on their doorstep, but the true story really is very different. We’ve been saying for weeks that lower oil prices would not be a boon but a scourge for the US economy, for several different reasons, and this is a big one. The losses to investors, the restructurings and bankruptcies, and perhaps even the bailouts, are a very much interconnected and crosslinked other. There’s no resilience – left – in a system like this, it bets all on red, and that makes it terribly brittle.
While the media continue to just about exclusively paint a picture of recovery and an improving economy, certainly in the US – Europe and Japan it’s harder to get away with that rosy image -, in ordinary people’s reality a completely different picture is being painted in sweat, blood, agony and despair. Whatever part of the recovery mirage may have a grain of reality in it, it is paid for by something being taken away from people leading real lives.
130 banks are being tested. 12-18 will fail. And on top of that, almost a third of 130, that’s over 40, will pass while still getting their feet wet. That means anywhere between 40% and 44% of Eurozone banks either fail or are in bad shape. If 40% of your banks are either dead in the water or barely floating, I’d say you have a major problem. We all know our world, be it politics or economics, consists almost exclusively of spin these days, but in the face of these numbers we very much wonder how many people will be willing to bet their own money that Europe can get away with another round of moonsmoke and roses come Monday.
To claim that this is the market at work makes no sense anymore. Today central banks, for all intents and purposes, are the market. Our overall impression is that the Fed has given up on the US economy, in the sense that it realizes – and mind you, this may go back quite a while - that without constant and ongoing life-support, the economy is down for the count. And eternal life-support is not an option, even Keynesian economists understand that. Add to this that the "real" economy was never a Fed priority in the first place, but a side-issue, and it becomes easier to understand why Yellen et al choose to do what they do, and when. When the full taper is finalized next month, and without rate rises and a higher dollar, the real US economy would start shining through, and what’s more important - for the Fed, Washington and Wall Street - the big banks would start 'suffering' again.