The stock market enjoyed a big rally this past week.
Why, you may ask?
The answer is simple. Next week the Federal Reserve meets once again. And Ben Bernanke and the Fed are expected to have some form of more free money giveaways to Wall Street to the tune of hundreds of billions of dollars.
The Federal Reserve just continues on its path of destroying the value of the US dollar (down more than 80% since 1971) in order to please Wall Street.
President Obama's favorite economist, John Maynard Keynes, wrote some very prescient words in his 1919 classic, “The Economic Consequences of the Peace”.
In the book, Keynes spoke about Vladimir Lenin – founder of the USSR and of the Soviet Communist Party.
“Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”
Keynes agreed with Lenin's assessment saying, “There is no subtler, no surer means of overturning the existing basis of society than to debauch [debase] the currency.
He then went on to point with alarm to post-World War I Germany where officials were printing lots of money. Keynes' warning went unheeded, however.....
The money printing only accelerated, eventually destroying the German middle class. And in the ensuing social chaos, we all know what followed.
As Mark Twain was quoted as saying, “History does not repeat itself, but it does rhyme.”
The fact is that the US dollar has shrunk greatly in value since President Nixon took the United States off the gold standard in 1971. Since then, paper dollars have been backed with, well, nothing.
Americans need to ask themselves one question.....
Why in the world does the Federal Reserve continue its mad money printing when it is benefiting only one segment of society (Wall Street) and is causing the middle class to shrink every day.
Think about the Fed's policies the next time you go to the grocery store or fill up your gas tank. The higher prices you see are at least partly caused by the Fed's money printing.
Saturday, September 17, 2011
Saturday, September 10, 2011
The United States of Zero
Some of the political pundits have begun calling President Obama “President Zero”.
That is because the August employment figures showed no net new jobs created here in the good old USA.
But these pundits should look back a little farther. There have been a lot a zeros the United States has generated since the turn of the century.
How many net new jobs have been created in the last decade? Zero!
There were about 130 million jobs in America in the year 2000. And there are about 130 million jobs in America today.
How much more does average US wage earner make? Zero!
Adjusted for inflation, he or she made about $16 an hour in 2001. He or she still makes about $16 an hour today.
How much more are stocks worth today? Zero!
The S&P 500 has gone nowhere for over a decade. And adjusted for inflation, investors are on the losing end.
How much more are houses worth? Zero!
Gains made early in the new century have been erased and more.
So by all the important economic measures, Americans are zero better off than they were a decade ago. Perhaps the pundits could call our nation the United States of Zero.
Actually, the statement that Americans are zero better off is incorrect. Americans are much worse off. They have much more debt than they did at the turn of the century.
Here's a look at some numbers that are unfortunately not zero.....
In round numbers total debt to GDP (US economic output) increased from around 200 percent to over 350 percent. Federal debt alone went from 57 percent of GDP to nearly 100 percent today, a figure where many economists start worrying about the future solvency of a nation.
What is truly worrisome is that the leadership of both political parties seem clueless and have come up with zero fresh ideas for solving the country's economic ills.
It's just more of the same.
It's either more debt being issued, attempting to paper over the already huge debt hole in the economy.
Or it's printing up trillions of more dollars via the Federal Reserve in an effort to drive the value of the US dollar to zero and thus eliminate the debt that way.
No heed seems to paid to the fact that such a policy will completely devastate the US middle class' standard of living.
Policy makers right now are grading out in my estimation to a zero.
That is because the August employment figures showed no net new jobs created here in the good old USA.
But these pundits should look back a little farther. There have been a lot a zeros the United States has generated since the turn of the century.
How many net new jobs have been created in the last decade? Zero!
There were about 130 million jobs in America in the year 2000. And there are about 130 million jobs in America today.
How much more does average US wage earner make? Zero!
Adjusted for inflation, he or she made about $16 an hour in 2001. He or she still makes about $16 an hour today.
How much more are stocks worth today? Zero!
The S&P 500 has gone nowhere for over a decade. And adjusted for inflation, investors are on the losing end.
How much more are houses worth? Zero!
Gains made early in the new century have been erased and more.
So by all the important economic measures, Americans are zero better off than they were a decade ago. Perhaps the pundits could call our nation the United States of Zero.
Actually, the statement that Americans are zero better off is incorrect. Americans are much worse off. They have much more debt than they did at the turn of the century.
Here's a look at some numbers that are unfortunately not zero.....
In round numbers total debt to GDP (US economic output) increased from around 200 percent to over 350 percent. Federal debt alone went from 57 percent of GDP to nearly 100 percent today, a figure where many economists start worrying about the future solvency of a nation.
What is truly worrisome is that the leadership of both political parties seem clueless and have come up with zero fresh ideas for solving the country's economic ills.
It's just more of the same.
It's either more debt being issued, attempting to paper over the already huge debt hole in the economy.
Or it's printing up trillions of more dollars via the Federal Reserve in an effort to drive the value of the US dollar to zero and thus eliminate the debt that way.
No heed seems to paid to the fact that such a policy will completely devastate the US middle class' standard of living.
Policy makers right now are grading out in my estimation to a zero.
Saturday, September 3, 2011
The Fed and Wall Street
How appropriate that in advance of the Labor Day holiday the party on Wall Street came to an abrupt end.
The reason? Jobs...or rather the lack of jobs. The August employment data, released on Friday, showed a continued lack of job creation in the US economy.
Wall Street was surprised by this as the dummies there cannot grasp the concept that the policies of the Federal Reserve are not working.
The reason for this lack of a grasp of the obvious is that all of the monies printed by the Federal Reserve have gone to only one place – Wall Street.
According to Bloomberg, during the financial crisis, Wall Street received $1.2 trillion in “loans” from the Federal Reserve to keep the big banks going.
In addition, the Fed had its QE1 and QE2 programs which gave in excess of another $2 trillion to Wall Street via purchase of Treasury and mortgage securities.
With more $3 trillion received directly from the Federal Reserve, no wonder Wall Street has enjoyed such a party since March 2009!
But what the party goers on Wall Street have ignored is the fact that they have received all of the Fed's largess. Main Street got nothing and conditions continue to worsen there.
Recently, Fed chairman Ben Bernanke hinted very strongly that sometime before the end of the year, possibly as early as later this month, the Fed would initiate QE3. It would likely be in the amount of half a trillion to $1 trillion and you guessed it – the monies would go to Wall Street again.
That is why until Friday Wall Street was in party mode again.
So why does the Fed keep using a policy that does not work?
Simple. As explained in a prior article, the Fed is not an independent agency as it is portrayed. It is literally owned 100% by the banks and its main purpose is to see that the banking industry remains healthy.
A second reason is the short-term mentality which now permeates Wall Street. Most of its denizens could care less about anything longer term than three months...only short term profits matter.
Think of two scenarios.....
In the first scenario, the economy and especially Wall Street would suffer through a terrible two years. But afterwards, all would be well and what would follow was the biggest boom in history.
In the second scenario, Wall Street would have a terrific year. But afterwards, it and the US economy would enter a period of many years that would make the Great Depression look like a picnic.
If forced to make a choice, I think most people would choose the first. I know I would.
But if this question was asked of people on Wall Street, my 30 years of experience tells me that today 99.9% of them would choose the second - "let's enjoy the party and not worry about a year from now".
Until this psychology changes, the "Great Recession" in the United States will continue to linger.
The reason? Jobs...or rather the lack of jobs. The August employment data, released on Friday, showed a continued lack of job creation in the US economy.
Wall Street was surprised by this as the dummies there cannot grasp the concept that the policies of the Federal Reserve are not working.
The reason for this lack of a grasp of the obvious is that all of the monies printed by the Federal Reserve have gone to only one place – Wall Street.
According to Bloomberg, during the financial crisis, Wall Street received $1.2 trillion in “loans” from the Federal Reserve to keep the big banks going.
In addition, the Fed had its QE1 and QE2 programs which gave in excess of another $2 trillion to Wall Street via purchase of Treasury and mortgage securities.
With more $3 trillion received directly from the Federal Reserve, no wonder Wall Street has enjoyed such a party since March 2009!
But what the party goers on Wall Street have ignored is the fact that they have received all of the Fed's largess. Main Street got nothing and conditions continue to worsen there.
Recently, Fed chairman Ben Bernanke hinted very strongly that sometime before the end of the year, possibly as early as later this month, the Fed would initiate QE3. It would likely be in the amount of half a trillion to $1 trillion and you guessed it – the monies would go to Wall Street again.
That is why until Friday Wall Street was in party mode again.
So why does the Fed keep using a policy that does not work?
Simple. As explained in a prior article, the Fed is not an independent agency as it is portrayed. It is literally owned 100% by the banks and its main purpose is to see that the banking industry remains healthy.
A second reason is the short-term mentality which now permeates Wall Street. Most of its denizens could care less about anything longer term than three months...only short term profits matter.
Think of two scenarios.....
In the first scenario, the economy and especially Wall Street would suffer through a terrible two years. But afterwards, all would be well and what would follow was the biggest boom in history.
In the second scenario, Wall Street would have a terrific year. But afterwards, it and the US economy would enter a period of many years that would make the Great Depression look like a picnic.
If forced to make a choice, I think most people would choose the first. I know I would.
But if this question was asked of people on Wall Street, my 30 years of experience tells me that today 99.9% of them would choose the second - "let's enjoy the party and not worry about a year from now".
Until this psychology changes, the "Great Recession" in the United States will continue to linger.
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