Will the economy continue to float on a sea of debt through the election? Probably. From David Stockman at internationalman.com:
International Man: Bill Clinton’s infamous phrase during the 1992 presidential election was “It’s the economy, stupid.” How important of a role do you think the economy and a continued rally in the stock market will play in the outcome of the presidential election?
David Stockman: Well, in the befuddled mind of Donald Trump, probably a considerable role as manifest in his campaign oratory. And since there are less than 50 days left, he might get away with his groundless boasting. That is, we seriously doubt that the great reckoning will commence before November 3, meaning that he will keep peddling the “but for COVID” canard, claiming that, before that, he single-handedly created the Greatest Economy Ever.
Actually, it’s the greatest BS story ever told. It rests on the utterly misleading circumstance that the Donald entered office in month #90 of what became the longest business cycle expansion in history (at 128 months in February).
Consequently, his “record” was artificially flattered by the low U-3 unemployment rates (3.5%) that naturally occur during the last 38 months of the cycle as the inventory of unused labor is finally exhausted. Of course, that’s also exactly what occurred during the final months of the 118-month expansion of the 1990s and the 106-month expansion of the 1960s, when Democrats happened to be incumbent in the Oval Office.
But when measured by something relevant, such as the average real GDP growth rate during his tenure, it turns out that the Donald’s cherished “score” is the very worst among all the presidential terms since 1948.
I thought we had reached peak insanity some time ago, but they keep surprising me. From Mitchell Feierstein at lewrockwell.com:
The Fed’s fiscal profligacy and greedy tech oligarchs are sinking capitalism faster than the Titanic
During my 40-year Wall St career, I’ve never seen a mania like this. The problem is that central banks are rogue hedge funds with printing presses who are not elected or accountable and make policies that are consistently wrong.
US stock markets were rocked last week by massive volatility that saw the most significant declines since the March correction. The US Congress and Federal Reserve policy of endless bailouts, moral hazard and exponential money printing are extreme fiscal profligacy that will sink capitalism faster than the Titanic on its maiden voyage.
Stock market indexes have recently rocketed to record highs. The NASDAQ traded up at 12,050.46, and the Standard & Poor’s 500 index traded at 3,588.11, achieving another benchmark. Stock valuations are the highest they’ve ever been, exceeding the crash of 1929 and the 2000 technology bubble. Just six stocks have driven this rally: Apple, Amazon, Microsoft, Facebook, Google and Tesla.
Should you worry that the world has never witnessed a stock mania that has seen valuations skyrocket during the worst economic depression the world has ever experienced? Yes, indeed, you should step back from the cliff’s edge immediately.
The billionaire oligarchs of Silicon Valley, whose stocks are at all-time highs during an economic depression, will utilize censorship to manipulate the outcome of the 2020 election. These oligarchs demand one rule for thee and another for me. They demand equality of outcome and will implement laws that prevent equality of opportunity. The US is in a class war dressed up as a race war. Google, Facebook, Amazon and Twitter are “all in” on ensuring their power base is protected with the election of Biden and Harris.
Traditionally there’s been a strong correlation between the stock market and the electoral fortunes of presidents and their challengers. From Charles Hugh Smith at oftwominds.com:
Come on, Jay, you can always goose stocks back to new highs after the election.
Indulge me for a moment in some backroom speculation. It’s absurdly obvious that the unelected, permanent, ever-expanding National Security State, a.k.a the Deep State, and its Democratic Party allies have been attempting to torpedo Donald Trump since the 2016 election took them by surprise. (Imagine doing everything that worked so well in the past and failing at the last minute. Ouch. Revenge is best served cold, n’est pas?)
The comedy-of-errors RussiaGate collapsed in a foul heap, the impeachment backfired, and so what’s left in the Deep State quiver other than its usual bag of, ahem, accidents?
Some might argue that urban riots and civil unrest might be enough to cause Trump to lose the election in November, but this strategy can backfire just as easily as the previous Deep State strategies.
Assuming Americans will ultimately vote their pocketbook as in the past, the only sure way to sink Trump is to crash the stock market, the jewel in Trump’s crown. This is blinding obvious, but the Deep State’s political allies have been wary of shrinking the bloated wealth of their donors, and wary of a backlash from the wealthy who want to see Trump lose but not if it requires the personal sacrifice of surrendering any of the $548 billion they’ve gained in the recent stock market melt-up.
But with the election just months away, the pressure is now so intense that the Deep State is demanding Powell and the Fed stop the money-printing that’s goosing stocks higher. Hints have been elevated to suggestions which are about to become demands.
The insanity attendant on the coronavirus will kill far more than the coronavirus will. From William Murray at ronpaulinstitute.org:
Fear is contagious: Fear is more contagious than any virus could ever be, and the media has really fed the fear factor when it comes to the coronavirus.
I am by no means playing down the deadly Covid-19 coronavirus. It is a killer. Depending on the reporting nation, it appears that on average 3.4 percent of every 100 who catch the coronavirus die. Those are not good odds.
Adding to the problem, the Center for Disease Control allowed the virus to spread in the United States out of an act of pure stupidity. The CDC refused to allow testing of those with coronavirus symptoms unless they had visited certain areas of China. And what about those who were exposed at airports, restaurants and stores? People died of the coronavirus in the United States before the CDC diagnosed a single case.
Because most of those infected are asymptomatic the scope of the spread of Covid-19 could only have been accurately measured by random testing. But months after the first actual warning from China there were not even enough test kits produced in the United States to test those with symptoms. Random testing still is impossible. Even citizens returning from hotspots in the first half of March were not tested at airports.
The Fourth Turning is going into exponential hyperdrive. From Jim Quinn at theburningplatform.com:
“So, first of all, let me assert my firm belief that the only thing we have to fear is…fear itself — nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. In every dark hour of our national life a leadership of frankness and of vigor has met with that understanding and support of the people themselves which is essential to victory. And I am convinced that you will again give that support to leadership in these critical days.”- Franklin D. Roosevelt – March 4, 1933
Franklin D. Roosevelt spoke these words during his first inauguration at the depths of the Great Depression in 1933. The narrative taught in government schools is how FDR’s words invigorated the nation and inspired the people to show courage in the face of adversity. His terminology was that of a general leading his troops into battle.
What is not taught in government schools or proclaimed by the propaganda spewing fake news media were the dictatorial type actions taken by FDR over the next month after his “inspirational” speech. He was the first Democrat president to not let a crisis go to waste. The day after his inauguration, Roosevelt assembled a special session of Congress to declare a four-day bank holiday, and on March 9 signed the Emergency Banking Act.
Posted in Business, Civil Liberties, Collapse, Crime, Cronyism, Debt, Economics, Economy, Government, History, Law, Military, Politics, Propaganda, War
Tagged Bailouts, CoVid-19 coronavirus origin, Federal Reserve, Fourth Turning, Stock Market
The main reason this article got posted is for the great headline. From Wolf Richter at wolfstreet.com:
Because “the coronavirus poses evolving risks to economic activity,” despite the “strong” fundamentals of the US economy, and despite stocks being off just 7.8% from all-time highs, the Fed’s FOMC announced during trading hours this morning, following the G-7 conference call, that it had voted unanimously to cut the target for the federal funds rate by half a percentage point to a range between 1% and 1.25%:
The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. In light of these risks and in support of achieving its maximum employment and price stability goals, the Federal Open Market Committee decided today to lower the target range for the federal funds rate by 1/2 percentage point, to 1 to 1‑1/4 percent. The Committee is closely monitoring developments and their implications for the economic outlook and will use its tools and act as appropriate to support the economy.
But at the moment as I’m writing this, the impact of the biggest rate cut since the Financial Crisis is not propitious, with the Dow and the S&P 500 down between 1.5% and 2.0%. Note yesterday’s spike, about half of which has been undone at the moment:
The bull markets in bonds and stocks will not go quietly into that good night. From Sven Henrich at northmantrader.com:
One day this bull market will end and the age of the central banking enabled debt bubble will be exposed for the hubris that it is and all the sins of “potential side effects” that central bankers warn about but never do anything about will come back to haunt all of us. It’ll be the age of the great unwind. Nobody will tell us in the moment when it peaks and I suspect it will not start with a bang, rather a whimper, but only end with a bang.
And this great unwind will not last a month or a year, but many years as all the excesses will have to work themselves through the system and all the systematic buy programs will turn into systematic sell programs that will be just as relentless on the way down as they were on the way up.
They very notion of the permanent can kicking we are witnessing now will reveal itself to have been a fantasy. People forget that 2019 and into 2020 came about because of systemic failure of epic proportions. The single one time central bankers tried to tighten blew up in their faces. And the Fed’s forced re-expansion of their balance sheet has now bestowed this blow-off top that has pushed asset prices the farthest distance above the underlying size of the economy that we’ve ever seen. A perversion of the financial system that has created wealth for the few not seen since the 1920s.
By all the time-tested valuation measures and sentiment indicators, the stock market is ripe for a big fall. From Sven Henrich at northmantrader.com:
None of us can know where markets would be trading without the Fed’s constant massive liquidity injections, but now that the bubble recognition has gone mainstream (Bloomberg, FT) and acknowledged by at least one Fed president (Kaplan) I think it’s fair to say: Lower, much lower.
But while investors continue to dance on the liquidity driven momentum rally right into major resistance currently ignored data keeps suggesting that risk is much higher than anyone is willing to acknowledge. Indeed these data points suggest investors may be walking a precarious tight rope without even realizing it.
I do my best to keep pointing out these data points, but so far admittedly in vain:
Since the Fed is currently hosting the most expensive frat party of all time it’s no wonder that investors are currently ignoring everything else consequences be damned.
I’ll let the reader be the judge, but below are a few charts I think are worth documenting as they highlight what investors are entirely ignoring at this stage.
Massive debt at the top of the business cycle is nobody’s idea of good economics, but that’s what the US is doing. From David Stockman at internationalman.com:
Doug Casey’s Note: David Stockman is a former congressman and director of the Office of Management and Budget under Ronald Reagan.
Now, anyone with connections to the government should elevate your suspicion level. But as you’ll see, David is a genuine opponent of government stupidity. Although his heroic fight against the Deep State during the Reagan Administration was doomed, he remains a strong advocate for free markets and a vastly smaller government.
We get together occasionally in the summer, when we’re both in Aspen. He’s great company and one of the few people in this little People’s Republic that I agree with on just about everything. This absolutely includes where the US economy is heading.
I read his letter the Contra Corner every day, and suggest you do likewise.
International Man: Trump is calling for a weaker dollar and negative interest rates. What does this tell you about Trump’s understanding of economics?
David Stockman: It tells you that he has no understanding of economics at all!
I think Trump is not even a primitive when it comes to economic comprehension. His views are just plain stupid when it comes to exchange rates. He seems to think it’s some grand game of global golf, where the strongest player gets the lowest score.
What sense does it make tweeting as he did recently in attacking the Fed?
According to Trump, the US economy is so much better than the rest of the world’s economies, and therefore we should have the lowest interest rate as a result. It has nothing to do with economic logic or with principles related to sound money. I think he’s just thrashing about trying to create a warning that if things go badly, it’s the Fed’s fault.
Posted in banking, Business, Cronyism, Debt, Economy, Financial markets, Government, Science
Tagged Climate Change, Fed Audit, Federal Reserve, Inflation, interest rates, National Debt, Stock Market
It takes increasing amounts of debt just to stay in the same place. This can’t last. From James Rickards at dailyreckoning.com:
Herbert Stein, a prominent economist and adviser to presidents Richard Nixon and Gerald Ford, once remarked, “If something cannot go on forever, it will stop.”
The fact that his remark is obvious makes it no less profound. Simple denial or wishful thinking tends to dominate economic debate.
Stein’s remark is like a bucket of ice water in the face of those denying the reality of nonsustainability. Stein was testifying about international trade deficits when he made his statement, but it applies broadly.
Current global debt levels are simply not sustainable. Debt actually is sustainable if the debt is used for projects with positive returns and if the economy supporting the debt is growing faster than the debt itself.
But neither of those conditions applies today.
Debt is being incurred just to keep pace with existing requirements in the form of benefits, interest and discretionary spending.