The Next Global Meltdown Is Baked In: Connecting The Dots Between Oil, Debt, Interest Rates And RiskSubmitted by Tyler Durden on 07/01/2014 10:05 -0500
The bottom line is the Fed can only keep the machine duct-taped together by suppressing the market's pricing of risk. Suppressing the market's ability to price risk is throwing common-sense fiscal caution to the winds; when risk arises from its drugged slumber despite the Fed's best efforts to eliminate it, we will all reap what the Fed has sown.
All sorts of promises, explicit and implicit, were issued to win votes. All the promises are now empty, and we might as deal with this reality head-on... if we can muster up the almost-lost ability to deal with reality rather than rely on fantasy/wishful thinking.
Janet Yellen has dismissed rising inflation figures. They were “noisy,” she said. She didn’t like the sound of them. Valid numbers are harmonious. Invalid ones are cacophonous. But after so many years of listening to such loud noise coming from her own colleagues, poor Ms. Yellen may be tone deaf. At least, that is one explanation for her nonchalance toward the threat of inflation.
Though the Fed is doing its best to mask its abject failure and lack of choices with public relations, the reality is it has no choice but to taper and eventually end its endless spew of credit and its unprecedented and destabilizing purchases of assets.
An interesting dynamic taking place in financial markets on Thursday as Gold saw some substantial buying interest up $22 to the $1295 an ounce area.
Currently there is a great debate within the financial media on the who’s right – who’s wrong, as both sides stare at a financial market that seems to go ever higher with every morning bell. In actuality, it’s both, and neither. Currently the macro economy is being expressed via circumstances resulting from a myopic view of participation. i.e., The financial markets. All of those fundamental based principles have been annexed to what one solitary person will do – then say. That person was Ben Bernanke. Now it’s been codified via the markets recent reactions to Janet Yellen. All of those fundamental based principles have been annexed to what one solitary person will do – then say. That person was Ben Bernanke. Now it’s been codified via the markets recent reactions to Janet Yellen.
The damage done by Central Planning has yet to come home to roost. Six years into the Grand Experiment--that Central Planners can pick winners who just happen to be their cronies--the chickens of consequence are still making their way home. And when they finally come home to roost, we will all discover that the economy is much more fragile than advertised by the Central Planners and their media toadies.
You can ignore and even downplay for a while, but eventually and as sure as the fundamental law of nature that everything has a cost....
We believe Jeffrey Gundlach, et al. are wrong regarding the 10-Year Bond yield staying below 2.80% over the second half of the year.
One major factor to the slow growth/low inflation in the U.S. is the Wall Street Yield Trade. By incentivizing unproductive use of capital, low interest rate via monetary policy is actually deflationary.
Month after month, they came up with new excuses. Now they’ve used up all the good ones, but sales are still tanking.
With much hotter CPI & PPI reports the last two months, we anticipate the May reports before Fed's June meeting to be on the high side, and that the Fed will probably have to address these new inflation pressures....
During the bubblicious years from 2000 through 2014, while Wall Street used control fraud and virtually free money provided by the Fed to siphon off hundreds of billions of ill-gotten profits from the economy, the average middle class family saw their income drop and their debt load soar. This is crony capitalism success at its finest. The oligarchs count on the fact math challenged, iGadget distracted, Facebook focused, public school educated morons will never understand the impact of inflation on their daily lives. The pliant co-conspirators in the dying legacy media regurgitate nominal government reported income figures which show median household income growing by 30% over the last fourteen years. In reality, the real median household income has FALLEN by 7% since 2000 and 7.5% since its 2008 peak. Again, using a true inflation figure would yield declines exceeding 15%.
Our Fed-fueled lottery-ticket economy will unravel with a vengeance in the years ahead. Malinvestment - the systemic consequence of the Federal Reserve's policies of near-zero interest rates and abundant credit - doesn't just inflate destruction asset bubbles: it poisons productive assets and the entire economy.
When good decisions are no longer possible, bad decisions are inevitable.