Yellen – Page 3 – The Burning Platform

The Epocalypse: What Will D-Day Look Like?

Guest Post by David Haggith at The Great Recession Blog

D-day, December 16, 2015. It’s now the dawn of that day when either the Fed Does or the Fed Doesn’t. It doesn’t matter. Either way, the economic apocalypse begins. Let me share something counter-intuitive. Whether the Fed raises interest rates or not, this Wednesday is D-day for the Fed’s economic recovery because the Fed is Damned if it does and Damned if it doesn’t. I’ll certainly show you why, but the counterintuitive part is that you can expect the market to crash upward as it leaves Wonderland and returns to reality.

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What if the Fed doesn’t?

While I am certain, like many, that the Fed will raise rates, the US stock market may crash faster if the Fed does not. That’s one thing that is counter-intuitive to some. I believe it would drop the very next day out of shear bewilderment as people try to fathom what the Fed’s failure to raise rates means. Throughout 2015, the Fed has been building up expectations for its first raise in interest rates in nine years. In a world where every word of the Fed is dusted off with a soft-hair brush like an artifact in the sand, the Fed’s broad hints of an interest-rate rise are about as abrupt as the Fed gets.

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LIVING A LIE

“Above all, don’t lie to yourself. The man who lies to himself and listens to his own lie comes to a point that he cannot distinguish the truth within him, or around him, and so loses all respect for himself and for others. And having no respect he ceases to love.” – Fyodor Dostoyevsky, The Brothers Karamazov

The lies we tell ourselves are only exceeded by the lies perpetrated by those controlling the levers of our society. We’ve lost respect for ourselves and others, transforming from citizens with obligations to consumers with desires. The love of mammon has left our country a hollowed out, debt ridden shell of what it once was. When I see the data from surveys about the amount of debt being carried by people in this country and match it up with the totals reported by the Federal Reserve, I’m honestly flabbergasted that so many people choose to live a lie. By falling for the false materialistic narrative of having it all today, millions of Americans have enslaved themselves in trillions of debt. The totals are breathtaking to behold:

Total mortgage debt – $13.6 trillion ($9.9 trillion residential)

Total credit card debt – $924 billion

Total auto loan debt – $1.0 trillion

Total student loan debt – $1.3 trillion

Other consumer debt – $300 billion

With 118 million occupied households in the U.S., that comes to $145,000 per household. But, when you consider only 74 million of the households are owner occupied and approximately 26 million of those are free and clear of mortgage debt, that leaves millions of people with in excess of $200,000 in mortgage debt. Keeping up with the Joneses has taken on a new meaning as buying a 6,000 sq ft McMansion with 3% down became the standard operating procedure for a vast swath of image conscious Americans. When you are up to your eyeballs in debt, you don’t own anything. You are living a lie.

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Central Bankers Are Upsetting God’s Applecart

Guest Post by Bill Bonner

Fools or Knaves?

[ed. note: this article was written shortly before the ECB decision was announced, so the deposit facility rate mentioned in it is still the old one; it has been reduced to – 30 bps in the meantime]

BALTIMORE – Thursday is the big day. Mario “whatever it takes” Draghi is expected to goose up stock markets with more stimulus measures. On the table is more QE… and further cuts to the key lending rate.

creation The good Lord adds jerks to the mix to keep things interesting … we’re happy to report the operation was a success. It may actually have been a tad too successful.

Cartoon by Gary Larson

The Chinese feds are also supposed to come forward with another gift to asset holders. According to the Wall Street Journal, the expectation is for something targeting property purchases and another interest rate cut (which would make it cut No. 7 since last November).

China’s central bank administered one-year benchmark lending rate – click to enlarge.

And yesterday, Fed chair Janet Yellen told the Economic Club of Washington:

“Were the FOMC [the Fed’s policy setting committee] to delay the start of policy normalization for too long, we would likely end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of our goals. Such an abrupt tightening would risk disrupting financial markets and perhaps even inadvertently push the economy into recession.”

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THE FED INDUCED FARCE

The minutes from the last Fed meeting were released on Wednesday afternoon. The minutes, along with a squadron of jabbering Fed heads lying about the economy doing great, pretty much locked in the most talked about .25% interest rate increase in world history. Evidently the Wall Street titans of greed have convinced the muppets higher interest rates are great for stocks, as the market soared by 250 points. As institutional money exits the market on these rigged up days, the dumb money retail investor buys into the market with dreams of riches just like they did with Pets.com in 2000, McMansions in 2005, and Bear Stearns in 2007.

The Fed has lost any credibility they ever thought they deserved by delaying this meaningless insignificant interest rate increase for the last three years, so they will make this token increase in December come hell or high water. They want to give themselves some leeway for easing again when this debt saturated global economy implodes in the near future. The Fed is trapped by their own cowardice and capture by the Wall Street cabal. If they raise rates the USD will strengthen even more than it has already. The USD is already at 11 year highs. It has appreciated by 25% in the last year versus the basket of world currencies. The babbling boobs on the entertainment news channels authoritatively expound with a straight face about the rise in the dollar being due to our strong economic performance. It’s beyond laughable, as the economy has been sucking wind since the day the Fed turned off the QE spigot in October 2014.

Chart of the Day

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HOUSING BUBBLE PART DEUX

The housing recovery without mortgage originations is coming to its inevitable conclusion. The Fed, Wall Street bankers and the US Treasury have been able to increase national home prices by 30%, with 50% to 100% in some bubble markets, using 0% interest rates, a massive buy and rent scheme, withholding foreclosures from the market, encouraging foreign cash buying, and allowing flippers back into the market. In a real free market would home prices go up by 30% while mortgage originations remained flat for the last four years?

Thirty year mortgage rates have been falling for the last 30 years. They bottomed at 3.35% in late 2012. Since then they rose as high as 4.4% in early 2014. They fell to 3.6% by early 2015 and are now hovering in the 3.8% range. Everyone who had a high interest mortgage loan, including those with underwater mortgages, have refinanced to a lower rate. The economic boost to the economy from the lower mortgage payments is over. The Obamacare costs have spent the mortgage payment savings. The combination of declining real household income, overpriced homes, millennials with massive levels of student loan debt, and now rising mortgage rates are putting a halt to this fake Fed recovery scheme.

Chart of the Day

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THE MOST DEVIOUS LIARS IN THE ROOM

There were a few different stories coming out over the last few days that reveal the true nature of government and the apparatchiks who use disinformation, devious machinations, fraudulent accounting, and taxpayer money to cover up their criminality, lies, and the true state of the American economy. The use of government accounting tricks to obscure the truth about our dire financial straits is designed to keep the masses sedated and confused.

A few weeks ago, to great fanfare from the fawning faux journalists who never question any Washington D.C. propaganda, they announced the lowest annual deficit of Obama’s reign of error.

For the fiscal year that ended Sept. 30 the shortfall was $439 billion, a decrease of 9%, or $44 billion, from last year. The deficit is the smallest of Barack Obama’s presidency and the lowest since 2007 in both dollar terms and as a percentage of gross domestic product.

Jack Lew, the Treasury Secretary, and Obama were ecstatic as they boasted about this tremendous accomplishment. I find it disgusting that our leaders hail a $439 billion deficit as a feather in their cap, when until the mid-2000’s the country had never had an annual deficit above $300 billion. After 183 years as a country, the entire national debt was only $427 billion in 1972. Now our beloved leaders cheer annual deficits above that figure. What a warped, deformed, dysfunctional nation we’ve become.

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Yellen Is Trapped in the Worst Nightmare Ever

Guest Post by Martin Armstrong

Yellen has inherited a complete nightmare. Thursday’s decision to delay yet again the long-awaited liftoff from zero interest rates is illustrating that the world economy is totally screwed. There is a lot of speculation about why the Fed seems so reluctant to “normalize monetary policy”. There are of course the typical domestic issues that there is low inflation, weak wage gains in the face of strong job growth, a hike will increase the Federal deficit and then there is the argument that corporations that now have $12.5 trillion in debt. All that is nice, but with corporate debt, our clients are locking in long-term at these levels, not funding anything short-term. Those clients who have listened are preparing for what is to come unlike government which has been forced to shorten the average duration of their debts blind to what happens when rates rise, which will be set in motion by the markets – not Yellen.

Fed is really caught between a rock and a very dark place. Yes, they have the IMF and the world pleading with them not to raise rates for it will hurt other debtors who borrowed excessively using dollars to save money. The Fed is also caught between domestic policy objectives that dictate they MUST raise rates or they will bankrupt countless pension funds and international where emerging markets will go into default because commodities have collapsed and they have no way of paying off this debt that has risen to about 50% of the US national debt.

By avoiding the normalization of interest rates (hikes), the Fed has encouraged government to spend far more than they realize because money is cheap. This will eventually light the fire under the economy helping to fuel the Sovereign Debt Crisis. There appears to be no hope for the Fed and they will be forced to raise rates only when they see asset inflation in equities. Then they will have no choice. This is the worst possible mess and the longer they have waited to normalize interest rates, the worst the total crisis is becoming for they will have zero control over the economy and once that is seen, holy Hell will break lose.

Tell us Ron, What’s the Plan, What’s the “Austrian” Plan?

Guest Post by Pater Tenebrarum

What? No Austrian Prescription? Bloomberg Reporters Cannot Believe It

This is truly funny. Ahead of the FOMC decision, Ron Paul, who is well-known as an an implacable critic and enemy of the Fed and a fan of the Austrian School of Economics, was interviewed at Bloomberg as to “what the Fed should do”.

What makes it so funny is that the Bloomberg reporters seemingly cannot believe that Austrian economists simply have no “prescriptions” for the Fed. They keep pushing Ron Paul for giving them some advice. “But we do have a Fed…given that the institutional set-up is what it is and we cannot change it, what should they do? What’s the “Austrian” prescription?”

Dear Dr. Paul, please tell the Fed what to do! 🙂

Photo credit: Sean Gardner / Reuters

We happen to think Ron Paul could actually have handled the reply to this a bit better than he did. He could e.g. simply have told them that their question was akin to asking him “how many tractors should GOSPLAN produce this year?” It is simply an utterly nonsensical question. What inter alia makes Austrian economics unique is precisely that the theory leads to the inescapable conclusion that one cannot improve on the free market economy by means of statist intervention and central planning.

There Cannot Be a “Right” Fed Decision

Hence there cannot be any “advice” to a central bank, except the one Ron Paul actually gives: butt out and let the market decide. Of course this is tantamount to telling the Fed that it is surplus to requirements – which it indeed is. Ron Paul also mentions that the government should actually open money to competition – in other words, it should repeal legal tender laws and allow private money production to occur.

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LIES, DAMNED LIES & STATISTICS

The government released their monthly CPI report this week. Even though it came in at an annualized rate of 3.6%, they and their mouthpieces in the corporate mainstream media dutifully downplayed the uptrend. They can’t let the plebs know the truth. That might upend their economic recovery storyline and put a crimp into their artificial free money, zero interest rate, stock market rally. If they were to admit inflation is rising, the Fed would be forced to raise rates. That is unacceptable in our rigged .01% economy. There are banker bonuses, CEO stock options, corporate stock buyback earnings per share goals and captured politician elections at stake.

The corporate MSM immediately shifted the focus to the annual CPI figure of 0.1%. That’s right. Your government keepers expect you to believe the prices you pay to live your everyday life have been essentially flat in the last year. Anyone who lives in the real world, not the BLS Bizarro world of models, seasonal adjustments, hedonic adjustments, and substitution adjustments, knows this is a lie. The original concept of CPI was to measure the true cost of maintaining a constant standard of living. It should reflect your true inflation of out of pocket costs to live a daily existence in this country.

Instead, it has become a manipulated statistic using academic theories as a cover to systematically under-report the true level of inflation. The purpose has been to cut annual cost of living adjustments to Social Security and other government benefits, while over-estimating the true level of GDP. Artificially low inflation figures allow the mega-corporations who control the country to keep wage increases to workers low. Under-reporting the true level of inflation also allows the Federal Reserve to keep their discount rate far lower than it would be in an honest free market. The Wall Street banks, who own and control the Federal Reserve, are free to charge 18% on credit card balances while paying .25% to savers. The manipulation of the CPI benefits the vested interests, impoverishes the masses, and slowly but surely contributes to the destruction of our economic system.

A deep dive into Table 2 from the BLS reveals some truth and uncovers more lies. Their weighting of everyday living expenditures is warped and purposefully misleading. Let’s look at the annual increases in some food items we might consume in the course of a month, living in this empire of lies:

Ground Beef – 10.1%
Roast Beef – 11.8%
Steak – 11.1%
Eggs – 21.8%
Chicken – 3.7%
Coffee – 3.4%
Sugar – 4.2%
Candy – 4.6%
Snacks – 3.5%
Salt & Seasonings – 5.3%
Food Away From Home – 3.0%

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SF – NO BUBBLE HERE

The charts below certainly reflect a rational free market trend. Right? Home prices always double in the space of three years when the economy is limping along with sub 2% GDP growth and median real household income is still 7% below the levels of 2007 and equal to levels of 1989. These are the median home prices, so they aren’t even skewed by the really high end prices.

San Francisco is now unaffordable to 99% of the US population. Only the richest of the rich can afford to live there. The titans of technology usually lean to the left and spout gibberish about equal rights, going green, and fighting poverty as they occupy gated estates with armed guards to keep the riff raff out. They want the rest of the country to do what they say, not what they do. They don’t want the peasants living near them. The help can live in Stockton and take the bus to arrive on time to clean their toilets.

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GOVERNMENT USING SUBPRIME MORTGAGES TO PUMP HOUSING RECOVERY – TAXPAYERS WILL PAY AGAIN

It seems hard to believe, but your government is purposely recreating the mortgage debacle of 2007 and putting you on the hook for the billions in losses coming down the road. In their frantic effort to generate the appearance of economic recovery they are willing to gamble with taxpayer’s money while luring unsuspecting blue collar folks into buying houses they can’t afford. During the previous housing bubble, greedy Wall Street bankers, deceitful mortgage brokers, and corrupt rating agencies colluded to commit the greatest control fraud in the history of mankind. This time it is your government, aided and abetted by the Federal Reserve, that is actively promoting the lending of money to people incapable of paying it back. And again, you the taxpayer will be on the hook when it predictably blows up.

The FHA, created during the first Great Depression, is supposed to be self-sustaining through mortgage insurance premiums charged to homeowners, just like Fannie, Freddie, Medicare, Social Security, and student loan lending were supposed to be self- sustaining through taxes, fees, and interest. This agency was supposed to promote homeownership for lower income Americans, but has been used by politicians as a tool to capture votes, payoff crony capitalist benefactors, and as a Keynesian stimulus tool designed to kindle a fake housing recovery. They entered the fray at the tail end of the last Fed/Wall Street created housing bubble, insuring a huge number of subprime mortgage loans from 2007 through 2009. The taxpayer has already had to bail out this incompetent, politically motivated, joke of an agency to the tune of $1.7 billion in 2014.

Edward J. Pinto, a former Fannie Mae official, estimates that under standard accounting practices the agency is already insolvent to the tune of $25 billion. Mark to fantasy accounting hasn’t just benefitted the criminal Wall Street cabal, but also the bloated pig government housing agencies – Fannie, Freddie and the FHA. The FHA’s share of new loans with mortgage insurance stood at 16.4% in 2005 and currently stands at 44.3%. This is a ridiculously high level considering the percentage of first time home buyers is near all-time lows and low income buyers have lower real median household income than they had in 2005. Distinguished congresswoman Maxine Waters, who once declared: “We do not have a crisis at Freddie Mac, and particularly Fannie Mae, under the outstanding leadership of Frank Raines.”, prior to them imploding and costing taxpayers $187 billion in losses, thinks the FHA is doing a bang up job. Her financial acumen is unquestioned, so you can expect another bailout in the near future.

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MEN GO MAD IN HERDS

The Chinese real estate bubble has been imploding for the last year. The Chinese economy is barely growing at 1.6% after decades of 10% growth. There are millions of unoccupied condos. There are dozens of ghost cities and empty office towers. It’s the most corrupt nation on earth. We are in the midst of a global recession.It’s pure madness that the Chinese stock market would soar when its leading economic indicators crash to 2008 lows.

Its stock market has gone up 115% in the last 9 months. It has gone up 80% in the last 5 months. It has gone up 35% in the last month. Housewives and other uneducated gamblers have opened a record 10.8 million new stock accounts this year, more than the total number for all of 2012 and 2013 combined.

The Hong Kong stock market has gone up 14% in three weeks.

Since real estate investing is failing miserably, the Chinese middle class have piled into stocks on margin. Where have I seen that before? Margin debt on the Shanghai Stock Exchange climbed to a record 1.16 trillion yuan on Thursday. When has buying overvalued stocks on margin when the economy is tanking ever gone wrong before? Have we already forgotten 2000 and 2008? Humans truly act like irrational herds of cattle stampeding in whatever direction they are pushed by their keepers.

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TRUTH – THE CURE FOR COGNITIVE DISSONANCE

“In a time of deceit telling the truth is a revolutionary act.” ― George Orwell

Every time the BLS puts out their monthly propaganda report on the wonderful state of the U.S. jobs market and states with a straight face the unemployment rate is a measly 5.5%, their corporate mouthpieces in the mainstream cheerleader media regurgitate the fake numbers and urge you to buy stocks. The millionaire talking heads on CNBC and the corrupt bought off politicians in D.C. make broad sweeping declarations about economic recovery, strong job growth, GDP advancement, record highs in the stock market, and soaring consumer confidence.

The people living in the real world know otherwise, but they want to believe the “experts” and “leaders”. This dichotomy between reality and what they are being told is causing a tremendous amount of mental stress. This cognitive dissonance of attempting to reconcile what they are experiencing in their every day existence and the propaganda being peddled at them on a daily basis from big media, big bankers, corporate titans, and captured politicians pulling the strings and running the show, is causing psychological discomfort. Most people want their lives to get better, so to reduce their cognitive dissonance they choose to believe the government and media reports about economic improvement.

It is only a small minority who want to know the unvarnished truth. They are drawn to alternative media websites, which the the captured corporate media refers to as doom sites. These critical thinking individuals understand the facts. The Deep State propaganda has no impact on these people because they have no cognitive dissonance. They know things are far worse than what is reported by the government and their media whores. Knowing the truth and seeing how the majority remain willfully ignorant results in rising anger among truth seekers. Huxley was right.

“You shall know the truth and the truth shall make you mad.” ― Aldous Huxley

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