Stocks and Precious Metals Charts - BuckBusters

"The money was all appropriated for the top in the hopes that it would trickle down to the needy. Mr. Hoover was an engineer. He knew that water trickled down. Put it uphill and let it go and it will reach the driest little spot. But he didn't know that money trickled up. Give it to the people at the bottom and the people at the top will have it before night anyhow. But it will at least have passed through some poor fellow’s hands."

Will Rogers, 5 December 1932


"It is no exaggeration to say that since the 1980s, much of the global financial sector has become criminalised, creating an industry culture that tolerates or even encourages systematic fraud."

Charles H. Ferguson


"Quantitative easing is a gigantic confidence trick. It was promised that it would yield new investment. It has not. It was promised that it would 'pump money into the economy'. It has not. It was also feared that printing money would lead to hyper-inflation. It has not, for the simple reason that no one gets to spend the money. It is a bookkeeping transaction between a central bank and a commercial bank. It means nothing as long as banks are told to build up their reserves (or drive up the speculative value of financial paper assets)."

Simon Jenkins


"We so easily forget. Once the cry of so-called prosperity is heard in the land, we all become so stampeded by the spirit of the god Mammon, that we cannot serve the dictates of social conscience. We are here to serve notice that the economic order is the invention of man; and that it cannot dominate certain eternal principles of justice and of God. The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little."

Franklin Delano Roosevelt


“Evil when we are in its power is not felt as evil, but as a necessity, or even a duty."

Simone Weil

Stocks were pushing higher today, on hopes for Fed  dovishness (e.g. moneyprinting) as far as the eye can see.  And within a fiscal regime that guides most of the money, if not all of it, to the top one percent.

The Dollar moved loved, skidding down towards the 92 handle.

Gold and silver rallied.

The unsustainable will not be sustained, except through ever-increasing force and fraud.

Need little, want less, love more.

For those who abide in love abide in God, and God in them.

Have a pleasant weekend.

Stiglitz: Why Western Capitalism Has Been Failing Since 1980

As I had written some time ago in the The Fall of the American Republic: The Quiet Coup:

"I am not so optimistic that this reform is possible, because there has in fact been a soft coup d'etat in the US, which now exists in a state of crony corporatism that wields enormous influence over the media and within the government.

To be clear about this, the oligarchs are flush with victory, and feel that they are firmly in control, able to subvert and direct any popular movement to the support of their own ends and unslakable will to power.

This is the contempt in which they hold the majority of American people and the political process: the common people are easily led fools, and everyone else who is smart enough to know better has their price. And they would beggar every middle class voter in the US before they will voluntarily give up one dime of their ill gotten gains.

But my model says that the oligarchs will continue to press their advantages, being flushed with victory, until they provoke a strong reaction that frightens everyone, like a wake up call, and the tide then turns to genuine reform."

 

The article which I wrote was based on the insightful and largely ignored work by renowned economist Simon Johnson called The Quiet Coup.

 

This lecture by Stiglitz below is a little 'wonky' and uses some terminology which may be unfamiliar.

Nevertheless if you listen to it and just try to capture the main points of his discussion it will be worthwhile.

 

His basic premise is to ask why capitalism has shown a tendency to stagnation since 1980 in the United States and other parts of the West.

 

I am, as you know, an adherent to the belief that there has been a soft coup d'état in the US.  One can always quibble about the exact dates, but that is of less importance.   I have said it was shortly after Greenspan's 'irrational exuberance' speech, although the stage was certainly set for this during the 1980's with the rise of the efficient markets hypothesis, the assumption of rational wealth optimizers in the markets, and of course, the laughable supply side economics which are the old trickle down canard in drag.

 

The point, rather, is to understand what has happened, to continue to shine a light on it, and to hope that Simon Johnson is correct, that the overreach of the 'winners' will eventually provoke a reaction. 

 

Quite frankly I had thought it would have come by now.  One can rarely go wrong betting on the power of apathy and momentum, and the persistent greed of the sociopaths and their enablers.

 

After all, in the aftermath of a tragic derailment of the flagship train line in the US from Washington to Boston that could have been prevented by continuing investments in fundamental railroad infrastructure, the House of Republicans have voted to further slash Amtrak funding by $260 million. 

They are instructed to hate anything that benefits the public without putting an abundant stream of income into the pockets of their corporate money masters.  This explains their virulent animosity to Social Security, public transportation, public healthcare, public education, public infrastructure, consumer protections, environmental laws, safety regulations, product safety measures, and any sort of financial regulation that inhibits the greed and power of the Banks.

And we should be ashamed for continually standing quiet in the face of such pathological incivility.

 

But I can almost guarantee that if this crash had been the result of some sort of despicable act of terrorism for example, the public coffers would already be wide open, flowing with a Niagara of funds for homeland security and the militarization of domestic law enforcement.   Millions for the corporatized state, but little or nothing for the people.

 

I am increasingly concerned that, as has happened so many times in the past, the status quo will greet this eventual reaction for reform, justice, and equality with repression and even draconian measures to maintain what they perceive as their rightful place and power. 

 

Like apathy and momentum, it is also difficult to underestimate the self-delusion and overreach of sociopaths who would be as gods, even if they are gods of the damned.

History is replete with examples.

 

European 'QE' In a Nutshell - Propagating the Western Trickle Down Policy Errors

This is about it in a nutshell.   'Stimulus' American style comes to Europe.

Printing money and giving it to your cronies inflates asset prices, lines the pockets of the well-heeled heels, but does little for the real economy.

 

But it doesn't produce broad inflation (or aggregate demand) so we can do it many times!    Success!

"At last the euro’s lords and masters have accepted that something must be done about their zone’s lamentable growth. They will unleash a massive bond-buying programme totalling a reported €1tn. The former BBC economic pundit Stephanie Flanders told the world it was “Santa Claus time”; the European Central Bank (ECB) has ridden to the rescue.

No it has not. Europe’s great and good, partying on the slopes of Davos, are like courtiers at the Congress of Vienna. They are blinded by snow and celebrities. Santa Claus gives presents to people; the ECB gives presents to its banks. It is merely tipping large sums of money into the vaults of precisely the institutions whose crazy lending caused the crash of 2008, and which have been failing Europe’s economy ever since.

Quantitative easing is a gigantic confidence trick. It was promised that it would yield new investment. It has not. It was promised that it would “pump money into the economy”. It has not. It was also feared that printing money would lead to hyper-inflation. It has not, for the simple reason that no one gets to spend the money. It is a bookkeeping transaction between a central bank and a commercial bank. It means nothing as long as banks are told to build up their reserves.

Money in circulation matters. The whole of Europe, including Britain, is chronically short of demand, which is why deflation is such a menace. If no one can afford to buy anything, no one will sell anything or invest money in making anything..."

Simon Jenkins, QE for the eurozone is a gigantic confidence trick. It should fool no one

Can You Help the Fed Figure Out What Is Wrong With The Recovery™

Why doesn't the public spend and save more?

"We are determined to make every American citizen the subject of his country's interest and concern; and we will never regard any faithful law-abiding group within our borders as superfluous.

The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little."

Franklin D. Roosevelt, Second Inaugural Address

Stock Valuations Outrunning Profits Growth - And the Band Played On

"We are still amazed by the chart [below], but it summarises the problem for those seeking to short stocks with fundamental weaknesses. In the last three years, the MSCI World Index has risen by 38% (11% per annum) whilst reported profits have risen by just 3% (that’s just 1% per annum!). As the events of last month attest, central bank actions–not profits–are driving equities forward."

Andrew Lapthorne, Societe General

This quote is in reference to the first chart below that shows stock prices are outrunning profit growth.   The second chart is the Shiller PE 10 Ratio for US stocks.

Beside the corrupting influence of Big Money on politics and academics, the other pervasive problem in our society is really quite banal, that is, mindlessly managing to the numbers.

Although incentives have always been an issue, in the last thirty years it has become quite fashionable in modern management theory to set a few relatively narrow metrics and judge the performance and rewards of a manager by them and them alone.

While this is not wrong in and of it self, such a philosophy provides a source of great mischief if the metrics are excessively narrow, and therefore obscure the bigger picture and the health of an organization, a company, or even a nation.

I think we are all familiar with how incentives badly designed can drive counter-productive, short term behavior that can actually be destructive of the values of an organization.  I cannot think of a better recent example, other than the widespread fraud and corruption on Wall Street, than the manner in which the Central Banks and their governments are managing The Recovery™.

If employment is a metric, let us foster an economy in which a large number of jobs are created, that are low paying and part time, in order to address the metric of unemployment.  Never mind that this ignores the real reason for concern, ie, the lack of jobs at living wages which will spur aggregate demand.   If unemployment is the only concern, why not just bring back indentured servitude and give everyone a job at below subsistence wages.  Not far off the Japan model at that.

If inflation is a metric, let us follow policies of money printing in order to raise the prices of goods.  Unfortunately this will have price inflation running ahead of the ability of the broad public to pay for the things that they need through wage and income growth.  

See, there is no deflation.  It doesn't matter to the model that the growth in prices is not only artificial, but is in fact increasing the misery of the people by diluting their already reduced incomes with which to purchase necessities.

Now, this would seem to insult common sense.  But in fact if you are a bureaucrat under pressure to please a powerful constituency, and are driven to pursue policies that really do not make sense by any reasonable estimation of 'the public good,' it is tempting to stand fast on your models, and insist that one cannot prove that you are not doing a good job of it. 

 

And it is all so easy to claim well intentioned ignorance, or a lack of relevancy to your responsibilities.  There were executives at Enron who were so incapable, who knew and did so little, that it was a marvel that they were not in nursing homes.

When pressed you can always use discredited theories and perception management to quell those who are calling out the contrariness, at times to the point of madness, of your policy actions.  Prove to me it is a bubble!  Prove to me that people are not just lazy, or incapable of doing useful work!  Prove to me that giving trillions to the Banks is not sound monetary policy.

 

What does it matter, if your bosses are happy, and the perks and prestige, and all important access to the halls of power, are ensured.  At times your conscience may be troubled by the thought that in some of your actions you may have gone too far, and committed acts that could be considered outside of the law.  But you have done it for the good of the system, after all. 

And in that you are above the law, a law maker, not a follower.  A bonus or promotion, or some other visible reward or recognition, may quiet your conscience and concerns.  You are only doing what must be done, as demanded by those who deserve to be followed and obeyed. 

 

You see the excesses, by the really bad ones, but you are not like them.  Some day when you have the power you will set things right, but you must stay within the system to obtain that power.  So you must steel yourself, and be practical, and do what must be done. 

 

And that is easier to do, when there is no metric for human misery and suffering.  The unfortunate are easy to ignore.  No one wishes to see them, or hear them.  And they have little power.

You work hard, and are only human after all.  And for this you are a very important person, well regarded in the Capitol.  You are making money for yourself and your friends, the people who really count.  You are a success!  And all is right with your world.

"When virtue is lost, benevolence appears, when benevolence is lost right conduct appears, when right conduct is lost, expediency appears. Expediency is the mere shadow of right and truth; it is the beginning of disorder."

Lao Tzu

 

No one sits down one day and decides, 'I shall become a monster, and do monstrous things.'

 

And the band played on.

h/t Zerohedge

Shiller PE Ratio

FOMC On QE III: Mission Accomplished

It is mission accomplished for the Fed's third stimulus program, if one keeps in mind that Quantitative Easing is a subsidy program for the one percent and Wall Street, not the general public and Main Street.

It is the fallacy of trickle down economics at its most blind and pernicious.

At the end of the day, the Fed's objective has been to bail out and preserve their owners in the Banking System, largely intact, down to their thoroughly rotten core.   The Fed is not the government.  The Fed works with its friends in the government.  The Fed is a creature of the Banks.

And the public is being forced to pick up the tab through financial repression and a stealth austerity through market manipulation, money printing, and price rigging.

Board of Governors of the Federal Reserve System

Release Date: October 29, 2014

For immediate release

Information received since the Federal Open Market Committee met in September suggests that economic activity is expanding at a moderate pace. Labor market conditions improved somewhat further, with solid job gains and a lower unemployment rate. On balance, a range of labor market indicators suggests that underutilization of labor resources is gradually diminishing. Household spending is rising moderately and business fixed investment is advancing, while the recovery in the housing sector remains slow. Inflation has continued to run below the Committee's longer-run objective. Market-based measures of inflation compensation have declined somewhat; survey-based measures of longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators and inflation moving toward levels the Committee judges consistent with its dual mandate. The Committee sees the risks to the outlook for economic activity and the labor market as nearly balanced. Although inflation in the near term will likely be held down by lower energy prices and other factors, the Committee judges that the likelihood of inflation running persistently below 2 percent has diminished somewhat since early this year.

The Committee judges that there has been a substantial improvement in the outlook for the labor market since the inception of its current asset purchase program. Moreover, the Committee continues to see sufficient underlying strength in the broader economy to support ongoing progress toward maximum employment in a context of price stability. Accordingly, the Committee decided to conclude its asset purchase program this month....

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.

Related: US Child Poverty Highest In Twenty Years

Yellen's Trickle Down Dilemma

Why is the economy so sluggish?

Even if real wages are stagnant, and consumers are tapped, the Banks have been saved and stand ready to loan from an abundance of freshly created money (that they can obtain for almost nothing).

Why won't consumers make a leap of faith and borrow more, betting their last assets on an indifferent Congress and an elusive recovery?  

 

It's heads we win and tails you lose for the bailout Banks. 

 

And from a Banker's perspective it probably makes sense.

 

We Are Still In a Financial Crime Wave

In his recent column The Opposite of Stagflation Paul Krugman says that:

"One of the truly amazing (and disheartening) things about the Great Recession and its aftermath has been the continuing insistence of many economists that it’s somehow a supply-side slump, driven by the evils of Obamacare or something. This tends to come from people who view stagflation in the 1970s as having permanently refuted all things Keynes.

So I guess it’s worth pointing out repeatedly that the recent slump shows all the hallmarks of a demand-side shock; in particular, rising unemployment has been associated with falling inflation — the opposite of stagflation."

So I guess its also worth pointing out that the opposite of stagflation is not economic stagnation with declining inflation, but steady growth with very modest inflation. But given it is Paul K. we'll grant that he is assuming inflation as a reference point in this.   And in focusing in on the model battles, he is saying that we are indeed seeing stagnation, but there is deflation as his form of the Keynes model would predict.  Huzzah!

 

I will put aside for now his assertion that we are seeing declining inflation.  I think it might be said we are seeing little inflation growth overall, but with inflation appearing in certain product segments and assets.  But this is, I believe, an artifact of the way in which the Fed is pursuing very significant, top down monetary stimulus in a system that is still distorted and corrupted by the financial sector and its moneyed interests.  A few at the top are taking the greatest part of the monetary growth, and their demand is not for common goods but for luxuries, and monopolies, and more financial assets.

And so Paul Krugman is triumphant, because he would then go on to say, as he often does, that all we have to do is pour massive stimulation in to the economy from the fiscal side, and the demand side of the economy would recover as consumers could use their wages to purchase more goods.  Problem solved. 

 

And its a good piece of intellectual land to stake out, because no matter what the actual outcome in the real world, Paul will be able to argue that he was right if there is a favorable outcome.  Or if not, then it would have been favorable except that the government did not provide enough stimulus.  I would be inclined to believe that even if stagflation does eventually show up, he will argue that it was some other anomaly that does not affect his model.  A model that is too narrowly focused, and yet with too many degrees of freedom, to be useful.  

 

This works for Paul because his focus is sufficiently narrow and circumscribed, which is the failure of most economic models to provide any actual benefit for the real world, and are unsuited for the purposes of making policy decisions except at the most advisory level.  It allows him to almost completely ignore the facts on the ground, what really happened to cause the financial crisis, and what forces exist to keep it stubbornly at work despite massive top down monetary stimulus by the Fed.  

 

But like the housing bubble, when reality throws an economist a curveball, I have no doubt he will search his many hundreds of columns and find that he mentioned it, once.  And I suppose he may have mentioned reform once or twice as well.

 

His heart may be closer to the solution than the Austerians, but his mind is still carrying water for a system of learning, a method of distributing the benefits of productivity, and a political mindset that is more of an impediment to progress that an aid to it.. This is what happens when a vibrant set of theories from an original mind like John Maynard Keynes suffer from the arteriosclerosis of political dogmatism.  And after all, economics is a disgraced profession.

 

It is the hallmark of what Chris Hedges has called 'the death of the liberal class,' and along with it, the death of its conscience and sacrifice of moral principles to expediency in the service of power.  Few better representatives of this than the Clintons and Obama, and their acolytes in the status quo.  But they are presented as the alternative to an opposing political point of view so base as to almost redefine hypocrisy and greed.

 

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.

h/t Yves Smith, et al.

The Recovery™ In One Graph

"Gentlemen! I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country.

When you won, you divided the profits amongst you, and when you lost, you charged it to the bank.

You tell me that if I take the deposits from the bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin!

You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal, (bringing his fist down on the table) I will rout you out!"

Andrew Jackson, On the Bank of the United States

"...supply-side economics was merely a cover for the trickle-down approach to economic policy — what an older and less elegant generation called the horse-and-sparrow theory: If you feed the horse enough oats, some will pass through to the road for the sparrows."

John Kenneth Galbraith

Recovery.  For some.

I am not sure what is trickling down in this recovery.  It is not oats, or wealth.

But I am fairly sure that I know why the recovery is so disjointed and selective.  

It is one of the oldest stories.  It is about the abuse of privilege, of foolish people led in herds shouting slogans crafted by the clever and the unscrupulous, of the treacherous and self-destructive fury of unbridled greed.

It is about the lust for power, the deceptiveness of hubris, the blindness of pride, and the lessons from history that have been carefully and intentionally unlearned.  It is about the madness that brings the fire, in hearts and minds of men.

 

 

h/t Anthony Sanders, Confounded Interest

Bubble-nomics: The Federal Reserve Balance Sheet and the SP 500

"How could I have done this? I was making a lot of money. I didn’t need the money. Am I a flawed character?

I realized from a very early stage that the financial market is a wholly rigged job. There’s no chance that investors have in this market....It’s unbelievable. Goldman-- no one has any criminal convictions. The whole new regulatory reform is a joke."

Bernie Madoff


"Unfettered capitalism is a revolutionary force that consumes greater and greater numbers of human lives, until it finally consumes itself."

Chris Hedges


"I preyed upon the weak, the harmless and the unsuspecting. This lesson I was taught by others: might makes right."

Carl Panzram, psychopath, serial killer

Not much is going to the real economy and the 99 percent, so it has to be going somewhere.

The creation of financial asset bubbles using the power of selective monetary inflation is 'trickle down' at its finest.

But certain assets may blurt out unpleasant truths, if they are allowed to speak.

This is not sustainable. What are they thinking?

Entitlement, indeed.

US Healthcare Costs a Global Outlier and Monument to Crony Capitalism

I think the Big Pharma/Health and Big Finance sectors have similar cartel like structures where a few large companies dominate the field, exercising considering political power and the ability to obtain subsidies and protections from the system while fending off regulation and price restraints.

There are others of course, like the energy field from exploration to distribution, often known as Big Oil, but which now includes natural gas and electric energy production and distribution.

The recurring myths of the efficient market and 'free trade' are exacting a heavy toll on the general public and the real economy.  They provide ideological cover to a favored elite that is acting in the manner of a privileged and extractive aristocracy while beguiling many with the allure of easy money.

The concentration of ownership in the media has become an inhibiting and directing influence in public discourse that is hard to miss.

The current recovery fueled corporate perks and ZIRP for the financial sector, a fine example of 'trickle down' economics, will be remembered as one of the great policy errors of modern economic history. They pretend ignorance, they feign helplessness, and they know.  But they are getting paid not to act effectively, and even not to see, but to spin some fantasy.

They 'feel your pain.'  They just do not do anything substantial about it.  Even a second term president can still talk as though he is a recently arrived outsider, critiquing the actions of some predecessor and a corrupt system in which is he barely involved.

These are not leaders.  They are like modern CEO's, professional organizers and managers, who talk a great game about their accomplishments but, when the truth comes out, posture that they stand outside the very system for which they have long held the ultimate responsibility.  

But even worse are those who make little pretense to justice and goodness and moral principle, preferring to appeal to the darkest impulses, the fears and hatreds of a society.  Their actions betray their words.

The lack of serious reform, in large part because of the partnership between Big Money and Washington's new political class, and the dormancy of the progressive impulse, will eventually stress the fabric of society to the limit.  And then change will come.

Read the entire story here.

Amount of Dollar GDP Added For Each Additional Dollar of US Federal Debt

The line represents each dollar of GDP added for each incremental dollar of Federal Debt.

I would suggest that someone look into why the velocity of debt is now running into the law of diminishing returns.  The big slide started with Reagonomics and the 'supply side' theory based on the second chart.

It might have something to do with a corrupt financial system, the myth of efficient markets and globalization,  tax cuts for the wealthy and unfunded wars, and the largely stagnating median wage.

However one wishes to slice it, it might be difficult to make up in volume what is taken away by a crippled financial system that keeps sweeping the productivity gains and national wealth up to the one percent where it is used for largely non-productive monopolization of resources, political corruption, unfunded endless wars, and fraud.