Another week passed and another week closer to the end of history’s most destructive financial experiment. This weekend alone, we witnessed further escalation of the “new Cold War,” China accusing a “sick” America of being a “disgusting, spying thief,” the largest Chinese supply-chain management company warning of “ongoing global macroeconomic weakness”; Secretary of Defense Hagel warning ISIS is more dangerous than al Qaeda, whilst UK Parliamentary leaders call for America to work with Syria’s Assad – you know, the guy we wanted to bomb last year – to destroy it; Francois Hollande dissolving the French government amidst expanding political and economic turmoil; Iran shooting down an Israeli drone, whilst the latest Gaza “cease fire” collapsed; expanded violence between India and Pakistan; and major San Francisco earthquake; and an Icelandic volcanic eruption that will likely be blamed for future economic weakness. But don’t worry, with global bond yields plunging to record lows – and the U.S. 10-year Treasury back below 2.4% – worldwide stocks are supposedly higher due to…well we’ll just let Yahoo! Finance’s top story speak for itself…
Oh well, I simply used this opportunity – particularly after the PMI services index tanked from 61.0 in July to 58.5 in August, whilst new home sales unexpectedly remained at last month’s horrific lows, to take advantage of the criminally overvalued gold/silver ratio, and Miles Franklin’s latest promotion – by purchasing newly minted Canadian Bald Eagle Silver Maple Leaf coins. The Bald Eagle is the latest of the Royal Canadian Mint’s “Bird of Prey” limited edition series; and, as always, Miles Franklin views such coins as great values when current pricing does not incorporate potential “numismatic value” they may hold down the road.
Yes, amidst such wildly PM-bullish and equity-bearish news, TPTB continues to drive “markets” deeper and deeper into unprecedented valuation extremes – that must ultimately be unwound, either via crash or hyperinflation. And reading the incredibly “dovish” – and more importantly, the speeches of Whirlybird Janet and Goldman Mario at Friday’s “Jackson Black Hole” boondoggle, our views have never been stronger. Not that our views matter; as ultimately, simple math will continue to be truth’s greatest ally. To that end, using key quotes from their soon-to-be-infamous keynote speeches, the Miles Franklin Blog intends to tell you “what JY and MD really said” – just as we did in “the most ridiculous report ever written,” which similarly dissected the FOMC’s comically May 21st policy statement.
First, the Queen of the Ivory Tower herself, whose disjointed speech discussed the conundrum the Fed faces in carrying out its Congressionally-directed “dual mandate” of maximum employment and price stability. Before even reading the speech, I perused its key headlines; my favorites of which were…
- “Tightening policy too soon, as inflation moves toward 2%, might prevent labor market from fully recovering”
- “Still unclear as to degree of remaining labor slack, and how quickly it will disappear”
- “Fed emphasis shifting to determining what labor conditions would ring about less accommodation.”
The layman’s translation, of course, is that that now that the 6.5% “rate increase threshold” has been removed, the Fed has not a clue why labor market conditions are so poor, or how to react to a broad set of variables they clearly don’t understand. Better yet, they perpetuate the lie that inflation is less than their current “rate increase threshold” of 2.0% – which for some unknown reason, they continue to cling to despite their own measures having already reached or exceeded that arbitrary level.
When the speech commenced, she immediately highlighted the White House-spearheaded propaganda that all jobs lost during the “Great Recession” have since been recovered; when in fact, most of said “jobs” are phantom positions created by the BLS’ birth-death model with most actual jobs being temp/part-time, low paying/no benefits positions that in prior years would not even be counted as full “jobs.” Let alone, the 35-year low in the Labor Participation Rate or 40-year low in Real Income.
Next, she noted how the Fed’s highly accommodative post-2008 policy has been entirely predicated on inflation falling short of its 2% objective; i.e., an even bigger lie, as according to John Williams of ShadowStats, real consumer price inflation has been closer to 9%. Which, by the way, is what every person reading this blog has experienced, too.
Then, she followed up on her increasingly infamous July 30th statement regarding America’s “significant underutilization of labor resources” by deflecting Fed ignorance by noting the “especially challenging” nature of measuring labor market “slack.” In other words, simply creating a newest propaganda buzzword as the ambiguity of “slack” can easily be utilized like “the weather” to blame future economic weakness on. Building on her overarching goal of detaching the Fed from accountability, she made sure to note that labor force participation peaked in early 2000, “well before the Great Recession.” In other words, before she joined the Fed in 2004, although if one does one’s homework, they’ll realize she was front and center in creating this economic horror as Chairman of Bill Clinton’s Council of Economic Advisors from 1997-99.
To conclude, Yellen demonstrated the full range of FOMC naivety in noting the consensus at last month’s FOMC meeting was that “labor market conditions improved,” despite said “significant underutilization of labor resources.” In other words, we have no idea why it’s so weak, but to save face, we’ll simply publish unfounded platitudes of “recovery.” And for the coup de gras, Yellen solidifies why she is an “insult to all Americans” by concluding a decidedly disappointing discussion of labor market weakness with this time-honored tidbit of beaurocratic claptrap. In other words, “we haven’t a clue what’s going on or where it’s going; let alone, what we’re going to do about it.”
If progress in the labor market continues to be more rapid than anticipated by the Committee or if inflation moves up more rapidly than anticipated, resulting in faster convergence toward our dual objectives, then increases in the federal funds rate target could come sooner than the Committee currently expects and could be more rapid thereafter. Of course, if economic performance turns out to be disappointing and progress toward our goals proceeds more slowly than we expect, then the future path of interest rates likely would be more accommodative than we currently anticipate. As I have noted many times, monetary policy is not on a preset path. The Committee will be closely monitoring incoming information on the labor market and inflation in determining the appropriate stance of monetary policy.
–Forbes.com, August 22, 2014
Wall Street, of course, immediately opined that her statement was “less dovish” than anticipated, despite rates not only plunged immediately thereafter, but this morning as well. Not to mention, global stock markets surged with France rocketing higher as its government collapses and the S&P 500 hitting a new all-time high despite the aforementioned horrific economic data. Yeah, real “hawkish” to me.
As for Goldman Mario, he didn’t disappoint in the “dovishness” department either, proclaiming the ECB’s “preparation for outright purchases in asset-backed security (ABS) markets is fast moving forward.” However, his statement was far more terrifying in its potential ramifications; again, depicting the utter cluelessness of Europe’s supposedly greatest financial minds. First, he avers…
We have already seen exchange rate movements that should support aggregate demand and inflation, which we expect to be sustained by the diverging expected paths of policy in the U.S. and the euro area.
–Business Insider, August 22, 2014
In other words, the ECB is accomplishing its goal of expanding the “final currency war” by devaluing the Euro against the dollar and British Pound – creating inflation for hundreds of millions of Europeans while inviting sure retaliation by the Fed, BOE and other major Central banks.
And last but not least, Goldman Mario stated monetary itself may not work in such a horrific fiscal environment. Which calls to question why on Earth the ECB would tempt hyperinflation fate further, when it admits such draconian policy may not work!
We are operating in a set of conditions determined by the last financial cycle, which include low inflation, low interest rates and a large debt overhang in the private and public sectors. In such circumstances, due to the zero lower bound constraint, there is a real risk that monetary policy loses some effectiveness in generating aggregate demand. The debt overhang also inevitably reduces fiscal space.
–European Central Bank, August 22, 2014
And there you have it, the scary truth of “what JY and MD really said.” Frankly, it baffles us as to how Westerners are not fleeing fiat-denominated assets – as Easterners are for the time-honored safety of real money; you know, the “barbarous relics” that earn more “interest” in a negative interest rate environment (coming shortly, to the entire world) than insolvent government bonds. This may be your one and only chance to save yourself, and we suggest you take it!