WASHINGTON — The Federal Reserve chairman, Ben S. Bernanke, meant to deliver two dollops of good news on Wednesday: The economy is doing better, and the Fed is determined to keep it that way.
He announced that the Fed would extend one part of its stimulus campaign, suggested that it might extend another part, and offered new details about the timing.Goody, goody then... investors should be turning cartwheels over the prospect of continued low interest rates and insane amounts of fresh new money pumping endlessly into the torn leaky balloon we call the economy.
Increased speculative gambling, sorry... more "investments" should surely have manifested as a result of such a reassuring commitment, but didn't.
Surprisingly, at least for Mr. Bernanke, quite the opposite happened, it was as though nerve wracked, jumpy players caught whiff of a rat, or at least suspected a trick. Rather than a buoyant, happy gaming session, much chips were cashed in right across the board and "markets" plunged.
Two Economies in Turmoil, for Different Reasons
“They are getting very close to where I would have had them be two or three years ago,” said Joseph E. Gagnon, a former Fed economist and architect of the first round of asset purchases who is now a senior fellow at the Peterson Institute for International Economics. “I find it odd, and probably the chairman is surprised and unhappy with the market reaction, too.”
The Fed declined on Thursday to comment on the market reaction to Mr. Bernanke’s remarks. But he expressed himself clearly during the news conference on the negative market response since his last public appearance in May. “Well, we were a little puzzled by that,” he said.Is it possible there is more than one economy?
Firstly, the stock exchanges are obviously not connected to any form of real world activity, they have been entirely disengaged from what you and I would think of as economic reality for some time.
They are at best an exclusive closed loop casino where activity at each of the slots has absolutely nothing to do with the price of tea in china. As such they cannot be used as a relative gage for anything economic. It is a place where winners profit from bad bets made by losers--not a reflection of companies performance or prospects. Valuations are seemingly pulled from a hat and headlines prompt betting activity, not company or commodity performance.
To keep the odds looking rich... failed companies are de-listed and their millions of ex-employees swept under a rug.
If that premise is near to fact then we can discount stock market motions as being any measure of economic reality.
In other words performance of the stock market is irrelevant, except unto itself.
The second probable economy is the world far away from the bright lights, obscene bonuses and opening bells of Wall Street.
It is a place where you and I fret and struggle to make ends meet, where we cringe as staples and necessities nudge ever higher in cost and where our means to secure a living seem ever more tenuous... while taxes, fees, premiums and all manner of tithes seem to grow and expand at every turn.
The real economy is a place where disposable income and discretionary spending seem mythical... like echos from some better past.
Perhaps it is this world the Federal Banking System elites have completely lost sight of or wilfully ignore.
Perhaps after years of painting whitewash over wallpapered veneer and applying lipstick to pigs, they have self deluded into thinking things are solid underneath, that by stuffing failed banks and corporations with unlimited credits and propping up hollowed out commerce, that somehow this translates to "let the good times roll."
Unfortunately these quantitative easing proceeds are either locked up tight and unavailable to the street or have financed all manner of bourgeois trifles.
The commitment to the casino patrons was predicated on an assessment of claimed recovery, specifically unemployment rates dropping.
According to officialdom things are picking up smashingly and by next year we will be under fair winds and full sail. Unfortunately anyone who has even peeked fleetingly into the bowels of the reality beast can see this notion is completely unfounded. There is not one single redeeming feature evident to support any form of recovery, in fact ALL indications are... we are on the verge of completing the original and unavoidable collapse of the financial system.
Perhaps what we witnessed today was dramatic realization of the punters... that the supreme keeper of the printing presses has no clue whatsoever about that of which he speaks, or that he has now resorted to just saying stuff.
Fear and greed are the motivators for wealth grubbers. When afraid they bail out, when confident they go all in. What I saw today was naked fear... not of the risks of placing bets but the stark realization that their soon to depart golden goose will not be around to lay that next promised golden egg. It seems likely Mr. Bernanke will be long gone before his promises or emergence of a true economic picture--What then?
President Barack Obama made his comments about Federal Reserve Chairman Ben Bernanke in a PBS interview Monday. Bernanke has stayed "a lot longer than he wanted to or he was supposed to," Obama said.We all know who gets the blame, the one who used to have the position.
A quick look at global news confirms the absurdity of recovery attempts - it is mathematically impossible.
In the matter of sage wisdom, I did notice this...
The Fed has made the unemployment rate the measuring stick for its stimulus effort. It doubled down on Wednesday by saying that it would buy bonds until the rate fell to 7 percent.
But the unemployment rate so far has fallen almost entirely because people have stopped looking for work. The share of adults with jobs, known as the employment-to-population ratio, has barely changed over the last three years.
In past recoveries, declining unemployment has encouraged people to re-enter the labor market, but some economists argue that that will not begin to happen until the rate falls well below 7 percent.
“Why is monetary policy linked to unemployment rate as opposed to employment-to-population ratio?” Amir Sufi, an economist at the University of Chicago, wrote on Twitter. “Seems bonkers. Does anyone seriously think labor market is improving dramatically?”Final thoughts:
Given the state of world indebtedness, which is orders of magnitude above combined GNP, only universal debt forgiveness could begin the solution of recovery. This sensible approach will never see the light of day.
The second option is involuntary, cascading, sovereign, regional, municipal, personal defaults which eventually will serve the same purpose--the pain of letting nature take its course will prolong the agony, at least for constituents, not so much the ivory tower dwellers--where said decisions are made.
In the meantime money addicts are a fickle lot and are easily enticed to make another play, expect a flurry of reassuring headlines and a re-continuation of market climb...
For the "administration" -- appearance is everything! Reality is someone elses problem!
Smelling rats...
Stay tuned...
Comments
Post a Comment