iftttwall – Page 26669

The QE Experiment is Failing… Will Stocks Crash?

We’ve long maintained that Japan is ground zero for the “QE works vs QE doesn’t work” debate.

The Fed’s economic models, and 99% of the economic models employed by Central Banks in general, believe that monetary easing can bring about an economic recovery. The primary argument for this crowd if QE has thus far failed to produce a recovery is that the QE efforts have not been big enough.

And then there’s Japan. In a nation with GDP of $5.96 trillion, the Bank of Japan has launched a $1.4 trillion QE effort: a monetary move equal to 23% of Japan’s GDP.

To put this into perspective, this would be akin to the US’s Federal Reserve announcing a QE effort of over $3 trillion.

Suffice to say, Japan’s QE most certainly should be considered “enough” by even the most pro-QE supporter. But the very problem is that it does not appear to be having the intended effects.

The following is an article from the Wall Street Journal. I’ve highlighted a few choice items for your review:

At Koeido Co., a 156-year-old sweets maker based in this city in southwest Japan, chairman Shuichi Takeda says he feels the country may finally be coming out of a 20-year funk.

Sales of Koeido's sweet millet dumplings are holding up. The company is spending around 80 million yen ($800,000) to renovate two shops—a sign of how Japan's economy is showing signs of life, lifted in part by a flood of easy money from the central bank that has boosted stocks and helped spur growth.

But with future demand unclear, and costs for imported sugar rising, Koeido still isn't bullish enough to take out bigger loans to replace equipment or expand its business—even though banks are begging it to borrow more.

"The economy doesn't necessarily get better just because of monetary easing," says Mr. Takeda. "And you don't borrow just because rates are low."…

It is an attempt to literally crowd banks and other investors out of the market and force them to put their money to work in other ways—through loans or investments in real estate, for example—to help stimulate the economy…

"The idea that the Bank of Japan will buy bonds, and then the extra money will start flooding into corporate or retail loans—that's just a theoretical exercise,'' says Chugoku's Mr. Miyanaga. "Most important is [for the government] to hurry up and produce a concrete growth strategy, which will spur private economic activity."

http://online.wsj.com/news/articles/SB10001424052702304470504579163094082999108

I want to point out that the individuals who are expressing basic common sense views about monetary policy and the economy are businesspeople who run actual businesses, NOT academics.

This is what happens when academic monetary theory meets reality: theory proves to be just that theory.

There are some perceived benefits (the markets rally) from the easy money high. But the inevitable hangover is usually intense (see 2000-2001 and 2007-2008).

So stocks rally for now. But eventually this will end. In fact it may come sooner rather than later.

Remember 2008? Everyone said everything was just fine… right up until the Crash hit.

We're seeing the same warnings in the markets now. The time to prepare is BEFORE it hits.

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

Best Regards

Phoenix Capital Research

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/7OL7hpWXM9s/story01.htm Phoenix Capital Research

OECD Warns UK Faces Housing Bubble

The U.K. faces a housing-market bubble unless the government boosts the supply of new homes, the OECD warned yesterday. U.K. home values have climbed 36.6% since 2004, the seventh-biggest rise among OECD nations and back near their 2007/8 bubble highs. The Bank of England said last week mortgage approvals had surpassed 60,000-a-month six months earlier than it had predicted. As Bloomberg’s Niraj Shah notes, while the OECD raised its forecasts for U.K. economic growth, it said risks to the recovery include “vigorous” house-price increases that may curtail affordability. We are sure this will all end well – a speculative real estate bubble as the key driver of nominal economic growth? What could go wrong?… Is it any wonder that UK realtors see the crash coming and are asking the government to step back from this policy-induced euphoria?

Chart: Bloomberg

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/lWY3qo_cAf8/story01.htm Tyler Durden

The American Style of Paranoid Politics

My latest contribution to JFK Week — it’s like Shark Week, but
it happens every 10 years instead of every summer — is an article
for CNN called “The
Roots of American Conspiracy Theories.” Here’s an excerpt:

America is not unusually
suspicious. Conspiracy stories flourish all over the world, some of
them far less plausible than the notion that more than one man was
involved in the King or Kennedy killing. As I write, Europe is
undergoing one of its
periodic panics about international child-stealing gypsy
conspiracies. Over the summer, the prime minister of Turkey

blamed a global plot for the protests against his government.
Last year, the host of Nigerian Idol
lashed out at the local press for reporting that he was a
high-ranking member of the Illuminati. In Iran, it is apparently
considered savvy to
claim that the Holocaust was a hoax. The fear of conspiracy
isn’t the property of any one nation — it’s more like a universal
human trait.

But if Americans are not unique in being suspicious, it’s true that
we can be suspicious in distinctive ways. Every country’s
conspiracy stories reflect that country’s culture, and that’s as
true of the United States as any place else. There is an American
style of paranoid politics.

You can read the rest
here.

I also have a cameo in
this report about the Kennedy assassination. And I’ll be
talking
about all this stuff on the public radio show Radio
West at 11 a.m. Mountain Time today; you can tune in to that
here.

from Hit & Run http://reason.com/blog/2013/11/20/the-american-style-of-paranoid-politics
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What “Car Salesman” Ben Bernanke Said At Dinner Last Night

From Simon Black of Sovereign Man

What Ben Bernanke Said At Dinner Last Night

Last night I attended a private function put on by the National Economists Club where the guest of honor was none other than Ben Bernanke. You can read his full speech to the attendees here.

Meanwhile, I’m still trying to figure out how a guy with my views was even allowed in the room.

But since I was already scheduled to be in the US this week to speak at a conference in Miami, I jumped at the chance to enjoy Bistro Filet and economic doublethink.

I’ve always wanted to find out for myself– does this man actually believe that printing money is the path to prosperity?

As it turns out, he does believe it.

At one point during the evening, when pressed about whether his Quantitative Easing program was good for Wall Street at the expense of Main Street, he flat out denied it, saying that such a premise is “simply not true”.

He defended his printing $85 billion per month, suggesting that fixing interest rates at zero is beneficial for society because, among other things, it allows people to ‘buy cars’.

I saw these words coming out of his mouth and thought to myself, “Is this guy f’ing serious?” Cars. Wow. As if going into debt to purchase a rapidly depreciating consumer item is somehow a victory for the people.

Fixing interest rates at zero screws responsible people who save.

My mother, for example, is completely risk averse. She holds the entirety of her savings in a bank account, and nobody can convince her otherwise.

What she doesn’t realize is that the interest rate she receives is below the rate of inflation. So year after year, the purchasing power of her savings declines.

This point seemed completely lost on the Chairman.

He also dismissed the Fed’s role in the growing wealth gap here in the Land of the Free.

As we’ve discussed before, recently published data show that the US wealth gap is at its highest point since 1929.

For this, the chairman blames trade globalization, saying that the wealth gap is a ‘complicated phenomenon’.

He also stated flat out that there’s ‘not much the Federal Reserve can do about long-term trends like [the wealth gap] that don’t have much to do with monetary policy.’

Right. Keeping interest rates at zero so that bankers and the ultra-wealthy can see their portfolios rise to record levels while the middle class gets hosed by rising costs of medical care, education, food, and fuel has nothing to do with monetary policy.

This may have been the most intellectually disingenuous thing I heard all night.

Mr. Bernanke also made it quite clear that they were going to keep printing no matter what.

In his own words, he told the story about how they had tried issuing forward guidance… first suggesting that Quantitative Easing would last through 2013. Then they changed it to 2014. Then 2015.

Finally they changed the target altogether, announcing that they had set a threshold for the unemployment rate of 6.5%… but that this figure was just a ‘threshold’, not a ‘trigger’.

In other words, even if the official unemployment rate moves below 6.5%, the Fed isn’t going to end QE. They will at that point START to look at other data, like the Labor Force Participation Rate (which is at its worst level since 1978).

He also hinted that their unemployment threshold was not set in stone… which I took as a sign that they would probably lower this threshold even more, paving the way for several more years of printing.

And even if they do let up on Quantitative Easing, he stated very plainly that the Fed would still likely keep its target interest rate at zero.

Bottom line, it’s not going to end… at least, not voluntarily. It’s going to take a full-blown currency crisis before the Fed gets a whiff of reality.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/ZSWJ54jrdaA/story01.htm Tyler Durden

What "Car Salesman" Ben Bernanke Said At Dinner Last Night