There was a time when the Fed's QE was, at least on paper, supposed to generate jobs (the broad inflation will come on its own, in due course). After all, the prospect of injecting $85 billion in liquidity into a market with the sole goal of pushing the stock markets that benefit the purchasing power of about 10% of the population would hardly have received broad approval even by the co-opted Congress. So, to all those who still naively claim Fed is not the sole reason for the market's relentless march higher, those billions in liquidity must go into the economy, and specifically into job creation, right? As a result, we decided to back into what the average private sector job has ended up costing the US population in pure dollar terms (which in turn ultimately manifests itself in terms of unsustainable government debt and pent up inflation) via the Fed's monetary pathway. Well, according to the ADP data released earlier, in which a paltry 130K private sector jobs were created in a month in which the Fed, as always, injected $85 billion, the bottom line came to a whopping $654K per job! And taking the average job growth throughout 2013, this number, as can be seen on the chart below, is a laughter-inducing $553K!
Having previously exposed the world to the "nominal stock market cheerleaders," it is clear that Kyle Bass sees things as only having got worse among developed nations. In fact, the following interview shows that he does not fear US losing its credibility since "developed western economies with the largest debt loads are all in the same boat." The discussion expands from the debt ceiling debacle to bonds and stocks, "given the lack of nominal yield in the bond market, all of the new money is going to continue into stocks. The interesting thing is it’s going to make the rich people richer and the middle and lower class won’t be any better off, which is the opposite of what the administration is trying to pull off," adding that being in stocks "is not your choice," thanks to Fed repression and that deficit contraction is all that can stop the Fed now.
Many have asked us to expand on how the rapid expansion of money supply leads to an effect the opposite of that intended: a fall in economic activity. This effect starts early in the recovery phase of the credit cycle, and is particularly marked today because of the aggressive rate of monetary inflation. The following are the events that lead to this inevitable outcome. And while many central bankers could profit by reading and understanding this article, the truth is they are not appointed to face up to the reality that monetary inflation is economically destructive, and that escalating currency expansion taken to its logical conclusion means the currency itself will eventually become worthless.
The kabuki theater that passes for governance in Washington D.C. reveals the profound level of ignorance shrouding this Empire of Debt in its prolonged death throes. Ignorance of facts; ignorance of math; ignorance of history; ignorance of reality; and ignorance of how ignorant we’ve become as a nation, have set us up for an epic fall. It’s almost as if we relish wallowing in our ignorance like a fat lazy sow in a mud hole. The lords of the manor are able to retain their power, control and huge ill-gotten riches because the government educated serfs are too ignorant to recognize the self-evident contradictions in the propaganda they are inundated with by state controlled media on a daily basis.
Just as it is easy being a weatherman in San Diego ("the weather will be... nice. Back to you"), so the same inductive analysis can be applied to another week of stocks in Bernanke's centrally planned market: "stocks will be... up." Sure enough, as we enter October's last week where the key events will be the conclusion of the S&P earnings season and the October FOMC announcement (not much prop bets on a surprise tapering announcement this time), overnight futures have experienced the latest off the gates, JPY momentum ignition driven melt up.
Take Venezuela - Hugo Chavez' socialist paradise, which was recently inherited by Nicolas Maduro, when he proceeded to not only completely devalue the local currency but to engineer, through such exquisite central-planning that even the Politburo at the Marriner Eccles building is green with envy, the highest returning stock market on earth in 2013. Alas, either the locals are not quite as impressed with the Caracas' "stock market" YTD return of over 300% (which doesn't quite cover the loss in purchasing power for what things one can actually purchase in Venezuela), or the chronic toilet paper shortages remind them that the phrase socialist utopia is the world's greatest oxymoron. As a result, president Maduro has decided to boldly go where no socialist has gone before and has unveiled a new Vice Ministry of Supreme Social Happiness, whose primary purposes will be to enforce "happiness." In other words, something along the lines of the beatings will continue until happiness returns...
Our hypothesis is simple: if money growth exceeds the GDC metric a deflationary busts will inevitably come. If authorities refuse to accept reality and print more fiat money at the first sign of bust, they may “save the day” but they will “ruin tomorrow”!
Tokyo, and the entire country of Japan, which the documentary below describes as "a place where socially awkward people gather and use money to resolve their communication problems", has a ticking demographic timebomb: on one hand the population is getting so old that sales of adult diapers now exceed those for babies; on the other as the chart below courtesy of Mark Adomanis shows, the number of actual births each year has dropped to a record low. The issue: young people in Japan just don't want or have any interest, in commitment to the other sex, nor do they seem to have any interest in procreating in a narrow sense, or sex in a broad one (a topic further pursued in "Why have young people in Japan stopped having sex"). There is another angle. As this documentary from Vice investigates, "sex sells and the Japanese are buying." The reason: Japan has a "seemingly infinite menu of relationship replacement services." Watch the following clip to find out just what that menu is...
The future of the US economy with Chairman Yellen at the helm is grim indeed, which provides all the more reason to end our system of central economic planning by getting rid of the Federal Reserve entirely. Ripping off the bandage may hurt some in the short run, but in the long term everyone will be better off. Anyway, most of this pain will be borne by the politicians, big banks, and other special interests who profit from the current system. Ending this current system of crony capitalism and moving to sound money and free markets is the only way to return to economic prosperity and a vibrant middle class.
Five years ago, when QE first started, we blasted the Fed's "Plan Z" systemic rescue "policy" - which was merely a tried and true dilutive fallback plan used by every collapsing monetary regime starting with the Romans - stating it does absolutely nothing to resolve the biggest underlying threat to the economy and the western way of life, namely the epic accumulation of debt (most of it bad), courtesy of a Fed which has now unleashed a perpetual "buyer of only resort" QE (as we predicted months before QEternity was revealed), which instead only redistributes wealth from the middle class to the wealthiest 0.01%, while providing scraps to the poorest to keep them occupied and away from very violent thoughts. Enter the FT, which in an Op-Ed today titled "QE has stigmatised the well-off" says that "despite it being entirely justified as a save-the-world policy in its first round, it is still at best an unfair and at worst an evil policy. Why? Because of the way in which it redistributes wealth" And now we lean back and await for even more of the incisive mainstream media to suddenly come up with this timely, non-conspiratorial observation.
Commodities are no longer on investors’ radar screens. Various signals, however, are pointing to a new rally within the commodities super cycle.
There are two characteristics of a currency that make it useful in international trade: one, it is issued by a large trading nation itself, and, two, the currency holds its value vis-à-vis other commodities over time. These two factors create a demand for holding a currency in reserve. Of course, psychological factors entered the demand for dollars, too, since the US was seen as the military protector of all the Western nations against the communist countries for much of the post-war period. Today we are seeing the beginnings of a change. The Fed has been inflating the dollar massively, reducing its purchasing power in relation to other commodities, causing many of the world’s great trading nations to use other monies upon occasion. President Obama’s imminent appointment of career bureaucrat Janet Yellen as Chairman of the Federal Reserve Board is evidence that the US policy of continuing to cheapen the dollar via Quantitative Easing will continue. As we noted before, nothing lasts forever... (especially in light of China's earlier comments)
Big picture and dispassionate discussion.
Yesterday millions of "shoppers" living on the government dole left their shopping carts in droves in checkout counters, exited countless foodstamp-accepting stores, and made Wal-Marts and other general merchandise stores into veritable ghost towns, after a power outage at Xerox Corp, made EBT usage in 17 states for most of Saturday impossible, and left tens of millions of poverty-level Americans unable to engage in one of their favorite pastimes: shop with other people's money. In short: the Walfare States of America were probably closer to a state of outright revolution than at any time before in history. And had the EBT stoppage continues into today, things would have certainly spilled out from the shopping aisle to main streets where the people's anger may have culminated in an violent expression of disgust at a state which gives with one hand and a xerox company that takes with the other.
The popular take on the current debt ceiling stand-off is that the Tea Party wing of the Republican Party has a delusional belief that it can hit the brakes on new debt creation without bringing on an economic catastrophe. While Republicans are indeed kidding themselves if they believe that their actions will not unleash deep economic turmoil, there are much deeper and more significant delusions on the other side of the aisle. Democrats, and the President in particular, believe that continually taking on more debt to pay existing debt is a more responsible course of action. Even worse, they appear to believe that debt accumulation is the equivalent of economic growth.