Tag: finance

Curious which were the best and worst performing asset classes for the month of October? Deutsche Bank explains.

After September’s no Fed taper fuelled performance, financial markets were supported in October by the near-term satisfactory resolution of the fiscal situation in the US. Asset returns in October broadly reflect what we’ve generally seen so far YTD. Developed world equities have seeing the best of the returns while the performance of commodities has been disappointing. October’s highlights in equities centred on the European periphery where Greek, Italian and Spanish equities returned +17.2%, +11.1% and +8.3% respectively, pushing YTD returns above +20% for Italy and Spain and above +30% for Greece. That said Japanese stocks still lead the way YTD with the Nikkei up just shy of +40% (+39.9%) despite weaker returns in October (-0.9%). EM equities produced another decent month of returns (+4.9%) following the summer’s weakness with the MSCI EM index now back into positive territory YTD, only Chinese stocks (-1.5%) saw negative returns in October amongst the EM countries included in our review.

At the other end of the returns spectrum commodities saw further declines with the CRB index (-2.7%) seeing it’s 6th monthly decline of the year with the YTD performance of -5.8%. Although US WTI crude fell -5.8% in October it is still up (+5.0%) YTD; one of the few commodities to be in positive territory in 2013.

In terms of fixed income returns were positive across the spectrum as key government bond yields saw further declines. 10 year Treasury yields fell around 6bps to 2.55% and traded below 2.5% during October. Government bonds saw more impressive declines in Europe with the 10 year Bund and the 10 Year Gilt both down around 10bps to 1.67% and 2.62% respectively. So government bond total returns were positive with Italian BTPs leading the way (+2.6% in October and +6.2% YTD). EM bonds retraced more of the summer weakness but they remain in negative territory YTD. In credit we saw further outperformance from the higher beta part of the credit spectrum with Fin Sub and HY leading the way. GBP Fin Sub returned an impressive +3.2% in October and is up +8.9% YTD.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/0ESsx8Dp_CI/story01.htm Tyler Durden

After a blistering October for stocks, drunk on yet another month of record liquidity by the cental planners, November’s first overnight trading session has been quiet so far, with the highlight being the release of both official and HSBC China PMI data. The official manufacturing PMI rose to 51.4 in October from 51.1 in September. It managed to beat expectations of 51.2 and was also the highest reading in 18 months. October’s PMIs are historically lower than those for September, so the MoM uptick is considered a bit more impressive. The uptrend in October was also confirmed by the final HSBC manufacturing PMI which printed at 50.9 which is higher than the preliminary reading of 50.7 and September’s reading of 50.9. The Chinese data has helped put a floor on Asian equities overnight and S&P 500 futures are nudging higher (+0.15%). The key laggard are Japanese equities where the TOPIX (-1.1%) is weaker pressured by a number of industrials, ahead of a three day weekend. Electronics-maker Sony is down 12% after surprising the market with a profit downgrade with this impacting sentiment in Japanese equities.

Over in Europe, the EUR continues to be pressured this morning following yesterday’s stunningly weak European jobs and inflation data. Also of note, as had been leaked previously, RBS announced the creation of an internal $61 billion “bad bank.”

Looking at the US day ahead, today’s ISM will be a major focus particularly following the bumper Chicago PMI yesterday. The first of the post-FOMC Fedspeak begins today with Bullard speaking on monetary policy in St Louis. In the UK, the manufacturing PMI is the only data of note.

US data docket

• US: ISM Mfg, cons 55.0 (15:00)
• US: Fed speakers: Bullard (14:10), Kocherlakota (16:15) and Lacker (17:00)

Overnight news bulletin

• Treasuries steady, 10Y yields little changed on the week after 2Y/5Y/7Y auctions, FOMC statement that contained few surprises; ISM Manufacturing report in focus today after yesterday’s stronger than expected Chicago PMI.
• Draghi is facing down a deflation threat with few options left to fight it as consumer prices in euro area are rising at the slowest pace in four years
• Analysts are shifting views on ECB rates, with cuts seem more likely; BofAML, UBS and RBS see a refi rate cut at next week’s meeting, SocGen, BNP and JPM look for a move in Dec.
• China’s official PMI rose to 51.4 in October, highest in 18 months, from 51.1 in September and the 51.2 median estimate in a Bloomberg News survey
• The IMF joined the U.S. Treasury Department in rebuking Germany’s trade surpluses, rebuffing the claim of Merkel’s government that booming exports are a sign of economic health
• Royal Bank of Scotland Group Plc expects to post a “substantial” full-year loss after transferring GBP38.3b of its worst loans to an internal bad bank under government pressure
• Sovereign yields and EU peripheral spreads mixed. Nikkei -0.9%, Shanghai +0.4%. European stocks fall, U.S. equity- index futures gain. WTI crude little changed, gold lower, copper gains

SocGen’s key macro event recap:

‘December tapering is not off the table’ is the message that some market participants gleaned from Wednesday’s FOMC statement, boosting the USD and UST yields in the process. But is this interpretation correct? The market may simply have erred in pricing a first reduction in asset purchases for March 2014 and is now reassigning a greater than zero probability that tapering could still happen before year-end. Even so, SG’s economics team does not believe the balance of probability has shifted much as we still look for a tapering start in March, and USD bulls need to be mindful that any decision to start winding down bond purchases comes with a precondition for the Fed of seeing ‘more evidence of an improving economy’. Without better non-farm payroll numbers in November and December, tapering will be a story for next year.

A very weak flash Eurozone HICP inflation figure of 0.7% yoy (consensus at 1.1% and SG forecast of 0.9%) was reported yesterday and delivered a serious but not fatal blow for EUR enthusiasts. Unsurprisingly, the EUR fell against all G10 counterparts (barring SEK), and its performance against EM currencies was no less lacklustre either, with EUR/TRY down 0.92% and EUR/THB down 0.8%. After the inflation figure hit its lowest level since November 2009, speculation about further ECB policy easing has increased. In December, we expect the ECB to mark down its 2014 inflation forecast from the current 1.3% rate. A more detailed analysis of the latest inflation data can be found here “Low inflation puts pressure on the ECB” (link). EU 10y swaps also fell sharply in reaction to the inflation numbers, registering a dip below the 1.94% mark before correcting to 1.97% in Asia. As a result, the US/EU 10y spread has now widened sharply to 74bps, marking a 17bps spike from its weekly low of 57bps.

In Asia, the BoJ kept its policy unchanged yesterday and maintained that the 2% price stability target is likely to be achieved sometime during the latter half of its projected period, i.e. between October 2014 and March 2016. We expect additional QQE sometime during Q2 2014, as we forecast weaker FY14 real GDP growth than the BoJ has projected due to the consumption tax hike. More details on this by our economics team can be accessed through our research piece “Japan: additional easing needed by BoJ during Q2 2014” (link).

The USD performance so far has been relatively strong gaining against most G10 peers, greenback also strengthened vs most of the EM currencies, and 10y yields are up 3bp at 2.70%. Markets today will look to private sector employment inputs from ISM manufacturing as they hunt for hints on how the federal shutdown impacted the US economy. Also on the agenda today are a trio of Fed speakers, a series of PMI releases from the Europe and industrial production figures from Brazil.

The overnight event summary concludes with Jim Reid’s recap

One interesting development this week has been the much lower than expected European inflation rates which in most cases are taking the YoY growth back down to levels only previous seen in the modern era (for a few months) in 2009. Spanish CPI was 0.3-0.4% lower than expected on Wednesday with the straight CPI number in technical deflation at -0.1% YoY. German numbers came in around 0.2% below expectations on the same day (1.2% YoY) with Italy yesterday seeing 0.7% YoY inflation against 1.1-1.2% expected. The overall Eurozone number showed similar declines. It’s difficult to know what to think about this though. It has certainly helped the Euro come off its recent peak (1.382 earlier this week to 1.355 as we type) as the market considers the possibility of ECB rate cuts again. Higher than expected Euro unemployment (12.2% vs 12.0% expected) helped on this front too. Simultaneously it seems the Fed isn’t going to guarantee us no taper before March even if that eventually materialises. So the liquidity perception balance between the two regions has shifted a bit over the last 48 hours. But back to Euro inflation, our experts think there are some one-offs in the numbers and expect the rate to tick up over the coming months. One can also argue that low inflation in the likes of Spain is a sign of improving competitiveness. Nevertheless there are worries and it certainly ties in with the arguments made in our long-term study from September “A Nominal Problem” where we highlighted how we were having a global problem with both low real GDP and inflation. The combination not being great when you still have a high debt burden. Europe really doesn’t need the threat of deflation with so many structural issues still to deal with.
Although inflation is expected to edge back up from here we are getting to low enough levels that the behaviour of participants in the economy might start to be influenced by the prospect of falling prices and they may hold back purchases/investments. This is why central banks generally aim for at least 2% on inflation and not zero. You tend to want to make it positive enough that deflation doesn’t ever become an imminent risk. So this is one to watch going into 2014. In the nearer-term keep an eye out for the survey of professional forecasters release in the middle of this month. The ECB is very sensitive to the 2-yr ahead reading as a measure of inflation expectations and it may influence their policy stance to some degree at the December meeting and into 2014.

On a more positive note, the latest activity data from China continues to improve. The official manufacturing PMI rose to 51.4 in October from 51.1 in September. It managed to beat expectations of 51.2 and was also the highest reading in 18 months. DB’s Jun Ma highlights that October’s PMIs are historically lower than those for September, so the MoM uptick is therefore a bit more impressive. The uptrend in October was also confirmed by the final HSBC manufacturing PMI which printed at 50.9 which is higher than the preliminary reading of 50.7 and September’s reading of 50.9. The Chinese data has helped put a floor on Asian equities overnight and S&P 500 futures are nudging higher (+0.15%). The key laggard are Japanese equities where the TOPIX (-1.1%) is weaker pressured by a number of industrials, ahead of a three day weekend. Electronics-maker Sony is down 12% after surprising the market with a profit downgrade with this impacting sentiment in Japanese equities. While EURUSD continues to be pressured this morning, the sentiment is firmer in AUDUSD (+0.2%) driven by the Chinese PMIs.

In the US, a surprisingly strong Chicago PMI print set the tone early in the day. The PMI surged 10.2 points to 65.9 which was almost 11points above consensus estimates. Our economists point out that this was the largest monthly increase since July 1983 (+12.7) and the highest level since March 2011 (67.6). Initial jobless claims of 340k were broadly in line with estimates of 338k. The S&P 500 traded down to a session low of 1755 shortly after the Chicago PMI release which triggered further chatter of December tapering, but the dip proved to be brief and equities quickly recovered from those levels. Towards the end of US trading, equities once again gave up those gains to finish near the month on a sour note (S&P500 -0.38% on the day). Financials weighed on the index for much of the day and closed at the lows. A Bloomberg report suggesting that AT&T would make a tilt at Vodafone next year, saw telcos also weigh on equity markets in the final minutes of trading. If the acquisition were to go ahead, it would create the world’s largest telecom company with a market cap exceeding $250bn with more than 500 million subscribers worldwide (Bloomberg). Elsewhere, after the initial post-Chicago PMI selloff, 10yr UST yields drifted back down to be a little higher (2.554%,
+1.6bp) on the day – bucking the trend in Europe where core and periphery bond yields fell on the back of the lower inflation numbers.

Looking at the day ahead, today’s ISM will be a major focus particularly following the bumper Chicago PMI yesterday. The first of the post-FOMC Fedspeak begins today with Bullard speaking on monetary policy in St Louis. In the UK, the manufacturing PMI is the only data of note. RBS is due to report its FY13 results and the expectation is that Chancellor Osborne may speak shortly after to detail options for dealing with the bank’s problem loans. The FT reports that the bank will announce the creation of an internally managed bad bank, refocus on UK retail and business lending and pull back from its overseas operations.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/ddjXpE4D5SQ/story01.htm Tyler Durden

Submitted by Michael Krieger of Liberty Blitzkrieg blog,

Al Jazeera America has done some great work in obtaining the official NSA talking points via a Freedom of Information Act request. As might be expected, the agency tells its people to use the attacks on September 11, 2001 to manipulate public opinion into accepting unacceptable levels of surveillance. As I have maintained over and over again for years, our overreaction to 9/11 has done exponentially more damage to the nation than any terrorist attack ever could. I penned my latest thoughts on the attacks last month in my piece: How I Remember September 11, 2001.

One of the highlights, actually lowlights, of the document is what the NSA refers to as a “soundbite that resonates.” Here it is:

I much prefer to be here today explaining these programs, than explaining another 9/11 event that we were not able to prevent.

More from Al Jazeera America:

The National Security Agency advised its officials to cite the 9/11 attacks as justification for its mass surveillance activities, according to a master list of NSA talking points.

 

The document, obtained by Al Jazeera through a Freedom of Information Act request, contains talking points and suggested statements for NSA officials (PDF) responding to the fallout from media revelations that originated with former NSA contractor Edward Snowden.

 

Invoking the events of 9/11 to justify the controversial NSA programs, which have caused major diplomatic fallout around the world, was the top item on the talking points that agency officials were encouraged to use.

 

Under the subheading “Sound Bites That Resonate,” the document suggests the statement “I much prefer to be here today explaining these programs, than explaining another 9/11 event that we were not able to prevent.”

 

The NSA has not yet turned over to Al Jazeera the documents the agency used to prepare the talking points, saying those materials require additional review before they can be released.

I can only imagine what’s in those…

The master talking points list goes on to explain, under a subheading titled “We Needed to Connect the Dots,” that “post-9/11 we made several changes and added a number of capabilities to enable us to connect the dots.”

I suppose there were too many dots to connect in the Boston bombing. Oh let me guess, if you only had more spy powers you could’ve stopped it!

Full article and link to the source documents here.

 

 

nsa-talking-points.pdf

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

Submitted by Michael Krieger of Liberty Blitzkrieg blog,

Al Jazeera America has done some great work in obtaining the official NSA talking points via a Freedom of Information Act request. As might be expected, the agency tells its people to use the attacks on September 11, 2001 to manipulate public opinion into accepting unacceptable levels of surveillance. As I have maintained over and over again for years, our overreaction to 9/11 has done exponentially more damage to the nation than any terrorist attack ever could. I penned my latest thoughts on the attacks last month in my piece: How I Remember September 11, 2001.

One of the highlights, actually lowlights, of the document is what the NSA refers to as a “soundbite that resonates.” Here it is:

I much prefer to be here today explaining these programs, than explaining another 9/11 event that we were not able to prevent.

More from Al Jazeera America:

The National Security Agency advised its officials to cite the 9/11 attacks as justification for its mass surveillance activities, according to a master list of NSA talking points.

 

The document, obtained by Al Jazeera through a Freedom of Information Act request, contains talking points and suggested statements for NSA officials (PDF) responding to the fallout from media revelations that originated with former NSA contractor Edward Snowden.

 

Invoking the events of 9/11 to justify the controversial NSA programs, which have caused major diplomatic fallout around the world, was the top item on the talking points that agency officials were encouraged to use.

 

Under the subheading “Sound Bites That Resonate,” the document suggests the statement “I much prefer to be here today explaining these programs, than explaining another 9/11 event that we were not able to prevent.”

 

The NSA has not yet turned over to Al Jazeera the documents the agency used to prepare the talking points, saying those materials require additional review before they can be released.

I can only imagine what’s in those…

The master talking points list goes on to explain, under a subheading titled “We Needed to Connect the Dots,” that “post-9/11 we made several changes and added a number of capabilities to enable us to connect the dots.”

I suppose there were too many dots to connect in the Boston bombing. Oh let me guess, if you only had more spy powers you could’ve stopped it!

Full article and link to the source documents here.

 

 

nsa-talking-points.pdf

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

Are genetically modified foods, better known as GMOs, safe to eat? Although there is no definitive answer to this question yet, American consumers eat genetically engineered foods all the time. However, the maze of labeling laws makes choosing whether or not they want to eat them a totally different story.

 

 

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

Are genetically modified foods, better known as GMOs, safe to eat? Although there is no definitive answer to this question yet, American consumers eat genetically engineered foods all the time. However, the maze of labeling laws makes choosing whether or not they want to eat them a totally different story.

 

 

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

Submitted by Michael Snyder of The Economic Collapse blog,

If you believe that there is high inflation in the United States, you are just imagining things.  That is the message that the U.S. government and the Federal Reserve would have us to believe.  You might have noticed that the government announced on Wednesday that the cost of living increase for Social Security beneficiaries will only be 1.5 percent next year.  This is one of the smallest cost of living increases that we have ever seen.  The federal government is able to get away with this because the official numbers say that there is hardly any inflation in the U.S. right now. 

Of course anyone that shops for groceries or that pays bills regularly knows what a load of nonsense the official inflation rate is.  The U.S. government has changed the way that inflation is calculated numerous times since 1978, and each time it has been changed the goal has been to make inflation appear to be even lower.  According to John Williams of shadowstats.com, if the inflation rate was still calculated the same way that it was back when Jimmy Carter was president, the official rate of inflation would be somewhere between 8 and 10 percent today.  But if the mainstream news actually reported such a number, everyone would be screaming and yelling about getting inflation under control.  Instead, the super low number that gets put out to the public makes it look like the Federal Reserve has plenty of room to do even more reckless money printing.  It is a giant scam, but most Americans are falling for it.

Meanwhile, the prices of the things that most Americans buy on a regular basis just keep going up.  The following are just a few examples of price inflation that we have seen lately…

-McDonald's has killed the dollar menu because it is becoming impossible to "make any money selling burgers for $1".

But don't worry – the government says that the inflation you see is just your imagination.

-Amazon.com has raised the minimum order size required for free shipping from $25 to $35.

But don't worry – you can afford to order more stuff thanks to the great new job that you got during this "economic recovery".

-It is being projected that those using natural gas to heat their homes will see their heating costs rise by 13 percent this winter.

But don't worry – "global warming" should kick in to high gear any day now.

-The price of chocolate has gone up by 45 percent since 2007, and it is being projected that it will now be increasing at an even faster pace.

But don't worry – eating chocolate is bad for you anyway.

-Thanks to Obamacare, the health insurance premiums of many American families are absolutely skyrocketing.  As I wrote about the other day, one family down in Texas just got a letter informing them that their health insurance premiums are going up by 539 percent.

But don't worry – this is just "health care reform" in action.

Meanwhile, things just continue to get tougher for middle class American families.  Household incomes have actually been declining for five years in a row and total consumer credit has risen by a whopping 22 percent over the past three years.

The quality of our jobs continues to go down and our paychecks are not keeping up with inflation.  In fact, 40 percent of all U.S. workers are now making less than what a full-time minimum wage worker made back in 1968 after you account for inflation.

So what do the "authorities" say that the solution to our problems is?

They want even more inflation of course.  According to CNBC, many Federal Reserve officials (including Janet Yellen) believe that what the U.S. economy really needs is a lot more inflation…

Inflation is widely reviled as a kind of tax on modern life, but as Federal Reserve policy makers prepare to meet this week, there is growing concern inside and outside the Fed that inflation is not rising fast enough.

 

Some economists say more inflation is just what the American economy needs to escape from a half-decade of sluggish growth and high unemployment.

 

The Fed has worked for decades to suppress inflation, but economists, including Janet Yellen, President Obama's nominee to lead the Fed starting next year, have long argued that a little inflation is particularly valuable when the economy is weak. Rising prices help companies increase profits; rising wages help borrowers repay debts. Inflation also encourages people and businesses to borrow money and spend it more quickly.

The rest of that article goes on and on about how wonderful inflation is for an economy and about how the U.S. economy desperately needs some more of it.

Well, if that was actually true, then the Weimar Republic should have had one of the best economies in the history of mankind.

But this inevitably happens when a nation starts producing fiat currency that is backed by absolutely nothing.  There is always a temptation to just print a little bit more.

In the end, we are going to be destroyed by our own foolishness.  We have the de facto reserve currency of the planet, and the rest of the world has trusted it for decades.  But now we are systematically destroying our currency, and the rest of the globe is looking on in horror.

If you want to see a very good example of the impact that inflation has had on our economy in recent years, just check out this amazing chart which shows what the Federal Reserve's reckless
policies have done to the prices of commodities.

Ultimately, the U.S. dollar will be destroyed, and we will have done it to ourselves.

Many people are attempting to protect themselves against this inevitability by putting a lot of their money into hard assets such as gold and silver, but before you do that you might want to make sure that you don't have a vengeful spouse that will toss it all into a dumpster someday.  The following is from a recent New York Post article…

A Colorado man was so angry at his ex-wife for divorcing him that he had the couple’s life savings of $500,000 converted to gold — then tossed it in a dumpster so she couldn’t have any of it, the Colorado Springs Gazette reports.

 

In June, Earl Ray Jones, 52, of Divide, Colorado, was ordered by a judge to pay $3,000 a month to the woman he’d been married to for 25 years, so he pillaged the couple’s retirement account and had it converted into 22 pounds worth of gold and silver bars,  the paper reports.

 

Jones claims he then tossed the modern-day treasure into a dumpster behind a motel, where he had been living temporarily, later telling the judge he had no money to give his ex-wife, according to the paper.

Did that story make you smile?  It sure did the trick for me.

But that story is also a picture of what the Federal Reserve is doing with our dollar.

Our currency has been used for decades by almost everyone else around the planet.  In fact, more U.S. dollars are used outside of our country than inside of it.

But now the Federal Reserve is systematically trashing the dollar and the rest of the globe is starting to lose faith in it.

Instead of realizing their mistakes, Fed officials say that we need to create even more inflation and they just keep on wildly printing more money.

In the end, we will all pay a great price for their foolishness.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/zrhyqX7PX90/story01.htm Tyler Durden

Submitted by Michael Snyder of The Economic Collapse blog,

If you believe that there is high inflation in the United States, you are just imagining things.  That is the message that the U.S. government and the Federal Reserve would have us to believe.  You might have noticed that the government announced on Wednesday that the cost of living increase for Social Security beneficiaries will only be 1.5 percent next year.  This is one of the smallest cost of living increases that we have ever seen.  The federal government is able to get away with this because the official numbers say that there is hardly any inflation in the U.S. right now. 

Of course anyone that shops for groceries or that pays bills regularly knows what a load of nonsense the official inflation rate is.  The U.S. government has changed the way that inflation is calculated numerous times since 1978, and each time it has been changed the goal has been to make inflation appear to be even lower.  According to John Williams of shadowstats.com, if the inflation rate was still calculated the same way that it was back when Jimmy Carter was president, the official rate of inflation would be somewhere between 8 and 10 percent today.  But if the mainstream news actually reported such a number, everyone would be screaming and yelling about getting inflation under control.  Instead, the super low number that gets put out to the public makes it look like the Federal Reserve has plenty of room to do even more reckless money printing.  It is a giant scam, but most Americans are falling for it.

Meanwhile, the prices of the things that most Americans buy on a regular basis just keep going up.  The following are just a few examples of price inflation that we have seen lately…

-McDonald's has killed the dollar menu because it is becoming impossible to "make any money selling burgers for $1".

But don't worry – the government says that the inflation you see is just your imagination.

-Amazon.com has raised the minimum order size required for free shipping from $25 to $35.

But don't worry – you can afford to order more stuff thanks to the great new job that you got during this "economic recovery".

-It is being projected that those using natural gas to heat their homes will see their heating costs rise by 13 percent this winter.

But don't worry – "global warming" should kick in to high gear any day now.

-The price of chocolate has gone up by 45 percent since 2007, and it is being projected that it will now be increasing at an even faster pace.

But don't worry – eating chocolate is bad for you anyway.

-Thanks to Obamacare, the health insurance premiums of many American families are absolutely skyrocketing.  As I wrote about the other day, one family down in Texas just got a letter informing them that their health insurance premiums are going up by 539 percent.

But don't worry – this is just "health care reform" in action.

Meanwhile, things just continue to get tougher for middle class American families.  Household incomes have actually been declining for five years in a row and total consumer credit has risen by a whopping 22 percent over the past three years.

The quality of our jobs continues to go down and our paychecks are not keeping up with inflation.  In fact, 40 percent of all U.S. workers are now making less than what a full-time minimum wage worker made back in 1968 after you account for inflation.

So what do the "authorities" say that the solution to our problems is?

They want even more inflation of course.  According to CNBC, many Federal Reserve officials (including Janet Yellen) believe that what the U.S. economy really needs is a lot more inflation…

Inflation is widely reviled as a kind of tax on modern life, but as Federal Reserve policy makers prepare to meet this week, there is growing concern inside and outside the Fed that inflation is not rising fast enough.

 

Some economists say more inflation is just what the American economy needs to escape from a half-decade of sluggish growth and high unemployment.

 

The Fed has worked for decades to suppress inflation, but economists, including Janet Yellen, President Obama's nominee to lead the Fed starting next year, have long argued that a little inflation is particularly valuable when the economy is weak. Rising prices help companies increase profits; rising wages help borrowers repay debts. Inflation also encourages people and businesses to borrow money and spend it more quickly.

The rest of that article goes on and on about how wonderful inflation is for an economy and about how the U.S. economy desperately needs some more of it.

Well, if that was actually true, then the Weimar Republic should have had one of the best economies in the history of mankind.

But this inevitably happens when a nation starts producing fiat currency that is backed by absolutely nothing.  There is always a temptation to just print a little bit more.

In the end, we are going to be destroyed by our own foolishness.  We have the de facto reserve currency of the planet, and the rest of the world has trusted it for decades.  But now we are systematically destroying our currency, and the rest of the globe is looking on in horror.

If you want to see a very good example of the impact that inflation has had on our economy in recent years, just check out this amazing chart which shows what the Federal Reserve's reckless policies have done to the prices of commodities.

Ultimately, the U.S. dollar will be destroyed, and we will have done it to ourselves.

Many people are attempting to protect themselves against this inevitability by putting a lot of their money into hard assets such as gold and silver, but before you do that you might want to make sure that you don't have a vengeful spouse that will toss it all into a dumpster someday.  The following is from a recent New York Post article…

A Colorado man was so angry at his ex-wife for divorcing him that he had the couple’s life savings of $500,000 converted to gold — then tossed it in a dumpster so she couldn’t have any of it, the Colorado Springs Gazette reports.

 

In June, Earl Ray Jones, 52, of Divide, Colorado, was ordered by a judge to pay $3,000 a month to the woman he’d been married to for 25 years, so he pillaged the couple’s retirement account and had it converted into 22 pounds worth of gold and silver bars,  the paper reports.

 

Jones claims he then tossed the modern-day treasure into a dumpster behind a motel, where he had been living temporarily, later telling the judge he had no money to give his ex-wife, according to the paper.

Did that story make you smile?  It sure did the trick for me.

But that story is also a picture of what the Federal Reserve is doing with our dollar.

Our currency has been used for decades by almost everyone else around the planet.  In fact, more U.S. dollars are used outside of our country than inside of it.

But now the Federal Reserve is systematically trashing the dollar and the rest of the globe is starting to lose faith in it.

Instead of realizing their mistakes, Fed officials say that we need to create even more inflation and they just keep on wildly printing more money.

In the end, we will all pay a great price for their foolishness.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/zrhyqX7PX90/story01.htm Tyler Durden

Given our previous discussion of the “born-again” jobs scam, the growing use of robots, and shift in technology, and the increasing disincentivization (via benefits) of the US labor force, Paul Singer’s detailed discussion below of the”serious dysfunction” in the US employment markets is crucial to comprehending why the Fed is just making things worse.

 

Via Elliott Management’s Paul Singer,

The employment situation in America is in a state of serious dysfunction. The problems existed before the 2008 crisis, to be sure, but they are getting worse, and the current Administration’s job-related policies are seriously deficient. Most parts of the developed world are facing similar challenges, but our focus in this section will be on the U.S., where the labor participation rate has reached a 40-year low. This is a nasty statistic, one that reveals the published unemployment figures to be a deception. In reality, five years after the crash, unemployment remains at recession levels. The fall in the labor participation rate reflects the perils of long-term unemployment, which turns millions of workers into unemployables as their skill sets rust with disuse and their attractiveness to employers diminishes.

One element in the long-term jobs picture is the march of technology. The technologies that are chewing up jobs are actually accelerating in their efficiency and their ability to perform tasks previously done by people. The fear that technology will make workers obsolete predates the industrial revolution, but the future will likely prove that this is only partially true. Technological advances may not be the death of employment, but they will require seriously creative policies to counteract their negative effects on jobs without impeding overall growth. We believe that this can and must be achieved.

These advances, of course, include the Internet, robotics, 3D printing, GPS, cheap shipping and nanotechnology, among others. Entire industries are being revolutionized and their profitability models altered or destroyed. There is no “solution” to this problem from the standpoint of workers who are displaced or displaceable. There is only adaption, education, retraining and moving workers in both developed and developing countries to jobs that are created by such technological advances. Where some manufacturing and service jobs are destroyed by technology, others are created. The job of government leaders (which is currently being done incredibly poorly) is to make sure their educational systems are as high-quality as possible, including a good amount of vocational training, and that their employment policies are as flexible as possible in order to avoid employer flight. Sovereigns must become platforms for, and remove impediments to, entrepreneurship, innovation and start-ups. It is not a solution to the employment challenge for policymakers to behave like Luddites or protectionists.

A related problem in America is benefits policies that encourage dependency. This is insidious and life-draining, because a balance must be struck between helping those truly in need and providing harmful incentives for able-bodied people not to work. If the government makes it less economically attractive to work than to receive a check, the predictable result will be an increase in handouts and a drain on the productive sectors of the economy. This is a self-reinforcing trend if it is practiced by politicians buying votes by promising benefits. Benefits can come only from other citizens, and this form of corruption is terrible policy with dreadful results: a cycle of dependency, class warfare, declining productivity, slower growth, fewer opportunities and unmet hopes and dreams.

A third employment-related problem in America and other countries in the developed world is competition from emerging markets, where goods and services are increasingly being produced with comparable or better efficiency, quality, range and sophistication. It is a great and wonderful human development that the opportunity for prosperity is spreading throughout the world. We should all be in favor of policies aimed at helping people and countries all over the world develop tools and methods for educating their people and providing new foundations for entrepreneurship, higher education, creativity, innovation and work at the highest possible level.

The difficulty that developed countries face from this surge in developing-world capability stems from the developed countries’ tendency to coast on past glories and to have uncompetitive wage and cost structures, in addition to an aversion to working harder/smarter/better to stay in the game. The best and only sustainable growth is that which emanates from the human mind – from smarter and more creative efforts and better organizations. “Growth” from policies that depend on beggaring thy neighbor by depreciating one’s currency, erecting trade barriers or cutting wage rates is often chimerical, and such policies are ultimately likely to backfire.

None of the aforementioned headwinds to full employment is disputable. One could assert that the developed countries are doing all they can with the best possible policies, or that nothing can be done about education, labor policy, training, free trade and other important levers for generating good jobs in a tough environment because of internal or external politics. These assertions would be false. While admittedly the cures may be politically difficult, they are there for the taking for leaders and people of courage and vision. Increasing the rigidity of labor policies, combined with protectionism, is not the answer.

In the absence of serious reforms and more effective leadership in the developed countries, their workforces and their economies are probably headed for a spiral of dependency, strife, poverty, inflation and political unrest. Although the long-term budget curves provide some clues about the outer boundaries of timing, the exact moment when we will reach a tipping point is uncertain. However, if that point is reached, which could happen sooner rather than later, it won’t be pretty.

Of course, for any given set of technological changes, policies and conditions related to jobs and the labor force, a stronger rate of economic growth makes things easier and better. Unfortunately, current government policies in the developed countries are no more conducive to providing the conditions for and removing the impediments to stronger economic growth than they are at intelligently helping the work forces in these countries manage the challenges of technological change.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/19KtdqCWzJU/story01.htm Tyler Durden

Given our previous discussion of the “born-again” jobs scam, the growing use of robots, and shift in technology, and the increasing disincentivization (via benefits) of the US labor force, Paul Singer’s detailed discussion below of the”serious dysfunction” in the US employment markets is crucial to comprehending why the Fed is just making things worse.

 

Via Elliott Management’s Paul Singer,

The employment situation in America is in a state of serious dysfunction. The problems existed before the 2008 crisis, to be sure, but they are getting worse, and the current Administration’s job-related policies are seriously deficient. Most parts of the developed world are facing similar challenges, but our focus in this section will be on the U.S., where the labor participation rate has reached a 40-year low. This is a nasty statistic, one that reveals the published unemployment figures to be a deception. In reality, five years after the crash, unemployment remains at recession levels. The fall in the labor participation rate reflects the perils of long-term unemployment, which turns millions of workers into unemployables as their skill sets rust with disuse and their attractiveness to employers diminishes.

One element in the long-term jobs picture is the march of technology. The technologies that are chewing up jobs are actually accelerating in their efficiency and their ability to perform tasks previously done by people. The fear that technology will make workers obsolete predates the industrial revolution, but the future will likely prove that this is only partially true. Technological advances may not be the death of employment, but they will require seriously creative policies to counteract their negative effects on jobs without impeding overall growth. We believe that this can and must be achieved.

These advances, of course, include the Internet, robotics, 3D printing, GPS, cheap shipping and nanotechnology, among others. Entire industries are being revolutionized and their profitability models altered or destroyed. There is no “solution” to this problem from the standpoint of workers who are displaced or displaceable. There is only adaption, education, retraining and moving workers in both developed and developing countries to jobs that are created by such technological advances. Where some manufacturing and service jobs are destroyed by technology, others are created. The job of government leaders (which is currently being done incredibly poorly) is to make sure their educational systems are as high-quality as possible, including a good amount of vocational training, and that their employment policies are as flexible as possible in order to avoid employer flight. Sovereigns must become platforms for, and remove impediments to, entrepreneurship, innovation and start-ups. It is not a solution to the employment challenge for policymakers to behave like Luddites or protectionists.

A related problem in America is benefits policies that encourage dependency. This is insidious and life-draining, because a balance must be struck between helping those truly in need and providing harmful incentives for able-bodied people not to work. If the government makes it less economically attractive to work than to receive a check, the predictable result will be an increase in handouts and a drain on the productive sectors of the economy. This is a self-reinforcing trend if it is practiced by politicians buying votes by promising benefits. Benefits can come only from other citizens, and this form of corruption is terrible policy with dreadful results: a cycle of dependency, class warfare, declining productivity, slower growth, fewer opportunities and unmet hopes and dreams.

A third employment-related problem in America and other countries in the developed world is competition from emerging markets, where goods and services are increasingly being produced with comparable or better efficiency, quality, range and sophistication. It is a great and wonderful human development that the opportunity for prosperity is spreading throughout the world. We should all be in favor of policies aimed at helping people and countries all over the world develop tools and methods for educating their people and providing new foundations for entrepreneurship, higher education, creativity, innovation and work at the highest possible level.

The difficulty that developed countries face from this surge in developing-world capability stems from the developed countries’ tendency to coast on past glories and to have uncompetitive wage and cost structures, in addition to an aversion to working harder/smarter/better to stay in the game. The best and only sustainable growth is that which emanates from the human mind – from smarter and more creative efforts and better organizations. “Growth” from policies that depend on beggaring thy neighbor by depreciating one’s currency, erecting trade barriers or cutting wage rates is often chimerical, and such policies are ultimately likely to backfire.

None of the aforementioned headwinds to full employment is disputable. One could assert that the developed countries are doing all they can with the best possible policies, or that nothing can be done about education, labor policy, training, free trade and other important levers for generating good jobs in a tough environment because of internal or external politics. These assertions would be false. While admittedly the cures may be politically difficult, they are there for the taking for leaders and people of courage and vision. Increasing the rigidity of labor policies, combined with protectionism, is not the answer.

In the absence of serious reforms and more effective leadership in the developed countries, their workforces and their economies are probably headed for a spiral of dependency, strife, poverty, inflation and political unrest. Although the long-term budget curves provide some clues about the outer boundaries of timing, the exact moment when we will reach a tipping point is uncertain. However, if that point is reached, which could happen sooner rather than later, it won’t be pretty.

Of course, for any given set of technological changes, policies and conditions related to jobs and the labor force, a stronger rate of economic growth makes things easier and better. Unfortunately, current government policies in the developed countries are no more conducive to providing the conditions for and removing the impediments to stronger economic growth than they are at intelligently helping the work forces in these countries manage the challenges of technological change.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/19KtdqCWzJU/story01.htm Tyler Durden