iftttwall

Submitted by Lance Roberts of STA Wealth Management,

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/7C2Jkkrim8c/story01.htm Tyler Durden

 

By engaging in QE, the Fed alters the very structure of risk in the financial system. Traders on Wall Street, knowing full well that the Fed would be soaking up Treasuries, rushed into new debt issuance with the intention of flipping over these assets to the Fed in the near future.

 

This became a self-fulfilling prophecy as the “front-running the Fed” trade became a dominant theme for Wall Street. By piling into bonds, traders forced prices higher and yields lower: precisely what the Fed wanted.

 

It is critical to note that a significant percentage of these investors had no interest in actually owning US debt as an asset class in the long run. They were simply looking for an easy trade that made money. As a result, interest rates were driven even lower by the “investment herd”.

 

All risk in the financial world ultimately traces its pricing back the yield on US Treasuries. US Treasuries are considered to be “risk free” because they are backed by the full faith and credit of the US Government.

 

All other, riskier assets (corporate bonds, municipal bonds, emerging markets bonds, then stocks and emerging market stocks) trade based on their perceived riskiness relative to Treasuries yields. By manipulating interest rates lower, both directly (cutting rates) and indirectly (by broadcasting its intention in buying Treasuries, thereby incentivizing traders to front run it) the Fed altered the capital market landscape in ways that few investors understand.

 

By maintaining artificially low interest rates, the Fed was hoping to drive investors away from bonds and into stocks and other, more risky assets. The Crash of 2008, combined with a retiring or soon to retire Baby Boomer population that is more interested in income than capital gains, resulted in a mass exodus away from stocks in the 2009-2013 period.

 

By keeping interest rates near zero, the Fed has been hoping to push investors into the stock market. The hope here was that as stock prices rose, investors would feel wealthier (the “wealth effect”) and would be more inclined to start spending more, thereby jump-starting the economy.

 

This has not been the case. Instead the entire capital market structure has become mispriced.

 

Individual investors have been fleeing stocks for the perceived safety (and more consistent returns) of bonds. Since 2007, investors have pulled over $405 billion out of stock based mutual funds. The pace did not slow throughout this period either with investors pulling $90 billion out of stock based mutual funds in 2012: the largest withdrawal since 2008.

 

In contrast, over the same time period, investors have put over $1.14 trillion into bond funds. They brought in $317 billion in 2012, the most since 20008.

 

This had the effect of pushing yields even lower (precisely what the Fed wanted).

 

 

As you can see, today rates are the lowest they’ve been in over fifty years. This is not a sustainable trajectory. Real estate and all other assets that have been financed via cheap debt have been pushed higher due to excess leverage. This includes GDP.

 

In the 1960s every new $1 in debt bought nearly $1 in GDP growth. In the 70s it began to fall as the debt climbed. By the time we hit the ‘80s and ‘90s, each new $1 in debt bought only $0.30-$0.50 in GDP growth. And today, each new $1 in debt buys only $0.10 in GDP growth at best.

 

Put another way, the growth of the last three decades, but especially of the last 5-10 years, has been driven by a greater and greater amount of debt. This is why the Fed has been so concerned about interest rates. It’s also why ultimately the Fed’s efforts to reflate the system will fail on some level with the inevitable market deleveraging occurring one way or another.

 

Be prepared.

 

For a FREE Special Report outlining how to protect your portfolio a market collapse, swing by: http://phoenixcapitalmarketing.com/special-reports.html

 

Best

Phoenix Capital Research

 

 

 

 

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/TE8JRcF-p0w/story01.htm Phoenix Capital Research

Today’s AM fix was USD 1,341.75, EUR 971.79 and GBP 827.58 per ounce.
Yesterday’s AM fix was USD 1,336.25, EUR 968.79 and GBP 825.76 per ounce.

Gold climbed $12.10 or 0.91% yesterday, closing at $1,345.40/oz. Silver inched up $0.11 or 0.49% closing at $22.67. Platinum rose $15.45 or 1.1% to $1,445.75/oz, while palladium fell $0.53 or 0.1% to $743.47/oz.

Gold Krugerrands (1 oz) are trading at $1,406.48 or premiums between 4.75% and 5.5%  and Gold Kilo  Bars (1 kilo) are trading at $44,451.89 or premiums between 3% and 3.5%. Premiums are steady.

Bloomberg Industries – Precious Metal Mining

Gold dipped below its three-week high in London on profit taking after a 2% gain this week, which put gold on course for a second week of higher prices. Gold closed above the 50-day moving average and this in conjunction with two weekly higher closes is bullish technically.

Gold’s gains yesterday came due to increasing concerns that the Federal Reserve will maintain the pace of unprecedented monetary stimulus and debasement.

Gold is on track for its first yearly drop in over 13 years, as speculators sold gold on the COMEX and some investors became nervous of the recent price falls.
Gold is probably at a cyclical bottom and CPM sees gold prices rising sharply in 2016-2023, CPM Group’s Jeffrey Christian said in a speech in Toronto on Wednesday.

The call is interesting as CPM have been notoriously bearish on gold in recent years – throughout much of the 11 year bull market.
CPM Group sees the gold price at $1,240-$1,380/oz for “most of the next few months,” CPM managing partner Jeffrey Christian said. Gold may trade in a $1,240- to $1,500/oz range for “the next couple of years”.

  
Gold in USD – Year To Day and 50 Day Moving Average – Bloomberg

Gold may jump 7.5% or $100 to $1,450/oz by year end if prices break out of a pennant formation, according to technical analysis by Paul Kavanaugh of Future Path Trading as seen on Bloomberg.

The chart above shows gold trading in a “pennant flag,” when the upper and lower trend lines for prices meet to form a triangle. The lower level is $1,251, and the upper is $1,434, Kavanaugh said.

“Prices are clearly trying to move higher, and a close above the 50-day moving average means we could see some strength,” Kavanaugh said.

Comments from state backed Xinhua that call for a “de-Americanised world” and a proposal to consider a new international reserve currency to replace the dollar mark a key event for gold prices.

The official Xinhua News Agency and the voice of the Chinese government, offered a not so subtle, highly critical commentary on October 14 regarding the U.S.’ appalling fiscal, monetary and political situation as it stands today.

While the Chinese echoed the notion of a “super-sovereign reserve currency” before, their statement is more important as the U.S. continues to struggle to reach agreements on debt ceiling talks and future monetary policy actions.

“It is perhaps a good time for the befuddled world to start considering building a de-Americanised world” said the important op-ed.

Bloomberg Industries – Precious Metal Mining

Key among its proposals: the creation of a new international reserve currency to replace the present reliance on the U.S. dollar as reserve currency. The article suggested that this is a necessary step to prevent American bumbling and profligacy from further afflicting the world.

“The world is still crawling its way out of an economic disaster thanks to the voracious Wall Street elites.”

“The cyclical stagnation in Washington for a viable bipartisan solution over a federal budget and an approval for raising the debt ceiling has again left many nations’ tremendous dollar assets in jeopardy and the international community highly agonized,” says Xinhua.

The Chinese have for a long number of years expressed concerns about the direction Washington, led by Wall Street, is leading the world financial system and the global economy.

In March 2009, the governor of the People’s Bank of China, Zhou Xiaochuan, called for the creation of a new reserve currency, albeit in less forthright language. The world needs a new “super-sovereign reserve currency” to replace the current reliance on the dollar, Zhou wrote in a paper published on the People’s Bank of China’s website.

Zhou Xiaochuan is still China’s central bank governor.

The goal is to “create an international reserve currency that is disconnected from individual nations and is able to remain stable in the long run.”

This sounds like he may be referring to gold, as gold is an “international reserve currency that is disconnected from individual nations” and has remained “stable in the long run.”
Toppling the dollar isn’t enough today, however: “Several cornerstones should be laid to underpin a de-Americanised world,” explains the Xinhua piece.

 
Bloomberg Industries – Precious Metal Mining

Along with a greater role for developing-market economies in both the World Bank and International Monetary Fund, “the authority of the United Nations in handling global hot-spot issues has to be recognized. That means no one has the right to wage any form of military action against others without a UN mandate.”

“A self-serving Washington has abused its superpower status and introduced even more chaos into the world by shifting financial risks overseas, instigating regional tensions amid territorial disputes, and fighting unwarranted wars under the cover of outright lies,” the commentary continues.

“Such alarming days when the destinies of others are in the hands of a hypocritical nation have to be terminated, and a new world order should be put in place, according to which all nations, big or small, poor or rich, can have their key interests respected and protected on an equal footing.”

Since the early 2000s, those positive on gold have rightly suggested that excessive money printing by the Federal Reserve would lead to a devaluation of the world’s reserve currency as inflation picks up and hampers the currency.

Those more concerned about the dollar’s fate has warned of a currency collapse and serious inflation.

While the notion of the dollar losing its status as the world’s reserve currency had appeared muted for some time given the lack of alternatives, it is now gaining credence.

A deeper look into China’s gold holdings warrants attention (see charts).

Its last reported gold holdings in April 2009 were 1,054 metric tons. After adjusting for net imports from Hong Kong and domestic output, the figure is closer to 5,086 metric tons. If one were to take away gold uses for jewelry, industrial, and other categories and only add implied bar demand to central bank holdings, the figure is likely closer to 2,710 metric tons according to Bloomberg Industries’ Andrew Cosgrove and Kenneth Hoffman.

In just 10 years, China’s gold holdings could catch up to the U.S., based on adjusted Chinese consumption for jewelry, industrial and other uses and using implied bar demand as the primary driver of incremental central bank additions (see chart).

Bloomberg Industries – Precious Metal Mining

At current run rates, China is on pace to add 622 metric tons of bars to its central bank holdings this year (380 mt in 2012). Given the low gold price, growing reserves in 2014 above this year’s levels appears achievable.

Gold will benefit from the continuing move away from the dollar as the world’s reserve currency as some form of a gold-backed currency emerges.

China’s call for “de-Americanization” is likely just a posturing maneuver. A large-scale sale of China’s U.S. Treasury holdings would likely cause a dramatic decline in the dollar, while increasing rates. This would cripple the U.S. economy and dent export demand for Chinese products.

This therefore, is the “nuclear option” for the Chinese government and one that they will be keen to avoid. They will only adopt this position if forced to in extreme circumstances, such as a U.S. default or extreme debasement of the dollar.

Already, the Chinese have stopped accumulating dollars – preferring safer currencies, infrastructure, hard assets and commodities and of course gold. Even a small amount of Chinese selling  could lead to substantial dollar weakness and much higher bond yields plummeting the U.S. into another recession.

The smart money, including the Chinese people and the People’s Bank of China, is concerned about currency debasement and continue to accumulate physical gold for the long term.

The dumb money continues to not understand the ramifications of dollar currency debasement and the De-Americanising world and continues to see gold as a trade or a mere speculation rather than the essential safe haven asset that it is.

Gold is heading for the first annual decline since 2000.

The Chinese have lustily greeted gold’s 19% drop this year by continuing to buy record amounts of gold. They know the price drop has created a gift for physical buyers globally.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/A8keaqdxXs8/story01.htm GoldCore

Today’s AM fix was USD 1,341.75, EUR 971.79 and GBP 827.58 per ounce.
Yesterday’s AM fix was USD 1,336.25, EUR 968.79 and GBP 825.76 per ounce.

Gold climbed $12.10 or 0.91% yesterday, closing at $1,345.40/oz. Silver inched up $0.11 or 0.49% closing at $22.67. Platinum rose $15.45 or 1.1% to $1,445.75/oz, while palladium fell $0.53 or 0.1% to $743.47/oz.

Gold Krugerrands (1 oz) are trading at $1,406.48 or premiums between 4.75% and 5.5%  and Gold Kilo  Bars (1 kilo) are trading at $44,451.89 or premiums between 3% and 3.5%. Premiums are steady.

Bloomberg Industries – Precious Metal Mining

Gold dipped below its three-week high in London on profit taking after a 2% gain this week, which put gold on course for a second week of higher prices. Gold closed above the 50-day moving average and this in conjunction with two weekly higher closes is bullish technically.

Gold’s gains yesterday came due to increasing concerns that the Federal Reserve will maintain the pace of unprecedented monetary stimulus and debasement.

Gold is on track for its first yearly drop in over 13 years, as speculators sold gold on the COMEX and some investors became nervous of the recent price falls.
Gold is probably at a cyclical bottom and CPM sees gold prices rising sharply in 2016-2023, CPM Group’s Jeffrey Christian said in a speech in Toronto on Wednesday.

The call is interesting as CPM have been notoriously bearish on gold in recent years – throughout much of the 11 year bull market.
CPM Group sees the gold price at $1,240-$1,380/oz for “most of the next few months,” CPM managing partner Jeffrey Christian said. Gold may trade in a $1,240- to $1,500/oz range for “the next couple of years”.

  
Gold in USD – Year To Day and 50 Day Moving Average – Bloomberg

Gold may jump 7.5% or $100 to $1,450/oz by year end if prices break out of a pennant formation, according to technical analysis by Paul Kavanaugh of Future Path Trading as seen on Bloomberg.

The chart above shows gold trading in a “pennant flag,” when the upper and lower trend lines for prices meet to form a triangle. The lower level is $1,251, and the upper is $1,434, Kavanaugh said.

“Prices are clearly trying to move higher, and a close above the 50-day moving average means we could see some strength,” Kavanaugh said.

Comments from state backed Xinhua that call for a “de-Americanised world” and a proposal to consider a new international reserve currency to replace the dollar mark a key event for gold prices.

The official Xinhua News Agency and the voice of the Chinese government, offered a not so subtle, highly critical commentary on October 14 regarding the U.S.’ appalling fiscal, monetary and political situation as it stands today.

While the Chinese echoed the notion of a “super-sovereign reserve currency” before, their statement is more important as the U.S. continues to struggle to reach agreements on debt ceiling talks and future monetary policy actions.

“It is perhaps a good time for the befuddled world to start considering building a de-Americanised world” said the important op-ed.

Bloomberg Industries – Precious Metal Mining

Key among its proposals: the creation of a new international reserve currency to replace the present reliance on the U.S. dollar as reserve currency. The article suggested that this is a necessary step to prevent American bumbling and profligacy from further afflicting the world.

“The world is still crawling its way out of an economic disaster thanks to the voracious Wall Street elites.”

“The cyclical stagnation in Washington for a viable bipartisan solution over a federal budget and an approval for raising the debt ceiling has again left many nations’ tremendous dollar assets in jeopardy and the international community highly agonized,” says Xinhua.

The Chinese have for a long number of years expressed concerns about the direction Washington, led by Wall Street, is leading the world financial system and the global economy.

In March 2009, the governor of the People’s Bank of China, Zhou Xiaochuan, called for the creation of a new reserve currency, albeit in less forthright language. The world needs a new “super-sovereign reserve currency” to replace the current reliance on the dollar, Zhou wrote in a paper published on the People’s Bank of China’s website.

Zhou Xiaochuan is still China’s central bank governor.

The goal is to “create an international reserve currency that is disconnected from individual nations and is able to remain stable in the long run.”

This sounds like he may be referring to gold, as gold is an “international reserve currency that is disconnected from individual nations” and has remained “stable in the long run.”
Toppling the dollar isn’t enough today, however: “Several cornerstones should be laid to underpin a de-Americanised world,” explains the Xinhua piece.

 
Bloomberg Industries – Precious Metal Mining

Along with a greater role for developing-market economies in both the World Bank and International Monetary Fund, “the authority of the United Nations in handling global hot-spot issues has to be recognized. That means no one has the right to wage any form of military action against others without a UN mandate.”

“A self-serving Washington has abused its superpower status and introduced even more chaos into the world by shifting financial risks overseas, instigating regional tensions amid territorial disputes, and fighting unwarranted wars under the cover of outright lies,” the commentary continues.

“Such alarming days when the destinies of others are in the hands of a hypocritical nation have to be terminated, and a new world order should be put in place, according to which all nations, big or small, poor or rich, can have their key interests respected and protected on an equal footing.”

Since the early 2000s, those positive on gold have rightly suggested that excessive money printing by the Federal Reserve would lead to a devaluation of the world’s reserve currency as inflation picks up and hampers the currency.

Those more concerned about the dollar’s fate has warned of a currency collapse and serious inflation.

While the notion of the dollar losing its status as the world’s reserve currency had appeared muted for some time given the lack of alternatives, it is now gaining credence.

A deeper look into China’s gold holdings warrants attention (see charts).

Its last reported gold holdings in April 2009 were 1,054 metric tons. After adjusting for net imports from Hong Kong and domestic output, the figure is closer to 5,086 metric tons. If one were to take away gold uses for jewelry, industrial, and other categories and only add implied bar demand to central bank holdings, the figure is likely closer to 2,710 metric tons according to Bloomberg Industries’ Andrew Cosgrove and Kenneth H
offman.

In just 10 years, China’s gold holdings could catch up to the U.S., based on adjusted Chinese consumption for jewelry, industrial and other uses and using implied bar demand as the primary driver of incremental central bank additions (see chart).

Bloomberg Industries – Precious Metal Mining

At current run rates, China is on pace to add 622 metric tons of bars to its central bank holdings this year (380 mt in 2012). Given the low gold price, growing reserves in 2014 above this year’s levels appears achievable.

Gold will benefit from the continuing move away from the dollar as the world’s reserve currency as some form of a gold-backed currency emerges.

China’s call for “de-Americanization” is likely just a posturing maneuver. A large-scale sale of China’s U.S. Treasury holdings would likely cause a dramatic decline in the dollar, while increasing rates. This would cripple the U.S. economy and dent export demand for Chinese products.

This therefore, is the “nuclear option” for the Chinese government and one that they will be keen to avoid. They will only adopt this position if forced to in extreme circumstances, such as a U.S. default or extreme debasement of the dollar.

Already, the Chinese have stopped accumulating dollars – preferring safer currencies, infrastructure, hard assets and commodities and of course gold. Even a small amount of Chinese selling  could lead to substantial dollar weakness and much higher bond yields plummeting the U.S. into another recession.

The smart money, including the Chinese people and the People’s Bank of China, is concerned about currency debasement and continue to accumulate physical gold for the long term.

The dumb money continues to not understand the ramifications of dollar currency debasement and the De-Americanising world and continues to see gold as a trade or a mere speculation rather than the essential safe haven asset that it is.

Gold is heading for the first annual decline since 2000.

The Chinese have lustily greeted gold’s 19% drop this year by continuing to buy record amounts of gold. They know the price drop has created a gift for physical buyers globally.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/A8keaqdxXs8/story01.htm GoldCore

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/LktzCpBk4nI/story01.htm williambanzai7

A 7.3 (according to USGS) magnitude earthquake just struck 311 miles ENE of Tokyo at a depth of 10km. The Pacific Tsunami Center has issued a warning and VOA reports a 1-meter high tsunami could hit Fukushima coast at 02:40 local – 1340ET)…

 

 

NHK radio and TV announcers airing repeated warnings to residents of #Fukushima to stay away from the coast. #tsunami #Japan

— Steve Herman (@W7VOA) October 25, 2013

 

 

 

 

 

Tepco never lies. “@W7VOA: .@TEPCO_Nuclear: No fresh damage reported from Fukushima-1 NPP following strong quake off coast.”

— zerohedge (@zerohedge) October 25, 2013

 

 

 

it seems the eathquake is shrinking (are Japanese officials quantitatively easing down expectations)…

• 1319ET – *MAGNITUDE 7.6 QUAKE HITS 311 MILES ENE OF TOKYO: PT TSUNAMI
• 1323ET – FLASH: 7.5-MAGNITUDE QUAKE HITS OFF COAST OF JAPAN — USGS
• 1324ET – *USGS: MAGNITUDE 7.3 – OFF THE EAST COAST OF HONSHU
• 1327ET – URGENT:  Magnitude-6.8 quake hits Japan’s Fukushima region
• 1331ET – AP NewsAlert: Magnitude 7.3 Earthquake Strikes Off Fukushima

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

The Obamacare tech team should add another pressing cyber issue to its to-do list. As Mother Jones reports, web secuirty experts warn that that Healthcare.gov (and various state exchanges), the Obamacare websites, has a security flaw that could make sensitive user information, including Social Security numbers, vulnerable to hackers. The website, reportedly, has a coding problem that could allow hackers to deploy a technique called “clickjacking,” where invisible links are planted on a legitimate web page. Using this scheme, hackers could trick users into giving up personal data as they enter it into the web site, potentially placing Americans at risk of identity theft or allowing fraudsters to file bogus health care claims.

 

Via Mother Jones,

…

 

it’s not just the federal exchange that has security problems. Some of the 15 states that have established their own online exchanges aren’t using standard encryption throughout their Obamacare websites—leaving user information at risk.

 

…

 

Here’s the problem: When an American signs up for Obamacare online, they must enter a good deal of personal information to verify identity—including name, Social Security number, phone number, email address, income, and employer—and identifying information for their family members. In the majority of states, Americans will enter this information directly into the Healthcare.gov website.

 

Kyle Wilhoit, a threat researcher at Trend Micro, a Japanese security software company, studied the Healthcare.gov portal with his security team and found a “moderate risk” for hacking due to an easy-to-fix coding problem that leaves the site vulnerable to clickjacking.

 

…

 

“Common clickjacking would be a popular method to attempt to exploit [the site]” says Wilhoit. “Hackers could use this information in the creation of fake identities, fake credit cards, and fake accounts very easily.” He adds that it’s relatively easy to fix, although the fixed code would need to rolled out on multiple Healthcare.gov pages and potentially state websites as well.

 

Asked about clickjacking concerns, the Department of Health and Human Services (HHS) referred Mother Jones to this security statement, which says that Americans don’t need to worry: “If a security incident occurs, an Incident Response capability would be activated, which allows for the tracking, investigation, and reporting of incidents.”

 

…

 

Some state Obamacare sites could be significantly more vulnerable than the federal portal. Healthcare.gov site uses a common form of encryption called Secure Sockets Layer (SSL), which prevents information from being intercepted by a hacker after you click “send” (SSL doesn’t defend against most clickjacking). But the 15 states currently running their own independent Obamacare websites do not have explicit instructions from the HHS to use SSL.

 

…

 

“These state sites…represent more viable targets for direct attack” than the federal data hub, Budd argues. And hackers have been known to target state healthcare programs—last year, over 280,000 Social Security numbers were stolen from Utah’s Medicaid server.

 

…

 

Many security experts argue that Healthcare.gov’s code would quickly improve if it was open source—posted publicly for other programmers to examine, adapt, and improve. In fact, the code for the site was originally supposed to be open source. But HHS removed its code from open-source websites after developers complained they had trouble distinguishing which code belonged to which part of the website. Since then, all of Healthcare.gov’s coding mistakes have happened behind closed doors.

So apart from low sign-up rates, inability to handle visitor volumes, FUBAR Account creation, incorrect pricing guidelines, helpline overload, and security holes… Obamacare is a great success so far

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/cF7_jSt2Iyc/story01.htm Tyler Durden

Submitted by Bill Bonner via Acting-Man blog,

Alan Greenspan’s Shock Revelation

“We really can't forecast all that well. We pretend that we can but we can't. And markets do really weird things sometimes because they react to the way people behave, and sometimes people are a little screwy.”

 

– Alan Greenspan, speaking this week on “The Daily Show”

 

“Jobs Report Leaves Fed in Doubt,” was a big headline on Wednesday morning. Later in the day came this: “Dow down 54 on jobs concern.” What is the Fed in doubt about? To taper, or not to taper, that is the question. And why should a jobs report make any difference?

Oh, dear reader, where have you been? Don’t you know everyone now sits on the edge of his seat wondering when and how the Fed will back off from its massive QE program? And don’t you know the future of civilization hangs in the balance? On that point, we have a position… a thought… a reaction. Civilization hangs in the balance, but not in the way you think.

 

Asking for Trouble

 We have been trying to introduce a new way of looking at civilization. In short, we’ve tried to make it more civilized. What is the difference between a civilized community and a barbaric one? We have introduced a simple test. The civilized community relies mostly on cooperation and consent. The uncivilized community depends heavily on force and violence.

A French historian first introduced the word “civilization” less than 300 years ago. Since then there has been much argument about what it means. We enter the fray gingerly, but sure of ourselves. It only makes sense on our terms. A civilized community is peaceful; a barbaric one is not.

“Okay, Bill,” you may be saying to yourself. “I’ll give you that one… I guess. But what the hell difference does it make? What has it got to do with the jobs report?” Good questions. Glad you asked.

We know from bitter experience that trying to force economies to do what you want is a thankless task. Markets are fundamentally based on free exchange, cooperation, trust and trade. Force them in one direction or another and you are just asking for trouble.

As Alan Greenspan described this week, in an interview with John Stewart on “The Daily Show,” people are a little “screwy” from time to time. Which means they don’t necessarily go along with your central planning, no matter how good you think it is.

But still economists insist that, if they are allowed to monkey around with it, they can make an economy better. This is occasionally true. Said occasion is usually when they have already messed it up. By withdrawing some of their planning and programs, they may allow it to recover. Otherwise, there is no example in history where force has been successfully applied to economics.

 

Compounding Errors

But that doesn’t stop the PhDs from trying. The jobs report showed about 60,000 jobs missing – fewer jobs than economists had projected. Now, the erring economists will most likely compound their error by continuing to try to force the economy to do their bidding – force up the rate of consumer price increases and force down the number of Americans out of work.

If they really wanted to increase employment, that would be easy enough. They would encourage the feds to withdraw some of the laws that bully employers (health insurance… EEOC threats… overtime, etc.)… or some of the schemes that make it easy for potential employees to remain unemployed (disability… unemployment benefits… food stamps). As far as we know, those things are not on the table.

What is on the table is more QE. With regards to QE, the poles of possibility are as follows:

1. QE does nothing important. If this were so, there would be no reason to keep it.
2. QE is essential to the economy. If this were so, they couldn’t get rid of it… no matter what the jobs report says.

Most likely, QE lies somewhere in between… perhaps lost in the horse latitudes. It probably has little effect on the real economy. That is why the jobs report is so disappointing. But it probably has a great effect on the financial economy. That’s why the Dow sets new record highs almost every session.

The Fed is probably stuck with QE. Were it to stop, the stock market would likely tumble and the “wealth effect” the PhDs have been aiming for would quickly turn into a poverty effect.

Janet Yellen couldn’t stand it. She believes the Fed should use all its available weapons to force the economy to do what she wants it to do. She won’t be able to stand by, dagger in hand, when the market turns its back on her. Instead, she will stab.

And the Fed, which has lived by the sword of QE, will probably die by it too.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/MhPx3EJl_3E/story01.htm Tyler Durden

Submitted by Bill Bonner via Acting-Man blog,

Alan Greenspan’s Shock Revelation

“We really can't forecast all that well. We pretend that we can but we can't. And markets do really weird things sometimes because they react to the way people behave, and sometimes people are a little screwy.”

 

– Alan Greenspan, speaking this week on “The Daily Show”

 

“Jobs Report Leaves Fed in Doubt,” was a big headline on Wednesday morning. Later in the day came this: “Dow down 54 on jobs concern.” What is the Fed in doubt about? To taper, or not to taper, that is the question. And why should a jobs report make any difference?

Oh, dear reader, where have you been? Don’t you know everyone now sits on the edge of his seat wondering when and how the Fed will back off from its massive QE program? And don’t you know the future of civilization hangs in the balance? On that point, we have a position… a thought… a reaction. Civilization hangs in the balance, but not in the way you think.

 

Asking for Trouble

 We have been trying to introduce a new way of looking at civilization. In short, we’ve tried to make it more civilized. What is the difference between a civilized community and a barbaric one? We have introduced a simple test. The civilized community relies mostly on cooperation and consent. The uncivilized community depends heavily on force and violence.

A French historian first introduced the word “civilization” less than 300 years ago. Since then there has been much argument about what it means. We enter the fray gingerly, but sure of ourselves. It only makes sense on our terms. A civilized community is peaceful; a barbaric one is not.

“Okay, Bill,” you may be saying to yourself. “I’ll give you that one… I guess. But what the hell difference does it make? What has it got to do with the jobs report?” Good questions. Glad you asked.

We know from bitter experience that trying to force economies to do what you want is a thankless task. Markets are fundamentally based on free exchange, cooperation, trust and trade. Force them in one direction or another and you are just asking for trouble.

As Alan Greenspan described this week, in an interview with John Stewart on “The Daily Show,” people are a little “screwy” from time to time. Which means they don’t necessarily go along with your central planning, no matter how good you think it is.

But still economists insist that, if they are allowed to monkey around with it, they can make an economy better. This is occasionally true. Said occasion is usually when they have already messed it up. By withdrawing some of their planning and programs, they may allow it to recover. Otherwise, there is no example in history where force has been successfully applied to economics.

 

Compounding Errors

But that doesn’t stop the PhDs from trying. The jobs report showed about 60,000 jobs missing – fewer jobs than economists had projected. Now, the erring economists will most likely compound their error by continuing to try to force the economy to do their bidding – force up the rate of consumer price increases and force down the number of Americans out of work.

If they really wanted to increase employment, that would be easy enough. They would encourage the feds to withdraw some of the laws that bully employers (health insurance… EEOC threats… overtime, etc.)… or some of the schemes that make it easy for potential employees to remain unemployed (disability… unemployment benefits… food stamps). As far as we know, those things are not on the table.

What is on the table is more QE. With regards to QE, the poles of possibility are as follows:

1. QE does nothing important. If this were so, there would be no reason to keep it.
2. QE is essential to the economy. If this were so, they couldn’t get rid of it… no matter what the jobs report says.

Most likely, QE lies somewhere in between… perhaps lost in the horse latitudes. It probably has little effect on the real economy. That is why the jobs report is so disappointing. But it probably has a great effect on the financial economy. That’s why the Dow sets new record highs almost every session.

The Fed is probably stuck with QE. Were it to stop, the stock market would likely tumble and the “wealth effect” the PhDs have been aiming for would quickly turn into a poverty effect.

Janet Yellen couldn’t stand it. She believes the Fed should use all its available weapons to force the economy to do what she wants it to do. She won’t be able to stand by, dagger in hand, when the market turns
its back on her. Instead, she will stab.

And the Fed, which has lived by the sword of QE, will probably die by it too.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/MhPx3EJl_3E/story01.htm Tyler Durden