Hindsight: A friend of mine said, “If I had known, I would have sold my gold at $1900, silver at $50 and put the proceeds into the stock market at 7000. Who wouldn’t? At the time, it made no sense. But sometimes we get a second chance. I suspect that by next summer many of you will say, “If I had known, I would have sold the Dow at 15700 and put the proceeds into gold at $1,290 and silver at $21.51.” Hindsight is 20-20.
Here’s a shocker for you. Most of you probably don’t know that The Fed’s QE is included in the GDP number
The definition of a recession is two consecutive down quarters for the GDP.
The definition of a depression is four consecutive down quarters for the GDP.
Take away QE and “officially” we would already be in a depression.
I know it sounds crazy, but the government has been including the cash infusions from the various QEs into the GDP numbers. You can look it up.
So what happens when you take the QE injections out of the GDP?
Four consecutive quarters of declining GDP is officially a depression!
Question: If GDP is declining, (without QE) then how will the debts that were created based on the assumption of ever growing GDP get paid? It’s obvious that there’s not enough money in the system, without QE to infinity, to repay the debt. Without it, we are already in a depression. Go ahead, Ms. Yellen, cut off QE if you dare.
And if you can’t, what do you think will happen to the dollar and inflation? Per the Zero Hedge article below:
Ray Dalio’s Bridgewater On The Fed’s Dilemma: “We’re Worried That There’s No Gas Left In The QE Tank”
Submitted by Tyler Durden on November 10, 2013
“The Fed’s real dilemma is that its policy is creating a financial market bubble that is large relative to the pickup in the economy that it is producing,” Bridgewater notes as the relationship between US equity markets and the Fed’s balance sheet (here and here for example) and “disconcerting disconnects” (here and here) indicate how the Fed is “trapped.” However, as the incoming Yellen faces up to her ‘tough’ decisions to taper or not, Ray Dalio’s team is concerned about something else – “we’re not worried about whether the Fed is going to hit or release the gas pedal, we’re worried about whether there’s much gas left in the tank and what will happen if there isn’t.“
In the old days central banks moved interest rates to run monetary policy. By watching the flows, we could see how lowering interest rates stimulated the economy by 1) reducing debt service burdens which improved cash flows and spending, 2) making it easier to buy items marked on credit because the monthly payments declined, which raised demand (initially for interest rate sensitive items like durable goods and housing) and 3) producing a positive wealth effect because the lower interest rate would raise the present value of most investment assets (and we saw how raising interest rates has had the opposite effect).
All that changed when interest rates hit 0%; “printing money” (QE) replaced interest-rate changes. Because central banks can only buy financial assets, quantitative easing drove up the prices of financial assets and did not have as broad of an effect on the economy. The Fed’s ability to stimulate the economy became increasingly reliant on those who experience the increased wealth trickling it down to spending and incomes, which happened in decreasing degrees (for logical reasons, given who owned the assets and their decreasing marginal propensities to consume).
How can this be?
In Wall Street’s world, black is white and hot is cold. The ECB lowers interest rates, which is gold friendly and the hedge funds dump gold. Then the jobs report comes in as awful, but spun as good. Per the article below from Yahoo Finance:
United States of Underemployment: Dead-End Jobs Prop Up Employment Growth
By Matt Nesto | Breakout – Fri, Nov 8, 2013 11:25 AM EST
To say the October jobs report was a surprise doesn’t begin to scratch the surface. Not only did the headline reading on this most-important economic barometer come in twice as strong as analysts were expecting, but the monthly snapshot of American labor has once again found a way to simultaneously encourage, confuse, anger and confound — depending on where you look.
On the surface, the addition of 204,000 new jobs looks pretty good, in fact, it’s statistically above the 190,000 average of the last twelve months. The fact that it came at a time when the government was shut down and its elected caretakers were within inches of defaulting on our debt makes it all the more, well, unbelievable.
“It’s a weird report,” says Zachary Karabell, the head of global strategy at Envestnet and founder of River Twice Research in the attached video. “It’s people tending bar. It’s lower wage retail jobs. It’s lower wage health services jobs” that the economy is creating, and “a lot of these are not particularly well paid and they don’t have a great future.”
And that’s a problem. Not only for the 14-million American who are still out of work and looking to get hired, but more broadly, it undercuts the entire economy.
“If you’re earning $18,000 a year as a bartender, that’s not going to translate into massive consumer spending,” Karabell says.
Nor is it going to generate massive taxpaying either, which is needed more than ever to contend with the nation’s burgeoning debt and deficit, including pricey new entitlement programs like Obamacare.
While the slow-but-steady decline in the unemployment rate, from 10% in 2009 to 7.3% today, has lulled some people into thinking things are almost back to normal, the fact is, it’s a lot more complicated than a single number. Even members of the Federal Reserve have embraced this concept lately and have been trying to make the case for backing away from long-standing targets on employment and inflation that the central bank has used to drive its interest rate policy.
If all of this data and methodology feels daunting, you’re not alone. After all, the highly paid Wall Street economists who are supposed to have a better handle on this than anyone, just missed the target (again) by a mile. In fairness, Karabell and others would say that it’s not all the clear what we’re aiming at anyways.
“We don’t quite know what’s okay and what’s not,” he says. “The fact is, we’re not falling apart economically, but we just don’t know what the optimal number is.”
–Yahoo Finance, November 8, 2013
This is par for the course, especially on a Friday. Spin the truth; use the spin to hit the gold and silver market and no matter how blatant, no regulatory overview.
I must say, these guys play this game with finesse and they are guaranteed to win, short-term, since regulation is non-existent in gold and silver.
The Achilles heel is still the ability of the West to DELIVER gold and silver physicals to the East. The lower the price, the greater the demand is. They are boxed into a corner and can’t win – but that doesn’t stop them from pocketing billions by picking the pockets of the hedge funds, financed by investments from wealthy American’s who don’t have the confidence to manage their own money and instead give it to money managers and hedge funds. This will all change when the Fat Lady sings. Below is a quote from Ed Steer:
I’d forgotten all about yesterday’s jobs report, so the $30 face-plant in the gold price starting at 8:30 a.m. EST was a bit of a shock. But once I realized what had caused it, then I calmed down a lot, as this is standard operating procedure for JPMorgan et al. and their associated high-frequency trading teams.
– Casey Research, November 9, 2013