A lie always contains a certain factor of credibility, since the great masses of the people in the very bottom of their hearts tend to be corrupted rather than consciously and purposely evil, and that, therefore, in view of the primitive simplicity of their minds, they more easily fall victim to a big lie than to a little one, since they themselves lie in little things, but would be ashamed of lies that were too big - Adolph Hitler, "Mein Kampf"Most of you are aware by now that the FOMC minutes for the December meeting released yesterday contained a statement that suggested more FOMC members were interested in ending the Fed's bond buying progarm - aka QE - by the end of 2013. The precious metals were immediately hammered, while there was very little reaction in the bond market and no reaction in the S&P 500 or the housing stocks. Hmmm.
There's two problems with the above. First, if it were indeed true about the Fed ending QE by the end of 2013, think about what that would mean for interest rates, mortgage rates, the housing sector and the economy overall. If the Fed stopped buying Treasury and mortgage bonds, interest rates would spike up several hundred basis points and the economy would really tumble off the cliff.
Second, who will buy all the new Treasury debt issuance? The Fed has purchased well over 50% of all new Treasury issuance in the last three years. If there Fed were not buying this paper, who would? Seriously. Either future Treasury bond auctions will fail OR it will take significantly higher interest rates to induce new money into Treasuries to make up for the trillions the Fed has been buying. Or, of course, the Government will balance its spending and won't require additional Treasury issuance...I would lay all my money on any bet that the latter will never happen.
So I guess the FOMC minutes were a big lie. It's not the first time the Fed has suggested that QE would not continue, only to be expand it within 6-9 months. Government deficit spending = de facto QE. The second Big Lie today was with the BLS employment report. As it turns out, I found a big gaping hole in the employment report today and I have not seen anyone question the number in any of the prolific material which explains why the BLS employment report is fictitious.
You can read my analysis here: The Big Gaping Hole In The BLS Jobs Report
Needless to say, the Fed has already committed to buying a $trillion more in Treasury and mortgage debt in 2013, and unless the Fed is prepared to shoulder the consequences of ending that program rather than expanding at the end of 2013, yesterday's plunge in precious metals can be seen seen as a true gift from the markets by anyone who takes advantage of it.
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Could you critique some of the stuff Armstrong is putting out?
ReplyDeleteHe's saying there is NO CRISIS!
He's also saying there's plenty of buyers for the flood of debt being issued.
http://armstrongeconomics.com/armstrong_economics_blog/page/2/
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I like these whoppers I found:
The Fed is concerned that if interest rates rise because of inflation, the balance sheet will tank. The Fed will shift now to be more concerned about the bond market. The crisis they face is rates are so low, even a quarter point up tick will be devastating for the bond market.
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The Fed is concerned that if interest rates rise because of inflation, the balance sheet will tank. The Fed will shift now to be more concerned about the bond market. The crisis they face is rates are so low, even a quarter point up tick will be devastating for the bond market.
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CORE ECONOMIES have historically imploded - NEVER exploded with hyperinflation – that is reserved for countries that nobody buys their debt anyway. Here, the government will try to keep the bondholders happy. They come first!
Professor Polleit explains why fiat currency systems produce 'collective corruption'
Delete"The problem with central banking has been mainly the old problem of power -- it corrupts.
"Central bankers are supposed to be more capable of restraint than ordinary politicians, and maybe some are, but they are not always or even often capable of the necessary restraint. One market intervention encourages another and another and increases the political pressure to keep intervening to benefit special interests rather than the general interest -- to benefit especially the financial interests, the banking and investment banking industries. These interventions, subsidies to special interests, increasingly are needed to prevent the previous imbalances from imploding.
http://www.gata.org/node/12095
I was a big follower of Armstrong when he was in prison, but since his release I've found his published views confusing and contradictory.
DeleteI can't help wondering if he did some sort of deal with TPTB to get released? I wouldn't blame the poor guy for selling out, but I'll never trust him from now on, either.
There was a time when I actually trusted the words of people in various government sectors. Really.
ReplyDeleteNot any more. This President, this Congress, and this FED flat out lie and mislead. They are the most dishonest people in the U.S. I know convicted felons with far more integrity.
Sad but true, and you are FAR from alone in that thought, which has equally dire implications.
Delete"Either future Treasury bond auctions will fail OR it will take significantly higher interest rates to induce new money into Treasuries to make up for the trillions the Fed has been buying."
ReplyDeleteExcept that 600 plus quadrillion in Interest Rate Derivatives alone control the interest rate and bond market. The paper gold market does the rest. That's why they brought Summers in.
The Fact that the FED is the buyer of last resort shows that support for the dollar is falling. There will come a time when the ESF is powerless, but for now a lot of old money follows the status quo.
It has been four long winters since the federal government, in the hulking, shaven-skulled, Alien Nation-esque form of then-Treasury Secretary Hank Paulson, committed $700 billion in taxpayer money to rescue Wall Street from its own chicanery and greed. To listen to the bankers and their allies in Washington tell it, you'd think the bailout was the best thing to hit the American economy since the invention of the assembly line. Not only did it prevent another Great Depression, we've been told, but the money has all been paid back, and the government even made a profit. No harm, no foul – right?
ReplyDeleteWrong.
It was all a lie – one of the biggest and most elaborate falsehoods ever sold to the American people. We were told that the taxpayer was stepping in – only temporarily, mind you – to prop up the economy and save the world from financial catastrophe. What we actually ended up doing was the exact opposite: committing American taxpayers to permanent, blind support of an ungovernable, unregulatable, hyperconcentrated new financial system that exacerbates the greed and inequality that caused the crash, and forces Wall Street banks like Goldman Sachs and Citigroup to increase risk rather than reduce it. The result is one of those deals where one wrong decision early on blossoms into a lush nightmare of unintended consequences. We thought we were just letting a friend crash at the house for a few days; we ended up with a family of hillbillies who moved in forever, sleeping nine to a bed and building a meth lab on the front lawn.
Gotta love Matt Taibbi!
http://www.rollingstone.com/politics/news/secret-and-lies-of-the-bailout-20130104?print=true