A popular Wall Street myth is that bear markets are caused by recessions. The contention is as long as the economy isn’t in a recession stock prices won’t drop by more than 20 percent. And since the cheerleaders who dominate Wall Street never predict a recession, it should come as no surprise they never foresee the bear market that always precedes two negative quarters of GDP growth. The truth is Bear markets and recessions do not occur simultaneously, bear markets both predict and help engender a recession to occur.
Typifying this myth is Capital Economics’ Chief Economist John Higgins as he recently argued, “Major declines in the S&P 500 — that is to say, bear markets in which prices drop by at least 20%, which is roughly twice the drop that occurred between 10th and 24th August–have only tended to occur in, and around, recessions…And we doubt very much that one of those is around the corner.”
But the truth is bear markets always precede a recession–those who argue otherwise have it exactly backwards. The stock market is a forward looking indicator: it anticipates economic activity yet to come, it doesn’t report on economic conditions that are occurring. Continue reading
Submitted by James Howard Kunstler – www.kunstler.com
The economy is a two-headed monster. One head is the trade in real goods and real services. The other head is the financialized traffic in swindles and frauds that surrounds banking. There is some deception and overlap about which is which. For instance so-called health care might be perceived as a real service. In fact, it’s a hostage racket, designed to victimize “patients” at their weakest, with a “protection” premium that easily runs to $12,000-a-year for a married couple, even when they aren’t sick, and vulnerable. Just see what happens if you go to an emergency room with an injury that requires six stitches. Next stop: re-po land.
Most of the remaining on-the-ground economy consists of people merely driving their cars absurd distances, burning gasoline, between exquisitely-tuned giant warehouse store operations that were designed to destroy local Main Street trade — and accomplished that, by the way, to the applause of the local citizens whose towns were destroyed (“We want bargain shopping!”).
Now, of course, even WalMart is looking over its shoulder at the collapse of the complex arrangements that allowed it to metastasize across North America like some cancerous fungus. Globalism is winding down as the gargantuan matrix of Ponzi schemes based on owed money dissolves debt by debt. It isn’t long before nobody is a credit-worthy borrower, and no transaction in real goods can be risked unless cash hits the barrelhead — which turns out to be a very awkward way of doing business. Continue reading
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 wedo 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 Continue reading
When the difference between your rhetoric and your actions is wide, inconsistency is pretty much axiomatic. However, Janet Yellen’s press conference was much more than that. I understand it’s a lot to charge blatant dishonesty, but almost everything she said is cow manure. And I make that assertion not on my own reading of the situation, but onhers.
The FOMC itself decided against exiting ZIRP in September, leaving little room for a policy shift in 2015. Does anyone remember March 2014 and her “six months” remark? In other words, for the FOMC to be so far off track there has to be some reason. Instead, she said this:
You know, I want to emphasize, domestic developments have been strong. We see domestic demand growing at a solid pace, the labor market continuing to improve. Of course, we will watch incoming data to confirm our expectation that that will continue. And we of course will watch global financial and economic developments.
Maybe she means “strong” in the same way she used to talk about the “strong dollar.” In that case, as has been once more proven, she was sorely mistaken. There is no possible way in which the “strong” or even “solid” should accompany her inaction. If the economy were truly that, then the rate hike would have been on schedule within that six-month ideal. Continue reading
There is not a peaceful person among the Republican candidates. Even the female is heartless. Carly Fiorina positioned herself along side the macho men as a warmonger. She let the military/security complex know that she, too, was for sale. Send in the campaign donations, and she will see that the money flows back to the military/security complex in the buildup of fleets and armaments that will send the Russians a message.
Alas, the only message US politicians want to send to the Russians is a war message. The Pentagon has upgraded the newly orchestrated “Russian threat” to “potentially aggressive” and is updating its plans for war with Russia.
What has Russia done to cause Washington to plan war with Russia? Don’t you know? Russia invaded Ukraine, just like Saddam Hussein had weapons of mass destruction and al-Qaeda connections. Continue reading
Submitted by Mark O’Byrne – GoldCore
Russia’s gold reserves rose to 42.4 million troy ounces as of September 1 compared with 41.4 million troy ounces a month earlier, the Russian central bank announced on Friday.
The monthly accumulation of 1 million ounces in just one month was one of the more sizeable monthly purchases by China and equates to 31.1 metric tonnes in August alone.
The value of the bank’s holdings rose to $47.68 billion from $44.96 billion a month earlier, Russia said in a statement on its website.
The amount bought was more than the 30.5 metric tons that Russia purchased in March, then the highest amount in six months.
Russia is now the seventh biggest holder of gold reserves after the U.S, Germany, the IMF, Italy and France and the rising gold power China. Russia has more than tripled its reserves since 2005 and holds the most gold bars since at least 1993, International Monetary Fund data shows. Continue reading