| The term red pill and its opposite, blue pill, are pop culture terms that have become a common symbol for the choice between the blissful ignorance of illusion (blue) and embracing the sometimes painful truth of reality (red). |
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- Best Places in the World to Retire, Part II
- Tax Laws, Corruption and Other Reasons to Expatriate
- Unattainable Government Goals
- Commodities Take Off!
- How Ben Bernanke Rationalizes “Exceptionally Low” Interest Rates
- Best Places in the World to Retire
- Obama’s Fairness Doctrine
- Big Ben Discusses Another Round of Quantitative Easing
- Demand Fears in a Consumer-Based Economy
Waist Deep in the Big Muddy
With its announcement this week that it will keep interest rates near zero until at least late 2014, the Federal Reserve has put another large crack into the foundations underlying the US dollar. In a misguided attempt to provide clarity and transparency, Ben Bernanke has instead laid out a simple road map for economists and investors to follow. The signposts are easily understood: the Fed will stop at nothing in pursuing its goals of creating phantom GDP growth, holding down unemployment, propping up stock and housing prices, and monetizing government debt. To do so, it will continue to pursue a policy of negative interest rates, while ignoring the collateral damage of unsustainable debt, virulent inflation, misallocated resources and credit, suffering yield-dependent retirees, and a devalued U.S. currency.
Not surprisingly, precious metals and foreign currencies rallied strongly on the news – with gold up more than 4.3% and the Dollar Index down nearly 1.6% in the days following the announcement. The Dollar Index is now down more than 3.5% from its highs in mid-January.
In coming to the momentous decision to extend the Fed’s prior low-rate promises by another 18 months, Bernanke and his cohorts relied on a somber view of the economy that is at odds with the sunnier view presented the night before by President Obama in his State of the Union address. To justify holding rates so low for so long, the Fed is choosing to ignore the fact that CPI inflation is currently running north of 3%. Instead, it has conveniently chosen to look at a hand-picked alternative measure, the chain-weighted core PCE, which comes in just a shade below the Fed’s arbitrary 2% target. How convenient.
After some changes in key membership at the Federal Reserve’s policy-setting Open Markets Committee, in which a few long-time hawks were put out to pasture, the Fed has now established itself at the extreme dovish end of the policy spectrum. Among other central banks around the world, it may now be outflanked only by some very profligate ones in South America and sub-Saharan Africa. Unfortunately, the FOMC has its hands on the wheel of the world’s reserve currency, and therefore its decisions may lead the planet into financial chaos as long as other nations are content to follow the Fed farther and farther into a swamp of liquidity. To paraphrase Pete Seeger’s protest of the escalation of the war in Vietnam, “we are waist deep in the Big Muddy and the damn fool yells ‘press on.’”
Is High, Single-Digit Unemployment the ‘New Normal?’
Ask ManpowerGroup Chairman and Chief Executive Jeff Joerres if there’s a “new normal” of higher-than-desired unemployment in the U.S. He will agree.
“There’s no reason to suspect any time in the next three years we will find ourselves under 7% unemployment,” said the top officer at the $22 billion revenue, Milwaukee-based Manpower, which provides temporary staffing and a host of other employment services globally.
“That (would be) almost eight years of high, single-digit” unemployment, he added in an interview at the outskirts of the World Economic Forum meeting in Davos, Switzerland. The U.S. unemployment rate currently stands at 8.5%.
The bottom line of hiring remains demand and if it gets strong enough, Mr. Joerres asserts it will trump all the serious, much-talked-about structural issues afflicting the ability of so many people to find and keep jobs.
Those issues in the U.S. include a talent mismatch, especially for some highly skilled manufacturing jobs, immigration policies that frustrate employers who believe they keep skilled, productive people out of the country, and colleges that aren’t preparing enough young people for the available careers of the future.
Pentagon Seeks Mightier Bomb vs. Iran
WASHINGTON — Pentagon war planners have concluded that their largest conventional bomb isn’t yet capable of destroying Iran’s most heavily fortified underground facilities, and are stepping up efforts to make it more powerful, according to U.S. officials briefed on the plan.
The 30,000-pound “bunker-buster” bomb, known as the Massive Ordnance Penetrator, was specifically designed to take out the hardened fortifications built by Iran and North Korea to cloak their nuclear programs.
But initial tests indicated that the bomb, as currently configured, wouldn’t be capable of destroying some of Iran’s facilities, either because of their depth or because Tehran has added new fortifications to protect them.
Doubts about the MOP’s effectiveness prompted the Pentagon this month to secretly submit a request to Congress for funding to enhance the bomb’s ability to penetrate deeper into rock, concrete and steel before exploding, the officials said.
The push to boost the power of the MOP is part of stepped-up contingency planning for a possible strike against Iran’s nuclear program, say U.S. officials.
The Defense Department has spent about $330 million so far to develop about 20 of the bombs, which are built by Boeing Co. The Pentagon is seeking about $82 million more… Continue reading
NOVO: Gingrich was a lobbyist
Documents from Novo Nordisk show that the Danish company Novo saw Newt Gingrich as a lobbyist
Novo Nordisk viewed Republican presidential hopeful New Gingrich as a lobbyist in Washington, according to the Danish company’s 2009 annual report in which Novo’s membership of Gingrich’s Center for Health Transformation is listed as “costs for lobbyism”.
Gingrich has come under attack as he insists that he has never worked as a lobbyist, but has only offered strategic consultancy.
The issue is a controversial one because Gingrich portrays himself as a politician who is not involved with what he calls ‘the Washingon elite’.
Gingrich’s claim that he has not been a lobbyist is in sharp contrast to Novo’s annual report from 2009 in which the following “Costs for lobbyism” are listed.
“The total lobby expenditure for 2009 was USD 1,725,000. The number includes staff time in-house lobbying (staff time, expenses), fees for lobbying firms and law firms, membership fees to e.g. industry organisations”.
DOCUMENTATION: Novo Nordisk Annual Report 2009
The Perfect Heist: Why Government Theft Continues to Go Unnoticed
Today, we doff our caps to the folks at the European Central Bank. They’ve pulled off the perfect heist.
The euro-feds have opened the valves…turned on the spigots…and let nearly a half trillion euros worth of liquidity flow directly into the very same banks that have proven they can’t be trusted with a penny.
But that’s how a zombie system works. The living give. The monsters get.
And since, at this stage of the credit cycle, the living don’t have much to give, the feds turn on the printing presses.
Then, from whom does the money come?
Gotta come from someone, no?
That’s right… When you borrow it, it comes from the people who lend it. When you tax it, it comes from the taxpayers. But whom does it come from when you just print it up?
Well, at first it appears to come from no one. Nobody reaches in his pocket and finds fewer dollars. Nobody’s pocket has been picked. But how could that be? Nothing comes from nothing. You add a zero to a zero and you still have a zero.
And yet, the zombie banks now have 489 billion more euros in their vaults. That’s what it said in yesterday’s Financial Times.
“Banks snap up 489 billion euros in ECB loan offer.”
This money certainly seems real. The banks can lend it. Spend it. Toss it out the window or down the drain. They can light cigars with it. They can use it to wrap gold coins before sending them out as Christmas presents.
Let’s see, we saw an ad. Mercedes Benz CL class 2011-2012 autos are selling, in round numbers, for $100,000. With this money, you could buy about 6 million of them. Which is probably more or less what will happen to the money.
But what concerns us today is not where it goes but where it came from. Did it come from space? From another galaxy? No? Then, isn’t all wealth on earth owned by someone? Yes? Then, it must have come from some humans somewhere on Earth.
Goldman Sachs Analysis Highlights Tripwires for U.S. Economic Policy in 2012
The Price of Oil, Tight Fiscal Policies, and the European Debt Crisis
The latest economic prognostication for U.S. economic growth in 2012 from analysts at Goldman Sachs Group Inc. is essentially pessimistic—forecasting about 2 percent real economic growth (after accounting for inflation) for the year. That would be tolerable if the economy wasn’t still climbing out of the big hole dug by the Great Recession. To emerge from that hole, we need to do better.
Broadly speaking, the Goldman Sachs analysts see a repeat of 2011 with some job growth but not as much as we need, stagnating incomes, and general sluggishness. But what’s more interesting than this bottom line are the three contributors they highlight as providing the headwinds:
- Tight, and tightening, oil supplies
- Contractionary fiscal policy
- Spillovers from European crisis
