Last night was a monumental one, at least for those of us students of monetary policy.
Market Roundup
Current Federal Reserve Chairman Janet Yellen joined former Chairmen Ben Bernanke, Alan Greenspan and Paul Volcker at a panel discussion in New York. It was held at the International House (with Greenspan chiming in via video connection), the first such gathering since the celebration in 2013 of the Fed’s founding 100 years earlier.
There was the usual happy talk about unemployment, long-term growth, and the Fed’s plan to only raise rates gradually. That’s the same thing we’ve heard lately in speech after speech and interview after interview.
But what I found more interesting was Yellen’s flat-out denial of financial excesses, including her argument that this is “not a bubble economy.” Bernanke also downplayed any talk of economic and credit cycles, saying expansions don’t die of old age. He added that he doesn’t “see any particular reason to believe a recession is any more likely in 2016 than it was in 2015 or 2014.”
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| Greenspan and Volcker discuss the economy in a file photo. |
I could easily point out how truly ridiculous Bernanke’s argument was that the mortgage crisis was “well-contained” back in the mid-2000s. Or I could note that Greenspan only saw limited “froth” when he was at the helm. Those predictions failed spectacularly.
But what’s more important for the here and now is that the easy-money cycle from 2009-15 has inflated TONS of bubbles. They’re not hard to spot at all. Indeed, as I noted in December when the Fed first hiked interest rates, “We’ve had a massive, easy-money-fueled rally in almost every asset on the planet.”
Trillions of dollars of negative-yielding government bonds.
An auto leasing boom and auto sales boom fueled by the riskiest lending in history.
Commercial real estate (again).
The list of wild excesses and risky behavior financed by the biggest flood of cheap, easy money in world history goes on and on.
As for the economic and credit cycles, they’re no figment of my imagination. They are consistent, powerful forces that drive virtually every market move in history.
[Read More – The Consequences of Reckless Lending – Mike Larson]
Bernanke may think the economy can keep growing forever, despite multiple signs that credit is getting tighter and that growth is falling. But fund managers with $600 billion on the line disagree , and I do too.
You can already see signs of weakness in everything from retail spending durable goods orders to auto sales.
As a matter of fact, lousy inventory figures released this morning drove the Atlanta Fed’s “GDP Now” prediction of first-quarter growth even lower. It dropped to 0.1%, a massive cut from an estimate of around 2.7% several weeks ago. The economy may even have SHRUNK in the first three months of 2016 – something hardly any of the highly paid cadre of Ivory Tower economists on Wall Street (not to mention the Fed) saw coming.
| “Don’t look to this Fed leader, or her predecessors, for truth-talking about bubbles or the economy.” |
My advice? Don’t look to this Fed leader, or her predecessors, for truth-talking about bubbles or the economy. Follow the guidance of independent analysts with no ax to grind.
Also make sure continue to stick with the investment strategies that I believe will work best in this environment. I highlighted several of them in my morning column today.
One last thing: A potential “escape valve” for investors looking for protection and profit is gold. I don’t think it’s any coincidence that gold just notched its best quarter in decades at the same time several panicky central bank policy steps backfired. Nor do I think it’s a fluke that the Market Vectors Gold Miners ETF (GDX) … a diversified collection of mining stocks … just hit its highest level in 14 months today.
I went into more detail about what’s driving gold, and where it’s likely to head next, in a timely, information-packed webinar on Monday. If you missed the session, called “The Next Phase for Gold, and How to Profit From It,” you can watch it in its entirety online here. I may be biased. But I think it’s worth your while to watch.
Now, I’d love to hear your thoughts on the Fed-head confab in New York. Are Yellen and Bernanke correct, and the economy in good shape with nary a bubble in sight? Or are burst bubbles and recession major threats to the economy and the market? What do you think of the plunging GDP estimates? Or the Fed’s forecasting track record? Hit up the discussion section and let me know.
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My colleagues and I tackled a lot of diverse topics this week here in Money and Markets – and I’m pleased to see many of you weighed in on them here at the website.
With regards to Fed policy, Reader Frebon said: “Every time the Fed had the opportunity to raise rates, someone said ‘BOO’ and scared Janet back into her cocoon. She will go down as the worst chair in history and probably will be a zero factor in the coming downturn.”
Reader Charles added: “Amen to that, Frebon! The Fed made the stock market the only game in town by driving interest rates substantially below the rate that anyone with a brain would think reasonable, and took away the incentive for people to create wealth.
“Do these federal Banksters know how to do any good for the long-term economy, or is their focus only on the next five minutes? They have the attention span of a 2-year-old, coupled with the intelligence of a donkey.”
On the question of earnings and stock prices, Reader Will said: “You say stocks peaked (symptom) because earnings fell (cause)? I say earnings fell (symptom) because of the real causes: Socialism, poor governance, the Fed, and misplaced Keynesian concepts.”
Speaking of socialism as an economic system, Reader Jim said: “For all of its good points, Socialism features a fatal flaw. It doesn’t generate enough economic activity to maintain itself. Forget the politics. Virtually every Socialist society runs out of money. Here, as in Europe, the system is being crushed under a mountain of debt.”
Reader Howard added: “How long has it been since government, business enterprise, and those really interested in peoples’ concerns actually sat down and listened to each other? If we are going to bake a successful economic cake, everyone needs to come to the table.
“Government control, scares away free market capital. An interfering Fed confuses free enterprise. And arguing politicians don’t inspire confidence.”
[Read More – Yet ANOTHER Billionaire Warns About Coming Chaos – Mike Larson]
I appreciate all the comments, and I hope you continue the discussions online over the weekend. The comment section is at the bottom of this piece.
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The commercial real estate bubble – which has been particularly bubble-icious in the apartment sector – is continuing to deflate. A handful of research organizations found rental-rate growth slowed, vacancy rates rose, and uptake of new units decelerated in the first quarter, according to the Wall Street Journal. I think things will get much worse over time, given the economic slowdown I see unfolding and the massive overbuilding we’ve seen in the multifamily market.
SpaceX is resuming cargo deliveries to the International Space Station with a launch today. The company founded by Tesla (TSLA) executive Elon Musk failed in its last delivery 10 months ago, with its Falcon 9 rocket disintegrating in flight.
Lastly, the television show American Idol ended its 14-year run yesterday. Trent Harmon beat out La’Porhsa Renae for the 15th and final title. The 25-year-old resident of Mississippi waits tables at a family restaurant.
So did America vote for the right Idol? Will SpaceX manage to work the kinks out of its launch process? Will the surge in rents and apartment construction flame out soon? Will Fed members ever stop making speeches and appearances … even for a few days … again? Let me know your thoughts in the comment section.
Until next time,
Mike Larson
Recommended Articles by Mike Larson:
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
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larry comitted dow not go 17900 blood will hit the street next week
excellent-txks,AHW
This is a most tenacious bubble – it doesn’t seem to want to pop. What that means, of course, is that, when it does inevitably burst, it is going to do far more damage to the economy than if it had promised at an earlier stage. I fear that, even at 87, I am going to see my second Great Depression – or Greater This one could make the first seem like child’s play. It could mean the end of the nation I grew up in – or what remains of it, as the politicians panic. Totalitarianism, anyone?
Chuck,
I’m surprised that in your 87 years, you haven’t noticed that, of the previous Stock Market Crashes, BOTH occurred on the watch of Conservative Administrations in 1929 and 2007… In fact, I don’t believe there has EVER been a Stock Market Crash during Progressive Liberal Administrations since our great country was founded…
Since the chance of having a Conservative Administration elected in 2016 is basically nil, I’d be prone to say that the Weiss organization has it wrong when calling for a Stock Market Crash now or in the near future….
Is that you Bernie?
Nope, just an Independent quoting American Economic History…. You a revisionist Conservative Republican that is about to tell us the the Republican Party is the Party of Lincoln? Of course, that is another GOP lie, as Lincoln was a Progressive Liberal and the Conservative, then were the Southern Slave holders….. But, you knew that didn’t you?
You conveniently left out the Dot Com Bust of 2000…..which began with Mr. Clinton circa August 2000. That being said…..if you go back in history and take the averages of all stock market losses and gains, you actually find a very small advantage for the Dems. I am sure that will please you E495. But, what will not please you is that…..statistically, the difference is so small it is nothing but fluff.
F151,
That is a lie… Since 1929 (until 2012) $10,000 invested ONLY under Democratic Administrations would have grown to $300, 671 and the same amount invested ONLY during Republican Administrations would have only grown to $11,733…. When considering inflation the investment ONLY under Republican Administrations would of actually LOST money… Do some homework…
Just to be real, in the time period mentioned the Democrats were in office 9 more years than Republican. Many of the years Republicans were in office were after a war when there is usually an economic contraction. In the Nixon years while the stock market headed lower the overall economic activity was such that inflation was a problem. When Volcker was a pup at the Fed in 1961 he felt one of the problems was that too many rural communities didn’t have enough mortgages to sustain the local bank. Greenspan though the problem wasn’t that other country’s standard of living was too low but America’s was too high. Seems both Fed chairs got the results they wanted.
Perhaps the answer lies in the fact that economic cycles follow behind political cycles so that Liberals reap the benefits of conservative policies and visa versa. Mind you in America, with the exception of Bernie Sanders, there are only conservative and ultra conservative politicians.
Eagle,
If Hillary rather than Bernie is elected does that mean that all bets are off. She’s so much the centrist they paint yellow stripes on her back.
You need to view the Barney Frank spitting reply to Geo W Bush that Fannie and Freddie did not need any more regulations. Well we know the out come there do we not. Now it has been disclosed that the obama admin is pushing and presssing the same activity. NO ONE can say how the $19 plus trillion sovereign debt can be repaid. The implosion will be due to Debt and soon.
There’s one thing about chuck at 87, he lived a childhood through the depression that followed the Crash of 29. Where was our high-flying Eagle during this time, or was he even a gleam in his father’s eye? Our Progressive FDR tried to deficit-spend his way back to prosperity, today it’s called QE. In 1936 he tried to do what Yellen is, in her return to economic “normalcy” and the economy didn’t recover from it until WWII. Then he financed this effort by “borrowing” from the Social Security “Trust” Fund, and then the following governments aped his example by being “Liberal” that is “stealing” from this fund, until today it can’t even afford to give back what it coerced from people who had supported it all this time. And now in a one-two punch Bernanke-Yellen have stolen the interest income those same people had planned on being the supplement they had been advised to work toward during that depression. Today we’ve gone from the Bernanke Boogie to Janet Yellen. And what’s she yellen? It sounds like ABC. Oh I get it! If we want to try to reverse Obama’s over-arching debt fling (more than all other presidents bedore him) the message is Anyone But Clinton!!!
Albert,
You are not even close….. I grew up in abject poverty with a Father left so broken from his combat service in WW-ll that we lived for many years in a low income project set aside for broken GI’s from WW-ll and Korea…. Volunteered for military service during Vietnam rather than being drafted…. Serviced my time in Special Operations and used the GI Bill to go to college… Now I am wealthy from what I learned about economic cycles and technical analysis…
I’ve lived both sides of the income gap and cycles well enough to know that America does it’s best when ALL Americans do better…. I pay a LOT in taxes and I don’t begrudge it as I’ve seen the ENTIRE world from the best out there to the worst…. America is the best because there is no where else in the world better than here where anyone willing to work hard can get ahead,,,
When the Democrats are in charge, that works very well and when the Republicans are in charge it doesn’t… Amazing how many will sell their souls for the gold coin of the 3% and be willing to screw their neighbor for that coin…’
We are beginning another roughly 50 year era where Americans will do better as their Grandparents and Parents did from 1932-1981 as even the most dimwitted are finally beginning to no longer believe the untruths coming from the Republican side…
Eagle, you’re right about everything except that America is not the best. Your neighbors to the north are the best as they have everything you have as well as what your apparently want but don’t have. And don’t believe all those lies your politicians tell you about Canadian taxes. Check the facts. And then check the medical system and the social security system. Then tell me who has the best.
I was born in 1932 and grew up in the South. The south had been in a depression for over 65 years at that time. The Democrat Party was the only party so the only time a person could choose who to vote for was their primary. They had been pro slavery and later provided segregation. The South did not truly start to be well off until the Republicans began to take charge. My ancestors on both my father’s side and my mother”s side include a few Democrat politicians. Two state Governors, one Lieutenant governor, a Clerk of Court ans a Sheriff. I am personally a Libertarian and have decided to vote against Hillary if she is not indited before the general elected. When the economy collapses this time it will be because of this administration or the Democrats. Sorry Eagle495 and it is happening already. It is past the point of no return, Trump or not.
Eagle494, you are right since the Dems are good at kicking the can down the road until just after they leave office; which is what is going on now. If Hillbilly or Bernie get in that will haunt them as Obummer is not leaving anyone any favors.
Eagle, you are comparing oranges to apples. Yes, the stock market often rallies under Liberal administrations but they do nothing for the underlying economy. FDR promised people that if that if they voted him he would give them money. They did and the first year of his term had a magnificent market rally. BUT, unemployment was worse in 1939 than in 1931. The New Deal inspired confidence and people spent and invested. It failed to help the economy in any way. Obama and Yellen have done the exact same thing on a grander scale. The Market has soared but the economy hasn’t. The Market isn’t the economy. I’m afraid that whoever gets the job in 2016 is going to have to deal with an economy artificially juiced with cheap money and the negative consequences that are sure to follow. Jim
The Stock Market is ALWAYS a precursor of the economy…… Really…. Check it out… Incidentally, the pullback you noted was similar to the stop in assistance that has roiled the markets in 2015…… From 1932-1981 the market had their longest and best rally in the Dow Jones Industrial in American history, under mostly Democratic Domination…
If the economy is so good under our current liberal, socialist administration, why does that administration find it necessary to alter the way statistics are kept, and eliminate points that do not back its deceitful prognosis? Why is it that our currency is failing so badly, and why is it that the Fed finds it necessary to “stimulate” the economy through QE and other behind the scenes manipulations? Likewise, why is manipulation of commodity markets tolerated? If things are so grand, why do the world movers and shakers now scramble to back their play with large investments in precious metals? Lastly, why do the people of this country put up with this nonsense and look to the same losers that brought us to this precipice for a solution to our problems?
If you would do some homework, you would realized that it took America many years to repair it’s economy from the devastation of the Republican Crash of 1929 and the follow on Depression… It is no different this time except the the GOP is doing everything it can to slow down of even stop that recovery…. The GOP was just fine with the repairs to Wall Street, yet they stopped many of the repairs for Main Street… That makes it pretty clear where their true allegiances are, aye?
Eagle, Again what you say is basically true, but at what price? You are leaving out the $20 trillion in govenment debt, $50 trillion in unfunded liabilities, and $50 trillion in consumer debt. All things considered, over the last 85 years, the out of control Federal government has wrecked our economic future with crackpot Keynesian Theory. The insanity of negative interest rates is the only proof of failure you need. Jim
You are also leaving out the part about the 95 per cent devaluation of the dollar. These guys all belong in prison. Jim
Jim,
It was Reagan who began this deficit in 1981 when he gave huge tax cuts to his supporters, the wealthiest 3% and failed to cut spending. Check the deficit charts and see when this problem began to go parabolic… Then there was the Republican wars in Iraq and Afghanistan for which taxes were not increased to pay for those incursions… Then came the Republican Crash and Depression of 2007 and here we are….
I agree with Mr. Larson. We have a debt problem in our country and its being ignored. High debt doesn’t sustain growth. We are getting volatility again at these higher levels which is a factor in a topping action in the market. The media is so bullish that it scares me. After seven years of zirp it’s losing its effectiveness. Be cautious as a programmed market like the Fed and zirp do cause bubbles an it’s not going to be pretty when they bust.
Yes badger 10 I agree the media is talking up the market. The earnings bars have been set so low that companies will step over them beating their chests. Markets will rocket on till they run out of fuel and foolishness.
How nice of past and present Fed chairs to allow us to join their family reunion! As usual none of them knows which way is up, so of course they always have the deer-in-the-headlights look if anyone asks a sustantive question. The incompetence quotient is sky high for sure.
Debra
Did you read Yellen’s interview and her answers. Her answers were really scary. I lost count of how many times she used the word um reaching for answers. Now every other day some Fed official comes out and makes hawkish and then dovish comments. We are all being whipsawed by this madness.
I liked the ‘foie gras’ metaphor better than anything I have seen in the last year. European bankers are learning about ‘limits’. Yellen is an unsophisticated political critter, and Bernanke never has emerged from 1932. There simply is no wisdom at the top – anywhere. You are on point, Mike, keep up the good work!
Mike: The Fed is using the equilibrium model which is wrong. Economies grow they contract and they evolve. Economics is the study of the allocation of scarce resources and is also a study of human behavior which is complex. James Rickards wrote about the complexity theory in his books, currency wars and the death of money. This is why the Fed has been and will continue to be poor forecasters. They are always behind the curve. Regards, Robert Calabro.
I believe the Fed members are a bit like the Wizard of Oz from the classic film. They want us to believe they are all knowing and powerful, but like the movie they have nothing to do with reality. They are riding the wave of their particular breed of fame, trying to be somebody. To the average American citizen they don’t mean diddly squat but they will continue to have something to say regularly. To me they are mostly blowing smoke.
The bond markets don’t believe them either as far as I can tell.
Just saw where Janet Yellen disagrees with Bernie Sanders on the oversight of Wall Street. If Yellen is incompetent then Sanders must be right.
They both are way over their pay grade.
The Fed has a plan???? What do they want us to do??? Follow, follow, follow, follow the yellow brick road to the wonderful world of OZ. You did sing the last line, right?
Unsustainable borrowing this time from governments will come back to haunt the global economy. Just look at Japan’s negative interest rates as an example of the latest market mania.
Unbelievable to see those two together, since it was Volcker (appointed by Carter) who stopped inflation in Reagan’s Administration, which brought us the Stock Market rally from 1982-1999 and it was mumbling Greenspan (appointed by Reagan) who saw “no Problem” with the removal of Glass-Steagall Act of 1933 by the Conservative (Republican) Majority Congress in 1999 which stopped the Volcker rally and brought back the same highly risky trading which brought the Crash of 1929 and with that removal the next Stock Market Crash within eight years on November 2007 under Conservative Republicans Cheney/bush in 2007
You can make your political arguments all day but when you enter the realm of the Fed….both parties now kowtow to the GS boys. In one door to do their “service”, out the other to collect the millions. There is very little difference. The only reality here is that we taxpayers get the screw when their machinations fail….as they invariably do.
Eagle,
In all fairness Robert Rubin and Phil Gramm were the culprits (along with what me worry Greenspan.
Mike,
The legislation to remove Glass-Steagall was brought by three powerful Republicans(Gramm/Leach/Blyle) under a Republican Majority Congress…. The cabal of Banking, Insurance and Brokerage gave 400 million to get that act removed from law… That was a record amount… Once unregulated, they ran wild and brought us 1929 again in 2007….. Until GS is returned to law our stock markets and our economy are at great peril…
Eagle,
Robert Rubin worked for GS for 26 years. Rubin oversaw the loosening of financial industry underwriting guidelines which had been intact since the 1930s, “‘Since the Depression, there were strict underwriting guidelines that Wall Street adhered to when taking a company public,’ says one prominent hedge-fund manager. ‘The company had to be in business a minimum of five years, and it had to show profitability for three consecutive years. But Wall Street took these guidelines and threw them in the trash.’ Goldman completed the snow job by pumping up the sham stocks. ‘Their analysts were out there saying Bulls*it.com is worth $100 a share.’ The problem was, nobody had told investors that the rules had changed. ‘Everyone on the inside knew,’ the manager said. ‘Bob Rubin sure as hell knew what the underwriting standards were. They had been intact since the 1930s.'” Taibbi, Matt
Yeah; the RR reduction of the egregious top 70% tax rate in effect when Carter went in and when he left office; was reduced by RR. Business loans interest rates 22% plus 2% prime. CDs paying 17% and gold from $278 to $800 an oz. Silver under the Hunt boys $5 to $40. Carter also said in Jan 19 ” we will run out of fossil fuel in 20 years.
Jan 1977
Gee Lightweight, we paid our bills back in those days (Despite the Inflation rates left by Nixon..) before Reagan gave those tax cuts but failed to reduce spending…
Actually, in the process, he the debt worse. Reagan actually increased Federal spending.. What, no one told you that? Try NOT listening to FOX so much, aye?… :(
The answer as to why the Fed talks the way it does is simple. I found out in the summer of 2001.
In 1978, after nearly a decade of bad times, Congress passed a law, called Humphrey-Hawkins, named after the sponsors, requiring full employment at low inflation – and tasked the Fed with making that happen. The law was actually set to expire in the summer of 2000 – and did. But when we got to that point in time, the authorities decided they liked the results of the enforcement of the law up to that time – basically up through the end of the 1990’s – so much that they decided to continue to enforce it as if nothing had changed. All they had to do was change the name of the required semi-annual report to Congress on the state of the economy – which they did – and they were set to go. They intend to enforce it indefinitely. They are still doing so. It is their so-called Dual Mandate.
This is why the Fed “can’t see bubbles.†Since they are required to keep the economy going permanently, and cycles have not been eliminated, so it takes ever more money-pumping, stimulus, to keep things going, what do you think would happen if they would admit to what is really going on? Instant crash. So they talk positive as much as they possibly can. They tell the Wall Streeters what they want to hear, the Wall Streeters love it, and the stock market keeps going. The hope is that a high and preferably rising stock market will induce the economy to keep rising. None of them want to understand that it is actually the other way around in the long run, that the economy ultimately drives stock prices.
The result will be, since cycles have not been eliminated, the largest boom in history followed by the largest bust in history. The country is condemned and doomed to that fate. And since the phenomenon has now been exported worldwide when other central bankers decided it would be a good idea, too, worldwide markets have synced up, so the entire world is now doomed to that fate. I question whether current political entities will survive the consequences. In other words, for example, the United States will probably cease to exist. Worldwide chaos, anyone?
One other note. Why did the crash of 2008 happen? Cycles. I predicted that crash, including the timing, when I found out about Humphrey-Hawkins in the summer of 2001. The bigger crash is yet to come.
Ya, it just happened that ALL the Stock Market Crashes since America was founded have happen in “Cycles” ALWAYS on the watch of Conservatives, aye? And here I thought it was because of Conservative financial and economic practices like further enriching the Wealthiest 3% and screwing the 97% …. You do know that the average individual in America is now lost about 40% of their net worth since the Republican Revolution of 1981 don’t you? How foolish of me….. :(
Funny how the Dot Com Bust started in 2000 under Clinton. Maybe he dropped party for a few years.
Unfortunately the cycle also usually features a major war. Our current “Pivot to the Pacific” is a very dangerous policy, In 1982 the UN declared itself the owners of the world’s oceans and appointed the U.S. Navy to enforce the power grab. The Chinese have just employed very sophisticated Q-9 missile systems in the China Seas. Somewhere they got the idea the China Seas belong to China. But, of course, our press has failed to notice. Jim
Jim,
That is the same China that was not a threat util the Republican Trade Agreements took millions of good paying Middle Class jobs from America and planted them in China where the work is done at slave labor rates… Now China has used those HUGE profits at America’s expense to become a real military threat… Makes you wonder which side the GOP is on, aye?
There is pain coming our way. Bernanke had the chance, but lack the testicular fortitude to absorb the pain when it would have been more manageable, but no, he did obama’s bidding, and pushed to pain into the future.
Guess what, we’re on the edge of the future.
All the Fed is doing is delaying the inevitable .. The bursting of many bubbles. We are living in a regulated economy. Asetts that are rising will not be affordable till the bust. Housing. Art.. Etc..
I have seen this act before onnseveral occasions.
They talk about no one on Wall Street went to jail because of their actions.. Why not the federal reserve chairmen.. Greenspan .. Bernanke . Now Yellen .. They are doing more harm. That the Wall Street executatives .
You will see
Gold Miners and Juniors are so over priced right now to the price of gold.
Gold was $1290 earlier and the miners were 30% cheaper then they are Now.
Gold goes down $50 and Miners go up 30%, I think this is the bubble.
Shorts on Miners are below their 52 week lows. Larry says Miners and Juniors will make a all time low before June.
We complain and complain; and then we vote and vote. We(and I say “we” collectively because “we” all suffer or enjoy irrespective of how each one votes)get what we vote for and put into office. Is it possible for someone with a clear mind(someone who does not puff for the dems or reps) to explain why a sane person would vote for Nixon twice, Clinton twice, and, most of all, VOTE FOR OBUMMER TWICE?????
i’d like to agree with you sparky, but we’ve already found out this election year that our candidates are chosen for us by super pacs and we have no say in who this group will select. plus, the candidates selected will be voted into office by an electorate which bypasses the popular vote. so, no matter who we vote for you can’t blame “we.” you’ll have blame the group of millionaires and billionaires who selected the candidates for us.
not to mention the voting machines that come pre-load with votes.
I think Yellen, Greenspan, Volcker,and Bernanke, those real life “four horsemen of the appocalypse” would make for a good commercial.
I can see it now – William Devane standing there asking them, “What’s in your safe?”.
If everything was fine, they would pay me interest on my money. Interest rates alone prove that the financial world is in bad financial shape. If things were fine, they’d move interest rates up quickly so people would make money and then spend it. These people are paid to try to deceive us. No telling what would happen if they expressed their fears and the truth. Greenspan could have not been as incompetent as he appeared to be in the end. .
Nothing is more indicative of economic conditions than the price of money. It hit record lows recently. Jim
looks like it could go even lower too. how about 1.25% rate on the 10yr?
Another excellent indicator it the Baltic Dry Index. It too is at record lows. It’s not in my nature to predict gloom and doom, but if something awful did happen in the near term we could not say we weren’t fairly warned. Jim
There is an ironic thought pattern developing with the banks the governments are ignoring: When negative interest rates start — meaning we pay to have cash and we pay to borrow cash and keep it. If banks are going to charge us for holding cash savings in the banks == SHOULDN’T THEY PAY US FOR BORROWING THE MONEY, since we are holding the banks moneys???
Not really. The borrower always pays more than the saver; the bank gets paid to take the risk of loaning out money. But loan rates go down as interest rates do. However, the only slightly negative interest rates (say in Japan) aren’t negative enough to drag loan rates below zero.
I have to question the theory that socialism is the problem when the U.S. continues to play “world police” and spend $600 billion/year on the military. This is the fatal flaw in our economic model, the money isn’t being spent in the right places. When even the Joint Chiefs of Staff say to stop giving them money and you don’t, you have a problem. Even 10% of what we spend on the military would make a huge difference. It’s not socialism that’s the problem, it’s that our priorities are f*cked and, along with corporate welfare, we go on starting wars to propagate the military/industrial complex, both of which have nothing to do with socialist ideals.
Well the deficit is in the range of $400 billion, so saving $60 billion from the military won’t be enough. You really have to go after social program entitlements by some combination of increased revenues and decreased expenditures. The problem with “socialism” (say Sanders style) is that much larger government programs are required, thereby swelling taxes and deficits, and swelling government way beyond the manageable size. Just like we don’t let one company control all consumer products (imagine if Apple were the only tech company), we can’t expect the government to efficiently carry out way more functions than it currently does (which is why I can’t vote for Sanders).
Pearl Harbor and Korea taught us to keep the biggest and best military in the world…. We sit on the economic top because of our mostly Democratic successful policies and freedom… That said, there is an endless list of Dictatorial Tyrants more than willing to take all of our freedoms and success away in a heart beat… The ONLY thing that keeps them at bay is that Military that you feel is so expensive…..
When the Titanic hit the Ice berg the Chandeliers in the main room began to swing back
and forth. The band played on. Count the members of our U.S. economic band and
check the fact they’re still playing the same tune. No problem, just a rough sea. Capt.
Yellen has everything under control. Water in the passage ways? That’s strange. What
could that possibly mean? Who’s worried? Time to turn in. Tomorrows another day on this unsinkable ship.
I like your analogy, Thomas. We didn’t pay a lot of attention to the bump of 1971, or the nose down that began in 1999 and increased since. It seems also that no one in charge wants to announce it is time to man the lifeboats. (There aren’t enough anyway.) The percentage of casualties could be a LOT higher than in 1912. There is no Carpathia handy for (US).
Fed’s got “bubble protection Team that will flood the market with ZIRP money, hence, this Bubble talk is only talk. Stock Markets will grind higher and Wall Strt will make moneys by “wheeling and Dealing” . It does not add to Wealth of USA as very little is spent in Productive assets, only Stocks keep grinding higher for benefit of already wealthy. Disparity will also widen just as it is doing all over the world. It will not end nicely, but, enjoy the party till it lasts. Watch out for Cheap JYEN to go to 95 per dollar from 109 now
These are possibly the 5 best sentences you’ll ever read , Road to Serfdom.
1. You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.
2. What one person receives without working for, another person must work for without receiving.
3. The government cannot give to anybody anything that the government does not first take from somebody else.
4. You cannot multiply wealth by dividing it!
5. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation.
people have to share the Dream of higher/bigger national income(Cake) from productive assets, not by Issuing more debt to leave the next generations’ to pick up the tab for Baby boomers spending/enjoying benefits that they did not save for.
the economy ultimately drives stock prices…..Bullshit, it is the FED and other CBs as they just “print/create out of thin air” as they send trillions to the Banks to keep the stock markets up…japanYEN and European currencies will gain on USD, till Yellen is kicked out
as she is a “phoney” and replaced by clone of Volcker, hahah
The result will be, since cycles have not been eliminated, the largest boom in history .. And since the phenomenon has now been exported worldwide when other central bankers decided it would be a good idea, too, worldwide markets have synced up, so the entire world is now doomed to that fate. I question whether current political entities will survive the consequences. In other words, for example, the United States will probably cease to exist. Worldwide chaos, anyone?……CBs are Gods and have Mandate to keep the bubble going till some “freak” event causes Chaos
America has always done best when ALL Americans do better….. If you understand only one thing, understand that when more people are employed at a decent wage, they buy products and jobs are created….. It is called the Velocity of Money and it worked very well from 1932-1981 under Democratic domination when ALL people did well rather than only the 3% who have dome the best since the “Republican Revolution” in 1981
The Fed can not see any bubble in front of their noses because the false interest rates they created moved consumption forward, and they think they can repeat this forever. So to them their past success in moving consumption forward just requires more of the same medicine in a bigger dose to extend this on forever. Well, the US does not live in isolation in this world, so if something somewhere in the world slams the valve shut on a part of the US economic pipeline you will see the effect of water hammer on the economic pipeline. Water hammer happens when a valve is closed the column of water continues to move by its momentum down the pipe creating a vacuum behind it to suddenly slam that train of water back in the direction it came from only to create a vacuum behind it again and again. Just as a water pipe can burst from water hammer, so can economic pipelines upon a sudden closure of an economic valve. This economic bubble will be the worst ever seen because of the vacuum in the economic pipeline created by ZIRP.
You seem to have forgotten that America is the consumptive engine of the world….. We are currently moving back to putting America first…… That means returning manufacturing to America…… When more Americans realize that buying “Made In America” products has a direct relationship to our ongoing success, this GOP trade policy inspired disaster will begin to be reduced…… Really is that easy….. It is called “Looking out for the 97% rather than the wealthiest 3%”….. It worked really well from 1932-1981 under mostly Democratic economic policy leadership…..
Eagle, you seem to have a good understanding of what is happening — except for your insistence that there are good guys and bad guys in politics. ALL politicians are bad guys. They are ALL in it for what they (and their backers) can get out of the rest of the population. Of course, we are all politicians to some degree. We must all try to satisfy bosses or workers, parents or kids, spouses, customers, neighbors, etc. The Founding Fathers never thought about the possibility of people making a career of politics, obviously, or they would have certainly included in the Constitution a proviso that no one could hold an elective office for more than one term. We badly need such an Amendment. Just TRY to get it past the career politicians in Congress. Then there are the career bureaucrats, of course, who can be a law unto themselves.
We agree on term limits Chuck… That said, the reason that the economy does so well under Democratic leadership is that the Liberal Progressive Democrats have always been the party of the people and the Conservative Republicans have always been the party of the Wealthiest 3%…. Look at who funds their campaigns…. Bernie is a good example… 100% has come from individual donors by the millions… He’s the ONLY Presidential candidate to do this… Now, who do you think he is going to look out for…
I’m betting that Congress also changes to the left in November and a lot of those candidates are going to do much the same… The Koch Brothers are worried, in my opinion… The sun is coming back up as the Quislings are about to be run out of town again, just as they were in the 1930’s by our Grandparents and Parents…
The chairman of the Fed sits in a sheltered money printing bunker. To them the economy will always be in top shape! As for the common people, the salt of the earth, they feel the slightest tremors that leads to lost productivity and job losses. How can the normal person listen to the chairman?
Everyone should read Martin Weiss’s commentary this morning on nuclear terror, along with the references at the end. They will give you something to think about.
J. R. Crooks, also has a good reminder that we never know when the market blowoff will occur. Just because it should happen, and is needed, doesn’t mean it is imminent, or even that it will occur. The markets are not as rational as we would like them to be – else we would all be rich.
Mike; As I mentioned in a previous E-Mail, the Fed is always behind the curve. They are still using the outdated equilibrium model. This model is calculated by using math equations. As you well know, economics is the study of scarce resources. It is also the study of human behavior. Human nature is complex. The the complexity theory is based on inverse probability, also known as the Bays ion theory. Based on training, education and experience, we can calculate what might happen. This is called indications and warnings. We cannot know when it will happen. The Fed is too arrogant to accept constructive criticism. Regards, Robert Calabro.