Initially, I planned to write of the expanding ambiguity of age-old economic and financial market lingo. That is, how terms such as “bull” and “bear” no longer have meaning in today’s manipulated markets; and similarly, the highly subjective terms “recession,” “depression,” and “recovery.” After all, when the government is cooking the books – as yesterday’s NFP whistleblower attested – how can we glean economic trajectory from published figures? For example, if GDP is positive only due to understated inflation, are we truly in a “recovery?” And if PMs are only down due to naked shorting – such as Wednesday morning’s third “stop logic” takedown in the past three months – does that mean they’re in a “bear market?” And for the record, a COMEX stop logic event, by definition, means someone purposely hit every bid on the screen; clearly, with the sole purpose of pushing prices down.
However, in light of the disjointed Central bank speak of the past few days; I changed my mind as clearly, it needed to be addressed now. To wit, last week I referred to rumors of potential “NGDP” targeting in Japan – i.e., broad-based attempts to accelerate inflation; as apparently, the stock market’s recent “stall” is considered economic failure. Moreover, following Europe’s tragic GDP report last week, ECB governors have been trotted out, one by one, to hint of pending QE. Not the covert type that occurs through indirect guarantees of sovereign loans or Federal Reserve “swap agreements” with European banks, but actual monetization of sovereign bonds.
Last night, one ECB governor said, “We still have not reached the effective lower bound; and thus, still have not exhausted our standard policy lever.” In other words, suggesting that by reducing rates by that final, miniscule quarter percent, they could actually affect Europe’s economy. Moreover, the ECB’s Vice President yesterday said QE was a possibility. And thus, you can see how rumors conveniently start corroborating each other; in this case, one week after a miserable GDP report and “surprise” ECB rate cut. One might say there’s a “method” to this madness; but as for me, I continue to believe these Keystone Kops respond ad hoc to the unending crises; in essence, hoping to “kick the can” one more day. In Europe’s case, they must also circumnavigate the paradoxical effects of both supporting the Euro and promoting improved economic activity. To wit, since Draghi’s July 2012 comment that the ECB would do “whatever it takes” to save the Euro (ironically, by printing as many as necessary to bail out every bank and nation imaginable), the Euro has risen 12% against the dollar. However, the “strong Euro” has had the disastrous result of cratering European corporate earnings; thus, contributing to the economic weakness that catalyzed third quarter 2013 GDP “growth” of just 0.1%. As proof positive, look no further than the brown line on the chart below – depicting how 2013 European earnings estimates started tanking as soon as he made those comments, to the point that overall 2013 EPS growth is now expected to be negative. As I’m writing – I kid you not – this article was published, discussing how the ECB is considering NIRP, or Negative Interest Policy. And voila, the Euro starts plunging, as the “final currency war” gains momentum. But have no fears, the U.S. will no doubt combat fire with fire; as even “uber-hawk” Larry Summers last weekend gave a speech advocating American NIRP.
Here in the States, the FOMC minutes from its October 30th meeting are about to be released; hence, this morning’s nonsensical PM raids, as such days have in recent years become “Key Attack Events.” The fact that the Fed voted 11-1 for the continuation of QE4 is ignored by the manipulators; as is the fact that essentially every Fed President has since given a speech stating their respective beliefs – including Janet Yellen last week, and Ben Bernanke last night. Conversely, any remote mention of “possible” tapering will be focused on, in yet another instance of Central bank madness possessing little, if any, method. After all, if they truly intended to taper, the most significant immediate impact would be surging interest rates; i.e., the very thing that scares them most.
Lately, the Fed’s “game plan” has been to continually contradict itself with speeches hinting at everything from expanding QE to stopping it cold – depending on their daily equity, fixed income, and gold market goals. Meanwhile, at the meetings themselves, they always vote 11-1 to indefinitely continue it. Moreover, they not only don’t give a timetable as to when QE might end – after Bennie’s June attempt at such “guidance” miserably failed; but they even give diametrically opposed views of the Fed’s own stated policies. In other words, despite the Fed’s “official” policy being to maintain ZIRP until unemployment falls below 6.5% and inflation 2.0%, various governors have recently offered views ranging from consideration of ignoring such goals, to altering them, to creating new goals altogether. In other words, as a wise man once said, “Baffle them with BS.”
Of course, the end result is always the same; i.e., QE “to infinity” – as clearly, the past five years of printing $10+ trillion overtly, and countless amounts covertly, haven’t improved a thing (if anything, it’s made the situation dramatically worse). Just yesterday, FOMC voting member Charles Evans tweeted, “We may need to purchase $1.5 trillion in assets until January 2015” – i.e., increase QE by 35%; while last night, Bennie the Helicopter said the Fed is “committed to highly accommodative policies”; the economy is “far from where the Fed wants it to be”; it may be “some time before policy is back to normal settings”; and its main rate will “likely remain low for a long time after QE is tapered.” Combine this with Janet Yellen’s confirmation hearing testimony last week, in which she stated, “Supporting the recovery today is the surest path to returning to a more normal approach to monetary policy”; and it becomes eminently obvious there is zero intention to slow the money printing down.
And why would it, given the utter carnage in the real economy; featuring 50% of American’s receiving entitlements, the lowest Labor Participation Rate in 35 years, and on average, the same real wages as the mid-1970s (due to manufacturing’s share of employment falling from 25% in 1973 to 10% in 2013). To wit, the third quarter has been the worst for U.S. corporate earnings in years; and if it weren’t for fraudulent, non-cash “earnings” generated by the banks receiving the Fed’s free money, overall earnings growth would have been negative.
Moreover, following the 2009-12 U.S. “deleveraging” – which I put in quotes due to how comical it is to consider the below chart deleveraging – it was reported today that consumer credit surged in the third quarter, at the fastest rate since early 2008. Yep, at the same rate as just before Global Meltdown I – only this time, unemployment is dramatically worse. And by the way, the leading contributors to said growth were student loans – which last month saw a record delinquency rate; and home purchases, just as rates started surging and mortgage activity plunging. To wit, today it was reported that existing home sales plunged 3.2% in October, while last week’s MBA composite housing index fell 2.3%.
And thus, on a day when the most important economic headline was manufacturing bellwether Caterpillar reporting negative revenue growth in all global regions, it should surprise no one that despite the “so-called recovery,” Obama’s approval rating just plunged to 37% this week; i.e., its all-time low. Not from “the 1%’s” votes, I’m sure, as they are living high on the hog due to the Administration’s blind devotion to money printing, but from “the 99%” that suffer from it. And if you think Obama’s approval ratings are bad now, just wait until no budget is passed by December 13th, setting the stage for another Congressional battle to prevent a January 15th government shutdown.
But have no worries, bankers; as inserted in October’s eleventh-hour agreement, Obama can veto any attempt to cap the debt ceiling – which currently, is “deferred” until February 7th. Hence, your “eight out of ten” approval rating for the money-printer-in chief, who is about to be replaced by an even more dovish Chairperson.
Hopefully, this piece helps you to understand there really is no “method” to the daily machinations of global Central bankers. Frankly, I’m amazed their fiat Ponzi scheme has survived this long; but then again, by creating exponential debt growth – cementing the necessity of “QE to Infinity” – they have set the stage for an even more cataclysmic collapse down the road. Whether it takes weeks, months, or even a few years, I have no idea. However, what I do know is that when it occurs, the big winners will be the same as they have been for millennia; i.e., physical gold and silver.