Unemployment

When a lot of Keynesian cowbell doesn't work, the only cure for the deflationary fever must be more Keynesian cowbell which explains why Japan is about to double down on Abenomics, and why the ECB will almost invariably expand PSPP now that the deflationary boogeyman is back in Europe. Indeed, S&P is now out calling for ECB Q€ to last for nearly two years longer than originally planned and for the size of the program to be expanded to a Dr. Evil-ish €2,400,000,000,000.

• Asia shares rally, but on track for worst quarterly loss in four years (Reuters)
• Global Rally Shows Relief at End of $11 Trillion Stocks Meltdown (BBG)
• Glencore Extends Rebound as Turmoil Shows Signs of Easing (BBG)
• Putin wins parliamentary backing for air strikes in Syria (Reuters)
• China Cuts Minimum Home Down Payment for First-Time Buyers (BBG)
• German Unemployment Unexpectedly Rises in Sign of Economic Risks (BBG)
• Japan Industrial Output Slide Hints at Recession (WSJ)

Terrible economic news is wonderful news for markets, all over again, and with the worst S&P500 quarter since 2011 set to close today, some horribly "great" news is just what the window-dressing hedge funds, most of whom are deeply underperforming the broader market (not to mention Dennis Gartman) ordered.

“The king is not in a stable condition and in reality the son of the king [Mohammed bin Salman] is ruling the kingdom,” the prince said. “So four or possibly five of my uncles will meet soon to discuss the letters. They are making a plan with a lot of nephews and that will open the door. A lot of the second generation is very anxious.”

When you tell people in self denial the market could drop 40% in a few months, they think you are crazy. They declare this could never happen. They would get out of the market before it would fall vertically. Their memories are conveniently short as their normalcy bias and cognitive dissonance blind them to what happened over three months in 2008/2009. We wonder how many willfully ignorant investors can handle a 50% to 70% haircut in their 401k, especially if they are over 50 years old. We wonder how much angrier the populace will become when the current recession results in more job losses, bankruptcies and revelations of Wall Street malfeasance. Beware of the bear.

If Congress understood the Austrian theory of the business cycle, it would have allowed the recession that followed the housing bubble’s inevitable collapse to run its course. Recessions are the economy’s way of eliminating the distortions caused by the Federal Reserve. Attempts by Congress and the Fed to end a recession via inflation and government spending will only lead to future, and more severe, economic downturns.

The solution is not to let politicians redistribute the wealth from the rich to the poor. Crony capitalism must be replaced by true free market capitalism, practiced with integrity, fairness, principled conduct, intelligence, and high moral standards. Profits generated by corporations are not evil, but seeking profits at any cost to society is reckless, shortsighted and immoral. Capitalism without capital is destined for failure. When corporate CEOs, Wall Street bankers, and shady billionaires exercise undue influence over the financial, political and judicial systems, their short-term quarterly profit mindset and voracious appetite for riches override the best interests of the people and create a sick, warped, repressive society. Today our system is in the grasp of psychopaths whose hubris and myopic focus on enriching themselves will ultimately be their downfall.

The global Bubble is bursting – hence financial conditions are tightening. Bubbles never provide a convenient time to tighten monetary policy. Best practices would require central bankers to tighten early before Bubble Dynamics take firm hold. Central bankers instead nurture and accommodate Bubble excess. It ensures a policy dead end -  the faltering global Bubble has progressed beyond the point where Fed rate policy has much impact.

Over the past few years no institution has had more consequences beholden to their words than the Federal Reserve. So much so one could reasonably argue in response to prevailing circumstances their communiques overshadowed most others; including presidents and other leaders. The problem today is; in their effort to bring more clarity via press-ers, and more as to what might be transpiring behind the doors at the Eccles building, they’ve now communicated more confusion in the last two weeks nullifying all previous efforts. In our eyes it seems to be working exactly the same as its other policy outcomes: adding confusion, uncertainty, and having the exact opposite of intended results.

CATALAN SEPARATISTS CLOSE TO 50% OF VOTES: EXIT POLL

Dear Fed Chairwoman Yellen: if you are still confused why there is so much slack and so little wage growth in the US economy despite the 5.1% "reported" unemployment rate, here is the answer: instead of a 5.1% unemployment rate in August, the true unemployment rate in the "land of the free" has been rising ever since the financial crisis, and is above 12% for the past three years.

As documented here and elsewhere, in addition to the Pope and Putin, the third world leader US president Obama is "historically" meeting this week is China's President, and General Secretary of the Chinese Communist party, Xi Jinping. But just like everywhere else, the president is mostly a figurehead for far greater political and primarily financial interests backing him. So who calls the shots in China? The following infographc lays out the key power divisions of political, economic and financial power in China at this moment.

For those unaware, a fifth of Spain's GDP is voting on whether to secede from the country on Sunday. Here is everything you need to know about the Catalan black swan.

“There’s a saying that helps explain our mood around here. When the sea is this turbulent, the only thing you can do is sit on the sand and watch. It’s not time to get in a boat."

When risk sold off last week in the wake of the Fed’s so-called “clean relent,” it signalled at best a policy mistake and at worst the loss of any and all credibility. Tonight, Yellen gets a do-over.