Beware The 'Head-Fake' Taper As "Markets Have Now Discounted Their Own Dishonesty"

Submitted by James Howard Kunstler of Kunstler.com,

The financial wires and pod-waves are all lit up these days like it was happy hour at the Lottery Winner’s Lounge.  It appears that the American economy – capital management division – has found the long-wished-for magic alternative energy source: horseshit. It is fueling the conversation all over the Web and over the senile mainstream media megaphones. One technical analyst, celebrity Tweeter Ralph Acampora of Altaira Wealth Management, actually said this week that the USA would be “energy independent by 2016.” That’s rich. We’d only have to come up with 8.5 million new barrels of oil a day, or give up driving cars altogether.

Apparently, the Federal Reserve is not just hosing down the markets with liquidity (i.e. money for nothing), but has also turned its headquarters in lower Manhattan into the world’s biggest stationary crack pipe. Meanwhile, more than a few professional observers of the financial scene say there can’t be any bubble because that’s the only thing everybody talks about and bubbles only form when nobody notices them.

That’s just not true. Plenty of people were hollering and finger-pointing about the housing bubble years before it blew up the banking system, including yours truly in a book published in 2005 (The Long Emergency). The reason there is so much anxious chatter about the current bubble is because the bubble is there for all to see, and when it pops it is sure to leave a lot more rubble on the ground than the last time — for instance, the wreckage of trust in all paper investments, which would be quite an historic financial innovation. Since the interventions and manipulations of markets and interest rates are perfectly obvious, one would have to conclude from the current sentiment that faith in the crookedness of finance has completely solidified. The markets have now discounted their own dishonesty.

The story making the rounds these days is that the USA’s industrial economy is on the rise again; that the housing market has “recovered;” that (according to Meredith Whitney) the “central corridor” of the nation (Texas to Minnesota) is the second coming of Japan in the 1960s; that we have more oil than we know what to do with; that the nation has bred a super-race of intrepid entrepreneurial risk-takers like unto no other society in history; and finally that whatever else we are or are not, America is the cleanest shirt in the laundry basket of Mother Earth.

This is all horseshit of course, being smoked in the New York Fed’s crack pipe.

Here’s what’s actually going on. The Federal Reserve can only pretend to have any option besides force-feeding “money” into Wall Street as if it were a Strasbourg Goose with Crohn’s disease. What passes through goose is a vile toxic substance called malinvestment, which turns the energies of society into activities that produce nothing of value, like hedge fund employee bonuses, NSA operations, Tesla car promotion, Frank Gehry condo towers, drone strikes against Afghani wedding parties, Obama photo ops, inflated auction prices of oil paintings, and Barney’s new Jay-Z holiday fashion collection.

The Fed makes regular noises about ending the force-feeding program (a.k.a. “quantitative easing” or “bond purchases”) issued in the recorded minutes of its Open Market Committee (FOMC). The propaganda is called “forward guidance” to give it the appearance of seriousness and rectitude, but its actual nature is more like what goes on in a Jerry Lewis movie of the 1960s — a kind of antic mugging. Lately it’s referred to as “taper talk” in reference to the threat of tapering the Fed’s purchases of US Treasury bonds and other debt paper, which runs at around $85 billion a month. Sometime soon, the Fed may announce a tiny taper of say $10 billion a month. This head-fake taper will cause the interest rates on the ten-year-bond to shoot up north of 3 percent and threaten to bankrupt the government — which is too broke to pay interest that high on the loans it takes. The markets will have a whack attack over the tiny taper. The Fed will freak out at the odor of deflationary depression and go back to full-tilt force-feeding of the sick goose.

The outcome will be some combination of a complete loss of faith in paper currency and the “assets” denominated in it, a complete loss of trust between banks that they are solvent enough to do business with each other, and a conclusive implosion of Wall Street and all the institutions in and around it, extending to the executive branch of the federal government. The sorry little appendage to all that, US economy, will be left in the cold and dark, whimpering for its mommy.


    



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Debt Is Failing as a Driver of Economic Growth

 

The US is heading towards a debt crisis.

 

Today, the US’s Debt to GDP ratio stands at over 105% (debt of $16.7 trillion on a GDP of $15.68 trillion). The only other time we’ve had more debt relative to our GDP was during WWII when the Debt to GDP ratio hit 112%:

 

 

Debt is not inherently evil. Debt that doesn’t create growth is. 

 

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. As you can see, after the Crisis began in 2007, the US moved into the point of debt saturation at which each new $1 in debt generates no additional growth.

 

This is why the Fed has been so concerned about interest rates. With a debt load of this size, every 1% rise in the US’s debt payments means another $100 billion in debt payments.

 

Unfortunately for the Fed, rates will eventually rise. It is guaranteed. As you can see in the below chart, rates have fallen almost nonstop since the early ‘80s. This is not sustainable. At some point rates will rise again. I cannot state expressly when, but that point is coming sooner rather than later.

 

 

 

With that in mind, investors should take steps today to shield their wealth from the impact of this.

 

If you have not taken steps to prepare this, we have a FREE Special Report that outlines how to prepare your portfolio. To pick up a copy, swing by:

http://phoenixcapitalmarketing.com/special-reports.html

 

 

Best Regards

 

Phoenix Capital Research

 

 

 

 

 


    



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Barack Obama, Trustworthiness Plummeting, Claims He’s “Not a Particularly Ideological Person”

not ideologicalPresident Obama is fast approaching lame duck
status as the public’s opinion of him sours. Only four in ten
Americans
now think he can effectively manage the federal
government,  and a majority (53 percent) don’t find him honest
or trustworthy. But there is one thing Americans can still trust
Obama to do,
raise lots of money for Democrats running in elections next
year. It may not matter what Obama says at these fundraisers (even
if they’re attended by the 47 percent that still trust him) as it’s
presumably his position as president that draws donors. He doesn’t
just show up and smile, though. Sometimes he’s good for a
laugh.


From Reuters:

President Barack Obama, on a fundraising swing in
Seattle on Sunday, described himself as “not a particularly
ideological person” despite ongoing political clashes with
Republicans over healthcare, the economy, and immigration
reform.

He’s
not a socialist, he just thinks he’s always right. And
everything that’s not is Republicans’ fault. That may not make him
seem particularly ideological, but it does make him seem
particularly partisan and petty.

Follow these stories and more at Reason 24/7 and don’t forget you
can e-mail stories to us at 24_7@reason.com and tweet us
at @reason247.

from Hit & Run http://reason.com/blog/2013/11/25/barack-obama-trustworthiness-plummeting
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Interventionists Attempt to Isolate Rand Paul Over Iran Deal

Only The Shadow knows.... ||| Al JazeeraAt The American Conservative, W. James
Antle III has a
shrewd, pessimistic take on how GOP opposition to the Iran
nuclear deal threatens to isolate intervention-skeptic Sen. Rand
Paul (R-Kentucky):

The most hawkish conservatives follow a simple script: Obama is
an apologizing appeaser while Republicans are the muscular party of
Reagan and anyone to the right of Jimmy Carter. That narrative is
complicated by the fact that they often side with the Obama
administration—when they aren’t divided among themselves—against
the rest of the right on military interventions and civil liberties
questions.

Iran brings the foreign-policy debate back to the hawks’ comfort
zone. The Iranian ayatollahs have been villains since at least the
1979 hostage crisis, much longer than Saddam Hussein was so
perceived before the Iraq war. As a state sponsor of terrorism, it
is not an undeserved reputation. […]

Republican lawmakers, aided by Democrats like New Jersey Sen.
Robert Menendez, are insisting on zero enrichment as a condition
for relaxing any sanctions against Iran. Some would even like to
authorize the use of military force. There are no partisan or
opportunistic reasons for any Republican to resist such
legislation.

In the Senate, Rand Paul—who has supported some sanctions—may be
alone. If he decides to push back against Marco Rubio, John McCain,
and Lindsey Graham this time around, it’s hard to envision Ted Cruz
or even Mike Lee joining him.

Whole thing
here; Antle’s 2010 Reason profile of then-candidate
Paul here.

Interventionists recently seen stomping on
Paul’s Iran positioning include longtime critics Jennifer Rubin
at the Washington Post (“Rand
Paul: Worse than Obama on Iran“) and the
Washington Free Beacon.

After the jump read what Paul told me in late August when I
asked whether the U.S. has “moral standing” to stop nuclear
proliferation in Iran and elsewhere:

Q: What about developments pursuant of nuclear weapons?
Iran, North Korea….Do we actually have moral standing to stop
that, and what are the tools that you think are
appropriate?

A: You know, what we’ve been trying with Iran is sanctions, and
I think the sanctions have had some influence, and I think they’ve
at least superficially brought the Iranians to the point where
they’d like to negotiate. I think ultimately, though, that no
successful negotiation will happen unless Russia and China are
included in it.

I think we’ve made the mistake of having sort of superficial
show-votes in the Security Council. There’s always going to
be—particularly as we came out of the Cold War—there’s ah, I guess
the best way to describe it is Russia feels a diminished manhood.
And they want to assert their manhood, and assert their former
superpowerdom by voting against us in the Security Council, and I
think they will. But I think if you were to talk to them one-on-one
in a basis, same with China, and convince them that 1) trade with
us is important and that we want to expand trade with them, but in
order to do that we need to quit diverting so many resources to
Iran. If you just get Iran to behave we’d all trade better, we’d
all make more money, and it’d be much better for all of our
countries.

But I think you need their influence. Because if both Russia and
China were to not trade with Iran, and go and talk to Iran, and say
“Look, just cut this nonsense of building a nuclear bomb, and we’ll
see if we can get some of the sanctions relaxed; we’re talking with
the United States”—I don’t think we’re going to be able to talk
with Iran directly probably very well, although I’m not sure that
doesn’t happen. But I think through Russia and China.

The same goes for North Korea. I think China holds the cards for
us with North Korea. I think they’re inept and poverty-stricken and
unable to really do anything; even the weapons they make usually
don’t work. So I don’t think we fear North Korea as a great ability
to attack the United States. But they have a nuclear weapon and
they need to be watched for that reason and contained. And I think
one of the ways you contain them, is that 1) you shouldn’t feed
them. When they run out of food, we shouldn’t give them any. But we
should encourage China that it’s to China’s benefit with us, and
our relations, to try to control North Korea.

from Hit & Run http://reason.com/blog/2013/11/25/interventionists-attempt-to-isolate-rand
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A. Barton Hinkle on Taxpayer-Subsidized Projects for the Elite

As Richmond, VA considers a broad new
redevelopment plan that includes a baseball stadium, A. Barton
Hinkle recalls a quote. “We should be careful to get out of an
experience only the wisdom that is in it,” Mark Twain advised,
“lest we be like the cat that sits down on a hot stove lid. She
will never sit down on a hot stove lid again … but also she will
never sit down on a cold one.” Hinkle says that Richmond should be
wise enough not to assume the stadium project will be another hot
stove lid that will leave everyone feeling burned. But the city
also should recognize that the project has some parallels.

View this article.

from Hit & Run http://reason.com/blog/2013/11/25/a-barton-hinkle-on-taxpayer-ballparks-ho
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Mayor Bloomberg Pushes for Ban on Styrofoam Cups

New York City elected Bill De Blasio as their new mayor earlier
this month, but Bloomberg still has some time in office. Before he
goes out, he wants to push a final, significant piece of
legislation into law:
banning plastic foam cups and plates. 

Bloomberg has supported the ban

since it was introduced by Brooklyn Councilman Lewis
Fidler this summer. Now, at Bloomberg’s request, the City
Council’s Sanitation Committee will hold a hearing Monday to
discuss the bill.

Bloomberg has said the ban is a no-brainer for environmental
reasons. According to the
New York Post, Bloomberg spokesman Jake Goldman said,
“When polystyrene foam is used for food service it becomes a
devastating pollutant that infects our parks and waterways while
never biodegrading and has been classified a carcinogenic health
hazard by the National Institute of Health.”

The Post also reports that plastic foam food
containers add 23,000 tons of trash a year to landfills.

Although Mr. Bloomberg is notorious
for his Nanny State tendencies, the plastic foam bill is not as
unprecedented as, say, the large soda ban. Many cities, including

Seattle and
Los Angeles, have banned the substance.

However, the bill’s opponents argue that the ban will be
extremely costly for small businesses. The American Chemistry
Council reports that replacing polystyrene cups and trays with the
cheapest alternative will cost New Yorkers $91.3 million
per year. MB Public Affairs found that for every $1 spent on
polystyrene foam goods, businesses 
will have to spend $1.94 on alternative replacements,
effectively doubling costs. Their report finds that “this 94% is in
effect an “environmental tax” far higher than any current sales tax
or import duty rates affecting the cost of consumer products.” And
given that most large chains in the city have
already stopped using polystyrene, small businesses will be hit
especially hard.  

Additionally, some trade groups and politicians have noted
alternative approaches to reducing environmental harm. In
California, 65 cities
with a total population of around 8
million (similar to New York City’s) have polystyrene recycling
centers. New York City’s recycling centers currently reject the
material, citing prohibitively high costs.

Forbes’ Jeff Stier
writes of Seattle’s problems with their polystyrene ban:

In coffee-loving Seattle, where styrofoam cups are already
banned, they’ve been having a hard time recycling their allegedly
green paper cups, according
to The Seattle Times.

They’ve found that mills don’t want recycled coffee cups because
the process takes longer, making cups more expensive to process
than items like recycled cardboard boxes. And facilities that do
accept the “mixed paper” that paper coffee cups and other food
service items contribute to, only use it in a 1:10 ratio
with higher-quality fibers. So there’s not much of a market for it,
at least in the U.S.

Even if Bloomberg doesn’t manage to get the ban passed, his
successor may try. On his campaign website, De Blasio pledges
to end government use of plastic foam. 

from Hit & Run http://reason.com/blog/2013/11/25/mayor-bloombergs-final-act-ban-plastic-f
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A Greek Tragedy: Half Of New Greek HIV Cases Are Self-Inflicted To Receive €700 Per Month Benefits, Study Finds

When one reads the following stunning, and tragic, excerpt from the World Health Organization’s recent report “Review of social determinants and the health divide in the WHO European Region: final report” what can one say but… Grecovery.

From the WHO:

Case study: countries’ experiences of financial crisis – Greece

 

Suicides rose by 17% between 2007 and 2009 and to 25% in 2010, according to unofficial 2010 data (398). The Minister of Health reported a further 40% rise in the first half of 2011 compared with the same period in 2010. Suicide attempts have also increased, particularly among people reporting economic distress (610). Homicide and theft rates have doubled. HIV rates and heroin use have risen significantly, with about half of new HIV infections being self-inflicted to enable people to receive benefits of €700 per month and faster admission on to drug-substitution programmes. Prostitution has also risen, probably as a response to economic hardship. Health care access has declined as hospital budgets have been cut by about 40% (398) and it is estimated that 26 000 public health workers (9100 doctors) will lose their jobs (611). Further cuts are expected as a result of recent negotiations with the IMF and European Central Bank.

But at least they have the Euro.

h/t @timmyconspiracy


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/9jaPUF5Emjs/story01.htm Tyler Durden

In China 1.2 Million Candidates Apply For 19,000 Government Jobs

The difficulty of US workers to obtain “desirable” jobs has been noted here previously. Recall in 2012 when Delta received 22,000 applications for about 300 flight attendant jobs in the first week after posting the positions outside the company (which was an improvement from 2010, when the Atlanta-based carrier received 100,000 applications for 1,000 jobs when it last hired flight attendants in October 2010). Or when in 2011 McDonalds hired 62,000 minimum wage applicants out of one million total applicants. However, that is nothing compared to the job seeking frenzy in China, where as AFP reports, more than one million people took China’s national civil service exam at the weekend in a modern version of an age-old rite, but faced huge odds against clinching one of the few government jobs available. A total of 1.12 million took the National Public Servant Exam, according to figures from the State Administration of Civil Service figures. How many total job openings were there? A tiny 19,000 according to China’s Global Times, meaning less than 1 on 50 would be successful.

But that’s just the tip of the scramble. According to AFP, the most competitive role was with the National Ethnic Affairs Commission, where 14,384 candidates were vying for just two jobs. Why the surge in applicants? “Domestic reports said it was so popular because the application process appeared to be less arduous than for other positions.” Somehow math suggest that over 7,000 applicants for one job means a somewhat more “arduous” application process, not less.

As for the allure of government jobs, the story here is well-known: job safety coupled with an easy living in which one isn’t expected to do much of anything:

Government jobs are especially appealing to Chinese because they are seen as stable employment and bring with them a range of privileges, as well as the status of being an official. The benefits can include living allowances, pensions, health insurance and even property — a valuable commodity in China’s prolonged housing boom.

 

The current civil service test is a legacy of the ancient imperial examination known as the keju, introduced during the Sui Dynasty, which ruled from 580-618 AD, and often regarded as a key meritocratic element of the governing system.

 

Early forms of the examinations were largely based on Confucian texts. They were open only to boys who were able to complete their education, either because of family wealth or sponsorship by benefactors.

In the US the pinnacle of professional development may mean ending up as a hedge fund billionaire on Twitter and moving stocks with nothing but a buy or sell recommendation in under 140 characters, but in China it is all about the government jobs:

The tests were only held every three years, and local officials would often present those who passed with a special banner to be hung at the entrance to their home, to ensure the success was remembered for generations.

The amusing nature of this process was not lost on the locals:

Many posters on Sina Weibo, a Chinese version of Twitter, ridiculed the candidates. “This really is China’s peculiar landscape”, said one poster with the username “Law and its value”.

 

“Do they really want to pass the test to ‘serve the people’? No. They desperately hope to go and enjoy a privileged system of wages.”

 

Another said: “Every time (they take the test), they are in fact just competing to be able to take bribes and bend the law.”

 

Other netizens asked whether more civil servants were needed in China, following government pledges to cut down on bureaucracy.

 

“Who wouldn’t want to have a job that is guaranteed for life?” said one netizen.

 

“But the real question should be: ‘Is it really necessary to recruit tens of thousands of civil servants every year?'”

The answer: of course it is. How else can the world’s second most centrally-planned economy and market (after the US of course) preserve the illusion of 7%+ growth unless it created as many government jobs as needed to fill the daily growing slack. But if you think 7000 applicants for 1 “desired” job is bad, wait until the full impact of China’s easing of its 1 child policy is felt…


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/Lm6YPaou6a4/story01.htm Tyler Durden