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Guest Post: Junkie Recovery
Submitted by John Aziz of Azizonomics
Junkie Recovery
A bad jobs report that left headline unemployment above 8% — and much worse when we dig under the surface and see that the real rate is at least 11.7%, if not 14.7% or an even higher figure when we take into account those who have given up looking and claimed disability — has made QE3 seem like an inevitability for many analysts.
U.S. Treasuries rallied on Friday after a weaker-than-expected August U.S. jobs report boosted hopes that the Federal Reserve would buy more bonds to help shift the economy into a gear that could create higher employment.
We now anticipate that the FOMC will announce a return to unsterilized asset purchases (QE3), mainly agency mortgage-backed securities but potentially including Treasury securities, at its September 12-13 FOMC meeting. We previously forecasted QE3 in December or early 2013. We continue to expect a lengthening of the FOMC’s forward guidance for the first hike in the funds rate from “late 2014” to mid-2015 or beyond.
Fed easing on Sept 13th is a done deal.
Quite dismal employment report confirming anemic US economic growth. QE3 is only a matter of when not whether, most likely in December.
Gold has shot up, too, the way it has done multiple times when the market has sensed further easing:
The thing I can’t get my head around, though, is why the Federal Reserve are even considering a continuation of quantitative easing. Here’s why:
If the point of the earlier rounds of quantitative easing was to ease lending conditions by giving the financial system a liquidity cushion, then quantitative easing failed because the financial system already has a huge and historically unprecedented liquidity cushion, and lending remains depressed. Why would even more easing ease lending conditions when the financial sector is already sitting on a massive cushion of liquidity?
If the point of the earlier rounds of quantitative easing was to discourage the holding of treasuries and other “safe” assets (I wouldn’t call treasuries a safe asset at all, but that’s another story for another day) and encourage risk taking, then quantitative easing failed because the financial sector is piling into treasuries (and anything else the Fed intends to buy at a price floor) in the hope of flipping assetsto the Fed balance sheet and eking out a profit.
If the point of quantitative easing was to provide enough liquidity to keep the massive, earth-shatteringly large debt load serviceable, then quantitative easing succeeded — but the “success” of sustaining the crippling debt load is that it remains a huge burden weighing down on the economy like a tonne of bricks. This “success” has turned markets into junkies, increasingly dependent on central bank liquidity injections. After QE3 will come more and more and more easing until the market has either successfully managed to deleverage to a sustainable level (and Japan’s total debt level as a percentage of GDP remains higher than it was in 1991, even after 20 years of painful deleveraging — so there is no guarantee whatever that this will ever occur), or until central banks give up and let markets liquidate. Quantitative easing’s “success” has been a junkie recovery and a zombie market.
As I see it, the West’s economic depression is being directly caused by an excessive total debt burden — just as Japan’s has been for twenty years; the bust occurred on the back of a huge outgrowth of debt and coincided with the beginning of a painful new era of deleveraging. And the central bank response has been to preserve the debt burden, thus perpetuating the problems rather than allowing them to clear in a short burst of deflationary liquidation as was the norm in the 18th and 19th centuries.
Central banks have been given ample opportunity to demonstrate the effectiveness of reflationism. And yet economic activity remains depressed both in the West and Japan.
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And when this whole mess is unwinded, it's gonna be real ugly.
In other news...
http://www.scpr.org/news/2012/09/05/34168/senator-feinstein-says-shell-r...
Senator Dianne Feinstein says she'll reintroduce assault weapon legislation.
Remember what that biatch said in 1995...
"If I could have gotten 51 votes in the Senate of the United States for an out-right ban, picking up every one of them... 'Mr. and Mrs. America, turn 'em all in,' I would have done it. I could not do that. The votes weren't here." -- Diane Feinstein on CBS "60 Minutes", February 5, 1995.
Aziz: allow me to simplify your above line of reasoning: without QE the markets crash. that is all you need to know, impotent liquidity cushions and increased true unemployment notwithstanding.
The Fed could also avoid markets crashing by drugging everyone's food and water with hopium.
that would be the average American diet plus meds and media; ie that part is actually quite more successful than QE and in many ways allowed for it.
the pavlovian HFT ponzi markets have narrow operating parameters predicated currently on QE which is to say fundamentals (banking liquidity vs banking) and PE are to be avoided at all costs. at all costs.
Sounds like you're smoking your own hopium there pal...
I was being sarcastic.
Detox man. They just put you in a coma for 24hrs and chemically detox you. No pain. Wake up all ready for more !!!
"If the point of the earlier rounds of quantitative easing was to ease lending conditions by giving the financial system a liquidity cushion, then quantitative easing failed because the financial system already has a huge and historically unprecedented liquidity cushion, and lending remains depressed. Why would even more easing ease lending conditions when the financial sector is already sitting on a massive cushion of liquidity?"
Liquidity cushion. Such a funny name for theft. Are we still pretending they didn't just outright steal money?
Let em bring it on lolmao500...its one thing to say theres an 'outright ban' and you have to 'turn em all in'....another thing to actually do it. Millions of americans know what this is all about. Molon Labe.
Millions may know what this is about but few can be counted on. Of 1,000,000 who chant, "you can pry them from my cold, dead hands," I fear only some 100 or so would actually stand their ground when pushed. If you doubt this, I respectfully recommend the excellent survival story in Jeff Cooper's "To Ride, Shoot Straight and Speak the Truth." Most people haven't drawn a line in the sand. And unless you know exactly where that line is, you tend to move it back...until it's too late.
she really is your typical Bolshevist. there is no way that gets anywhere-it is grandstanding. Gov Quinn brought it up here in pinko IL a month ago and even he isn't dumb enough to have brought it up again.
"The thing I can’t get my head around, though, is why the Federal Reserve are even considering a continuation of quantitative easing."
By.Any.Means.Possible.Shall.The.Powerful.Retain.Power.And.Influence
<Who said cutting off your nose to spite your face was a bad idea? It's all about control.>
The Powerful do not wear others soiled Depends
(print print print print......)
Extremely well articulated, CD, well spoken, sir.
It kills me the number of times I hear or read the same type of sentiment over and over and over again --- "Why do they do such and such --- because they profit from doing so!
Why do those banksters lend to the private equity leveraged buyout guys?
Why do they peddles those credit derivatives forever and ever?
Why do they manipulate LIBOR, to a mind-boggling degree?
Geez, could they possibly be profiting from it?
Why do those bank robbers hit more banks located near the entrances to superhighways than other banks?
Hmmmmmm.....something about their getaway, me thinks!
Our Achilles Heel is a continuously exploited fatal flaw of ours; in this case the tragic inability of us to fully comprehend (and then to accept as fact) what we consider to be impractical, immoral or downright evil acts by those in power. It is nearly impossible to fully understand and accept actions by others that we would never consider doing ourselves. To put it bluntly, the sociopath baffles and frightens us.
It is this abject failure of our imagination (an imagination that is constrained by a continuous case of cognitive dissonance) that chains us to our own false hopes (often anchored by prior mind control sessions and socially accepted propaganda [think a free and exceptional America])..........in this case that those who use and abuse their "power" will stop when showed (demanded?) the error of their ways. Sadly they will not stop, but rather will not only continue to do so, but will accelerate the insanity.
Aziz's analogy of a junkie hooked on ever increasing injections of fiat is apt. But the fiat fixation is just the symptom. The illness, the disease itself (the loss, the willing abandonment of our own personal sovereignty) is all consuming.
We are the problem. However our ego refuses to allow us to fully see this, thus we remain chained to the sociopath.
Most everybody in the country has been suckered into thinking that our political and economic leaders are acting on the same moral principles as the founders of the United States of America, when in fact they are acting on the same immoral principles that drove the founders to revolution.
I agree CogDis, that the problems are far deeper than market/social junkification.
And I tend to agree that really this all comes down to personal sovereignty.
The way to take it back is make ourselves economically independent from the state; insulate ourselves from tyranny. That means having your own energy supply, food supply, water supply, preparedness, etc. Other writers on this site, including yourself cover that particular topic of personal preparedness very well.
Well said, CD. Now how do we break free?
"We are the problem."
Indeed, but how do we solve it? Here's how: never tolerate a lying politician. Any politician caught in a lie should have his head handed to him (figuratively speaking). I'm not advocating violence but rather destroying the career of any politician or public servant who lies. For they will lie, and lie and lie to expand their power and further their greed. They'll keep lying even as they escort you off the train and into the showers.
Absolute power corrupts absolutely.
Who said the Fed IS considering more easing? Not the Fed certainly....just the banksters and buttboy anal-ysts as usual.
yes,
but where is the fulcrum of this sociopathic control that supports this power structure? that's what i want to know.
The fulcrum is in the psychic realm where dark forces lurk. We often call them demons but there are other terms. The PTB have made contracts, agreements with the dark forces and use fear to control the sheeples.
TD and others provide information for your mind to use as a weapon against the darkness.
FoCuS oN THe LiGHT.
Bath salts are a hell of a drug...
TV is better. It has none of the downsides, plus the hallucination can be programmed to whatever the advertisers need. Because its not a chemical sheep don't realize that its a drug; its almost perfect. Youtube is better though, because the addict adjusts the dose to optimal effect, ever at their convenience.
Welcome to the Skinner box of the real.
Wow. Anyone seen Karl Denninger and John Aziz in the same place lately? Because this sounds like Aziz cribbing from Denninger's book.
It is hard to think honestly about this subject and not reach at least partially similar conclusions, unless you're being paid to not.
Heh - just to be clear I did not mean that as a slam to either you or He Who Must Not Be Named At ZeroHedge.
I actually tried to edit my comment to reflect that, but for some reason I got an "access denied" error. Whatever.
Cheers -
That is because while you were trying to edit, someone had replied to your post.
Thou cannot edit what has been replied to.
All fiscal roads (thought paths) eventually lead to (the Fed) Rome.
Today's trivia question:
The oldest existing corporation is the City of London Corporation (wonder if there's any connection as to why London is the global financial speculation capitol???).
Was it created under the Roman Empire? Many short-term corporations were, to create various infrastructure programs, including Hadrian's Wall, etc.
You mistake the meaning of corporation.
Corporation was a word in common use BEFORE the invention of limited liability
companies.
The City of London corporation is an UNlimited liability corporation whose owners are
the old medieval trade Guilds,Merchants,Haberdashers,Tailors etc.,
The Lord Mayor of London is an elected from the members of those guilds.
His off ice is Guild Hall.
There are no financial guilds,period.
So, apart from being totally bereft of facts,your post is l amusing es a joke,nothing else.
bullshit:
the city is incorporated by prescription because there is no surviving record of charter
bullshit:
the oldest existing corporation is the office of the vatican and pope
The City of London Corporation's first recorded charter dates from around 1067. Prior to that city is regarded as incorporated by prescription.
http://www.lawrecord.com/files/37_Rutgers_L_Rec_20.pdf
1066 was the Norman conquest of Britain. The Norman conquerors of the later dark ages routinely created bogus histories to assert their right of dominion. Placing it that far back is absurd, and was probably done because that's the earliest date the impostors could defend. Its far more likely that it was created much later. They and their ruthless adversaries lie about everything, don't expect them to have ever told the truth about this. Or their not so innocent victims either. Their current objectives, tactics and ability to succeed are the only material details, everything else is a distraction. So far I like them alot better than the guys who like to be called Our Father, or Our Glorius Leader.
Yes this is a long post, if you have the attention span and the reading comprehension of a gnat don't bother. But don't say you weren't warned, and then bitch about it...bitchez.
Chapter 6 of Des Griffin's Descent Into Slavery:
Read between the lines of this 2002 Alan Greenspan speech in London:
Further along in his speech Greenspan had this to say about "The City":
IMO - The Vatican/Rome may have once controlled things but when they allowed the Rothschilds to become their bankers("guardians of the Vatican treasure") they were co-opted and then controlled. Just like the United States was co-opted and then controlled with the establishment of the 'Federal Reserve' central bank(and it's "special relationship" with the BOE per Greenspan). Now it's all over but the crying...
I've posted this here before, but the trinity of global empire in the 'new age' are:
["The City"]London(finance)
Vatican(religion)
Washington DC(military)
All three are sovereign city states. But I think the other two defer to London/BOE/the Red Shields.
http://tarpley.net/online-books/george-bush-the-unauthorized-biography
well,
in my thought paths, all roads lead to vatican, inc. and the master jesuit order puppeteers running the joint in their top notch sociopathic ways...including the poor guy w/ tiara on his head
Maybe, since the fed knows it has failed, they will just print a bunch of money, give it to the banks, then split it all up amongst themselves and get another years worth of hookers and blow while telling everyone else they just need to give the economy more time? Why do we have to complicate it?
Private Justin Beiber concert, too.
(thought to self; you should be embarrassed, that is just so fucking gay...)
They also can openly burn dollar notes at the front of their house. That would be more helpful.
Of course the owners of the Federal Reserve (a private bank) want to "preserve the debt burden" that is their income (money for doing absolutely nothing- thank you western taxpayers).
They did do someting... they lifted their finger to press the "print" button... that justifies their $963,956,376,942,000 per year salary!
Tyler posted a response to a post some time back pointing out wiping out that debt will be the absolute last thing they will do. And probably why they will not allow this market to drop. It IS their wealth.
They do not care about the muppets and will allow all to burn first.
When the smack begins to flow
Then I really don't care anymore
About all the Jim-Jims in this town
And everybody putting everybody else down
And all of the politicians makin' crazy sounds
All the dead bodies piled up in mounds
That heroin is in my blood
And the blood is in my head
Thank God that I'm good as dead
Thank your God that I'm not aware
And thank God that I just don't care
Next comes the screetching feedback.............
So good ... so long ago!
The Velvet UndergroundHeroin
http://www.youtube.com/watch?v=ffr0opfm6I4
And I guess
I just don't know
.........................................
Buffy Sainte MarieCod'ine
http://www.youtube.com/watch?v=d3bfqlTCHZk&feature=related
Little wheel spin and spinhttp://www.youtube.com/watch?v=6hVBFBCfN6E&feature=BFa&list=AL94UKMTqg-9...
And if the point of all that quantitative easing was for Ben to give money to his bankster buddies, taking advantage of the crisis as a way to justify it, then it seems to me it was pretty darn successful. Look at all those excess reserves. I don't know much, but I know they won't be there forever...that spike will drop back to historic levels. That's when I'll buy more donuts with my silver. And bacon too. Lots and lots of bacon.
As I have written many, many times on ZH and in other places transferring wealth to the financial sector is the underlying reality with QE (Cantillon Effect). But that was the case with traditional monetary policy operations since the end of the gold standard, too. That easy monetary policy enriches the banksters is assumed, because it's obvious.
Enjoy your donuts and bacon.
Tyler is clearly sharp--way more so than me. I wish I understood what he sees in Aziz.
Works cheap? I think he's right about the rolling depression, but let's keep this simple.
There is no exit strategy.
My "edit" button disappeared so I can't remove my ad hominem attack, so I'll just apologize for it. Sorry. It's much easier to say something quick (and stupid) than to back it up with a cogent explanation -- and I thought I was above that.
Other QE-efforts obviously didn't trickle down to employees, but replaced existing workplaces with lower waged jobs. What do the lower 50% US-citizens gain from such QE-effort that will firstly went into stock markets - and prices?
Excellent point. What seems to be missing from the whole QE debate is how it is highly redistributionist. Perhaps because it is *from* the middle class and poor and *to* the rich, your typical conservatives, who are so quick to point out government imposed redistribution the *other* way, haven't caught on. And your typical liberals still can't fathom that this massive wealth transfer to the rich could happen under a Democratic administration. It's refreshing to see Romney/Ryan finally starting to make feeble attempts at criticizing the Fed.
But back to your post, this redistribution is far worse than even the typical welfare checks to the poor. Reason is that is is actually destroying the economy itself (not just waste) and the founding principles of our country such as free market capitalism, individual liberty, representation, and rule of law.
Hope everyone heard Max Keiser's outstanding interview on Bonnie Faulkner's "Guns and Butter" show (American radio, KPFA).
Unfortunately, I agree with everything Max said .....
ECB and FED constant more liquidity when it is a solvency issue: and we see the markets heralded the news. As the old band Chicago sung "Does anyone really know what time it is?"
De facto gold standards and commodity spikes and increases -
When no one can afford a loaf of bread...they will know what time it is
Debt forgiveness and write offs PLEASE
QE in all its many forms was inevitable the day they "broke the buck'. That was an electronic bank run happening almost instantaneously, and it scared the bjesus out of the financial world. The tactic of excess bank liquidity, the artificial pumping up of the stock market, along with lots of other tactics such as the end of 'mark to market' are the Fed/ Tres. efforts to handle/ forestall bank runs such as occurred in 1929.
It's all wallpaper, about as thick as wallpaper and about as durable. But they will do it, until they can't.
Addictions take a long time to kill the host. Anyone who has ever known an alcoholic or substance abuser and has watched them waste away knows this. It is amazing, the punishment the human form can bring about upon itself without collapsing for years. No differnet for our economy. I think the cureent administration is a bit mazed, but they keep pushing.
But like the junkie pictures we see online, as the years go by you can see the toll. The toll, as written on their faces, tells the story. What is on the face of the current global monetary situation?
I don't need a Bonzai production to see where we stand (although I do enjoy these) these days. The lies the bolder, just like a junkie, and the situations more outlandish and bizarre. And we watch and wait.
More.
Well said. The reason many posters seem miffed is that they see QE and the intervention/manipulation as (i) originally glossing over the real problem, and now (ii) being part of the problem. An addict surrounded by people who accept the addiction is in far worse shape than someone surrounded by people who care and intervene. These markets, and our economy as a whole are very sick. To extend the analogy, now the Fed is enabling the addiction, when the economy needs to go cold turkey. Why? They don't want to deal with the ugliness that comes from quitting the stuff. And as BandGap says, it can go on a long time without collapsing, but eventually it comes to a poor end.
The Biggest Tragedy In Economics
Silver $33.73. Have to ask Keiser at what point Jamie Dimon's naked shorts blow up.
dont bother, keiser doesnt know
What a worthless article.... Aziz ain't worth reading. Furthermore, the crisis in Europe today is providing a lot of buyers in T-Debt, Gold, the markets, etc..... but this will run its course and at some point the Fed will be the only buyer again, esp in T-Debt to keep the ship floating for a little while longer. Remember, never think TPTB can't successfully kick the can down the road again, even if it has some undersirable consequences....
something about flow, no?
There are other ways of achieving flow without buying assets from banks in exchange for new currency. One of them is letting markets liquidate so that we can have an organic recovery instead of a zombie depression. Another is using a different transmission channel that doesn't dump the money immediately into the financial sector.
If the Fed is going to QE, why give it to distributors (banks) why not just send every tax payer a check. QE to banks is a perfect example of trickle down, so hated by Obama.
Because the purpose of QE is not to help the economy (although the Fed isn't necessarily against helping the economy, they just don't care one way or the other imo), but rather the purpose is to shower windfall profits on the oligarchs.
Note that the Fed's massive juicing of the economy hasn't done squat for unemployment.
http://confoundedinterest.wordpress.com/2012/09/07/economy-adds-only-960...
I wish the Keynesians would pay attention to this fact.
Krugman always screaming about unemployment (he's right to — it's a massive problem). How does he wanna fight unemployment? More QE!! Because trillions of that led to an employment recovery didn't it?
Krugman is a Liberal Elitist Central Planning Clown. He doesn't know the first thing about job creation the only thing he wants to create is more government dependency and government jobs. What you don't seem to understand is the ultra rich and the bankers got obama elected in the first place and now you think he or krugman would want them to go cold turkey. Crony Capitalism it's the obama way!
Why QE3 in spite of the fact that it failed at it's stated goal? Because it is succeeding at the unstated goal of undermining the USD as the world reserve currency.
Get your head around that.
http://www.naltrexzone.com/
Debt issuance began September with a bang. Investment grade issuers this week included GE Capital $4.0bn, Wellpoint $3.25bn, Berkshire Hathaway $2.28bn, EOG Resources $1.25bn, John Deere $1.0bn, SLM Corp $800 million, Norfolk Southern $600 million, Waste Management $500 million, American Honda Finance $1.5bn, Public Service Colorado $800 million, CMR Group $750 million, Rock-Tenn $700 million, Nissan Motor Acceptance $650 million, Principal Financial $600 million, NVR $600 million, Flowserve $500 million, Union Electric $485 million, Avalonbay Communities $450 million, Air Products & Chemicals $400 million, Verisk Analytics $350 million, Marriott International $350 million, Portmarnock Leasing $190 million, and Associate Banc-Corp $155 million, .
Junk bond funds saw inflows slow to $201 million (from Lipper). Junk issuers included QEP Resources $650 million, American Axle & Manufacturing $550 million, Starz $500 million, Catalent Pharma Solution $350 million, and Carrizo Oil & Gas $300 million.
I saw no convertible debt issued.
International dollar bond issuers included Vale $1.5bn, Digicel Group $1.5bn, BNP Paribas $1.25bn, Kommunalbanken $1.2bn, Banco Santander $1.3bn, Bancolombia $1.15bn, Inter-American Development Bank $1.0bn, Overseas Chinese Banking $1.0bn, Korea Development Bank $750 million, Australia & New Zealand Bank $3.0bn, Smurfit Kappa $300 million, WPP Finance $800 million, Hub International $740 million, Banco Cred Inver $600 million, Hudbay Minerals $500 million and Aruba $250 million.
me again :> i don't think Treasury borrowing is down either; the REITs did quite well price-wize on their re-fis ALONE; the roll + the "extra" from the low vig goosed their prices
<yawn>
mebbe the FED will QE next week
<yawn>