Thursday, June 16, 2016


Incoherent would not be too strong a word.  She's a likeable lady to be sure and I suppose that in itself gives her more leeway than most, but despite of it her performance yesterday should truly strike fear into the hearts of those who believe (hope against hope?) that this economy is in capable hands.

She made no sense, no sense at all.  In fact half of what she said had already been refuted by the economic numbers which had been released early in the week and in the day.  Unemployment was down" sure if you completely ignore those who have simply given up.  The REAL unemployment number is somewhat over 9% based on historical averages.  Nearly 100 million Americans are no longer in the job market.

--Retail Sales are up.  Rubbish.  Retail sales have moved less that 2% since 2014.

--Manufacturing is slowing.  In 10 of the last 12 months manufacturing numbers have slipped.  It 's not slowing, it's stopped.  Capacity utilization has fallen off a cliff.  It was reported as so doing and she missed it..and those numbers were generated by the Fed!

--Inflation is lower than the Fed's target.  Well of course it is as half the world is in recession as are ALL commodities...although nobody has talked about the cost of my food lately.  Oops, sorry.  That doesn't count in inflation figures.

--Corporate profits aren't bad, eh Janet?  Not really, if you look at EPS but that's because with zero interest rates corporates have borrowed up to their gills and bought back stock.  How much of those borrowings have gone into productive resources for future growth?  Damn few.

--The banking sector world-wide stinks for a number of reasons but not the least of which is increased regulation and zero--or near-zero--interest rates.  And not just the big guys.  We lose damn near a bank a day here in the fly-over zone.  Local guys tell me that Dodd/Frank has cost them $2 million annually just to fill out forms.  These guys are a long way from being J.P. Morgan, Bubbala.

The list goes on and on but the real "crime" in all of this is how an institution can continue to institute and retain policies that have been so remarkably unproductive based upon forecasting that has been so spectacularly wrong.  You have to be either above-average stupid which I doubt to be the case or so wedded to a particularly philosophy that makes it simply impossible to admit error.  This Central Bank seems to be in lock-step with the Paul Krugmans of this world who as we all know has become merely a shill for this administration and its socio-political agenda.   That would be fine if everyone admitted it, but they do not.  In the face of failure they double-down.  We now have $20 trillion in public debt, $14 trillion of which is in private hands.  We also have nearly $15 trillion of private debt...does anyone care when Jamie Dimond expresses some concern about the amount of auto debt outstanding?  We have also removed a substantial amount of liquidity from this market by dramatically reducing the ability of the former market makers to make markets and that falls not only on Congress but on the Fed as well.  Mario Draghi speaks of the need for "fiscal and structural adjustment" but he too is a prisoner of himself.  The Fed has uttered nary a word on the subject.

And yet the apologists remain in place.  You're in safe hands with grandma.  But grandma has lost control.  This is a different world from the one learned at the knee of ol' J.M. Keynes.  Mucking about with a 1/4 point move in the rate at which the Fed will lend overnight to banks means absolutely nothing in a global marketplace whose size and velocity is overwhelming.  Practically nothing remains from that earlier time that is truly important except on thing: confidence.  And when the world loses confidence in the Central Bank of the United States the risk is enormous.  Yesterday's performance prettty much accomplished that.

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