The Fed’s Phony Boom Is Becoming a Real Bust …

Submitted by William Bonner, Chairman – Bonner & Partners

No More Juice

Friday’s 391-point drop in the Dow – a nearly 2.5% fall – ended the worst 10-day start to a year in U.S. market history.

The average stock in the S&P 1500 – which includes about 90% of all stocks in listed in the U.S. – is now down more than 26% from its high. The standard definition of a bear market is a sustained fall of 20% or more from recent highs.

 

bearThe bear got loose somehow. Who let him out?

Photo credit: Lukas Holas

 

Woeful earnings,” suggested MarketWatch as a cause. Another guess: “The stock market is freaking out over Trump and Sanders.” Barron’s was closer to the real source of the plunge: “Without Fed’s Juice, Market Suffers Withdrawal Pains.”

In 1971, phony fiat money replaced the old gold-backed dollar… and money that came “out of nothing” replaced real savings. At first, inflation rates rose. No one trusted the new fiat dollar. But then, incoming Fed chairman Paul Volcker showed the world that the U.S. could manage its currency in a responsible way. Continue reading

Martin Luther King

Submitted by Dr. Paul Craig Roberts – Institute for Public Economy

Like all false flag attacks and assassinations, the 1968 murder of Martin Luther King was covered up. In the King case James Earl Ray was the framed-up patsy, just as Oswald was in the case of President John F. Kennedy and Sirhan Sirhan was in the case of Robert Kennedy.

The King family, along with everyone who paid attention to the evidence, knew that they and the public were officially handed a cover-up. After years of effort, the King family managed to bring the evidence to light in a civil case. Confronted with the real evidence, it took the jury one hour to conclude that Martin Luther King was murdered by a conspiracy that included govermental agencies.

For more information see: http://www.globalresearch.ca/court-decision-u-s-government-agencies-found-guilty-in-martin-luther-kings-assassination/5320024

Martin Luther King, like John F. Kennedy, was a victim of the paranoia of the Washington national security establishment. Kennedy rejected General Lyman Lemnitzer’s Northwoods Project for regime change in Cuba, opposed the CIA’s invasion plan for Cuba, nixed Lemnitzer’s plans for conflict with the Soviet Union over the Cuban missile crisis, removed Lemnitzer as chairman of the Joint Chiefs of Staff, and negotiated behind the scenes with Khrushchev to tone down the Cold War. Consequently, members of the military/security complex had it in for Kennedy and convinced themselves that Kennedy’s softness toward communism made him a security threat to the United States. The Secret Service itself was drawn into the plot. The films of the assassination show that the protective Secret Service personnel were ordered away from the President’s car just before the fatal shots.

King was only 39 years old and had established himself as a civil rights leader. The FBI convinced itself that King had communist connections and that the movement he led would develop into a national security threat. In those days, emphasis on civil rights implied criticism of America that many confused with communist propaganda. Criticizing America was what communists did, and here was a rising leader pointing out America’s shortcomings and beginning to foment opposition to the war in Vietnam. Continue reading

The Fed Admits What Happens Next – The Ghosts of 1937

Following an epic stock rout to start the year, one which has wiped out trillions in market capitalization, it has rapidly become a consensus view (even by staunch Fed supporters such as the Nikkei Times) that the Fed committed a gross policy mistake by hiking rates on December 16, so much so that this week none other than former Fed president Kocherlakota openly mocked the Fed’s credibility when he pointed out the near record plunge in forward breakevens suggesting the market has called the Fed’s bluff on rising inflation.

All of this happened before JPM cut its Q4 GDP estimate from 1.0% to 0.1% in the quarter in which Yellen hiked.

To be sure, the dramatic reaction and outcome following the Fed’s “error” rate hike was predicted on this website on many occasions, most recently two weeks prior to the rate hike in “This Is What Happened The Last Time The Fed Hiked While The U.S. Was In Recession” when we demonstrated what would happen once the Fed unleashed the “Ghost of 1937.”

As we pointed out in early December, conveniently we have a great historical primer of what happened the last time the Fed hiked at a time when it misread the US economy, which was also at or below stall speed, and the Fed incorrectly assumed it was growing.

We are talking of course, about the infamous RRR-hike of 1936-1937, which took place smack in the middle of the Great Recession.

Here is what happened then, as we described previously in June.

[No episode is more comparable to what is about to happen] than what happened in the US in 1937, smack in the middle of the Great Depression. This is the only time in US history which is analogous to what the Fed will attempt to do, and not only because short rates collapsed to zero between 1929-36 but because the Fed’s balance sheet jumped from 5% to 20% of GDP to offset the Great Depression.Just like now.

Continue reading

We Know How This Ends

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

The finance ministers and representatives of central banks from the world’s ten largest “capitalist” economies gathered in Bonn, West Germany on November 20, 1968. The global financial system was then enthralled by a third major currency crisis of the past year or so and there was great angst and disagreement as to what to do about it. While sterling had become something of a recurring devaluation tendency and francs perpetually, it seemed, in disarray, this time it was the Deutsche mark that was the great object of conjecture and anger. What happened at that meeting, a discussion that lasted thirty-two hours, depends upon which source material you choose to dissect it. From the point of view of the Germans, it was a convivial exchange of ideas from among partners; the Americans and British, a sometimes testy and perhaps heated debate about clearly divergent merits; the French were just outraged.

The communique issued at the end of the “conference” only said, “The ministers and governors had a comprehensive and thorough exchange of views on the basic problems of balance-of-payments disequilibria and on the recent speculative capital movements.” In reality, none of them truly cared about the former except as may be controlled by the latter. These “speculative capital movements” became the target of focused energy which would not restore balance and stability but ultimately see the end of the global monetary system.

Some background is needed before jumping into West Germany’s financial energy. The gold exchange standard under the Bretton Woods framework had appeared to have lasted as far as this monetary conference, but it had ended in practicality long before. In the late 1950’s, central banks, the Federal Reserve primary among them, had rendered gold especially and increasingly irrelevant in settling the world’s trade finance.

It took almost a decade, but Bretton Woods was mostly gone by 1968 when gold started trading at a two-tiered price. In reality, functionally, Bretton Woods ended not long after October 20, 1960, in the formation of what would become known as the London Gold Pool – a consortium of government and central bank allocations that would actively supply gold when needed to “hold” its price and enforce the official price. By the standards of Bretton Woods, to have a foreign pool established in order to maintain the convertibility of the dollar alone was breaking the rules.
That fact occurred almost immediately after gold flirted with $40. In fact, on October 27, 1960, the Bank of England was called upon to work closely with the Fed to supply gold in an attempt to calm that market (though there is little paper trail, you know there were gold swaps flying the Atlantic from that point). It was the initial formation of the Gold Pool, and had some success in at least keeping further “devaluation” from rapidly destabilizing global affairs, financial and economic.

Continue reading

US Economy – Slip-Sliding Away

Submitted by Pater Tenebrarum  –  The Acting Man Blog

Economic Conditions Continue to Worsen

It must be China. Or the weather, which is usually either too cold or to warm – somehow the weather is justnever right for economic growth. Surely it cannot be another Fed policy-induced boom that is on the verge of going bust? Sorry, we completely forgot – the Fed is never at fault when the economy suffers a boom-bust cycle. That only happens because we have “too few regulations” (that’s what Mr. Bernanke said after the 2008 bust – no kidding).

 

forgotten-heritage

Photo credit: Matthew Emmett

 

No matter what economic data releases one looks at lately, one seems more horrendous than the next. This is apart from payrolls of course, which are not only a lagging indicator, but are apparently a number that is occasionally made up out of whole cloth – such as in December, when 281,000 of the reported 292,000 in non-farm payroll gains were the result of “seasonal adjustment”, which is bureaucrat-speak for “didn’t actually happen”.

Today the markets were inundated with data that strongly suggest that the negative trends observed over much of 2015 continue to accelerate. In what is by now a well-worn tradition, Fed district surveys of the manufacturing sector continued their decline with today’s release of the Empire State survey. One no longer risks being accused of hyperbole by calling its recent trend a “collapse”:

 

1-Empire State IndexEmpire State Survey, general business conditions index. Such readings are usually not seen during economic expansions – click to enlarge.

 

As is often the case, not a single economist came even remotely close to correctly forecasting this meltdown. As Mish noted earlier today, it was quite a big miss:

 

“The Econoday Consensus  estimate was for a slight improvement to -4 from a November reading of -4.59. The actual result was -19.37 with the lowest economic estimate -7.50.”

 

Continue reading

The 21st Century: An Era Of Fraud

Submitted by Dr. Paul Craig Roberts – Institute for Public Economy

In the last years of the 20th century fraud entered US foreign policy in a new way.  On false pretenses Washington dismantled Yugoslavia and Serbia in order to advance an undeclared agenda.  In the 21st century this fraud multiplied many times. Afghanistan, Iraq, Somalia, and Libya were destroyed, and Iran and Syria would also have been destroyed if the President of Russia had not prevented it.  Washington is also behind the current destruction of Yemen, and Washington has enabled and financed the Israeli destruction of Palestine.  Additionally, Washington operated militarily within Pakistan without declaring war, murdering many women, children, and village elders under the guise of “combating terrorism.”  Washington’s war crimes rival those of any country in history.

I have documented these crimes in my columns and books (Clarity Press).
Anyone who still believes in the purity of Washington’s foreign policy is a lost soul.

Russia and China now have a strategic alliance that is too strong for Washington. Russia and China will prevent Washington from further encroachments on their security and national interests. Those countries important to Russia and China will be protected by the alliance.  As the world wakes up and sees the evil that the West represents, more countries will seek the protection of Russia and China.  Continue reading

Mike Tyson – Sage Financial Advisor

Submitted by Mark O’Byrne  –  GoldCore

In a crisis, it helps to have good counsel. Consider the following sage advice from investment strategist and financial advisor Mike Tyson:

“Everyone has a plan ‘til they get punched in the mouth.”

tyson-money

Or as German military strategist Helmuth von Moltke the Elder put it, somewhat more formally:

“No battle plan ever survives contact with the enemy.”

The enemy has been quick to show himself this year, in the form of a bear market, at least for stocks.

 

Conclusion

So the pragmatic response to this month’s volatility – if any is indeed required at all – is as follows:

1) Diversify by asset type.

2) Limit or eliminate exposure to emerging market debt. Raise cash rather than cling to a benchmark with no conviction (and no obvious value).

3) Concentrate any debt exposure to bonds issued by creditors, not debtors.

4) Limit equity exposure to high quality and inexpensive markets offering a ‘margin of safety’. (Most of the US market does not qualify in this regard.) Russell Napier recommends Japanese equities, currency hedged, and so do we. And in a bear market, you don’t want to own expensive growth, you want to own defensive value.

5) Complement traditional investments with alternatives. We would advocate systematic trend-following funds (which can profit in bear markets just as they did in 2008), and gold – the one form of currency that comes with no counterparty risk because it is the one asset that is no-one’s liability.

6) Limit your exposure to mainstream financial media, and especially to economists employed by commercial banks.

Full article by Tim Price on SovereignMan.com

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

• China GDP at 25-Year Low, Long Slog Increases the Pain (WSJ)
• China Stocks Surge As GDP Triggers Expectations Of Beijing Stimulus (MW)
• The Case for Chaos in Trying to Pick Bottom of US Equity Rout (BBG)
• Big US Banks Brace For Oil Loans To Implode (CNN)
• The Fed Responds To Zero Hedge: Here Are Some Follow Up Questions (ZH)
• The North Dakota Crude Oil That’s Worth Less Than Nothing (BBG)
• China’s Hot Bond Market Seen at Risk of Default Chain Reaction (BBG)
• Chinese Shipyards See New Orders Fall by Almost Half in 2015 (BBG)
• World’s Biggest Steel Industry Shrinks for First Time Since 1991 (BBG)
• Strong China Property Data Masks Big Problem of Unsold Homes (Reuters)
• Japan Makes Plans for Pension Fund to Invest in Stocks (WSJ)
• Italy Banks Lose $82 Billion of Cheap Financing From Savers (BBG)
• Italy PM Renzi Sharpens His Rhetorical Barbs At EU (FT)
• Hollande Says France In State Of Economic, Social Emergency (BBC)
• Russia Considers Suspending Loans to Other Countries (Moscow Times)
• Worse Than 1860 (Jim Kunstler)
• End Of Europe? Berlin, Brussels’ Shock Tactic On Migrants (Reuters)
• UN Seeks Mass Resettlement Of Syrians (AP)
• Davos Boss Warns Refugee Crisis Could Become Something Much Bigger (BBG)
• German Minister Urges Merkel To Prepare To Close Borders (Reuters)