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The Pretense Of Forward Guidance
Submitted by James H. Kunstler via Kunstler.com,
Guess what? There is none. Rather, the Federal Reserve practice of Delphically divulging its intentions ought to be understood as the master pretense of US economic life — the delusion that wise persons are actually in control of anything. The result of this guidance continues to be the mis-pricing of everything, especially the cost of money as represented in the operations of debt, and hence the value of everything denominated in money.
The interventions of our central bank have really been aimed at one objective: to compensate for the contraction of real wealth in an economy that replaced purposeful activity with Kardashian studies and tattoo art. Purposeful economic activity provides surpluses that allow for the repayment of debt. Kardashian study and tattoo art lead to entropic entrapment, aka, a death spiral of culture and economy. That’s where we are at. The debt is now eating us alive, and the central bank trick of piling on additional debt to mask the failure of repaying old debt is losing its palliative punch.
One big problem with the Fed’s policies is that the mis-pricing of everything ends up being expressed in the very statistics (GDP, unemployment, inflation) that are used to justify further interventions that produce ever deeper perversities. That is, the Fed distorts prices, which distort statistics used to make policy, which prompt the fed to ramp up policies that further distort prices, a dangerous recursive dynamic. Since prices are the basic information for running an economy, we end up in a situation where nothing really adds up. The antidote to that has been pervasive accounting fraud — the covering-up of mis-pricing, pretending that things add up when they don’t.
The poster child for that, of course, is the US government, the operations of which are so saturated in falsity that the inspectors general in every branch and agency might as well just fling linguini against the wall to arrive at whatever conditional reality suits their bosses. The pretense extends to the largest financial institutions including the TBTF banks (their vaults stuffed with the detritus of epic swindles), to the giant pension funds, which were among the chief victims of the swindling, to the corporations dedicated to producing this-and-that, whose cost structures are so fatally impaired by all the aforesaid mis-pricing and accounting fraud, that they must resort to massive stock share buy-backs to maintain the illusion of being going concerns, to the millions of ordinary households running on maxed-out plastic.
These perversities have been in force for five years now, and “folks” — to use our president’s fond locution for the diabetic masses — are beginning to get nervous about the five-year duration of the so-called bull market. This refers to the stock markets collectively, which have generally only gone up since 2009 in an economic environment that can only be called unconvincing. The word “bubble” is heard more and more in casual chatter. Events like Friday’s tanking of the NASDAQ put people in mind of the ominous Four Horsemen.
One thing we really do know, as good old Herb Stein put it, is that things go on until they can’t, and then they don’t. Sighs of relief were heaved all last week when it appeared that the Obama / Kerry response to doings in Ukraine amounted, more-or-less, to a policy that might be called “Oh… nevermind.” Personally, I’m relieved that our leaders decided not to start World War Three over that, since in the aftermath there might be no human historians left on planet earth to record our monumental stupidity for the cosmic annals — something for our successors, the sentient cockroaches, to meditate on. But a certain nagging emptiness remains in that void of initiative. The spring zephyrs are finally caressing the tender hills and vales of upstate New York. Something is in that wind. I think I scent revolution.
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excellent post (bc there's no peak oil nonsense here).
re no peak oil nonsense
Best be careful - denying peak oil is a thought crime.
-Niels Bohr
Sounds like Yogi....
Yogi Berra?
"One thing we really do know, as good old Herb Stein put it, is that things go on until they can’t, and then they don’t."
...or... Mr Market always wins in the end!
Self perception of what you make of things always win,
for better or worse of you.
I live in my own world and I see stock prices diluted while being levitated to levels never seen before.
I watched currencies for decades and finally none would get me fed no matter how much I convert back and forth.
I just came back from a business trip in Tomsk, Siberia. I had a free day so I decided to visit the university (it's a university town). I attended a lecture on "the economy of natural resources" and talked to 2 geology professors (I met an English-speaking student and she was tranlating for me).
I asked them both "what is the origin of oil?" and they both gave me the same answer: professors and experts are divided in 2 groups on this issue. The "non-organic group" and the "organic group" (sic), i.e. those who believe that oil is a fossil fuel (comes from dead dinosaurs and forests) and those who say energetic carbon compounds (oil and gas) are formed from minerals at high levels of pressure and temperature deep inside the Earth's crust. Both also said that whichever groups they belong to, they are humble and grant theoretical credence to the competing position.
When I told them "do you know that the fossil fuel theory is considered in the West as true as the fact that Earth is round?" they both said "of course, you need to believe in scarcity, otherwise there is no reason to go to war over it".
So basically Russian professors, according to my anecdotal experience, and humble, moderate and skeptical.
http://en.wikipedia.org/wiki/Abiogenic_petroleum_origin
Al Gore himself dumped billions upon billions of trees
into those future oil reservoirs in a former life for this his scam.
When I talk about the concept of abiotic oil to my friends they look at me like I'm from Mars. The media in the USA has done a great job of hiding that theory from the masses.
RETAIL TSUNAMI: 16 MAJOR CHAINS CLOSING MORE STORES
http://wealthydebates.com/retail-tsunami-16-major-chains-closing-more-st...
Please trade us your gold, and your labor, and your oil for our infinite bucket of Federal Reserve Bitcoins.
Relax with the guidance just take what you need.
"...Kardashian studies and tattoo art."
Yup. They used to call Tuberculosis "Consumption".
The spring zephyrs are finally caressing the tender hills and vales of upstate New York. Something is in that wind. I think I scent revolution.
Nope, that smell is dog shit that has been covered by snow for four months.
There is no higher authority than the Federal Reserve Chair(wo)man.
<And you're better your bottom dollar there isn't. You are a gambling (wo)man aren't you?>
CNBS just said Buy the Dip for the thousandth time since the market opened today. Never been a better time to buy stocks.
The economy is as sound as the dollar.
Uh-oh!
Reverse repo is the new QE - every time the repo starts (12:30), yields miraculously reverse course and start to go up.
NY FED = short treasuries
Falsity? Is that anything like "falsiness"?
Man, this guy really hates tattoos.
This is what happens when the cool kids who love communism and cronyism get to run the show.
Socialism and capitalism are two sides of the same coin.
Socialism robs you of your civil rights, undermines the constitution, brainwashes you to believe its for the greater good.
Capitalism focuses more on robbing state assets trough privatization and miring you in debt you will never be able to pay.
Both work towards the same goal, getting all power and everything worth anything into the hands of very few people, leaving you in a pile of debt, and as far away from democracy as you could possibly get.
We can create a better world, if we are ready to fight for it.
http://www.youtube.com/watch?v=bdRUQWVGENo
hoarding toiletpaper in Tokyo is normal
mass multi-million person per year immigration is normal
loan fraud is normal
They're lots better at 'reverse guidance.'
http://www.theaureport.com/pub/na/ted-dixon-what-gold-stock-insider-trading-tells-us
The Gold Report: The price of gold fell more than 6% in March. To what do you attribute this?
Ted Dixon: Gold took a one-two punch in late March. The first was the widening of the renminbi trading ban in China by 2%, which added extra costs to buying and hedging gold. The second was the surprisingly hawkish tilt of the U.S. Federal Reserve, pointing to interest rates rising a little bit sooner. Tighter monetary conditions do not usually benefit gold.
TGR: Increased import duties in India haven't reduced gold buying there. Why would China be different?
TD: I think the flows are different. In China, there is a lot of financial activity related to gold, whereas in India gold buying is cultural and driven by consumer consumption.
TGR: We've heard about greatly increased governmental buying in China, have we not?
TD: There have been rumors of that, and the Chinese media has called for the government to boost its gold reserves. That could provide a longer-term counterbalance to the shorter-term renminbi pressure.
TGR: DataQuick's latest U.S. national homes sales snapshot shows that "prices are flatlining or drifting lower while sales are sinking like a stone." Meanwhile, "The big private equity firms [are] exiting the [housing] market." These data don't suggest a U.S. economic recovery, do they?
TD: Basically, insiders are telling us that stock prices now have priced in a lot of good news, so it would be interesting to see how they react to whips to the downside. One has to be cognizant that much of the U.S. equities rally has been driven by the Fed and, arguably, has little to do with GDP growth one way or the other.
TGR: With regard to this hawkish tilt, it has been assumed for several years that we'd see higher interest rates and an end to quantitative easing (QE) only after an economic recovery. Given how weak the U.S. economy remains, can we assume that the Fed believes it is close to exhausting the utility of zero interest rates and quantitative easing?
TD: The Fed has a big ticking time bomb on its balance sheet. It is still piling up reserves, and I'd love to be a fly on the wall in staff meetings that don't get reported. I have to assume there is much concern about what happens to those reserves, particularly if the economy does surprise on the upside. In this sense, the low-altitude economy has been a blessing for the Fed.
We may have a little game of bluff going on here. The Fed is taking a hawkish stance now, saying it has to move rates up earlier, but, of course, if the economy remains weak, and the Fed has to backtrack, that opens up risks on the other side. The Fed has been running a big monetary policy laboratory over the past few years, and sometimes in laboratories accidents happen. At this point, however, the stock market seems to have assigned a very little risk premium to something bad happening.
TGR: It has been argued that if you remove the Fed's monthly stimulus from the monthly GDP report, GDP is actually shrinking, not growing.
TD: The Fed has certainly manipulated the economy. It has picked its favorite sectors, housing and autos. I believe that Operation Twist and QE have hurt the commodities base because they have favored interest-sensitive industries. Now, however, these industries will have to stand on their own two feet, and we'll see how this experiment in industrial policy works out. Usually, planned economies have a day of reckoning when stimulative measures run out of steam.
Ted Dixon is co-founder of INK Research (Insider News and Knowledge), Canada's first online financial news and research service dedicated to providing data on public company insider trading. (Free services are found on CanadianInsider.com and InsiderTracking.com.) He worked previously for Connor, Clark & Lunn Financial Group in portfolio strategy and product development, the Fraser Institute as an analyst, TD Bank as a treasury specialist and the Vancouver Stock Exchange as a floor trader. He has lectured in corporate finance at the BC Institute of Technology and is a Chartered Financial Analyst and member of CFA Vancouver. He holds a Master of Business Administration in financial management from the University of Chicago.
How can the Fed, BLS, company, etc offer any forward guidance when they can't predict the weather? Don't these ass clowns always blame the weather for everything?
"We are sure this will provide global meteorolgists and economists plenty of ammo for their hockey-stick recoveries to miss expectations..."
http://www.zerohedge.com/news/2014-03-25/goodbye-polar-vortex-hello-sola...
http://www.zerohedge.com/news/2014-03-27/spot-crushing-impact-tropical-v...
The study of economics is often baffling and confusing. Many economic theories exist but many are full of holes and conundrums. Much of how people react to a policy may have to do with timing and perception instead of reality. Economics is full of loops that feed back upon themselves and unexpected pitfalls based on expectations.
All this can become quite abstract. Economist predict events that never tend to unfold as expected or planned. Many of the "modern monetary theories" in use today have not been proven over time, but reflect an attitude that we can control economic cycles better than in the past. The article below looks deeper into this subject.
http://brucewilds.blogspot.com/2014/03/few-people-really-understand-econ...