Gold Daily and Silver Weekly Charts - Learning to Love the Fed's Bubbles Is Our Only Choice

Apparently today is my day to pick on poor Paul Krugman. I happened to read this today, and it was just too illustrative of a certain institutional economic mindset to go by unremarked. 

Paul is responding to questions for an interview in a recent issue of Princeton Magazine.

Are bubbles good or bad and do we need them to create strong economic growth and reach higher levels of employment?

Bubbles are bad if you have an economy near full employment, where they divert resources from their proper use and set the stage for financial instability. In a depressed economy, even ill-conceived spending can help create jobs, so bubbles aren’t necessarily bad. There are reasons to believe that we’re facing an era of persistent economic weakness, which means that we’ll only feel prosperous during bubble periods.

Please comment on how artificially low interest rates have impacted the current value of baby boomers’ retirement portfolios and should this be a consideration of the Federal Reserve?

Oh, boy. What do you mean 'artificially low'? Compared to what? The appropriate level of the interest rate, most economists would say, is the rate that gives us full employment without inflation; since we don’t have full employment, that says that rates are too high.

And no, the Fed’s job is to stabilize the economy, not to protect incomes of some groups at the expense of that mandate.

Paul Krugman, Princeton Magazine

It's one thing to infer that the economists of the professional status quo believe these sorts of things. And its quite another to see it in print. 

Paul apparently thinks that bubbles are not really a problem if you are not at 'full employment,'  because they might be stimulus.  Oh boy, what do you mean 'full employment?'  Does that mean everyone who wants a shit job without benefits at a below poverty level wage can have one is 'full employment?'

Or does 'full employment' mean a robust economic environment where people are obtaining jobs that pay living wages for families that keep up with inflation and provide affordable health benefits sufficient to keep them from falling into bankruptcy if anyone in their family sustains a serious illness?

Well, we haven't been at 'full employment' since the last bubble broke, and that was six years ago.  And depending on how you want to define it, we may not have been at 'full employment' in a very long time of stagnant median wages and a deteriorating middle class. 

So I would imagine that means that Paul was ok with the housing bubble, at least while it was growing.  In his defense the Fed publicly dismissed it as well.  And reading this interview helps one to understand why.

But that doesn't bother me so much, since this is the policy jargon used by economists to justify whatever policy initiative they are pumping for that day, for whatever reason.  And most do it.

What does surprise is that a Nobel prize-winning economist is ok with asset bubbles, which by definition in the real world involve a significant mispricing of risk, will almost always result in stress on the financial system, and inflict harmful losses on less sophisticated investors and non-insiders.   They tend to coarsen the political environment, and generate a cycle of moral hazard when tolerated.

Bubbles by their very nature are very often symptoms of lax regulation, and methods of transferring wealth from the many to the few.  And they are very often a fairly thin veneer for control frauds. 

Paul goes on to suggest that we are in a new normal where the bubbles that the Fed occasionally creates through its policy errors are the only times that 'we will feel prosperous.'   So enjoy.   This is preposterous humbug.  It is the worst sort of excuse making for the failure of leadership.

Does he notice that this latest 'recovery' from the aftermath of the latest financial bubble is resulting in the greatest disparity of wealth in US since before the Great Depression?  And that it is growing worse, not better?

His statement that the Fed's overwhelming mandate to provide 'stability,' for which you can read the health of the banks, is superior in consideration to protecting the income (wealth) of some groups like retirees, should give you a good idea of the Fed's actions in the future when this current asset bubble implodes, and the Banks come back to their trough again. Bail-in anyone?

Does this criticism seem harsh?  I hate to pick on the establishment Democrats, since their counterparts the neo-liberal austerians are often so much worse.  

But given that too large a part of the country has been enduring the equivalent of an economic 'Death March of Bataan' for the last seven years because the Wall Street wing of the Democratic party, which was given a mandate for reform, has perpetrated so many poorly thought out and corporate friendly economic policies, written by non-elected and barely accountable Banksters operating largely in secret, I don't think so.  And they can't keep blaming it all on the Republicans.  They are both failing, and badly.

This should give you a fairly good idea where the financiers and politicians are coming from these days.  Even the so-called 'liberals.'

Protect yourself. 

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - The Myopia of Empire - On Freedom

"Next week Scotland will hold a referendum on whether to leave the United Kingdom. And polling suggests that support for independence has surged over the past few months, largely because pro-independence campaigners have managed to reduce the 'fear factor' — that is, concern about the economic risks of going it alone. At this point the outcome looks like a tossup.

Well, I have a message for the Scots: Be afraid, be very afraid..."

Paul Krugman, Scotland, What the Heck

Kinnoch: With respect, Mr. Gandhi, without British administration, this country would be reduced to chaos.

Gandhi: Mr. Kinnoch, I beg you to accept that there is no people on Earth who would not prefer their own bad government to the good government of an alien power.

Brigadier: My dear sir! India *is* British. We're hardly an alien power!

[silence]

You just can't make this stuff up.

There is nothing less attractive than a liberal in service to power.

Have a pleasant evening.

 

Related:  A 'Yes' Vote In Scotland Would Unleash the Most Dangerous Thing of All -- Hope.

Yes, this is a fictionalized account of a speech from William Wallace before the Battle of Stirling. So is the famous St. Crispin's Day speech from Shakespeare's Henry V. The sentiments expressed in both are consistent with those struggles.

What is not a fiction is the fire that can burn in men's hearts, the preference for self-rule that they have, the yearning to be free that rises up against continuing repression and the overbearing dominance of distant rulers who do not have the best interests and well-being of their homes and families in mind.

 

Men often will sell other men's liberty, and gladly. But not everyone is willing to sell their children's freedom for money.

 

There is always a risk in change. It is a difficult thing to birth a new nation and to forge it in liberty.

But there is an even greater risk for those who resist peaceful changes to the very end, who make meaningful reform impossible.  Freedom is resilient.  Eventually the fire in men's hearts bursts forth, and the walls of repression, and even the far flung parapets of empires, can fall. 

This is one of the great lessons of history.

The calculating economist says 'be afraid.' But the great people of Scotland, and the ghosts of their fathers and mothers say, 'be free.'

 

Gold Daily and Silver Weekly Charts - Abide

Gold and silver had the usual hit today, that was almost perfunctory in its routineness.  That did not make it any less obvious. I am sure that they can rattle off a hundred rationales to support their actions for the good of others. That they happen to benefit is merely incidental.

There is quiet panic in the banks and the boardrooms, make no mistake of that.  Russia has them perplexed.  China has them confused.  The rest of the world holds them in contempt.  Most with eyes open can see their falsehoods. 

Their fabrications grow increasingly transparent.  Force is extended to make up for the weakness of the fraud.  Their empire of deceits are pervasive and fearsome in their shamelessness. 

How and when this will end, no one can say.

For now we must be waitful and watchful.

'At this moment we are the anvil, rather than the hammer.'

There was intraday commentary that may be worth reading.

Have a pleasant evening.

 

SP 500 and NDX Futures Daily Charts - The Age of the Thing

"Greetings citizens.
We are living in the age,
in which the pursuit of all values
other than
money, success, fame, glamour
have either been discredited or destroyed.

money, success, fame, glamour,
for we are living in the age of the thing.

money, success, fame, glamour..."

Macaulay Culkin et al., Party Monster


"The perpetrators were scholars, doctors, nurses, justice officials, the police and the health and workers’ administration.

The victims were poor, desperate, rebellious or in need of help. They came from psychiatric clinics and childrens hospitals, from old age homes and welfare institutions, from military hospitals and internment camps.

The number of victims is huge, the number of offenders who were sentenced, small."

Commemorative Tablet at Tiergartenstraße 4, Berlin

The banality of evil is alive and well in our culture of death, that measures everything in dollars, and values nothing that is human for its own sake, whether it be truth, or beauty, or goodness.

That it is banal does not mean it cannot be noisy.  That it wears a hand tailored suit instead of a uniform does not make it any less vulgar,  capable of causing great misery and destruction.  That it speaks with sophistication or cleverness does not makes its words any less poisonous.  That it will eventually destroy itself in the future does not detract from its power to taint and corrupt in the present.  That it reaches out remotely, by force and fraud, to throttle and kill its victims does not make its hands any less bloody.

Even that consummate anti-human evil on earth did not begin by writing off 47 percent of the people as less than human, as life unworthy of life.  As if any number of human lives could be justified by the godlike delusions of these narcissistic sociopaths.

Markets moved sideways today, with the SP down a bit and the tech heavy NDX up a bit.

Wall Street is rolling out the barrel for the Alibaba IPO.

Consumer Credit growth came in greater than expected.

Have a pleasant evening.

NAV Premiums of Certain Precious Metal Trusts and Funds - Bottoming, Perhaps

The currency war continues. 

My sense is that we *might* see a double bottom echo of the last double bottom. The impedance of seasonality factors and supply issues will continue to degrade the paper market price swing in this rinse cycle of the latest wash and rinse.

Am I calling bottom?  I do suspect we are at or near that point.  But the trend is the trend until it is not.  I have learned to be keenly aware of the brazen stupidity of our pampered princes when frightened.  And this is no 'natural' market.  Few are these days.

 

CFTC warns DOJ of 'criminal rate-rigging' in the ISDAfix.

The Corporate Media In America: Orwell Rolls Over In His Grave

"The American fascist would prefer not to use violence. His method is to poison the channels of public information. With a fascist the problem is never how best to present the truth to the public but how best to use the news to deceive the public into giving the fascist and his group more money or more power.”

Henry A. Wallace

"Do remember that dishonesty and cowardice always have to be paid for. Don't imagine that for years on end you can make yourself the boot-licking propagandist of the Soviet régime, or any other régime, and then suddenly return to mental decency. Once a whore, always a whore."

George Orwell

Gold Daily and Silver Weekly Charts - No My Jobs, Man

"I don't know if the people on Wall Street are not really getting out and seeing what's really going on.

When you go to small towns, like I do, and talk to people - people don't have much confidence in the numbers you hear."

Ronnie Squires, Winner of CNBC's Guess the Jobs Number Contest

The Non-Farm Payrolls number sucked out loud with a fairly stupendous miss.  If you back out the imaginary jobs from the Birth Death report, the economy added about 40,000 real jobs, of a generally low quality.  Chief Strategists and economists took delight in the tenth of a percent decrease in unemployment, a generally misleading statistic.  And of course, stocks rallied.

Given the need for the central banks to keep printing money, and the ECB's endorsement of that approach, the hit on the metals this week makes quite a bit of sense from a perception management standpoint of the porcine persuasion.

Here is my most probable forecast for the future. Be sure to make a note of it.

The next time there is a financial crisis, which is likely to be in the not too distant future, almost to a person the economists and talking heads of the status quo will express shock and bewilderment saying, 'who could have seen this coming?'  Unless of course there is some foreign scapegoat who can be conveniently blamed for the collapse of a house of cards.

And then, from their Olympian heights of privilege, the overpaid pundits will quickly fall back into their most comfortable, ideologically blind slogans. There is too much government, or there is not enough stimulus or the unfortunate many are just lazy and stupid.

And meanwhile, given the lack of reform of the financial and political system, the average American family, which they will all claim to uphold and revere, is being led down a blind alley of officially tolerated corruption, and strangled.

Alibaba was announced after the bell.  See the stock posting for commentary about that and its likely influence on the markets.

Have a pleasant weekend.

SP 500 and NDX Futures Daily Charts - BABA - Here Comes the Big Daddy IPO of All Time

"A fire broke out backstage in a theatre. The clown came out to warn the public; they thought it was a joke and applauded. He repeated it; the acclaim was even greater.

I think that's just how the world will come to an end: to general applause from those who believe it's just a joke.”

Søren Kierkegaard

The hills are alive, with the sounds of music.....

Alibaba announced that it will kick off its IPO in New York City on Monday, September 8.  Represent!

The company is considered an advertising company performing a middleman function more similar to eBay than Amazon in the ecommerce space in China. 

The IPO will value the company at a mind-boggling 162.7 Billion dollars.  That is about 60 to 66 dollars per share.  The stock symbol will be BABA.   Big Daddy!

 

It is a real company with real revenues and profits.  It's competitive longevity and growth prospects being worth a few hundred billion, or not, is the question.  The company does not have a buying and delivery infrastructure like Amazon or Walmart.

Yahoo will own a 16.3% share of the company after the IPO.  Given their own business performance they might do well to sell the shares and invest the proceeds--  in Treasuries.

Players will be able to buy just a portion of the company, however, about 21 billions worth.  About 20 percent is slated for retail.  Start begging your broker now.

Goldman will have the job of batting cleanup, making sure that the IPO goes well after it begins trading.  This includes stabilizing the price and order flow, by buying and selling shares.  Mr. Fixit is on the job.

Morgan Stanley is leading the 'friends and family' stock allocations.  Deja vu!  Is that the Friends of Frank Quattrone?

New York is getting the IPO rather than Hong Kong because the Yanks are allowing Alibaba to maintain its current management structure whereas Hong Kong leaned towards voting shares, allowing Jack Ma to maintain a more private control.

There is a lot of juice behind this one, people.  Barring any exogenous incident, there are a lot of VSPs (Very Serious People) with a vested interest in a calm market between now and the actual IPO date. There will be more professional, highly skilled beauticians slapping lipstick and makeup on this IPO than there are on the recent troubles in the Ukraine.

And I like it when you Call Me Big Papa.  Throw your hands in the air, if you a true player, try to snag some pre-IPO share.  Here comes what might be a notorious P.I.G.

Have a pleasant weekend.