Challenging a Sacred Cow of Banking Dogma
You don’t benefit from it, but you pay for it as a result of the government losing out. Yes, the government complacently sits back and does nothing while tax havens enable people to put their money hidden away in some secret off-shore excuse for a bank while at the very same time the taxpayer ends up paying for what the state is losing out on.
In one of his most voracious tomes, The Wall Street Journal's Fed-see-er Jon Hilsenrath prepared 726 words and published them in 5 minutes to explain that the Fed's forecasts for Q1 were dismally wrong, that the future will all be rosy, and their forecasts spot on, and that the Taper is steady..."Fed officials acknowledged the first-quarter slowdown was worse than expected by saying activity "slowed sharply." Previously, they had just said activity merely slowed...Still, officials nodded to signs of a pickup in economic activity in March and April, suggesting they aren't too worried about the winter slowdown."
Who can forget the amazing story of Alex Hope which was all the rage two years ago? Probably everyone. So here is a timely reminder because as it turns out young master Hope, who struck the proverbial gold at the tender age of 23, was nothing more than the latest Ponzi schemer whose only success in life was finding the absolute, and quite rich, idiots who believed his lies. Well, that, and being able to transform himself from a catering manager working at Wembley Stadium into an FX trader.... even if a fake, criminal and absolutely terrible FX trader.
“On the way in, there’s insatiable demand.” Alas, “it’s going to be a disaster on the way out.”
The similarities between 2007 and 2014 continue to pile up. And you know what they say - if we do not learn from history we are doomed to repeat it. Just like seven years ago, the stock market has soared to all-time high after all-time high. Just like seven years ago, the authorities are telling us that there is nothing to worry about. Unfortunately, just like seven years ago, a housing bubble is imploding and another great economic crisis is rapidly approaching.
As we noted earlier, The Federal Open Market Committee (FOMC) has continuously been overly optimistic regarding its expectations for economic growth in the United States. A major reason for the FOMC’s overly optimistic forecast for economic growth and its incorrect view of the effectiveness of quantitative easing is the reliance on the so-called 'wealth effect'. However, "There may not be a wealth effect at all. If there is a wealth effect, it is very difficult to pin down..." Since the FOMC began quantitative easing in 2009, its balance sheet has increased more than $3 trillion. This increase may have boosted wealth, but the U.S. economy received no meaningful benefit. Furthermore, the FOMC has no idea what the ultimate outcome of such an increase will be or what a return to a ‘normal’ balance sheet might entail. Given all of this, we do not see any evidence for economic growth as robust at the FOMC predicts. Without a wealth effect, the stock market is not the “key player” in the economy, and no “virtuous circle” runs through the stock market.
The 'alarming' trend of college students accurately identifying Edward Snowden as a hero has given James Clapper a panic attack. So much so, that he is taking time away from protecting us from “terrorists” (a term that now apparently includes folks at the Bundy Ranch according to Harry Reid) to embark upon a propaganda speaking tour of U.S. college campuses to demonstrate to those silly young kids that Snowden is no hero, but actually a traitorous villain.
Military Keynesians Are Full of Sh ... (Cough) ... Shallow Myths
Investors take note. One of the primary market props of the last five years is being removed. What happens when the markets finally catch on?
The proud recipient of today's $250,000 invoice for propaganda rendered by Ben Bernanke will be the Economic Club of Canada...
BERNANKE: FED ACTIONS DIDN'T FAVOR WALL STREET OVER MAIN STREET
Bernanke Says US Economy Is Heading Towards Complete Recovery
Just don't tell Obama (or the Democrats who have been told not to mention the 'recovery'), or the record number of middle-aged people living with their parents, or the almost imperceptible rise in the employed population since QE began...
Despite Janet Yellen's meet-and-greet with the unemployed and criminal classes, the absence of Ben Bernanke has seemingly empowered several Fed heads to be just a little too frank and honest about their views. The uncomfortable truthsayer this time is none other than Dallas Fed's Fisher:
*FISHER SAYS FED POLICIES HAVE MADE THE RICH 'MUCH RICHER' (but...)
*FISHER: UNCLEAR IF FED POLICIES WILL BENEFIT THE MIDDLE-CLASS
We wonder how President Obama, that crusader for fairness, equality and all time Russell 2000 highs, will feel about that? In the meantime, just like the Herp, QE is the gift that keeps on giving.. and giving... and giving... to the 0.001%.
On the 'growth' side, Commercial and Industrial loans are rising at a double digit annual rate of change (although it is unclear whether this is an indication of business optimism or stress - after all, we did see a big jump in these loans leading into the last recession). On the flip side, the bond market and the US dollar index seem to be flashing some warning signs about future growth. Simply put, the outlook for the economy is decidedly uncertain right now and we think so is the confidence in Janet Yellen. We think the more dire outcome for stocks would be if Toto fully pulled back the curtain on monetary policy and revealed it to be nothing more than a bunch clueless economists sitting in a conference room with no ability to control the economy or the markets. If US growth disappoints after all the Fed has done, how could anyone continue to view the Fed wizards as omnipotent? That would send the stock market back over the rainbow to the reality of an economy with big structural problems that can only be solved through political negotiation, something that has been notable only by its absence over – at least – the last 6 years. Are we headed back to Kansas?
The bull market in stocks is showing more signs of fatigue. Are we about to witness a change in trend?
The fear of deflation serves as the theoretical justification of every inflationary action taken by the Federal Reserve and central banks around the world. It is why the Federal Reserve targets a price inflation rate of 2 percent, and not 0 percent. It is in large part why the Federal Reserve has more than quadrupled the money supply since August 2008. And it is, remarkably, a great myth, for there is nothing inherently dangerous or damaging about deflation. Now unmoored from any gold standard constraints and burdened with massive government debt, in any possible scenario pitting the spectre of deflation against the ravages of inflation, the biases and phobias of central bankers will choose the latter. This choice is as inevitable as it will be devastating.