Tag: finance

Submitted by Michael Snyder of The Economic Collapse blog,

If you believe that there is high inflation in the United States, you are just imagining things.  That is the message that the U.S. government and the Federal Reserve would have us to believe.  You might have noticed that the government announced on Wednesday that the cost of living increase for Social Security beneficiaries will only be 1.5 percent next year.  This is one of the smallest cost of living increases that we have ever seen.  The federal government is able to get away with this because the official numbers say that there is hardly any inflation in the U.S. right now. 

Of course anyone that shops for groceries or that pays bills regularly knows what a load of nonsense the official inflation rate is.  The U.S. government has changed the way that inflation is calculated numerous times since 1978, and each time it has been changed the goal has been to make inflation appear to be even lower.  According to John Williams of shadowstats.com, if the inflation rate was still calculated the same way that it was back when Jimmy Carter was president, the official rate of inflation would be somewhere between 8 and 10 percent today.  But if the mainstream news actually reported such a number, everyone would be screaming and yelling about getting inflation under control.  Instead, the super low number that gets put out to the public makes it look like the Federal Reserve has plenty of room to do even more reckless money printing.  It is a giant scam, but most Americans are falling for it.

Meanwhile, the prices of the things that most Americans buy on a regular basis just keep going up.  The following are just a few examples of price inflation that we have seen lately…

-McDonald's has killed the dollar menu because it is becoming impossible to "make any money selling burgers for $1".

But don't worry – the government says that the inflation you see is just your imagination.

-Amazon.com has raised the minimum order size required for free shipping from $25 to $35.

But don't worry – you can afford to order more stuff thanks to the great new job that you got during this "economic recovery".

-It is being projected that those using natural gas to heat their homes will see their heating costs rise by 13 percent this winter.

But don't worry – "global warming" should kick in to high gear any day now.

-The price of chocolate has gone up by 45 percent since 2007, and it is being projected that it will now be increasing at an even faster pace.

But don't worry – eating chocolate is bad for you anyway.

-Thanks to Obamacare, the health insurance premiums of many American families are absolutely skyrocketing.  As I wrote about the other day, one family down in Texas just got a letter informing them that their health insurance premiums are going up by 539 percent.

But don't worry – this is just "health care reform" in action.

Meanwhile, things just continue to get tougher for middle class American families.  Household incomes have actually been declining for five years in a row and total consumer credit has risen by a whopping 22 percent over the past three years.

The quality of our jobs continues to go down and our paychecks are not keeping up with inflation.  In fact, 40 percent of all U.S. workers are now making less than what a full-time minimum wage worker made back in 1968 after you account for inflation.

So what do the "authorities" say that the solution to our problems is?

They want even more inflation of course.  According to CNBC, many Federal Reserve officials (including Janet Yellen) believe that what the U.S. economy really needs is a lot more inflation…

Inflation is widely reviled as a kind of tax on modern life, but as Federal Reserve policy makers prepare to meet this week, there is growing concern inside and outside the Fed that inflation is not rising fast enough.

 

Some economists say more inflation is just what the American economy needs to escape from a half-decade of sluggish growth and high unemployment.

 

The Fed has worked for decades to suppress inflation, but economists, including Janet Yellen, President Obama's nominee to lead the Fed starting next year, have long argued that a little inflation is particularly valuable when the economy is weak. Rising prices help companies increase profits; rising wages help borrowers repay debts. Inflation also encourages people and businesses to borrow money and spend it more quickly.

The rest of that article goes on and on about how wonderful inflation is for an economy and about how the U.S. economy desperately needs some more of it.

Well, if that was actually true, then the Weimar Republic should have had one of the best economies in the history of mankind.

But this inevitably happens when a nation starts producing fiat currency that is backed by absolutely nothing.  There is always a temptation to just print a little bit more.

In the end, we are going to be destroyed by our own foolishness.  We have the de facto reserve currency of the planet, and the rest of the world has trusted it for decades.  But now we are systematically destroying our currency, and the rest of the globe is looking on in horror.

If you want to see a very good example of the impact that inflation has had on our economy in recent years, just check out this amazing chart which shows what the Federal Reserve's reckless policies have done to the prices of commodities.

Ultimately, the U.S. dollar will be destroyed, and we will have done it to ourselves.

Many people are attempting to protect themselves against this inevitability by putting a lot of their money into hard assets such as gold and silver, but before you do that you might want to make sure that you don't have a vengeful spouse that will toss it all into a dumpster someday.  The following is from a recent New York Post article…

A Colorado man was so angry at his ex-wife for divorcing him that he had the couple’s life savings of $500,000 converted to gold — then tossed it in a dumpster so she couldn’t have any of it, the Colorado Springs Gazette reports.

 

In June, Earl Ray Jones, 52, of Divide, Colorado, was ordered by a judge to pay $3,000 a month to the woman he’d been married to for 25 years, so he pillaged the couple’s retirement account and had it converted into 22 pounds worth of gold and silver bars,  the paper reports.

 

Jones claims he then tossed the modern-day treasure into a dumpster behind a motel, where he had been living temporarily, later telling the judge he had no money to give his ex-wife, according to the paper.

Did that story make you smile?  It sure did the trick for me.

But that story is also a picture of what the Federal Reserve is doing with our dollar.

Our currency has been used for decades by almost everyone else around the planet.  In fact, more U.S. dollars are used outside of our country than inside of it.

But now the Federal Reserve is systematically trashing the dollar and the rest of the globe is starting to lose faith in it.

Instead of realizing their mistakes, Fed officials say that we need to create even more inflation and they just keep on wildly printing more money.

In the end, we will all pay a great price for their foolishness.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/zrhyqX7PX90/story01.htm Tyler Durden

Given our previous discussion of the “born-again” jobs scam, the growing use of robots, and shift in technology, and the increasing disincentivization (via benefits) of the US labor force, Paul Singer’s detailed discussion below of the”serious dysfunction” in the US employment markets is crucial to comprehending why the Fed is just making things worse.

 

Via Elliott Management’s Paul Singer,

The employment situation in America is in a state of serious dysfunction. The problems existed before the 2008 crisis, to be sure, but they are getting worse, and the current Administration’s job-related policies are seriously deficient. Most parts of the developed world are facing similar challenges, but our focus in this section will be on the U.S., where the labor participation rate has reached a 40-year low. This is a nasty statistic, one that reveals the published unemployment figures to be a deception. In reality, five years after the crash, unemployment remains at recession levels. The fall in the labor participation rate reflects the perils of long-term unemployment, which turns millions of workers into unemployables as their skill sets rust with disuse and their attractiveness to employers diminishes.

One element in the long-term jobs picture is the march of technology. The technologies that are chewing up jobs are actually accelerating in their efficiency and their ability to perform tasks previously done by people. The fear that technology will make workers obsolete predates the industrial revolution, but the future will likely prove that this is only partially true. Technological advances may not be the death of employment, but they will require seriously creative policies to counteract their negative effects on jobs without impeding overall growth. We believe that this can and must be achieved.

These advances, of course, include the Internet, robotics, 3D printing, GPS, cheap shipping and nanotechnology, among others. Entire industries are being revolutionized and their profitability models altered or destroyed. There is no “solution” to this problem from the standpoint of workers who are displaced or displaceable. There is only adaption, education, retraining and moving workers in both developed and developing countries to jobs that are created by such technological advances. Where some manufacturing and service jobs are destroyed by technology, others are created. The job of government leaders (which is currently being done incredibly poorly) is to make sure their educational systems are as high-quality as possible, including a good amount of vocational training, and that their employment policies are as flexible as possible in order to avoid employer flight. Sovereigns must become platforms for, and remove impediments to, entrepreneurship, innovation and start-ups. It is not a solution to the employment challenge for policymakers to behave like Luddites or protectionists.

A related problem in America is benefits policies that encourage dependency. This is insidious and life-draining, because a balance must be struck between helping those truly in need and providing harmful incentives for able-bodied people not to work. If the government makes it less economically attractive to work than to receive a check, the predictable result will be an increase in handouts and a drain on the productive sectors of the economy. This is a self-reinforcing trend if it is practiced by politicians buying votes by promising benefits. Benefits can come only from other citizens, and this form of corruption is terrible policy with dreadful results: a cycle of dependency, class warfare, declining productivity, slower growth, fewer opportunities and unmet hopes and dreams.

A third employment-related problem in America and other countries in the developed world is competition from emerging markets, where goods and services are increasingly being produced with comparable or better efficiency, quality, range and sophistication. It is a great and wonderful human development that the opportunity for prosperity is spreading throughout the world. We should all be in favor of policies aimed at helping people and countries all over the world develop tools and methods for educating their people and providing new foundations for entrepreneurship, higher education, creativity, innovation and work at the highest possible level.

The difficulty that developed countries face from this surge in developing-world capability stems from the developed countries’ tendency to coast on past glories and to have uncompetitive wage and cost structures, in addition to an aversion to working harder/smarter/better to stay in the game. The best and only sustainable growth is that which emanates from the human mind – from smarter and more creative efforts and better organizations. “Growth” from policies that depend on beggaring thy neighbor by depreciating one’s currency, erecting trade barriers or cutting wage rates is often chimerical, and such policies are ultimately likely to backfire.

None of the aforementioned headwinds to full employment is disputable. One could assert that the developed countries are doing all they can with the best possible policies, or that nothing can be done about education, labor policy, training, free trade and other important levers for generating good jobs in a tough environment because of internal or external politics. These assertions would be false. While admittedly the cures may be politically difficult, they are there for the taking for leaders and people of courage and vision. Increasing the rigidity of labor policies, combined with protectionism, is not the answer.

In the absence of serious reforms and more effective leadership in the developed countries, their workforces and their economies are probably headed for a spiral of dependency, strife, poverty, inflation and political unrest. Although the long-term budget curves provide some clues about the outer boundaries of timing, the exact moment when we will reach a tipping point is uncertain. However, if that point is reached, which could happen sooner rather than later, it won’t be pretty.

Of course, for any given set of technological changes, policies and conditions related to jobs and the labor force, a stronger rate of economic growth makes things easier and better. Unfortunately, current government policies in the developed countries are no more conducive to providing the conditions for and removing the impediments to stronger economic growth than they are at intelligently helping the work forces in these countries manage the challenges of technological change.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/19KtdqCWzJU/story01.htm Tyler Durden

Given our previous discussion of the “born-again” jobs scam, the growing use of robots, and shift in technology, and the increasing disincentivization (via benefits) of the US labor force, Paul Singer’s detailed discussion below of the”serious dysfunction” in the US employment markets is crucial to comprehending why the Fed is just making things worse.

 

Via Elliott Management’s Paul Singer,

The employment situation in America is in a state of serious dysfunction. The problems existed before the 2008 crisis, to be sure, but they are getting worse, and the current Administration’s job-related policies are seriously deficient. Most parts of the developed world are facing similar challenges, but our focus in this section will be on the U.S., where the labor participation rate has reached a 40-year low. This is a nasty statistic, one that reveals the published unemployment figures to be a deception. In reality, five years after the crash, unemployment remains at recession levels. The fall in the labor participation rate reflects the perils of long-term unemployment, which turns millions of workers into unemployables as their skill sets rust with disuse and their attractiveness to employers diminishes.

One element in the long-term jobs picture is the march of technology. The technologies that are chewing up jobs are actually accelerating in their efficiency and their ability to perform tasks previously done by people. The fear that technology will make workers obsolete predates the industrial revolution, but the future will likely prove that this is only partially true. Technological advances may not be the death of employment, but they will require seriously creative policies to counteract their negative effects on jobs without impeding overall growth. We believe that this can and must be achieved.

These advances, of course, include the Internet, robotics, 3D printing, GPS, cheap shipping and nanotechnology, among others. Entire industries are being revolutionized and their profitability models altered or destroyed. There is no “solution” to this problem from the standpoint of workers who are displaced or displaceable. There is only adaption, education, retraining and moving workers in both developed and developing countries to jobs that are created by such technological advances. Where some manufacturing and service jobs are destroyed by technology, others are created. The job of government leaders (which is currently being done incredibly poorly) is to make sure their educational systems are as high-quality as possible, including a good amount of vocational training, and that their employment policies are as flexible as possible in order to avoid employer flight. Sovereigns must become platforms for, and remove impediments to, entrepreneurship, innovation and start-ups. It is not a solution to the employment challenge for policymakers to behave like Luddites or protectionists.

A related problem in America is benefits policies that encourage dependency. This is insidious and life-draining, because a balance must be struck between helping those truly in need and providing harmful incentives for able-bodied people not to work. If the government makes it less economically attractive to work than to receive a check, the predictable result will be an increase in handouts and a drain on the productive sectors of the economy. This is a self-reinforcing trend if it is practiced by politicians buying votes by promising benefits. Benefits can come only from other citizens, and this form of corruption is terrible policy with dreadful results: a cycle of dependency, class warfare, declining productivity, slower growth, fewer opportunities and unmet hopes and dreams.

A third employment-related problem in America and other countries in the developed world is competition from emerging markets, where goods and services are increasingly being produced with comparable or better efficiency, quality, range and sophistication. It is a great and wonderful human development that the opportunity for prosperity is spreading throughout the world. We should all be in favor of policies aimed at helping people and countries all over the world develop tools and methods for educating their people and providing new foundations for entrepreneurship, higher education, creativity, innovation and work at the highest possible level.

The difficulty that developed countries face from this surge in developing-world capability stems from the developed countries’ tendency to coast on past glories and to have uncompetitive wage and cost structures, in addition to an aversion to working harder/smarter/better to stay in the game. The best and only sustainable growth is that which emanates from the human mind – from smarter and more creative efforts and better organizations. “Growth” from policies that depend on beggaring thy neighbor by depreciating one’s currency, erecting trade barriers or cutting wage rates is often chimerical, and such policies are ultimately likely to backfire.

None of the aforementioned headwinds to full employment is disputable. One could assert that the developed countries are doing all they can with the best possible policies, or that nothing can be done about education, labor policy, training, free trade and other important levers for generating good jobs in a tough environment because of internal or external politics. These assertions would be false. While admittedly the cures may be politically difficult, they are there for the taking for leaders and people of courage and vision. Increasing the rigidity of labor policies, combined with protectionism, is not the answer.

In the absence of serious reforms and more effective leadership in the developed countries, their workforces and their economies are probably headed for a spiral of dependency, strife, poverty, inflation and political unrest. Although the long-term budget curves provide some clues about the outer boundaries of timing, the exact moment when we will reach a tipping point is uncertain. However, if that point is reached, which could happen sooner rather than later, it won’t be pretty.

Of course, for any given set of technological changes, policies and conditions related to jobs and the labor force, a stronger rate of economic growth makes things easier and better. Unfortunately, current government policies in the developed countries are no more conducive to providing the conditions for and removing the impediments to stronger economic growth than they are at intelligently helping the work forces in these countries manage the challenges of technological change.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/19KtdqCWzJU/story01.htm Tyler Durden

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Gold had a good run for twelve years but has fallen by as much as 20% this year alone. Is that set to continue? It looks as if gold will increase marginally again this week and may even continue reaching a peak next month due to the weak dollar and the fact that the world’s highest consumer of gold (India) will be entering a festive season typically associated with marriages and gold-buying time. But, will investors soon be losing interest in gold? Prices are predicted to increase by at least 3.8% on average (as in previous years) in November. It may even be beyond that percentage increase due to the weakened dollar.

• 68% of those people polled by CNBC believed that gold would increase again this week after last week topped the highest price in gold for the past four weeks.
• Now, there is some belief that there will be a high that goes beyond August’s $1, 400.
• Only 18% of people believe that gold will drop this week while the rest see prices remaining stable.

   

  Gold Rush or Gold Streak?

Bullion increased last week by 1.7% and that was mainly due to the lower-than-expected US non-farm-payrolls data that was finally released by the administration for the first time since the government shutdown. The Bureau of Labor Statistics was inevitably one of the non-essential federal government departments that were asked not to come into work. Why on earth do we have non-essential government departments anyhow and why did they come back to work? It was probably only so the administration could inform us that despite the shutdown there was a 0.1% drop in unemployment from 7.3% to 7.2%.

My, the economy is really taking off! You’ll have to hold on to your hat President Obama as the wind that gets whipped up might just knock it off your head as the people stampede to the factories to get to work. Of course, the real unemployment figure is still roughly nearly 15% and that looks like it is set to increase even more as people become more and more discouraged about looking for work. Dropping out of the work market means dropping out of the figures.

But, the current situation means that the Federal Reserve will definitely not be able to withdraw its stimulus plan and Quantitative Easing will end up becoming a lengthy drawn-out process that could be equated with doing nothing more than lining the pockets of the banks so that they can create the next bubble on the stock market. The dollar will be weakened even further by the mere fact that tapering has yet again been postponed. It’s also lower still as a result of the shutdown and worry over the ability to pay back debt for the US.

This week it is expected that the two-day policy meeting for the Federal Reserve will end in an announcement that the easy money will continue well into 2014 and even beyond. Normally it’s loose lips that sink ships. But, this ship will be well and truly sunk by the loose money of Ben Bernanke and President Obama’s monetary policy that is far from conventional.

There are some analysts that believe that the strife for the dollar will bring about a rally in gold that will amount to+$200 in the next few weeks. There are even some that expect gold to go beyond $1, 500 by the end of December 2013. That would mean getting back to levels that have not been seen since April 2013. Gold came down pretty quickly after QE tapering was being bandied about and it could go up just as quickly now that tapering is being postponed. The dire situation of the US will certainly give gold a push and that could be good business to invest in. US debt is not going to go away and the country will end up spending more and more. People will inevitably go back into gold to secure their money. The price of gold can only go up and now is the time to cash in on that.

If the US is going to be in a position to deal with its national debt, paying it down, then it will have to let a little bit of inflation creep in there. That in itself will be more fuel to the fire and will drive up the price of gold again.

So is it a gold rush or a gold streak? Most people will be betting on the fact that this is not just a short burst and that it will last a lot longer than a wet firework that fizzles out.

Originally posted: Gold Rush or Just a Streak?

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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/FDXG9Ij_4YQ/story01.htm Pivotfarm

Over a year ago we discussed the “next Industrial Revolution” and where it might appear from. 3D printers were envisioned among Goldman’s top disruptive themes earlier this year and as UBS notes, 3D printing – or additive manufacturing – has been catching investors’ imaginations in recent months. Some commentators have suggested the technology has the potential to literally transform the world economy and dismantle global supply chains; while UBS points out that, others have suggested the technology is hyped and has little promise beyond a few niche product areas in manufacturing. The truth, Andrew Cates believes, probably lies somewhere in between but he is nevertheless more sympathetic to those who champion the technology’s disruptive – even revolutionary – qualities.

 

Via UBS’ Andrew Cates,

For those readers who are not yet aficionados on this technology we start with a brief explanation. Additive manufacturing (AM) techniques (a.k.a. 3D printing) create 3D objects directly from a computer model by depositing material where required and by building products up layer by layer using a range of different materials (e.g. polymers, ceramics, glass and even metals).

This stands in contrast to conventional subtractive manufacturing techniques which involve taking blocks of material, cutting them down into the right shape, and assembling them into more complex products. The technology is admittedly still in its infancy and it suffers from a range of limitations at present. However, we think the optimists who argue that this technology will be revolutionary have a strong case. As one author has quipped:

“This is not the third (industrial revolution), nor the second, but rather the first real revolution in how we make things since a pre-historic man picked up two rocks and started banging them against one another, trying to shape them into something useful” (Dr Alexander Elder)

The technology has not yet generated a major impact on the world economy. A recent report from UBS analysts, for example, noted that the AM market (USD 2.2 billion) amounted to just 0.02% of the global manufacturing sector. Still, as the analysts equally noted, the technology is starting to spread more broadly both at a sector-specific and at a country-specific level. A recent report from Wohlers Associates, for example, reveals that AM is now used in a number of different economic sectors with consumer products/electronics the leading industrial area. The motor vehicle and aerospace sectors are also keen users while the medical/dental profession has additionally established itself as a strong sector for AM over the last few years (see chart 1 below).

The technology is – at present – particularly advantageous in low-to-moderate volume markets (e.g. aerospace) that regularly operate without economies of scale.

At a country-specific level the data from that same report from Wohlers reveals that the US is the lead user by a large margin. Japan, Germany and China have the second, third and fourth largest installed bases, respectively, of systems worldwide (see chart 2 below).

There are a number of reasons why the technology has not yet had a bigger impact. Challenges include production speed, materials availability, precision and control. Issues concerning legal responsibility are also problematic. Still, as we explore below, incentives to overcome these challenges clearly exist because of the potential advantages that the technology affords. And matters at present may already be moving more rapidly than many of the pessimists might contend. The use of nanotechnology, for instance, could mean that plastics in 3D printing soon rival the strength of metals in more conventional manufacturing.

Meanwhile the printing of human kidneys, of houses, of hamburgers (and other food products) and even – in the distant future – of an aeroplane are being actively researched and in some of those cases (e.g. houses and hamburgers) even printed.

The reasons why the technology has so much potential are as follows:

It lowers energy intensity by saving energy, by eliminating production steps, by enabling the reuse of by-products by producing lighter products and by cutting the need for transportation. It is in these respects obviously environmentally-friendly as well.

 

AM techniques yield less waste. The US Department of Energy estimates that by building objects layer by layer instead of traditional machining processes that cut away material AM processes could reduce material needs and costs by up to 90%.

 

It heightens incentives to innovate by eliminating traditional design restrictions. It makes it possible, for example, to create items previously considered too intricate and accelerates final product design. The ability to improve performance and functionality – literally customizing products to meet individual customer needs – should open new markets and improve profitability.

 

It yields greater flexibility in the production process by enabling rapid response to markets and new production options outside of the manufacturing factory. Spare parts can be produced on demand, for example, reducing the need for inventory and complex supply chains.

In short the technology enriches the capital base and enhances the scope for an economy to achieve faster capital- and total factor productivity growth. Its disruptive qualities emerge from the ongoing fall in its relative costs and the increasingly broad reach of its potential. Arguably of most significance from the vantage point of potential global economic benefits the technology lowers the barriers to entry in manufacturing and allows almost anyone to become an entrepreneur.

As we have explored in more detailed research in recent weeks there are a large number of technologies that are rising to the surface of the world economy at present which offer a great deal of promise. AM in isolation would arguably not be so potent were it not for these other innovations that are acting alongside it. The marriage of nanotechnology and AM techniques is perhaps the bestillustration of this. But the increasingly connected world economy via the increasing use of mobile and cloud technology and the ease with which digital designs can now be transported around the planet are notably also helping to foster the take-up and deployment of AM techniques.

We have tentatively estimated that the efficient deployment of new technologies in the information and communications sector, in manufacturing (including AM) and in energy could lift the potential growth rate of the world economy by as much as 0.5 percentage points in the coming years. The winners from this potential transformation
, however, are more likely to be those economies, sectors, companies and consumers that are active users of these new technologies and not necessarily its active producers.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/Bn9QzOb278M/story01.htm Tyler Durden

From David Einhorn of Greenlight

The amount of media and market attention focused on whether the Federal Reserve will taper its quantitative easing (QE) would border on comical if it weren’t so serious. In August, the San Francisco Fed published an economic research paper that estimated that the $600 billion spent on QE2 added a meager 0.13% to real GDP growth in late 2010 (about $20 billion) and that the benefit fades after two years. Given that, what practical difference does it make whether the Fed buys a monthly $85 billion or $75 billion or no additional securities at all for that matter?

We maintain that excessively easy monetary policy is actually thwarting the recovery. But even if there is some trivial short-term benefit to QE, policy makers should be focusing on the longerterm perils of QE that are likely far more important. Here are some questions that come to mind:

• How much does QE contribute to the growing inequality of wealth in this country and what are the risks this creates?
• How much systemic risk does the Fed create by becoming what Warren Buffett termed “the greatest hedge fund in history”?
• How might the Fed’s expanded balance sheet and its failure to even begin to “normalize” monetary policy four years into the recovery limit its flexibility to deal with the next recession or crisis?

No one is sure what the Fed is focused on. After spending several months bracing the market for fewer QE donuts, the Fed decided that it was premature to taper. Even a token reduction (from a baker’s dozen to a dozen?) was ruled out despite the fact that the economic trajectory has not materially changed. We responded the next morning with our own stimulus by ordering jelly donuts for the entire office.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/YRagU0U6d9c/story01.htm Tyler Durden

From David Einhorn of Greenlight

The amount of media and market attention focused on whether the Federal Reserve will taper its quantitative easing (QE) would border on comical if it weren’t so serious. In August, the San Francisco Fed published an economic research paper that estimated that the $600 billion spent on QE2 added a meager 0.13% to real GDP growth in late 2010 (about $20 billion) and that the benefit fades after two years. Given that, what practical difference does it make whether the Fed buys a monthly $85 billion or $75 billion or no additional securities at all for that matter?

We maintain that excessively easy monetary policy is actually thwarting the recovery. But even if there is some trivial short-term benefit to QE, policy makers should be focusing on the longerterm perils of QE that are likely far more important. Here are some questions that come to mind:

• How much does QE contribute to the growing inequality of wealth in this country and what are the risks this creates?
• How much systemic risk does the Fed create by becoming what Warren Buffett termed “the greatest hedge fund in history”?
• How might the Fed’s expanded balance sheet and its failure to even begin to “normalize” monetary policy four years into the recovery limit its flexibility to deal with the next recession or crisis?

No one is sure what the Fed is focused on. After spending several months bracing the market for fewer QE donuts, the Fed decided that it was premature to taper. Even a token reduction (from a baker’s dozen to a dozen?) was ruled out despite the fact that the economic trajectory has not materially changed. We responded the next morning with our own stimulus by ordering jelly donuts for the entire office.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/YRagU0U6d9c/story01.htm Tyler Durden

Submitted by Brian LaSorsa via The Ludwig von Mises Institute,

It’s hard to maintain monopoly status in a free market when you have to deal with all that competition and whatnot.

Between other companies’ low prices and new, updated products entering the market each day, it’s almost like Rich Uncle Pennybags is a thing of the past. But fret not!

The politicians of the world would like to offer anyone dead set on controlling an entire industry the chance to shine. So come one, come all — government agencies, cronies, and all their friends — as we present the five best ways to create a monopoly and to ensure you never have to compete again.

1. Regulations. When the cost of doing business is high, make it higher. Small firms can’t survive government imposed regulations while bigger firms can certainly bear the burden, at least temporarily. Taxes, mandates, and especially “safety regulations” (e.g., clinical trials at the Food and Drug Administration) will wipe out your competition before they even have time to ask what the new rules mean. Then hire a lobbyist in Washington. I’m sure he or she will come up with a good reason that the industry should adhere to stricter and more expensive guidelines.

2. Subsidies. There’s no such thing as a free lunch. But, when the government is paying for it, the lunch sure does taste free. Subsidies offer an alternative, consumer-driven focus to acquiring monopoly status. Arbitrary revenue-boosts from the government will allow you to reduce prices to essentially nothing, all while maintaining profitability. You can give away (what used to be) a $10.00 item for free and, with the help of $1 million in subsidies from our nation’s capital, you can stay afloat. Your competitors, however, will have to make do with reality. Even if they somehow manage to slash prices to $1.00 per unit, what kind of customer will pass up free? The subsidy doesn’t have to last permanently, either. It will only take a few weeks before your competitors begin to default on paychecks and other loans without transaction revenue.

You can also take this route without the government revenue injections if you have a contingency plan in the form of a bailout. Both you and your competitors will go bankrupt, but only one (fingers crossed it’s you) will receive CPR.

3. Nationalization. Shout out to government officials! This one’s for you. The easiest and most straightforward way to create a monopoly is to simply write the monopoly into law. Federal control over an entire industry — much like we’ve done with the United States Postal Service — is effectively the prohibition of competition from the private sector. But don’t ever reference the USPS. It’s a terrible (albeit realistic) example of a government monopoly, what with its inefficiency, perpetual deficits, and general lack of regard for any sense of advancement in mail delivery. Rather, tell everyone you want to monopolize “for the good of the people” and then talk about the Department of Education or some other public sector operation people don’t like to criticize in front of company.

4. Tariffs. Neighbors can be annoying. Some are loud and others are strange, but the absolute worst neighbors are the ones who compete with you in the marketplace (and then win). In the beautiful Southwest, this neighbor is Mexico. Companies south of the border produce certain commodities much more cheaply than American companies do, and they have the nerve to think that they can export their inexpensive products to the United States on a whim. We don’t think so. If Mexican companies sell sugar for $2.00 per pound and you charge $3.00, don’t let them satisfy customers like they own the place. Make sure they pay an import fee of $1.01 and it’s guaranteed you’ll win new business one cent at a time. Better yet, propose a complete ban on the sale of foreign goods in your state, city, and town until you’re so isolated from the rest of the world that no one has a choice to buy from anyone except you.

5. Intellectual property. If you have a good idea, why let anyone else have the same one? Take that idea, write it down in the broadest words possible, and send it straight to the United States Patent and Trademark Office, where public officials will (hopefully) grant you the exclusive right to use it. And don’t worry, if someone else thinks of the idea one day later … too bad. You filed first. Even if someone halfway across the globe comes up with the same idea independently … too bad. You filed first. Milk your monopoly for all it’s worth. Put a huge price tag on that beast and feel free to ignore quality. What are consumers going to do: purchase your exclusive product elsewhere?

We wish you the best of luck in your venture. You deserve it.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/u5Pue4gXoIk/story01.htm Tyler Durden

Presumably you’ve already made plans for surviving a zombie apocalypse. You have detailed escape routes, stockpiled weapons made for killing zombies, stores of food… or at least plans for these things. But have you thought through the important economic factors that might make the difference between surviving and losing your brain to one of the walking dead? If uncertainty about how market prices and currency changes might affect your odds in a zombie-dominated society has been keeping you up at night, fear not. In this video, Prof. Anthony Davies provides a crash course in how a zombie apocalypse is likely to affect the economy. Hint: sell your designer shoes now while you can. And buy bullets.

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/4mujdZLrIiw/story01.htm Tyler Durden

The spat between the US and Germany is getting worse by the minute. Following yesterday’s meaningless escalation by the Treasury accusing, via official pathways, Germany of being the main culprit for Europe’s lack of recovery (and Germany’s subsequent retaliation), it is Germany’s turn now to refocus public attention on Big Brother’s spying pathology when a union representing Germany’s journalists advised its members earlier today to stop using Google and Yahoo because of the latest report implicating the NSA in eavesdropping on Google and Yahoo.

From Reuters:

“The German Federation of Journalists recommends journalists to avoid until further notice the use of search engines and e-mail services from Google and Yahoo for their research and digital communication,” the union said in a statement.

 

It cited “scandalous” reports of interception of both companies’ web traffic by the U.S. National Security Agency (NSA) and Britain’s GCHQ.

 

“The searches made by journalists are just as confidential as the contact details of their sources and the contents of their communication with them,” said Michael Konken, head of the union which represents about 38,000 journalists. He said there were safe alternatives for both searches and email.

And while in the US having one’s dirty laundry is almost perceived as a status symbol by a culture that encourages online exhibitionism via Facebook and other social media (so what if some bureaucrat in Virginia knows more than what is public), in Germany privacy is actually taken seriouysly.

The German government said last week it had evidence that Chancellor Angela Merkel’s mobile phone had been monitored by U.S. intelligence.

 

Government snooping is especially sensitive in Germany, which has among the strictest privacy laws in the world, since it dredges up memories of eavesdropping by the Stasi secret police in former communist East Germany.

 

Earlier this month, Deutsche Telekom said it wanted German companies to cooperate to shield local internet traffic from foreign intelligence services, although experts believe this could be an uphill battle.

 

In August, Deutsche Telekom and its partner United Internet launched an initiative dubbed “E-mail made in Germany” to protect clients’ email traffic.

And in other news, it is increasingly looking likely that none other than Ed Snowden will be called to testify against the NSA in a German court of law. Germany’s ARD reported that Snowden is willing in principal to help shed light on U.S. spying but outlined his complicated legal situation. As we noted earlier, German Greek politician Stroebele proposed possible safe conduct to Berlin, and granting Snowden a residence permit that would prevent extradition. Snowden attorney Anatoly Kutscherena earlier said he wouldn’t comment on alleged NSA spying on Angela Merkel.

Ironically, this follow news that Snowden would take a position with Russian Internet company Vkontakte, a local analogue to Facebook, to develop major website, according to his lawyer.

So if Obama was hoping that all the late summer scandals that have taken his reptuation to an all time low would at least push the NSA spying scandal away from the front page, he may need some additional fabricated and YouTube-validated false flag wars very soon.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/Kbu-WBQxubk/story01.htm Tyler Durden