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Main Street Sours As Wall Street Soars

Tyler Durden's picture




 

"Wealth Effect"


 

(h/t @Not_Jim_Cramer)

 

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Wed, 02/27/2013 - 19:39 | 3283728 Just Ice
Just Ice's picture

They're breeding resentment.

Wed, 02/27/2013 - 19:41 | 3283735 MrX
MrX's picture

Get Ready!  ---->http://vimeo.com/15056028

Wed, 02/27/2013 - 19:50 | 3283751 TruthInSunshine
TruthInSunshine's picture

Bernank's "Virtuous Circle" monetary and de facto macroeconomic policy, blessed wholeheartedly by one Paul Krugman, Ph.D., Professor Emeritus Douchebagus of Fail-Nomics, one particular Larry "Jabba Sleepy Hut" Summers, one Hank "I've Got 400 million USD in tax-exempt stawk options on the line so pass TARP/TALF/QE4ever Bitchez!" Paulson, and one Break It Again Timmmmay!, will go down in infamy.

Wed, 02/27/2013 - 20:10 | 3283833 LawsofPhysics
LawsofPhysics's picture

Isn't fascism fun.  All the simple advice rings true in times like this.  If it is too good to be true, it probably is; If you can't identify the sucker at the table then it is probably you, etc. etc.

Wed, 02/27/2013 - 20:25 | 3283877 espirit
Wed, 02/27/2013 - 20:51 | 3283899 LawsofPhysics
LawsofPhysics's picture

Here is another for those arrogant fucks in NY; "When fraud is the status quo, possession is the law."  Just walk away Argentina, just walk away.

Wed, 02/27/2013 - 21:10 | 3283999 derek_vineyard
derek_vineyard's picture

party like its 1999!

Wed, 02/27/2013 - 21:32 | 3284075 espirit
espirit's picture

Keeping record.

Argentina's got to be the first one to say it...

Molon Labe!

Wed, 02/27/2013 - 22:27 | 3284207 DaveyJones
DaveyJones's picture

as empires corrupt and fall, their finance section often balloons to cover the frauds while everyone else suffers

Thu, 02/28/2013 - 00:25 | 3284556 Spirit Of Truth
Spirit Of Truth's picture

Misled faith in Mammon has historically resulted in catastrophic collective consequences:

http://thespiritoftruth.blogspot.com/2013/02/dow-14000-world-war-three.html

Wed, 02/27/2013 - 23:15 | 3284316 GMadScientist
GMadScientist's picture

They did...to Repsol!

Wed, 02/27/2013 - 23:45 | 3284421 TruthInSunshine
TruthInSunshine's picture

If you're feeling like Bernanke & Co. have stacked the chips against what is a shrinking middle class, just go new vehicle shopping to take your mind off of things, given the incredible strength of Ben Bernanke's 'Virtuously Circular' policy driven economic recovery (as long as you're connected to the incestuous inner circle with ties to the Federal Reserve Bank of New York or Capitol Hill):

Of All Major U.S. Cities, Only Median-Income Households In Washington D.C. Can Afford Average New Vehicle

Looking to buy a new car, truck or crossover? You may find it more difficult to stretch the household budget than you expected, according to a new study that finds median-income families in only one major U.S. city [fucking parasitic, taxpayer-sucking Washington D.C....whocould'veknowit?] actually can afford the typical new vehicle.


The typical new vehicle is now more expensive than ever, averaging $30,500 in 2012, according to TrueCar.com data, and heading up again as makers curb the incentives that helped make their products more affordable during the recession when they were desperate for sales.

 

According to the 2013 Car Affordability Study by Interest.com, only in Washington could the typical household swing the payments, the median income there running $86,680 a year. At the other extreme, Tampa, Fla., was at the bottom of the 25 large cities included in the study, with a median household income of $43,832.

Wed, 02/27/2013 - 20:53 | 3283954 LetThemEatRand
LetThemEatRand's picture

To err is human, to be a douchebag, Bernanke.

Thu, 02/28/2013 - 06:42 | 3285028 Stoploss
Stoploss's picture

LOLOL!!!

Wed, 02/27/2013 - 19:51 | 3283778 Cursive
Cursive's picture

@Just Ice

I'll just leave this here.

http://gawker.com/hello-from-the-underclass/

What happens when the sleeper awakens?

Wed, 02/27/2013 - 20:35 | 3283850 LawsofPhysics
LawsofPhysics's picture

If the "sleeper" is new to the work force, even the sleeper must pay some dues.  these kids coming out of college demanding to be paid the same as another employee who has been successful for ten years is just plain ignorant.  I don't care how much debt you have.  Do what I did, work your way through school dumbass.  "Work" can be anything, get fucking creative, hell if most freshman used some of their loans to buy PMs in 2009, they would have had things paid off when they graduate this spring.

Wed, 02/27/2013 - 21:47 | 3284114 PeeramidIdeologies
PeeramidIdeologies's picture

Work and precious metals, phyz that is, is a notion worth noting.

Wed, 02/27/2013 - 20:02 | 3283812 insanelysane
insanelysane's picture

People are too busy buying houses for higher values to be spending money at Walmart and JC Penny.

Wed, 02/27/2013 - 19:53 | 3283733 Cult_of_Reason
Cult_of_Reason's picture

Tulip mania 2.0

On a serious note, the stock market is being manipulated. They are trying to hold the market up. No Ifs, Buts, or Maybes.

Greenspan, "if the stock market can hold up through this, then the effect (of sequester) will be rather minor".

Wed, 02/27/2013 - 21:49 | 3284117 PeeramidIdeologies
PeeramidIdeologies's picture

There's just this joke about gardening tulips...

Thu, 02/28/2013 - 06:15 | 3285001 Notarocketscientist
Notarocketscientist's picture

Just as with the 40B housing..... the Fed prints and hands out cash to the banks at ZIRP with one instruction:

BUY STOCKS

Wed, 02/27/2013 - 19:42 | 3283737 McMolotov
McMolotov's picture

This is probably what it would look like if you could graph a hardcore drug addict's daily mental health. Depression, euphoria, then back to depression. Eventually they just die. That's what will happen to Main Street.

The dealers usually do fine, though.

Thu, 02/28/2013 - 09:13 | 3285240 TruthInSunshine
TruthInSunshine's picture

The dealers either have to keep their existing customers alive (meaning having them die is toxic for business), or they must find an equal or greater number of new customers to consistently replace those who die, in order to maintain or grow revenue and margins (assuming economies of scale are normalized).

For sake of this simple example, I'll not muddy the waters with talk of additional dealers entering the market, but merely speak of the customer base or "pie."

It's economics 101.

Wed, 02/27/2013 - 19:42 | 3283738 Racer
Racer's picture

HFT are not people so they don't care

 Quod Erat demonstrandum

Wed, 02/27/2013 - 19:44 | 3283747 orangegeek
orangegeek's picture

Dow Jones Hourly is in a vertical climb.

 

http://bullandbearmash.com/chart/dow-jones-hourly-vertical-climb/

 

And of course we have another six year high.  Isn't that excellent?

Wed, 02/27/2013 - 19:45 | 3283750 kaiserhoff
kaiserhoff's picture

Commercial real estate is on a death watch.  That can't help main street, or the 8,000 or so banks and other financials that lend there.

Wed, 02/27/2013 - 19:53 | 3283783 Son of Loki
Son of Loki's picture

It's sad to see the malls die in my town. They used to be pretty nice. Now, as one by one stores close up, the black curtain is raised in the window like a funeral home. Then a new store apears, usually of some no-name low quality  junk stuff. The "people" walking in the malls are mostly teens with their jeans dropped down to their knees showing off their filthy underwear. It's too depressing going to these malls anymore.

The only local outdoor strip malls that survive have a check cashing place, nail place and perhaps a pizza or donut store if they are lucky.

Bleak is the word that comes to mind. Perhaps "dismal" is even more accurate.

Wed, 02/27/2013 - 19:56 | 3283796 Moe Howard
Moe Howard's picture

Booze stores seem to keep the strip malls alive around here, of course the mandatory nail shop as well.

Wed, 02/27/2013 - 20:02 | 3283813 McMolotov
McMolotov's picture

I've noticed the same thing. The Detroit-ification of the whole country seems to be picking up speed.

Wed, 02/27/2013 - 21:51 | 3284124 PeeramidIdeologies
PeeramidIdeologies's picture

Actually you just described the wealth effect.

Wed, 02/27/2013 - 23:16 | 3284319 GMadScientist
GMadScientist's picture

Now where will you trawl for jailbait!

Wed, 02/27/2013 - 23:55 | 3284459 Tijuana Donkey Show
Tijuana Donkey Show's picture

Facebook. "Hey baby, I have a hot meal over here!"

Wed, 02/27/2013 - 19:48 | 3283762 Cursive
Cursive's picture

What is "financial repression," FTW, Alex!

Wed, 02/27/2013 - 21:14 | 3284016 max2205
max2205's picture

Turn that frown upside down.

Wed, 02/27/2013 - 19:55 | 3283773 swissaustrian
swissaustrian's picture

Not the first time Wall Street was behind the curve:

https://www.youtube.com/watch?v=5gIMWLH7ylw

Wed, 02/27/2013 - 19:51 | 3283776 bidaskspread
bidaskspread's picture

Must be the bullish run from the sequester; correlates to the 2013 decrease in discretionary income and non-seasonally adjusted claims. Just need some mass layoffs (thanks JPM) and this thing will hit 15,000!!!

Wed, 02/27/2013 - 19:52 | 3283780 ebworthen
ebworthen's picture

People losing jobs, cashing out 401K's and IRA's, paying a decade of income to get healthcare, and the "we won't raise taxes" 2% tax hike starting January wouldn't have anything to do with confidence, would it?

Wed, 02/27/2013 - 19:55 | 3283791 trebuchet
trebuchet's picture

wall st dump and pump = smart money dump  + "BTFD sheeple"  

 

look at how the bottom getting bigger and bigger and the subsequent top not quite making it up to the old one

 

One of these days we gonna get a deer in the headlights moment

 

I just LOVE that piccie!!!

 

STFT !!!!!  YEEEEEEEEEEEHAAA!!!!!!! 

Wed, 02/27/2013 - 21:50 | 3284118 Dr_Lucid
Dr_Lucid's picture

Speaking of cashing out 401(k)s / IRA's, you sir are spot on.  I recently met with an old college buddy who is now a "financial advisor"  He went on and on about how his firm was raking in AUM due to client's tapping their DB / profit sharing / tax deferred plans.

Not only are American's taking loans on their tax qualified assets ( the 401(k) was a massive mistake) , but they are falling over themselves to take advantage of 72(t) code provisions or in-service distributions allowing for

  1. ... part of a series of substantially equal periodic payments made, at least annually, for the life or life expectancy of the individual or the joint lives or joint life expectancy of the individual and his designated beneficiary.

You can take withdrawls all day as long as long as they are at least 5 years running or up until you reach 59.5.   No need to wait until retirment age and no need to worry about the 10% penalty.

And JUST LIKE THAT, where the past run in equities was stoked by the ATM know as the home equity loan, given that the home equity well has run dry advisors have found another tool to keep the fiat spend growing and this time its America's retirement funds.

Thu, 02/28/2013 - 09:27 | 3285273 TruthInSunshine
TruthInSunshine's picture

Even with the historically epic bear market rally of 2009 through present (which only has been matched by another bear market rally seen amidst the Great Depression, from 1929 to 1933), massive numbers of "long term" 401(k) and other equity market-funded retirement plan holders are significantly underwater (and this is true even if one uses nominal figures, and doesn't adjust these portfolios to reflect real returns due to inflation) on the equity market-derived portion of their retirement plans.

The next true super crisis that's already begun is the literal "that which shall not be referred to often- or if given a choice- at all" underfunded pension/401(k)/retirement fund gap, which is going to devastate dozens of millions over boomers over the next decade.

I do not have the precise data at my ready, but the replacement of funding into equity-derived and other 401(k)/pension/retirement funds by the generations younger than boomers is something like 17% or 18% on the dollar.

Think about the long term implications of that as it pertains to the economy & entitlement programs, let alone the next wave of paper wealth destruction that's essentially certain to take place given the basic arithmetic.

Wed, 02/27/2013 - 19:52 | 3283782 Dr. Engali
Dr. Engali's picture

Americans are freaking stupid. How many times can they fall for the scare tactics out of Washington and the media? I'd love to see that confidence chart plotted along side every debt ceiling manufactured crisis.

Wed, 02/27/2013 - 19:53 | 3283784 busted by the b...
busted by the bailout's picture

You unlock this door with the key of imagination. Beyond it is another dimension - a dimension of sound, a dimension of sight, a dimension of mind. You're moving into a land of both shadow and substance, of things and ideas.

You've just crossed over into the Crash Zone.

Wed, 02/27/2013 - 19:55 | 3283792 NoWayJose
NoWayJose's picture

The only wealth effect today is going to banks and HFT's. Yes, some 401k's are up, but you cannot touch them until retirement and there is no certainty it will be there when you retire (especially if QE goes away). There is no wealth effect to stimulate the economy today.

Wed, 02/27/2013 - 19:56 | 3283798 davidsmith
davidsmith's picture

It should be obvious what is going on: the oligarchy is cannibalizing the society.  First start with the poor: boot their asses right out.  Then move up and take all the money away from the working poor (J.C. Penney results).  Then move up for the major assault on homeowners.  It's the corporatist playbook.

Wed, 02/27/2013 - 19:57 | 3283800 chump666
chump666's picture

 ZH

Have you been following the TB outbreak in LA? 

http://www.examiner.com/article/cdc-to-investigate-escalating-los-angele...

Wed, 02/27/2013 - 21:25 | 3284049 toady
toady's picture

The wife said she was coughing up blood. Maybe she should go to the doctor ....

Wed, 02/27/2013 - 22:52 | 3284260 Orly
Orly's picture

Chump, surprisingly, the Japanese didn't much care for Abe's picks.  This might be a sell the news event.  Euro back under pressure.  I'll watch the EJ to see if it breaks lower.

Is it risk-off for real this time?  Starting to get that creeping feeling...

How do you think?

Wed, 02/27/2013 - 23:20 | 3284330 GMadScientist
GMadScientist's picture

Who cares if the homeless have healthcare?

Oh....everybody.

Wed, 02/27/2013 - 19:58 | 3283804 SillySalesmanQu...
SillySalesmanQuestion's picture

We can see from those charts who is truly confident...

Wed, 02/27/2013 - 20:02 | 3283815 GrinandBearit
GrinandBearit's picture

Wealth effect, huh?

Plot the DOW (inflation adjusted) against gold and see what happens to the graph.

 

Wed, 02/27/2013 - 20:04 | 3283821 adr
adr's picture

But if my house doubles in value by next year I can gain $150k in wealth. I can sell my home and buy a $50k BMW and still have $100k. I put $100k down on a $250k home and have the same mortgage payment as my $150k home. Then the next year my $250k home will be worth $500k. I can sell it and then buy a $100k Porche Panamera. Since I feel richer I go all out and leverage myself to get a $500k home knowing the following year I can sell it for $1 million. Now I have $500k in cash. With that kind of money I put it in Netflix. In six months it will be worth at least $1.5 million.

Now I can buy a $1 million home and have $500k to invest. Maybe Priceline will have a 5:1 stock split and then double again in three months, better buy my shares before the split. Fuck, I'm rolling in dough. Private jet fo me.

IT'S GONNA HAPPEN. MY REALTOR AND STOCK BROKER TOLD ME SO!!!

Wed, 02/27/2013 - 20:11 | 3283825 Temporalist
Temporalist's picture

When the people that make dreams are laying employees off...who will keep the hope and change alive?

DreamWorks Animation to Lay Off 350 Employees

"DreamWorks Animation will lay off approximately 350 employees, about 15 percent of its full-time staff, CEO Jeffrey Katzenberg and CFO Lewis Coleman said Tuesday during the company's fourth-quarter earnings call.

The Glendale, Calif.-based company posted a loss of $83 million in the fourth quarter of fiscal year 2012 due to development costs and the poor performance of its latest film, "Rise of the Guardians." "

http://movies.yahoo.com/news/dreamworks-animation-lay-off-350-employees-...

 

And since someone mentioned Best Buy on another thread:

BEST BUY JOB CUTS: 400 layoffs at Richfield headquarters

"Best Buy confirmed Tuesday that it will cut 400 jobs at its Richfield, Minn., headquarters. The job cuts are part of a restructuring plan called "Renew Blue," and the company expects to save about $150 million via the reduction."

http://www.myfoxtwincities.com/story/21359668/best-buy-job-cuts-400-layo...

Wed, 02/27/2013 - 20:17 | 3283852 Temporalist
Temporalist's picture

Just to add one more:

Young adults are too broke to get loans

"The share of younger households owning their primary residence fell to 34% in 2011, down from 40% in 2007. Only 66% owned or leased at least one vehicle in 2011, down from 73% four years earlier, as car loans plunged. Credit card balances have also fallen.

The only debt on the rise is student loans. In 2007, just over a third of young households had outstanding student debt. That jumped to 40% in 2010."

http://money.cnn.com/2013/02/27/news/economy/young-adults-debt/index.htm...

Thu, 02/28/2013 - 08:41 | 3285176 GMadScientist
GMadScientist's picture

$150M / 400 == $375k/head average...WTF are they doin over there?

Wed, 02/27/2013 - 20:05 | 3283827 Moe Howard
Moe Howard's picture

Main street? Full of pot holes and zero percent interest KIAs.

 

Fuck Wall Street.

Wed, 02/27/2013 - 20:18 | 3283837 Critical Path
Critical Path's picture

The driving conditions in my city would be much better (and favorable for the life of my vehicle) if the city opted for gravel roads instead of what passes for roads around here.  The parking enforcement is certainly alive and well though

Wed, 02/27/2013 - 20:06 | 3283829 Critical Path
Critical Path's picture

My sole purpose is to maintain price stability and control inflation as well as ensure an environmental that is favorable to relatively low unemployment

 

...... completely and all out uttely fails at both

Wed, 02/27/2013 - 20:11 | 3283839 DavidC
DavidC's picture

Bernanke is not as bright as he thinks he is. If he'd got the Dow into the 10,000 to 12,000 range he'd be in a much better position to manage a recovery, instead of which he's determined to get back above the previous highs even though those were BUBBLE highs!

He's not as bright as he thinks he is.

DavidC

Wed, 02/27/2013 - 21:16 | 3284024 are we there yet
are we there yet's picture

To be accurate, the 2008 dollar was worth more, so some illusiory deflation of the bubble is present by Timmehh inflating the money supply.

Wed, 02/27/2013 - 21:39 | 3284098 Pareto
Pareto's picture

Kudlow had his tribe of idiots on tonight (including Don Luskin) arguing Bernanke maybe isn't doing enough!  And in the very next segment applauding Kudlow as a true conservative.  Its fucking goofy.  Its like you can't hide from the insanity.  Its everywhere.  Just print.  Problem solved.  Its like you want to punch the very next guy who says "yeah price deflation is very bad and must be avoided at all costs."  Yeah thats right.  Fuck market principles.  My sister wants to invest in the housing market and now I gotta try and persuade her not to, but that she doesn't understand economics, and I got Kudlow and Luskin to thank for putting that asinine thought into her head.

But hey, fuck maybe I'm totally out to lunch on this and she's right.  Maybe I'm not as bright as I think I am.

Thu, 02/28/2013 - 05:54 | 3284990 Notarocketscientist
Notarocketscientist's picture

The only good thing I have to say about that Jack Ass Kudlow.... is that he is a line sniffer. 

Wed, 02/27/2013 - 22:46 | 3284247 Hongcha
Hongcha's picture

DavidC, he is taking ordersa straight from the WH.  The One primps himself with how high DOW is; he mentions it in speeches.  It's a trophy number.

Wed, 02/27/2013 - 20:14 | 3283841 WhiteNight123129
WhiteNight123129's picture

The Fed will print for as long as the newly created currency units do not ignate real inflation. The newly created currency units are now shuffling between different financial assets, which has close to 0 impact on the real economy. The only user of the newly printed money who can actually inject that in the Economy is the Gov.

Once the massive increase and injection of newly created currency unit start to overwhelm deflation forces, the Fed will stop printing. No need to print if the econmy shows signs of inflationary expansion. At that point the Fed will have to contain the flow of those newly created currency units flowing into the real economy. It could create flatflation, inflationary depression, or stagflation in the best case scenario.

The printing is caused by shitty economy and deflaionary forces. It creates a boom in financial assets. Once the real economy receives the newly created units, interest rates will have to rise and rise and rise. However they will only rise because of inflation (and hence higher nominal GDP -- even if real GDP is 0). Those higher and higher interest rates will burn the bonds crisp and Equity multiples crisp.

Go Benny B. print them into inflationary hell, we have PMs and will survive teh inflationary fire.

 

Wed, 02/27/2013 - 21:04 | 3283981 thismarketisrigged
thismarketisrigged's picture

well good news for us. jim cramer just said there is nothing to be worried about, and sees this market going higher, so that means the crash is just around the corner.http://www.cnbc.com/id/100503151

Wed, 02/27/2013 - 21:05 | 3283985 are we there yet
are we there yet's picture

The fiscal cliff is about 7 % of fed budget, and nowhere near the yearly deficit.  Even 'Honey Booboo' has limits to whining. Picture 'Honey Booboo' attempting to do Kabuki theatre and you have congress in session. My apologies to the Japanese

Wed, 02/27/2013 - 21:22 | 3284044 realtick
realtick's picture

Nice charts

Wed, 02/27/2013 - 21:30 | 3284063 EclecticParrot
EclecticParrot's picture

Both charts look remarkably similar, except one is missing the final third.

Thu, 02/28/2013 - 00:39 | 3284101 JKearney3153
JKearney3153's picture

Hmmmm, maybe it's about time to get some more of those precious metals you ZHer's are all hyped about....

Wed, 02/27/2013 - 22:05 | 3284151 Billy Shears
Billy Shears's picture

yeah,  but "they" only have to satisfy 1% !  Going lower!

Wed, 02/27/2013 - 22:07 | 3284152 CaptainSpaulding
CaptainSpaulding's picture

Both the smoke shop and wine store in my neighborhood are doing outstanding business. All my dollars are belongs to Carlo Rossi and Honduras

Wed, 02/27/2013 - 23:24 | 3284350 GMadScientist
GMadScientist's picture

Mmmm....Ripple and Lucky Strikes.

Wed, 02/27/2013 - 22:18 | 3284185 Razzle Dazzle
Razzle Dazzle's picture

No end in sight to this party. Spin cycle dial set on max and market laundering cycle coupled to the print machine.  This sniffs of pre-2008 laundry, but the re-run seems longer. The only twist to 2008 is imminent Euro collapse (and Euro QE)  and unlimted US QE support. Not sure which trumps which. Inflation, bank contagion, derivative disaster, FED bond re-valuation, bond run, bank run something has to give, maybe we got used to disaster. Either way, this market build up will end bad and this is a sign that the party jukebox plug will be pulled. The long gold path is lonely. Whilst gold took the stairs down, mid-teir gold stocks took the express lift down, still the basement is not in sight.When the market tanks, gold shares will get hit again and join the trend just by the fact they are shares. When money starts crossing the room to gold, it will be realised where gold comes from. Like all plans that have many parts and sequence of events there are too many things that can go wrong. I'm struggling to make sense of insanity.

Thu, 02/28/2013 - 07:29 | 3285081 MisterMousePotato
MisterMousePotato's picture

Something has to give:

http://www.youtube.com/watch?v=7jGbtIdOZ-M&feature=youtu.be

(Funny for anyone, but absolutely drop dead hilarious if you know/like the song.)

Wed, 02/27/2013 - 23:09 | 3284301 disabledvet
disabledvet's picture

50,000 announced layoffs in the past two months for Wall Street does not strike me as "winning." In the meantime "that Den of Financial Elites called North Dakota" keeps on keeping on at 2% unemployment and more money than God FOR THE PEOPLE. i'm still not convinced i should be moving there...but i CAN be. this recovery has expanded to include a multitude of other States now as well...nay, veerily...does not include my own and it shows. We've just gotten crushed by these lay offs as well. the irony that "the world's financial capital" sits in a State with enough oil and natural gas reserves to cover its needs "forever" and nothing is done about it is not lost on me. all these lawyers want is for there to be a platform that "we the people" debate and not for them to actually do anything "in their stead." but hey...people have already abandoned the whole region for greener pastures...and indeed those pastures could wind up looking mighty green here soon. here's what it looks like just 100 miles south of here: http://seekingalpha.com/symbol/cog
ridiculous amounts of dough being made down there. and when we should be making everything up here http://seekingalpha.com/symbol/ddd?source=search_general&s=ddd
instead we're just treading water. it's hard to imagine this is a place where "it happened here first." now it's just the sounds of birds chirping...

Wed, 02/27/2013 - 23:23 | 3284343 GMadScientist
GMadScientist's picture

If only we could all work on the Bakken fields extracting a commodity with nearly completely inflexible demand.

 

Thu, 02/28/2013 - 05:10 | 3284956 polo007
polo007's picture

http://online.wsj.com/article/SB120424639824701397.html

The Bernanke Reflation

Naturally, the Fed and its most vocal constituencies -- Wall Street and politicians -- see nothing much to worry about. Wall Street sees a reflation as a way to ease its credit problems, as price increases ease debt burdens and perhaps reflate housing values. Congress and the White House see a way to perhaps avoid a near-term recession, which might get them past the election.

As for the Fed, its Governors are dusting off their favorite intellectual justifications. We are told that inflation isn't as bad as it seems because "core inflation" -- which excludes food and energy prices -- isn't rising as fast as the consumer price index. However, food and energy are what most Americans are having to spend ever more of their paycheck to buy. Thus the Bernanke reflation is in part self-refuting even as a short-term recession antidote, because it robs consumers of some of their discretionary income just when the economy needs it.

Meanwhile, even the Phillips Curve is making a comeback. That's the notion -- popular before it was discredited in the 1970s -- that there is a trade-off between inflation and economic growth. In its new version, argued by Fed Governor Frederic Mishkin, the Phillips Curve doesn't exist in the long term but does in the short term. Thus the Fed can afford to open the monetary flood gates now because the slower economy could lead to lower prices later this year. Then when the economy recovers, the Fed can afford to tighten money again.

This is a beguiling intellectual construct, but it puts a great deal of weight on Fed Governors to know when to tighten again. They were supposed to do something similar in 2003-2005, but they were terribly wrong. Then as now they were also dismissing such forward-looking price signals as gold and oil and instead focusing on such misleading indicators as "core inflation" and the money supply. Mr. Mishkin may be seen as a monetary wizard at the Fed, but to investors around the world he is beginning to look more like a high-class inflationist.

The people who aren't being fooled by all this are the American people. They don't pay their bills with "core" dollar bills, and they know those dollars buy less with each passing month. This explains their rising economic anxiety -- and anger -- better than trade or job losses do, especially since the job market has remained relatively healthy. Inflation is the great thief of the middle class, as even Americans who don't recall the 1970s are learning. With its all-in reflation bet, the Bernanke Fed is gambling with their money.

Thu, 02/28/2013 - 07:56 | 3285109 ArmyofOne
ArmyofOne's picture

Cash on the side lines, buy the dips.

 

CNBC

 

Wash spin do it again. 

Thu, 02/28/2013 - 08:54 | 3285206 overmedicatedun...
overmedicatedundersexed's picture

I don't understand all the depressed posts here, all the MSM is hopped up on the excellent health of the economy, the well connected rich are doing swimmingly well. hollywood even bought the Potus's wife to do some work for them.

selling movies nobody goes to, in empty theaters across the land, oops there I go being negative.

Thu, 02/28/2013 - 10:40 | 3285543 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Interesting trend to look into for the Tyler(s) to do a more in depth piece on. I think we may have a general idea what is driving this but this one probably should be looked into more closely.

http://worldtruth.tv/us-banks-shaken-by-biggest-fund-withdrawals-since-911/

US Federal Reserve is reporting a major deposit withdrawal from the nation’s bank accounts. The financial system has not seen such a massive fund outflow since 9/11 attacks.

The first week of January 2013 has seen $114 billion withdrawn from 25 of the US’ biggest banks, pushing deposits down to $5.37 trillion, according to the US Fed. Financial analysts suggest it could be down to the Transaction Account Guarantee insurance program coming to an end on December 31 last year and clients moving their money that is no longer insured by the government.

The program was introduced in the wake of the 2008 crisis in order to support the banking system. It provided insurance for around $1.5 trillion in non-interest-bearing accounts with a limit of $250,000. It was aimed at medium and small banks as the creators of the program believed bigger banks would cope with the crisis themselves.


So the current “fast pace” of withdrawal comes as a surprise to financial analysts because the deposits are slipping away from those banks which supposedly were safe. Experts expected savers in small and medium banks would turn to bigger players come December 31.

There are a number of reasons behind this unpredicted fund outflow. Some experts believe it has to do with the beginning of the year when the money is randomly needed here and there. Others have concluded the funds are getting down to business and being invested.


Another set of data from the US Federal Reserve shows some deposits may have moved within the banking system from one type of account to another.

 

Sourced from here

http://rt.com/business/us-major-deposit-withdrawal-740/

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