David Stockman Blasts, Brace For “The Explosion Of The Mother Of All Bubbles”

David Stockman has never been shy of expressing his true feelings (about Bernanke’s “Born Again Jobs Scam”, Calamity Janet Yellen, Obamacare’s resentment-encouraging rollout, and the entire Keynesian state wreck ahead). But this time, he aims his acerbic ire at the “markets.”

During a brief interview on FOX Business, the author of The Age of Deformation exclaimed “There’s no one in the stock market today except drugged up day-traders and robots… This is utterly irrational,” adding that “we’re in the fourth bubble inflated by the Fed in this century… but now we have the greatest, mother of all bubbles.”

The blame (and benefactors) are clear, he blasts, “how could someone in their right mind believe that you can have interest rates… at zero for nine years?That is the greatest gift to the speculators, to the 1%, to the leveraged traders, to the carry trade ever imagined!” He concludes, “we’re almost on the edge of another explosion at the present time.”

 

In just over 3 minutes Stockman takes it all on…

 

 


    



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

David Stockman Blasts, Brace For "The Explosion Of The Mother Of All Bubbles"

David Stockman has never been shy of expressing his true feelings (about Bernanke’s “Born Again Jobs Scam”, Calamity Janet Yellen, Obamacare’s resentment-encouraging rollout, and the entire Keynesian state wreck ahead). But this time, he aims his acerbic ire at the “markets.”

During a brief interview on FOX Business, the author of The Age of Deformation exclaimed “There’s no one in the stock market today except drugged up day-traders and robots… This is utterly irrational,” adding that “we’re in the fourth bubble inflated by the Fed in this century… but now we have the greatest, mother of all bubbles.”

The blame (and benefactors) are clear, he blasts, “how could someone in their right mind believe that you can have interest rates… at zero for nine years?That is the greatest gift to the speculators, to the 1%, to the leveraged traders, to the carry trade ever imagined!” He concludes, “we’re almost on the edge of another explosion at the present time.”

 

In just over 3 minutes Stockman takes it all on…

 

 


    



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

Guest Post: Is America Being Deliberately Pushed Toward Civil War?

Submitted by Brandon Smith of Alt-Market blog,

In 2009, Jim Rickards, a lawyer, investment banker and adviser on capital markets to the Director of National Intelligence and the Office of the Secretary of Defense, participated in a secret war game sponsored by the Pentagon at the Applied Physics Laboratory (APL). The game’s objective was to simulate and explore the potential outcomes and effects of a global financial war. At the end of the war game, the Pentagon concluded that the U.S. dollar was at extreme risk of devaluation and collapse in the near term, triggered either by a default of the U.S. Treasury and the dumping of bonds by foreign investors or by hyperinflation by the private Federal Reserve.

These revelations, later exposed by Rickards, were interesting not because they were “new” or “shocking.” Rather, they were interesting because many of us in the field of alternative economics had ALREADY predicted the same outcome for the American financial system years before the APL decided to entertain the notion. At least, that is what the public record indicates.

The idea that our government has indeed run economic collapse scenarios, found the United States in mortal danger, and done absolutely nothing to fix the problem is bad enough. I have my doubts, however, that the Pentagon or partnered private think tanks like the RAND Corporation did not run scenarios on dollar collapse long before 2009. In fact, I believe there is much evidence to suggest that the military industrial complex has not only been aware of the fiscal weaknesses of the U.S. system for decades, but they have also been actively engaged in exploiting those weaknesses in order to manipulate the American public with fears of cultural catastrophe.

History teaches us that most economic crisis events are followed or preceded immediately by international or domestic conflict. War is the looming shadow behind nearly all fiscal disasters. I suspect that numerous corporate think tanks and the Department Of Defense are perfectly aware of this relationship and have war gamed such events as well. Internal strife and civil war are often natural side effects of economic despair within any population.

Has a second civil war been “gamed” by our government? And are Americans being swindled into fighting and killing each other while the banksters who created the mess observe at their leisure, waiting until the dust settles to return to the scene and collect their prize? Here are some examples of how both sides of the false left/right paradigm are being goaded into turning on each other.

Conservatives: Taunting The Resting Lion

Conservatives, especially Constitutional conservatives, are the warrior class of American society. The average conservative is far more likely to own a firearm, have extensive tactical training with that firearm, have military experience and have less psychological fear of conflict; and he is more apt to take independent physical action in the face of an immediate threat. Constitutional conservatives are also more likely to fight based on principal and heritage, rather than personal gain, and less likely to get wrapped up in the madness of mob activity.

What’s the greatest weakness of conservatives? It’s their tendency to entertain leadership by men who claim exceptional warrior status, even if those men are not necessarily honorable.

Constitutional conservatives are the most substantial existing threat to the establishment hierarchy because, unlike dissenting groups of the past, we know exactly who the guiding hand is behind economic and social calamity. In response, the overall conservative culture has come under relentless attack by the establishment using the Administration of Barack Obama as a middleman. The goal, I believe, is to misdirect conservative rage toward the Democratic left and away from the elites. The actions of the White House have become so absurd and so openly hostile as of late that I can only surmise that this is a deliberate strategy to lure conservatives into ill-conceived retaliation against a puppet government, rather than the men behind the curtain.

Department of Defense propaganda briefings with military personnel have been exposed. These briefings train current serving soldiers to view Tea Party conservatives and even Christian organizations as “dangerous extremists.” Reports from sources within Fort Hood and Fort Shelby confirm this trend.

The DOD has denied some of the allegations or claimed that it has “corrected” the problem; however, Judicial Watch has obtained official training documents through a Freedom of Information Act request that affirm that extremist profiling is an integral part of these military briefings. The documents also cite none other than the Southern Poverty Law Center (SPLC) as a primary resource for the training classes. The SPLC is nothing more than an outsourced propaganda wing for the DHS that attacks Constitutional organizations and associates them with terrorist and racist groups on a regular basis. (Check pages 32-33.)

This indoctrination program has accelerated since January 2013, after Professor Arie Perliger, a member of a West Point think tank called Combating Terrorism Center (and according to the sparse biographical information available, a man with NO previous U.S. military experience), published and circulated a report called “Challengers From The Sidelines: Understanding America’s Violent Far Right” at West Point. The report classified “far right extremists” as “domestic enemies” who commonly “espouse strong convictions regarding the federal government , believing it to be corrupt and tyrannical, with a natural tendency to intrude on individuals’ civil and constitutional right."  The profile goes on to list supporting belief in "civil activism, individual freedoms, and self government” as the dastardly traits of evil extremists.

Soldiers have been told that associating with “far right extremist groups” could be used as grounds for court-martial. A general purge of associated symbolism has ensued, including new orders handed down to Navy SEALs that demand that operators remove the “Don’t Tread On Me” Navy Jack patch from their uniforms.

The indoctrination of the military also follows on the heels of a massive media campaign to demonize Constitutional conservatives who fought against Obamacare in the latest debt ceiling debate as “domestic enemies” and “terrorists.” I documented this in my recent article “Are Constitutional Conservatives Really the Boogeyman?”

Obama and his ilk have been caught red-handed in numerous conspiracies, including Fast and Furious, which shipped American arms thr
ough the Bureau of Alcohol, Tobacco, Firearms and Explosives into the hands of Mexican drug cartels. And how about the exposure of the IRS using its bureaucracy as a weapon to harass Tea Party organizations and activists? And what about Benghazi, Libya, the terrorist attack that Barack Obama and Hillary Clinton allowed to happen, if they didn’t directly order it to happen? And let’s not forget about the Edward Snowden revelations, which finally made Americans understand that mass surveillance of our population is a constant reality.

To add icing to the cake, a new book called Double Down, which chronicles the Obama campaign of 2012, quotes personal aides to the President who relate that Obama, a Nobel Peace Prize winner, when discussing his use of drone strikes, bragged that he was “really good at killing people.”

Now, my question is, why would the Obama Administration make so many “mistakes,” attack conservatives with such a lack of subtlety, and attempt to openly propagandize rank-and-file soldiers, many of whom identify with conservative values? Is it all just insane hubris, or is he serving his handlers by trying to purposely create a volatile response?

Liberals: Taking Away The Cookie Jar

Many on the so-called “left” are socially oriented and find solace in the functions of the group, rather than individualism. They seek safety in administration, centralization and government welfare. Wealth is frowned upon, while “redistribution” of wealth is cheered. They see government as necessary to the daily survival of the nation, and they work to expand Federal influence into all facets of life. Some liberals do this out of a desire to elevate the poverty-stricken and ensure certain educational standards. However, they tend to ignore the homogenizing effect this strategy has on society, making everyone equally destitute and equally stupid. Their faith in government subsidies also makes them vulnerable to funding cuts and reductions in entitlements. The left normally fights only when their standard of living and comfort to which they have grown accustomed plummets below a certain threshold, and mob methods are usually their fallback form of retaliation.

Austerity cuts, which the mainstream media calls the “sequester,” are beginning to take effect. But, they are being applied in areas that are clearly meant to create the most public anger. Reductions in welfare programs are also being implemented in a way that will certainly agitate average left-leaning citizens. The debt debate itself revolved around those who want the government to spend within its means versus those who want the government to spend even more on welfare programs no matter the consequence. The loss of subsidies is at bottom the greatest fear of the left.

A sudden and inexplicable shutdown of electronic benefit transfer cards (EBT cards or food stamps) occurred in more than 17 States while the debt debate just happened to be climaxing. This month, cuts to existing food stamp funds have taken effect, and food pantries across the country are scrambling against a sharp spike in demand.

Remember, about 50 million Americans are currently dependent on EBT welfare in order to feed themselves and their families. The response to the relatively short EBT shutdown last month was outright fury. Imagine the response in the event of a long-term shutdown, or if extraneous cuts were to occur? And where would that anger be directed? Since the entire debt debacle has been blamed on the Tea Party, I suspect conservatives will be the main target of welfare mobs.

The left, once just as opposed to government stimulus and banker bailouts as the right, is now unwittingly throwing its support behind infinite stimulus in order to cement the continued existence of precious Federal handouts. The issue of Obamacare has utterly blinded liberals to fiscal responsibility. Universal healthcare, perhaps the ultimate Federal handout, is a prize too titillating for them to ignore. Democrats will now go to incredible lengths to defend the Obama White House regardless of past crimes.

They are willing to ignore his offenses against the 4th Amendment and personal privacy. They are willing to look past his offenses against the 1st Amendment, including the Constitutional right to trial by jury for all Americans, and Obama’s secret war against the free speech of whistle-blowers. They are willing to shrug off his endless warmongering in the Mideast, his attempts to foment new war in Syria and Iran, and his support for predator drone strikes in sovereign nations causing severe civilian collateral damage. They are willing to forget Snowden, mass surveillance and executive assassination lists — all for Obamacare.

And the saddest thing of all? It is likely that Obamacare was never meant to be successful in the first place.

Does anyone really believe that the White House, with billions of dollars at its disposal, could not get a website off the ground if it really wanted to? Does anyone really believe that Obama would launch the crowning jewel of his Presidency without making certain that it was fully operational, unless this was part of a greater scheme?  And how about his promise that pre-existing health care plans would not be destroyed by Obamacare mandates?  Over 900,000 people in the state of California alone are about to lose their health care insurance due to the Affordable Healthcare Act.  Why would Obama go back on such a vital pledge unless he WANTED to piss off constituents?

Already, liberal websites and forums across the blogosphere are abuzz with talk of sabotage of the Obamacare website by “the radical right” and the diabolical Koch Brothers (liberals had no idea who they were a year ago, but now, they the go to scapegoat for everything). Once again, conservatives are presented as the culprits behind all the left’s troubles.

As I have stated in the past, Obamacare is designed to fail. The government has no capacity to fund it, and never will. Its only conceivable purpose is to further divide the country and excite both sides of the false paradigm into attacking each other as the reason the system is failing, when both sides should be questioning whether the current system should exist at all.

As the situation stands today, at least 50 million welfare recipients and who knows how many others exist as a resource pool for the establishment to be used to wreak havoc on the rest of us. All they have to do is take away the cookie jar.

Who Would Win?

Who would prevail in a second American civil war? Tactically speaking, conservatives have the upper hand and are far better prepared. Food rioters wouldn’t last beyond three to six weeks as starvation takes its toll, and mindless mobs would not last long against seasoned riflemen. The military, though suffering purges by the White House, still contains numerous conservatives within its ranks. Outside influences, including NATO or the United Nations, are a possibility. There are numerous factors to consider. But I would point out that the most dangerous adversary Constitutional conservatives face is not the left, Obama, or a Federal government gone rogue. Rather, our greatest adversary is ourselves.

If lured into a left/right civil war, would most conservatives be able to see beyond
the veil and recognize that the fight is not about Obama, or the Left, or tyrannical government alone?
Could we be co-opted by devious influences disguised as friends and compatriots? Will we end up following neocon salesmen and military elites who materialize out of the woodwork at the last minute to "lead us to victory" while actually leading us towards globalization with a slightly different face?

If a civil conflict has been war gamed by the establishment, you can bet they have contingency plans regardless of which side attains the upper hand. In the end, if we do not make the fight about the bankers and globalists, the Federal Reserve, the International Monetary Fund, the Council On Foreign Relations, etc., then everyone loses. Who wins in a new American civil war? If we become blinded by the trespasses of a certain White House jester, only the globalists will win.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/ymW35kqSFo0/story01.htm Tyler Durden

Lawsuit Against NYPD Internal Affairs Alleges Arbitrary Spying, Racial Discrimination, Sexual Impropriety

do not crossA pair of lawsuits by black female officers with
the NYPD’s Internal Affairs Bureau allege that the division
arbitrarily spies on cops, discriminates against minorities, and
that they are subject to sexual harassment including the trading of
sexual favors for promotions.
Via the New York Post
:

“Plaintiff alleges that African-American Female
Officers’ in particular, are expected to engage in the
stereotypical behaviors of being primarily subservient to primarily
Caucasian Male police supervisors by acting as their “personal
secretaries, paramours, or sex partners,” the suits allege.

Black female staffers in the IAB who don’t play the game are
routinely denied promotions and preferred assignments, according to
the suits.

Calling the IAB a “Good Ole Boys” club, the women allege that
agency brass routinely tap random officers home and cellular phones
and look into their private financial records as part of dubious
investigations, the suits state.

Black and Hispanic officers who file discrimination claims against
the department mysteriously become targets of IAB “fishing”
missions, the suits claim.

The lawsuits also claim minority officers are punished more
harshly by the bureau than their white counterparts.  Earlier
this year
, a detective who served as an aide to the Internal
Affairs Bureau’s chief likened the division to “the mob” and
endorsed the idea of an inspector as she prepared to file her own
lawsuit.

Between 1992 and 2008, an average of 119 cops were arrested a
year,
according
to Internal Affairs Bureau reports. A 2010

Village Voice exposé
 of the NYPD’s internal affairs
division revealed that internal affairs cases are processed at a
“snail’s pace” no matter their size or significance, that it’s
often impossible to find out what happened with a complaint, and
that cops who complain to the bureau about their colleagues are
often retaliated against by their supervisors.

The NYPD is currently
facing
a series of lawsuits alleging retaliation against
whistleblowers; the department argues, backed by case law, that the
whistleblowers
shouldn’t be protected
because reporting on internal misconduct
is part of their job.

from Hit & Run http://reason.com/blog/2013/11/07/lawsuit-against-internal-affairs-alleges
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Thursday Humor: Escape From Chicago

The following viral video, amusing as it may be (the real entertainment starts two minutes in) superficially, is a microcosm summation of some of the things most wrong in the US: an individual who refuses to take responsibility for their actions of careless stupidity despite being seen in broad daylight by dozens of onlookers, promptly devolving into a petty criminal, and then doing everything in his (or, judging by the driving, her) power to get the entire episode brushed under the rug while creating exponentially more damage to everyone involved including completely innocent bystanders. If only the protagonist wasn’t so ridiculously stupid, he could just as well be your average Wall Street banker, where he would fit right in with any bank that cultivates just this kind of criminally reckless behavior whose consequences – the more dire the better – end up costing everyone else. Or, alternatively, since it comes from Chicago and since he is dumb enough, your average politician.

The summary via Breaking 911:

For more proof that fleeing the scene of a crime is a bad idea, a video circulating the web shows a driver trying — and repeatedly failing — to flee after his vehicle strikes a Chicago cab. The video begins with the cab driver in the middle of the street in the 1400 block of West Belmont Avenue, urging the driver to get out of the car.

 

The car’s driver slowly backs up and tries to turn around before driving back toward the cab. The cabbie follows the car, at several points shaking what looks like a baton. The driver of the car tries to pull around him, but instead strikes another cab. The video shows him backing up and crashing in a parked car then pulling forward, crashing again into the first cab and another car and fleeing the scene. Witnesses heard the cab driver ask the motorist for his insurance.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/MJoCkb4f5z0/story01.htm Tyler Durden

22-Year-Old Jailed for Pot Possession Dies While Guards Ignore His Pleas for Help

A mother has finally obtained video
footage proving that her 22-year-old son died when guards in
a Snohomish County, Washington jail ignored his desperate
pleas for help. The victim, Michael Saffioti, was serving time
after missing a court date for a misdemeanor marijuana possession
charge. To make the awful story even worse, Saffioti’s mother
alleges that her son was killed by a severe allergic reaction
to oatmeal that prison officials erroneously told him was safe to
eat and then later covered up. She has spent the past year fighting
with the jail to obtain footage that might help explain his death.
 

The incident began in July of last year. Saffioti
turned himself in to the authorities in order to be “held
accountable for his legal issues
” and was promptly thrown
behind bars. He died less than 24 hours later.

As described by
KIRO TV
:

Around 5:46, a group of inmates arrived to serve breakfast and
men began lining up. While others sat to eat, the camera first
captured Saffioti at the guard’s desk, holding his tray. Saffioti
suffered from extreme dairy allergies and took regular pains to
protect himself.

The video shows Saffioti apparently discussing his food [and
whether it contained dairy] with the guard, servers and fellow
inmates. Eventually, he took a few bites. Within a few minutes,
Saffioti was back at the guard desk, using his inhaler. According
to the legal claim, he asked to see a nurse. Instead, he was sent
to his cell.

Over the next half hour, the video shows other inmates looking
in Saffioti’s cell as he jumped up and down. The legal claim says
he pressed his call button and was ignored.

A fellow inmate who witnessed the incident claimed that a
corrections officer took Saffioti’s inhaler away and accused
him of “faking”
 his sickness. 


KIRO TV
 continued:

About 35 minutes after he ate, a guard found Saffioti
unconscious in his cell. The guard called for help and
Saffioti was dragged him out.

Nurses arrived and performed CPR. Everett firefighters took over
and rushed Saffioti to the hospital where he was pronounced dead a
half hour later.

Rose Saffioti, Michael’s mother, has insisted that the jail was
negligent in caring for her son’s health needs. According to Rose
and Cheryl Snow, the attorney representing his case, Michael was
always vigilant about checking his food and would have told the
guards about his allergies. Additionally, the prison had his
medical condition on file and was supposed to place him in a
separate medical unit.

“Our theory is that they absolutely knew about Michael’s medical
needs,” Cheryl Snow
told KIRO TV
.

However, when Saffioti’s mother stated her belief that the
guards’ negligence caused her son’s death last year, the jail
retorted that it had not. In a report compiled by the Snohomish
County Sheriff’s Office Major Crimes Unit, they claimed
that Michael died from bronchial asthma rather than an allergic
reaction. Consequently, county prosecutors decided not to
press criminal charges
against any guards.

Once Michael’s mother filed a request for video footage of her
son’s death though, jail officials
engaged in an intentional cover-up
. First, officials denied the
existence of any footage. When his mother discovered that this
wasn’t true, officials edited out incriminating portions of the
video.

The
full video
, which confirms much of what inmate
witnesses told investigators
in interviews last year, is
finally available.  

Saffioti’s mother, who has filed suit against the county for $10
million, is unfortunately not alone. Over the past three years,
eight inmates have died in Snohomish County Jail.

Just four months after Michael’s death, Washington state
legalized recreational marijuana.

from Hit & Run http://reason.com/blog/2013/11/07/22-year-old-jailed-for-pot-possession-di
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Chris Christie Looking Good to Some Republicans Already Thinking About 2016

where are the taft references?Republican Chris Christie was re-elected
governor in New Jersey by a landslide over Barbara Buono, winning
with the largest margin in a gubernatorial race since Tom Kean
defeated a 33-year-old in 1985. Exit polling
shows
Christie won 57 percent of women, a 12 point increase
over 2009, as well as 51 percent of Latino voters, a 19 point
increase, and 21 percent of Black voters, a 12 point increase. He
won every age group except 18-29, which just barely broke for
Buono, and even 32 percent of Democrat voters after spending the
summer collecting Democrat endorsements. When Frank Lautenberg
died, vacating one of New Jersey’s senate seats, Christie
scheduled
a special election for three weeks before the
November election date, on a Wednesday, to avoid risking his
landslide margin by sharing the top of the Republican ticket with
another candidate.

Some Republicans, nevertheless, are hoping Christie can help
lead them to national victory in 2016. This weekend, Mitt Romney
told Meet the Press he thought Christie could “save
the Republican party.  Joe Scarborough
thinks
Christie could unite the party, like Reagan. Rich Lowry,
meanwhile,
compares Christie to Bill Clinton
:

Christie’s implicit pitch to the national GOP will
probably be that he’s to Republicans in the 2010s what Bill Clinton
was to the Democrats in the 1990s. In other words, he offers a
different kind of politics that can potentially unlock the
presidency after a period of national futility for his party.

Like Clinton when he was governor of Arkansas in the 1980s,
Christie is operating on hostile partisan and cultural territory,
and managing to thrive by co-opting or neutralizing natural
enemies.

Like the “explainer-in-chief,” Christie has a knack for public
persuasion. The New Jersey governor’s relentless town halls during
the fight for his public-sector reforms were model examples of
making an argument fearlessly and effectively.

Christie’s already been maneuvering for a 2016 election run,
becoming
one of the most

vocal opponents
of the perceived libertarian faction of the
Republican party so far. Rand Paul’s
said it was a mistake
for Christie to say there wasn’t room for
libertarians in the party.David Harsanyi (columns at Reason
here),
thinks this stance is Christie rejecting ideology in favor of
practicality, and not a sign of “cynical moderation.” Harsanyi
writes:

He might not be what conservatives want, but he may be
what they need. Sure, there’s a lot we don’t know about Christie’s
politics. Though he’s probably a conservative in the true sense of
the word, he almost certainly isn’t an ideologue. So you can
imagine that the rank and file will continue to be displeased with
the intensity of his political convictions. The “strain” of
libertarianism that was at the center of Rand Paul’s fight against
the NSA, and the nasty back-and-forth with House Republicans who
were aiming for a porkless Hurricane Sandy relief bill, were two
examples of Christie rejecting (what he sees as) ideology for
practicality. This is often confused with cynical
moderation.

Over the summer, former Obama campaign manager David Plouffe

called Christie
a “very strong general election candidate” who
was nevertheless too centrist to win in “the current Republican
party.”

More Reason on Chris Christie here.

from Hit & Run http://reason.com/blog/2013/11/07/chris-christie-looking-good-to-some-repu
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UBS Warns The Fed Is Trapped

The Fed seems to be facing two major risks: first, premature tapering disrupting markets and triggering global turmoil across asset classes, thereby threatening the fragile economy recovery; second, delayed tapering further fuelling asset price bubbles, which could burst eventually and do major damage. UBS’ Beat Siegenthaler notes the September decision suggested a Fed more worried about the fragile recovery than about the potential for asset bubbles and other longer-term problems associated with extended liquidity injections. Whereas it had originally assumed that a gradual tapering would result in a gradual market reaction, Siegenthaler explains it is now clear that the situation is much more binary; and as such, the hurdles for tapering might be substantially higher than originally thought.

Via UBS,

Central bankers seem more powerful than ever, yet also more divided and confused than for a long time. This may be particularly true for the Fed, as it struggles with how to exit unconventional policies without creating major global market turmoil. In September it shied away from reducing monthly QE purchases, surprising both markets and central bank colleagues around the world. UBS Economics now expects tapering to start in Q1 2014 with the January meeting seen as somewhat more likely than the March meeting. The risks to this call, though, seem almost entirely on the dovish side as a December move would be tantamount to admitting that September was a mistake given the likely lack of decisive data until then. For the dollar, this could keep things difficult for some time.

Looking back…

Why did the Fed decide to hold back in September, deeply puzzling investors who had very widely expected a move, and thereby putting the credibility of its communication strategy at risk? It appears that two arguments were decisive:

First, the recovery was seen as still too fragile to withstand the level of market turmoil that had developed following the taper talk in early summer.

 

Second, the looming government shutdown and debt ceiling were seen as seriously clouding the fiscal outlook.

Relatively soft economic data since the decision have so far seemed to vindicate the decision as has the subsequent political turmoil in Washington.

However, many observers, particularly in Europe, have been critical on the political aspect of the decision as the FOMC seemed to ‘bail out’ the politicians and thus risk creating moral hazard. It would seem fair to say that the ECB, for example, would have acted rather differently in similar circumstances. President Draghi’s pledge in summer 2012 to do ‘whatever it takes’ was the exception to the general ECB rule that monetary policy is not there to address structural problems that are the politicians’ responsibility. In Frankfurt, nonconventional policies are seen as something to get rid of as soon as possible rather than something to retain as an insurance policy. It was no coincidence that in June this year Draghi said with quite some satisfaction that ‘we, unlike other central banks, can gradually downsize our balance sheet without having to take any decisions that would, or could, create volatility’. This, clearly, is not a luxury the Fed has.

…and looking forward

The Fed is facing two major but opposing risks:

first, premature tapering could unleash market turmoil that could threaten a still fragile recovery;

 

second, delayed tapering could further drive up the cost of the inevitable QE exit.

The emerging market collapse in early summer may have been just a harbinger of what could come once central bank liquidity injections end. Some observers have argued that the market will react in a more relaxed manner to the next round of taper talk as the issues would be familiar. However, this might be too optimistic a view. Equity markets have continued to rally with the S&P reaching new record highs while ‘carry’ currencies such as the Australian dollar have regained lost ground, even though the advance has since been capped by the October FOMC statement not shutting the window on early tapering. Given that it has generally been a lacklustre year for most investors, the pressure is to jump back into riskier trades and generate some more performance before year end, even if the tail risk of early tapering might continue to loom. In this situation, any piece of weak data and any dovish communication could push tapering expectations further out and lure investors back into risk, thereby increasing the cost of the inevitable exit.

Linear vs. binary

Ideally, the Fed would gradually exit QE as the recovery gradually gains ground. Indeed, this seems to have been the idea behind the tapering talk in early summer, trying to prepare markets for an initial step later in the year. The belief had been that what investors cared about was the stock of QE purchases, i.e. the overall size of the Fed’s balance sheet. As it turned out, however, investors seem to care about the flow of QE purchases instead. Or even worse, they seem to hold a binary view, equating the start of tapering to the end of QE, which means positioning does not adapt in linear, but an abrupt way. It therefore does not matter much whether the initial reduction would be $10bn or $20bn as the market would read any move, whatever the number, as a signal that the monetary policy super tanker had started to turn. Or as St. Louis Fed President Bullard put it last week, “changes in the pace of asset purchases have a very similar financial market effect as changes in the policy rate during more normal times”, meaning that any tapering acts very much like a conventional rate hike. “The Committee needs to either convince markets that the two tools are separate, or learn to live with the joint effects of tapering on both the pace of asset purchases and the perception of future policy rates”. Bullard seems to believe that the Fed has to live with the joint effects, which would suggest that the hurdle for tapering is much higher than initially thought.

A clash of central banking traditions

So what should the Fed do? Few central bankers would dispute that there are risks to keeping nonconventional policy measures in place for an extended period of time. In fact, the marginal benefits in terms of the economic impact seem to be declining, while the risks in terms of asset bubbles and other distortions seems to be increasing. Many would also argue that keeping ’emergency measures’ in place beyond the actual ’emergency’ sends out a bearish signal to investors, keeping confidence down. Central bankers in the European, or more specifically the Bundesbank tradition, would thus argue that given the doubtful benefits of QE together with the increasing longer term risks, the policy should be stopped as soon as possible. The Anglo-Saxon tradition, however, would seem more willing to use asset prices as a tool to support economic activity, and have a higher willingness to accept the risk of bubbles. Indeed, a fear of an asset price shock appears to have been what kept the Fed from taking the plunge in September, and might continue to hold them back for some time. The majo
rity of the FOMC might be seeing propping up asset prices as a second best way to keep sentiment up, in the absence of a convincing economic recovery as the first best solution.

Policy trap

A pessimist might see the Fed facing a lose-lose situation, a veritable policy trap. The only scenario in which a relatively painless escape from the trap would be possible is one in which the economic recovery gains ground and becomes robust relatively quickly. This seems exactly what equity markets are pricing in, i.e. a world in which global economic activity will seamlessly take over from QE as a driver of risky assets. UBS Economics has been drawing a picture that looks fairly close to such a benign scenario, expecting a slow but steady acceleration of global growth over the next two years. Monetary policy accommodation could then be withdrawn gradually, avoiding substantial market turmoil (UBS Global Economic Outlook 2014-2015, 28 October). Viewed from this perspective, the likelihood of the Fed unduly fuelling asset bubbles might thus be considerably higher than the one of prematurely reducing QE and triggering market turmoil, particularly as the track record of the Bernanke Fed, as well as the reputation of incoming Chair Yellen, would suggest that monetary policy in the US will err on the easy side for some time to come. All of this might continue to support risky assets and weigh on the dollar, but also increase the risk of a crash once QE inevitably comes to an end.

Conclusions

The Fed seems to be facing two major risks: first, premature tapering disrupting markets and triggering global turmoil across asset classes, thereby threatening the fragile economy recovery; second, delayed tapering further fuelling asset price bubbles, which could burst eventually and do major damage.

The September decision suggested a Fed more worried about the fragile recovery than about the potential for asset bubbles and other longer term problems associated with extended liquidity injections. Whereas it had originally assumed that a gradual tapering would result in a gradual market reaction, it now appears that the situation is much more binary. If so, the hurdles for tapering might be substantially higher than originally thought.

For investors, the situation is a very challenging one: should they position for a QE world in which risky assets perform well, or for a QE-free world in which risky assets suffer? For the Fed, the ideal scenario might be one where they succeed in keeping the tapering threat alive without actually going there, thereby avoiding both of the above risks. For investors, the resulting low activity and low volatility environment might be challenging.

For the dollar, the future of QE seems crucial. A clean exit sometime next year would be a major positive driver and this is what investors generally appear to position for, or at least believe in. However, the danger may be that these hopes will continue to be disappointed by a risk-averse Fed, which could thus extend the dollar’s underperformance for quite some time.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/iCPmI7Y_SrQ/story01.htm Tyler Durden

Obama: “I Am Sorry” Americans Will Lose Their Existing Health Plan Because Of Obamacare

Remember all those YouTube clips (the same medium used to nearly justify World War III) that caught the president lying again and again with promises and assurances everyone would be able to keep their existing insurance plan under Obamacare even though he knew full they wouldn’t, until a week ago, thanks to what is left of the non-brownnosing media, as much was revealed to the general public? Well, it’s time to come clean, and once again via clip. Moments ago, in an interview with NBC, the charming and very photogenic president said he was “sorry.”

“I am sorry that they are finding themselves in this situation based on assurances they got from me,” Obama told NBC News in an exclusive interview at the White House. “We’ve got to work hard to make sure that they know we hear them and we are going to do everything we can to deal with folks who find themselves in a tough position as a consequence of this.”

Surely a good start to make sure “they know they are heard” is for nobody to lose their job over this fiasco, even those who claim full responsibility for the “debacle.”

As for apologies, perhaps it would be more prudent to wait until 2014 when the true costs of this latest welfare Ponzi scheme are revealed for all to see and experience: then it will be a daily tirade of non-stop apologies. So let’s just chalk today down to a general rehearsal.

Visit NBCNews.com for breaking news, world news, and news about the economy

There, there, Obama. All is forgiven. Just please tell Mr. Chairwoman to keep pushing that Nasdaq to its old time highs. Because who knows – without the daily distraction from the economic collapse this country finds itself in, an apology just may no longer be sufficient…


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/3Lo5SWGIR6c/story01.htm Tyler Durden

Obama: "I Am Sorry" Americans Will Lose Their Existing Health Plan Because Of Obamacare

Remember all those YouTube clips (the same medium used to nearly justify World War III) that caught the president lying again and again with promises and assurances everyone would be able to keep their existing insurance plan under Obamacare even though he knew full they wouldn’t, until a week ago, thanks to what is left of the non-brownnosing media, as much was revealed to the general public? Well, it’s time to come clean, and once again via clip. Moments ago, in an interview with NBC, the charming and very photogenic president said he was “sorry.”

“I am sorry that they are finding themselves in this situation based on assurances they got from me,” Obama told NBC News in an exclusive interview at the White House. “We’ve got to work hard to make sure that they know we hear them and we are going to do everything we can to deal with folks who find themselves in a tough position as a consequence of this.”

Surely a good start to make sure “they know they are heard” is for nobody to lose their job over this fiasco, even those who claim full responsibility for the “debacle.”

As for apologies, perhaps it would be more prudent to wait until 2014 when the true costs of this latest welfare Ponzi scheme are revealed for all to see and experience: then it will be a daily tirade of non-stop apologies. So let’s just chalk today down to a general rehearsal.

Visit NBCNews.com for breaking news, world news, and news about the economy

There, there, Obama. All is forgiven. Just please tell Mr. Chairwoman to keep pushing that Nasdaq to its old time highs. Because who knows – without the daily distraction from the economic collapse this country finds itself in, an apology just may no longer be sufficient…


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/3Lo5SWGIR6c/story01.htm Tyler Durden