While the price of oil is plunging, other price components are spiking higher...
"...What is clear is that the world has become addicted to central bank stimulus. Bank of America said 56pc of global GDP is currently supported by zero interest rates, and so are 83pc of the free-floating equities on global bourses. Half of all government bonds in the world yield less that 1pc. Roughly 1.4bn people are experiencing negative rates in one form or another. These are astonishing figures, evidence of a 1930s-style depression, albeit one that is still contained. Nobody knows what will happen as the Fed tries break out of the stimulus trap, including Fed officials themselves."
B-Dud Explains The Fed’s Economic Coup (Or Why Every Asset Price Influencing Monetary Policy Transmission Is Now Manipulated)Submitted by Tyler Durden on 12/03/2014 19:30 -0500
The Fed can do only do two concrete things to influence these income and credit sources of spending - both of which are unsustainable, dangerous and an assault on free market capitalism’s capacity to generate growth and wealth. It can induce households to consume a higher fraction of current income by radically suppressing interest rates on liquid savings. And it can inject reserves into the financial system to induce higher levels of credit creation. But the passage of time soon catches up with both of these parlor tricks.
Because when the rape and pillaging of the US middle-class begins at the very top, it won't end until the sharp metal objects finally start falling.
"What everyone wants to believe is that when things reach a tipping point and go from being merely crappy for the masses to dangerous and socially destabilizing, that we’re somehow going to know about that shift ahead of time. Any student of history knows that’s not the way it happens. Revolutions, like bankruptcies, come gradually, and then suddenly."
"as part of its continuous monitoring activities at JPMC, FRBNY effectively identified risks related to the CIO's trading activities, governance framework, risk appetite, and risk management practices in 2010. Additionally, a Federal Reserve System team conducting a horizontal examination at JPMC recommended a full-scope examination of the CIO in 2009. However, FRBNY did not discuss the risks that resulted in the planned or recommended activities... As a result, there was a missed opportunity for the consolidated supervisor and the primary supervisor to discuss risks related to the CIO."
We have been discussing the widespread belief in "the narrative of central bank omnipotence" for a number of months (here and here most recently) as we noted "there are no more skeptics. To update Milton Friedman’s famous quote, we are all Bernankians now." So when Saxobank's CIO and Chief Economist Steen Jakobsen warns that "the mood has changed," and feedback from conference calls and speaking engagements tells him, there is a growing belief that the 'narrative of the central banks' is failing, we sit up and listen.
First a secret "Doomsday book", and now this?
Federal Reserve officials have become more concerned about weak growth overseas and the impact of a strengthening U.S. dollar on the domestic economy, warns WSJ Fed-whisperer Jon Hilsenrath, adding that, the stronger currency, by reducing the cost of imported goods and services, could hold U.S. inflation below the Fed’s 2% objective. Fed staff also reduced its projection for medium-run growth in part because of these concerns. The minutes showed more clearly than before that concerns about global growth and the disinflationary impact of a strong currency are giving officials additional pause about moving quickly on rates.
- How you know it is all a lie: Pelosi Presses Obama to Talk Up Stronger U.S. Economy (BBG)
- Secret Goldman Sachs Tapes Put Pressure on New York Fed (NYT), Uh, no they don't
- Clashes Break Out at Hong Kong Protest Site (WSJ)
- N.Y. Fed Lawyer Says AIG Got Billions Without Paperwork (BBG)
- Ebola’s Disease Detectives Race to Track Others Exposed (BBG)
- UPS, FedEx Want Retailers to Get Real on Holiday Shipping (WSJ)
- No more mailman at the door under U.S. Postal Service plan (Reuters)
And no, it certainly can not be characterized as doing God's work............................
In the past, they were early, but they were right.
The Fed is now pre-occupied with an unanswerable and fanciful question, according to Jon Hilsenrath’s pre-meeting missive on the Fed’s current monetary policy “debate”. Figuratively estimating the number of angels which can dance on the head of a pin, Fed officials and economists suppose they can specify the the appropriate money market rate down to the decimal place for virtually all time to come... Of course, every one of these three magic numbers are perfectly arbitrary, academic and silly. Due to the structural failures of the US economy owing to decades of destructive Washington policies, the “unemployment rate” today is not remotely comparable to what was being measured in the 1950s and 1960s when today’s Keynesian theology with respect to the Phillips Curve, Okun’s Law and full-employment policy was being formulated.
Risk is no longer priced into anything. Volatility has gone to sleep. Uniformity of thought has taken over the stock market. Complacency has reached a point where even central banks have begun to worry about it: the idea that markets can only go up – once entrenched, which it is – leads to financial instability because no one is prepared when that theory suddenly snaps. But all this bullishness, this complacency is only skin deep. Beneath the layer of the largest stocks, volatility has taken over ruthlessly, the market is in turmoil, people are dumping stocks wholesale, and dreams and hopes are drowning in red ink.
It would appear the Fed, after being angry at itself for creating the "complacency" evident in the markets globally has reached the pinnacle of critically circular logic in its defense of policies that are aimed at financial stability (i.e. prices flat or rising but absolutely not falling). Fed's Williams, a la Greenspan's "a-ha" moment, appears to have realized that investors are not always 'rational' and "bull markets may cause investors to get ‘carried away’ over time and confuse what is a one-time, perhaps transitory, shift in fundamentals for a new paradigm of rising asset prices."