iftttwall

Submitted by AWD via The Burning Platform blog,

Maybe 2015 will be the year of the collapse.

Our entire economy runs on debt creations, vis-a-vis financialization, since we import $500 billion a year more than we export.

2015 is the year when increasing debt results in ZERO GDP growth. The end of the line. But that won’t stop the Federal Reserve and the criminals in Washington. Enjoy what time we have left before it all collapses.

Government Intervention in Economic Downturns…Makes Things Worse

Every time government intervenes in an economic downturn, the downturn (or recession) gets longer, and deeper. History has borne this out, yet politicians can’t resist the impulse to “do something” when recession comes. Left to its own devices, the economy will recover much more quickly than if we tinker with monetary policy or inject massive amounts of taxpayer dollars into the equation. Thomas Sowell makes this case one more time in a piece at Townhall:

The idea that the federal government has to step in whenever there is a downturn in the economy is an economic dogma that ignores much of the history of the United States.

During the first hundred years of the United States, there was no Federal Reserve. During the first one hundred and fifty years, the federal government did not engage in massive intervention when the economy turned down.

No economic downturn in all those years ever lasted as long as the Great Depression of the 1930s, when both the Federal Reserve and the administrations of Hoover and of FDR intervened.

The myth that has come down to us says that the government had to intervene when there was mass unemployment in the 1930s. But the hard data show that there was no mass unemployment until after the federal government intervened. Yet, once having intervened, it was politically impossible to stop and let the economy recover on its own. That was the fundamental problem then– and now.

The Keynesians that are busy trying to turn the magic levers in our economy right now still aren’t getting the message, more than two years later: government spending can’t make the economy grow. Until they stop trying (and racking up immense, almost unfathomable amounts of debt), things are likely to continue to get worse. What we need is some level of certainty about policies that the current administration is trying to enact. Businesses don’t invest in growth, and thus hire new employees, because they don’t know what’s going to happen.

The policies of this administration make it risky to lend money, with Washington politicians coming up with one reason after another why borrowers shouldn’t have to pay it back when it is due, or perhaps not pay it all back at all. That’s called “loan modification” or various other fancy names for welching on debts. Is it surprising that lenders have become reluctant to lend?

Private businesses have amassed record amounts of cash, which they could use to hire more people– if this administration were not generating vast amounts of uncertainty about what the costs are going to be for ObamaCare, among other unpredictable employer costs, from a government heedless or hostile toward business.

As a result, it is often cheaper or less risky for employers to work the existing employees overtime, or to hire temporary workers, who are not eligible for employee benefits. But lack of money is not the problem.

Uncertainty is killing opportunities for growth. We don’t need more government intervention in the form of stimulus, or easing, or regulation. We need to government to get out of the way.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/0F_FDPqqTmw/story01.htm Tyler Durden

Authored by Guy Haselmann of Scotiabank,

FED – Encouraging the Melt-Up Trade, While Regulating Bubbles Away      

The Fed moved ‘all-in’ in 2008/09 when it pushed rates to zero and embarked on QE. Since the Fed basically used its final chips via this action, it became trapped playing ‘this hand’ until the bitter end. The stakes are enormous and grow over time. The only way the Fed can ‘win’ is – as Yellen said today – “to do everything possible to promote a very strong recovery”. Tapering too soon could be calamitous toward this objective. Yet, the longer it continues, the more the risks aggregate.  However, Yellen seemed to calmly indicate today that any unintended consequences or dangers to financial stability are worth the risk.

There is an inability, and lack of good options, for providing any additional monetary or fiscal accommodation, should the economy weaken or should a global crisis arise. This is what makes the Fed’s current policy experiment such a high-stakes experiment. Here is why policy-makers are in such a predicament:

Every economic or business cycle decline over the past three decades has been met with the same response: monetary or fiscal stimulus.  Policy makers have been quick to offer accommodation, but they have been slow to withdraw the stimulus which is always politically more difficult. 

 

Fiscal accommodation over the years has resulted in large deficits and debt which are now leading to contentious discussion about how to reel them in.  

 

Monetary authorities have stair-stepped the Fed Funds Rate down, but eventually hit zero and ran out of room.

 

Effectively, both stimulatory mechanisms are broken.

Yellen had to field several questions about potential market bubbles, but she deflected them aggressively saying that she did not believe that “bubble-like conditions” existed.  Whether she believes that or not, it would have been counter-productive for her to admit it.  She mentioned that should bubbles begin to form, the Fed has the regulatory tools to control them.  She can’t possibly believe this (or can she); but regardless, she must try to convince the market that the Fed is monitoring them and can contain them.

Basically, she has given the market the green light to “melt-up”.  The only question is how much higher will the Fed’s ‘gift’ drive prices? She indicated the Fed has no choice but to continue with this policy until it succeeds (or will it ultimately fail?).

 

As perverse as this seems, Yellen likely ensured that an equity market crash (someday) is inevitable.  Yellen’s failure to acknowledge any signs of bubble-like conditions encourages more risk-taking and speculation.  Therefore, this fact, combined with her hints of a continuation of policy, should lead to a bubble; if one hasn’t been created already.  And, all bubbles eventually pop.

 

Alternatively, it is possible that Fed policy fails and economic growth begins to slip. In this scenario, a significant re-pricing (lower) of financial assets would occur.

 

Since banks are in a much stronger position today than in 2008, the Fed probably has limited concern about a market crash – as long as the banking system remains healthy.  The Fed probably doubts a crash could be as bad as 2008, and it know it know possesses a slew of liquidity facilities (established in 2008) which could be implemented quickly if necessary.

“The question isn’t who is going to let me; it’s who is going to stop me.” – Ayn Rand

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

Authored by Guy Haselmann of Scotiabank,

FED – Encouraging the Melt-Up Trade, While Regulating Bubbles Away      

The Fed moved ‘all-in’ in 2008/09 when it pushed rates to zero and embarked on QE. Since the Fed basically used its final chips via this action, it became trapped playing ‘this hand’ until the bitter end. The stakes are enormous and grow over time. The only way the Fed can ‘win’ is – as Yellen said today – “to do everything possible to promote a very strong recovery”. Tapering too soon could be calamitous toward this objective. Yet, the longer it continues, the more the risks aggregate.  However, Yellen seemed to calmly indicate today that any unintended consequences or dangers to financial stability are worth the risk.

There is an inability, and lack of good options, for providing any additional monetary or fiscal accommodation, should the economy weaken or should a global crisis arise. This is what makes the Fed’s current policy experiment such a high-stakes experiment. Here is why policy-makers are in such a predicament:

Every economic or business cycle decline over the past three decades has been met with the same response: monetary or fiscal stimulus.  Policy makers have been quick to offer accommodation, but they have been slow to withdraw the stimulus which is always politically more difficult. 

 

Fiscal accommodation over the years has resulted in large deficits and debt which are now leading to contentious discussion about how to reel them in.  

 

Monetary authorities have stair-stepped the Fed Funds Rate down, but eventually hit zero and ran out of room.

 

Effectively, both stimulatory mechanisms are broken.

Yellen had to field several questions about potential market bubbles, but she deflected them aggressively saying that she did not believe that “bubble-like conditions” existed.  Whether she believes that or not, it would have been counter-productive for her to admit it.  She mentioned that should bubbles begin to form, the Fed has the regulatory tools to control them.  She can’t possibly believe this (or can she); but regardless, she must try to convince the market that the Fed is monitoring them and can contain them.

Basically, she has given the market the green light to “melt-up”.  The only question is how much higher will the Fed’s ‘gift’ drive prices? She indicated the Fed has no choice but to continue with this policy until it succeeds (or will it ultimately fail?).

 

As perverse as this seems, Yellen likely ensured that an equity market crash (someday) is inevitable.  Yellen’s failure to acknowledge any signs of bubble-like conditions encourages more risk-taking and speculation.  Therefore, this fact, combined with her hints of a continuation of policy, should lead to a bubble; if one hasn’t been created already.  And, all bubbles eventually pop.

 

Alternatively, it is possible that Fed policy fails and economic growth begins to slip. In this scenario, a significant re-pricing (lower) of financial assets would occur.

 

Since banks are in a much stronger position today than in 2008, the Fed probably has limited concern about a market crash – as long as the banking system remains healthy.  The Fed probably doubts a crash could be as bad as 2008, and it know it know possesses a slew of liquidity facilities (established in 2008) which could be implemented quickly if necessary.

“The question isn’t who is going to let me; it’s who is going to stop me.” – Ayn Rand

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

Over the weekend, we reported that as Bitcoin’s unprecedented, Caracas-like surge continues, legislators are finally starting to pay attention to the digital currency, a process that will culminate with a hearing on November 18 titled “Beyond Silk Road: Potential Risks, Threats, and Promises of Virtual Currencies,” in which witness would be invited to testify about “the challenges facing law enforcement and regulatory agencies, and include views from “non-governmental entities who can discuss the promises of virtual currency for the American and global economies.” Which as everyone knows is code word for creeping, smothering regulation, especially since as was reported earlier, the FEC is debating allowing the use of Bitcoin for political donations (trust America’s corrupt politicians to always pay attention to anything that appreciates a few thousand percent in one year).

However, one person is not waiting that long: Ben Lawsky, the New York financial services superintendent, is looking to regulate Bitcoin now by issuing BitLicenses for business that conduct transactions in Bitcoin, and to that end he will conduct a public hearing to discuss the “burgeoning world of digital money.” Participants will discuss the feasibility of a license that would make the virtual currency market more like those for other forms of money. In other words: it will make BitCoin just like the fiat currency it is trying to replace, at least in the eyes of the government. At which point the primary utility of Bitcoin – as an unregulated medium of exchange- itself disappears.

 

Ben Lawsky with a Bloomberg terminal featured prominently in the background, photo credit NYT

From the NYT:

If the plans go ahead, it would be an important step in bringing bitcoin and other virtual currencies closer to the financial mainstream. In another move in the same direction, the Federal Election Commission held a hearing on Thursday in which it considered whether to legalize campaign donations made in virtual currencies.

 

Since bitcoin was created in 2009 by anonymous programmers, it has frequently been treated with derision by many financial insiders and authorities, who have described it as a speculative mania. Many authorities still hold to that position, but the currency’s online network, which is not controlled by any centralized authority, has survived several crises.

But the truth behind the scenes is simpler:

Several regulators have been looking at ways to make sure virtual money cannot be used for laundering money or other criminal purposes. In October, the federal authorities arrested the operator of an online marketplace where they said bitcoin could be used to buy drugs and other illegal goods.

 

“The cloak of anonymity provided by virtual currencies has helped support dangerous criminal activity, such as drug smuggling, money laundering, gun running and child pornography,” Mr. Lawsky said in a letter announcing the hearing, which has not yet been scheduled.

So please everyone think of the children and some such hypocrisy.

And speaking of Hypocrisy, the last sentence of this paragraph has no peers:

“Virtual currencies may have a number of legitimate commercial purposes, including the facilitation of financial transactions,” Benjamin Lawsky, superintendent of financial services, said in the notice. “That said, NYDFS also believes that it is in the long-term interest of the virtual currency industry to put in place appropriate guardrails that protect consumers, root out illegal activity, and safeguard our national security.”

So, shouldn’t he be looking at the dollar instead?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/_y-5YmfJyJk/story01.htm Tyler Durden

Over the weekend, we reported that as Bitcoin’s unprecedented, Caracas-like surge continues, legislators are finally starting to pay attention to the digital currency, a process that will culminate with a hearing on November 18 titled “Beyond Silk Road: Potential Risks, Threats, and Promises of Virtual Currencies,” in which witness would be invited to testify about “the challenges facing law enforcement and regulatory agencies, and include views from “non-governmental entities who can discuss the promises of virtual currency for the American and global economies.” Which as everyone knows is code word for creeping, smothering regulation, especially since as was reported earlier, the FEC is debating allowing the use of Bitcoin for political donations (trust America’s corrupt politicians to always pay attention to anything that appreciates a few thousand percent in one year).

However, one person is not waiting that long: Ben Lawsky, the New York financial services superintendent, is looking to regulate Bitcoin now by issuing BitLicenses for business that conduct transactions in Bitcoin, and to that end he will conduct a public hearing to discuss the “burgeoning world of digital money.” Participants will discuss the feasibility of a license that would make the virtual currency market more like those for other forms of money. In other words: it will make BitCoin just like the fiat currency it is trying to replace, at least in the eyes of the government. At which point the primary utility of Bitcoin – as an unregulated medium of exchange- itself disappears.

 

Ben Lawsky with a Bloomberg terminal featured prominently in the background, photo credit NYT

From the NYT:

If the plans go ahead, it would be an important step in bringing bitcoin and other virtual currencies closer to the financial mainstream. In another move in the same direction, the Federal Election Commission held a hearing on Thursday in which it considered whether to legalize campaign donations made in virtual currencies.

 

Since bitcoin was created in 2009 by anonymous programmers, it has frequently been treated with derision by many financial insiders and authorities, who have described it as a speculative mania. Many authorities still hold to that position, but the currency’s online network, which is not controlled by any centralized authority, has survived several crises.

But the truth behind the scenes is simpler:

Several regulators have been looking at ways to make sure virtual money cannot be used for laundering money or other criminal purposes. In October, the federal authorities arrested the operator of an online marketplace where they said bitcoin could be used to buy drugs and other illegal goods.

 

“The cloak of anonymity provided by virtual currencies has helped support dangerous criminal activity, such as drug smuggling, money laundering, gun running and child pornography,” Mr. Lawsky said in a letter announcing the hearing, which has not yet been scheduled.

So please everyone think of the children and some such hypocrisy.

And speaking of Hypocrisy, the last sentence of this paragraph has no peers:

“Virtual currencies may have a number of legitimate commercial purposes, including the facilitation of financial transactions,” Benjamin Lawsky, superintendent of financial services, said in the notice. “That said, NYDFS also believes that it is in the long-term interest of the virtual currency industry to put in place appropriate guardrails that protect consumers, root out illegal activity, and safeguard our national security.”

So, shouldn’t he be looking at the dollar instead?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/_y-5YmfJyJk/story01.htm Tyler Durden

 

Janet Yellen, who will likely be the next Fed Chairman, is insane.

 

There is simply no other way to describe someone who claims inflation is below 2% today and that the Fed’s monetary tools can improve employment.

 

Here are her comments on these subjects.

 

We have made good progress, but we have farther to go to regain the ground lost in the crisis and the recession. Unemployment is down from a peak of 10 percent, but at 7.3 percent in October, it is still too high, reflecting a labor market and economy performing far short of their potential. At the same time, inflation has been running below the Federal Reserve's goal of 2 percent and is expected to continue to do so for some time.

 

For these reasons, the Federal Reserve is using its monetary policy tools to promote a more robust recovery. A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases. I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy.

 

http://www.federalreserve.gov/newsevents/testimony/yellen20131114a.htm

 

First off, inflation is not below 2%. We’ve been over the fraudulent CPI data enough times for this claim alone to discredit Yellen as an economist. Even the former head of the BLS has stated that CPI is a joke and needs to be revised.

 

Secondarily, I fail to understand how inflation of 2% is acceptable. Why is this base assumption never challenged? At this rate, in 10 years you’ve lost roughly 20% of your purchasing power. And during the average worker’s lifetime, they will see a 40-60% decrease in purchasing power.

 

This is good?

 

Now let’s assess her claim that the Fed needs to continue its monetary policy tools to promote a robust recovery.

 

The official unemployment rate is highly charged politically as it is used by the media to gauge how well a particular administration is doing at generating job growth.

 

As such the unemployment numbers are routinely massaged to the point of no longer reflecting the true number of unemployed Americans. For this reason, I prefer to use the labor participation rate when gauging the health of the US jobs markets: this metric represents the number of Americans who are currently employed as a percentage of the total number of Americans of working age.

 

 

As you can see, the number of employed Americans of working age peaked in the late ‘90s. It has since fallen to levels not seen since the early ‘80s. Moreover, looking at this chart it is clear that job creation has failed to keep up with population growth.

 

This negates any claims of “recovery” in the jobs market.

 

In particular, I want to draw your attention to the last five years of this chart below. The US Federal Reserve began its first QE program, called QE 1, in November 2008. Since that time it has launched three other such programs, spending over $2 trillion in the process.

 

During this period, the labor participation rate has not once experience a sustained uptrend. Put another way, job creation has never outpaced population growth to the point of creating a significant turnaround in the jobs market. This has happened despite the recession officially “ending” in mid-2009.

 

 

The evidence here is clear. QE does not generate jobs in the broad economy. It failed for the UK, it failed for Japan. It’s failing here.

 

End of story.

 

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

 

Best Regards,

 

Phoenix Capital Research

 

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/sHBljh-lKJ8/story01.htm Phoenix Capital Research