Purchasing Power

While the Federal Reserve has chosen to keep the Federal Funds rate near zero, it is merely delaying the inescapable and inevitable result of its own monetary policy – another needed economic correction that its actions will have generated but which it will, no doubt, blame on the supposed “failures” of the market economy.

From a financial market psychology standpoint it is however very important that central bankers don’t appear clueless. A majority of market participants needs to be able to suspend disbelief to an sufficient extent, i.e., they must be able to share in the collective hallucination that central bankers actually do know what they are doing. When it is no longer possible to maintain this facade, many things are likely to be suddenly questioned – and among these is the question whether it makes sense to remain exposed to yet another gargantuan asset bubble.

What can we expect to happen in our homeland when finally even the generally uninformed population also understands that governments they have elected for decades, and its Fed facilitator or controller, jointly have waged a century-long war on its citizens? The people of America cannot make a counter offensive similar to those of sovereign nations; however people are uniting in resistance to robber baron policies, as evidenced by the popularity of nonpoliticians currently in candidacy for the office of president. These troops will mass also, it just remains to be seen what form their eventual counter offensive will be. The established order will be challenged.

The Federal Reserve system was created in December 1913 with the stroke of the pen by then President Woodrow Wilson. Since that time, consumer purchasing power has fallen from $1,000 in December 1913 to … $40 today.

For those of you who don’t want to take the time reading through the ponderous 7000-word transcript of yesterday’s FOMC press conference, we bring you the shorter Janet Yellen, translated from Fedspeak into plain English. Enjoy!

The illusion that the tide of "prosperity" is lifting all boats is dissipating into a mist that no longer offers cover to obscenely wealthy politicos disclaiming the ugly reality of rising wealth/income inequality. The question for the chattering classes is this: will the bread and circuses of sports, random shootings, Trump and the rest of the churn in the media arena be enough to distract those stuck in leaky rowboats from the political fund-raising parties on the grandiose yachts?

Today, most of the developing world, tomorrow most of the developed world. Today Ukraine, Syria, South Africa and Brazil. Tomorrow Ireland, Greece, the UK, the EU, other Middle Eastern and African nations and the U.S. (see important charts) 

This is getting way too stupid. The Keynesian Chorus has launched a full blast trilling campaign, emitting an increasingly shrill cackle of warnings against a Fed rate hike. Yes, 80 months of pumping free money into the canyons of Wall Street is not enough. Why? Well, this is hard to type with a straight face, but according to the cackling gaggle of Keynesian Chicken Littles, the Fed has already tightened too much!

For longer than any of us have lived, we have been brainwashed via financial advertising (and our, own, beloved “financial advisors”) to believe that life insurance represents the best way for a responsible wage-earner “to protect his or her loved ones”. 

Once welfare spending and subsidies of Elites collapses, the social and political stability of oil exporters becomes extremely fragile. The leadership of oil exporters without a stash of USD to tide them over as oil prices crash would be wise to start building their bug-out island fortresses.

In the early days of central banking, one primary objective of the new system was to take ownership of the public's gold, so that in a crisis the public would be unable to withdraw it. Gold was to be replaced by fiat cash which could be issued by the central bank at will. This removed from the public the power to bring a bank down by withdrawing their property. A primary, if unspoken, objective of modern central banking is to do the same with fiat cash itself.

Last week’s volatility to the downside was entirely predictable, as the first leg down during this ongoing market crash reached the correction stage of 11%. The technical bounce was a given, as the 30 year old HFT MBAs on Wall Street have been trained like rats to BTFD. In their lemming like minds, it has worked for the last six years of this Federal Reserve created “bull market”, so why wouldn’t it work now. Last week was their first lesson in why it doesn’t work during bear markets, and we’ve entered a bear market. John Hussman seems amused at the shallowness of the arguments by Wall Street shills and CNBC cheerleaders about the future of the stock market in his weekly letter. After this modest pullback from all-time highs, the S&P 500 is still overvalued by 92%...

Awareness about the concept of money is making a comeback. Gone are the decades in which the global citizenry was fooled to leave this subject to economists, governments and banks – a setup that has proven to end in disaster. The crisis in 2008 has spawned debate about what money is, where it comes from and where it should come from.

With just 20 minutes to go until the latest most important jobs report ever in the history of man, Richmond Fed Chief Lacker just explained why "the case for raising rates is still strong"...

LACKER: BOTH MANDATE CONDITIONS 'APPEAR TO HAVE BEEN MET', EXCEPTIONALLY LOW RATES NO LONGER WARRANTED BY JOB MKT
LACKER: AUG. JOBS REPORT UNLIKELY TO `MATERIALLY ALTER' PICTURE

But perhaps most crucially, Lacker explains "recent financial market volatility is unlikely to affect economic fundamentals in the United States and thus has limited implications for monetary policy," removing the one last leg for permabulls to rely on (that is if you velieve The Fed is not Dow-Data-Dependent).

The US economy was not “decoupled” in the slightest during the expansion of the great global monetary boom that has now crested. Nor will it uncouple during the deflationary bust that must necessarily ensue. The ultimate worldwide hit to US exports is evident in the 20% drop in shipments to Brazil, and that’s just for starters because its economic depression is just getting underway. Likewise, the panicked flight of hot dollars from Brazil now besetting the global financial markets is only indicative of the turmoil to come as the massive “dollar short” unwinds on a global basis. So this is not a retest. We are in the midst of an unprecedented global deflation. A real live bear market is once again at hand.