Could it be coincidence that the worst Crisis in years suddenly went away right as the women with her finger on the “bailout” button needed to convince German voters that she’s doing a great job?
There is literally no evidence that printing money creates jobs. Look at Japan, they have and continue to maintain QE efforts equal to 40+% of their GDP and unemployment hasn’t budged in 20 years. The UK has engaged in QE equal to over 20% of GDP with no success.
However, the Fed is terrified of losing control of the system, so it wants to continue doing anything no matter how futile in order to maintain the appearance of confidence. God forbid anyone figures out the emperor has no clothes…
So, somehow the US economy is roaring back in a big way? Hard to see. Over 70% of the economy is consumer spending. And spending is driven by incomes. And incomes are… falling.
Traders shot for and managed to hit 1,700 on the S&P 500. At this point, there is no real reason for this other than trader games (start of the month buying).
The bigger story is Japan, where the Central Bank dream of doing “enough” is crashing into the wall. Japan has announced a $1.4 trillion QE effort, an amount equal to 21% of its GDP. To put this into perspective, this is the single largest QE in history, the kind of QE Bernanke and his pals could only dream of announcing.
At this point the Central Bank has one of two options: 1) Monetize everything OR 2) Let the bond market fall to where it deems rates are appropriate given the new default risk.
The Fed publicly claims it wants to help the economy and Main Street. However, as we are now discovering, the Fed is more than willing to sacrifice the good of the people in order to prop up a few insolvent big banks.
Over 99% of “analysts” are missing this, but it is a fact. If you ignore the ridiculous GDP numbers (which even China’s Premiere has admitted are a joke in the past) and look at more accurate metrics, it’s clear China is collapsing at an alarming rate. Case in point, Electrical consumption rose by just 2.9% in the first quarter of this year.
These are truly horrible forecasts coming after the brutal downward revision for the first quarter (from 2.4% to 1.8%). And when you consider that growth is slowing like this while the Fed is running QE 3 and QE 4, then it becomes quite clear that the Fed is fast running out of out of evidence that QE accomplishes much of anything.
Bottomline: the Chairman went rogue and did it at the precise time when stocks were in need of a major boost. This is not coincidence. And now that this is over we have to wonder what’s next.
