Most of what accounts for GDP is nothing but noise, leaving only a few major indications about what the economy is doing (or not doing). Prior to 2008, that wasn’t much of a problem as GDP by and large seemed to correlate well with other estimations of economic progress, and even our own intuitive perceptions.
If you go back historically, almost all of GDP, on average, comes down to two components – Personal Consumption Expenditures (PCE) and Fixed Investment (FI). That makes a great deal of sense given that consumers and businesses are really what the economy is supposed to be about. What that means is that changes in ...
Click through for the rest of Jeffrey Snider's article.
The Federal Reserve has finally ended its quantitative easing programs. Since the financial crisis of 2008, the Fed has pursued what seemed like an endless policy of asset purchases. As recently as September 2008 the monetary base in the US was just a hair over $800 bn. Today this figure is just shy of $4.2 trillion, for a total increase of 425%.
For its part Janet Yellen and her gang of Fed economists are probably pretty pleased with themselves. Unemployment is down, headline inflation remains muted, and the word on Wall Street is that a worse crisis has been averted. The stock market is at record highs, and banks (and bankers) are back to their pre-crisis eminence.
One of the true marks of a great economist is an ability to see past the obvious outcomes and into the veiled results of policies. Friedrich Bastiat’s great essay on “that which is seen, and that which is not seen” provides a cautionary parable that disastrous analyses result when people don’t bother looking further than the immediate results of an action.
Nowhere is this lesson more instructive than with the Fed’s QE policies of the past 6 years.
Click through for the rest. It's a good read and short.
Increase of Russia’s gold reserves in September biggest since 1998 — Bloomberg October 29, 20:41 UTC+3
LONDON, October 29. /TASS/. Russia’s gold reserves have reached the biggest mark since 1998 when the country defaulted on local debt, Bloomberg said Wednesday. The country’s bullion holdings are now the biggest in almost two decades, the agency said.
The report indicated that “Russian reserves, which overtook China and Switzerland this year, almost tripled since the end of 2005 and are the highest since at least 1993.”
The agency said Russia mined 248.8 tons of gold last year, thus occupying the third position among global producers, with China and Australia being number one and number two. The London-based World Gold Council says gold accounts for 10% of Russia’s total reserves.
Quantitative easing is dead — and good riddance to it.
The Federal Reserve on Wednesday announced that it was finished with quantitative easing, a dangerous and experimental money-printing operation started in November 2008 when Washington was convincing itself and the nation that the banking system was on the verge of collapse.
During the past six years the Fed “printed” more than $4 trillion in extra money and used that digital dough to purchase Treasury bonds and mortgage-backed securities. The result has been artificially low interest rates which helped create an ebullient stock market that has blown itself into another bubble.
QE also has created conditions for a lot of possible unintended and unforeseen consequences. ...
The country expanded its stockpile by 37.2 metric tons in September, according to data on the IMF's website.
Author: Nicholas Larkin (Bloomberg) Posted: Wednesday , 29 Oct 2014
Russia boosted gold reserves by the most since defaulting on local debt in 1998, driving its bullion holdings to the largest in at least two decades.
The country expanded its stockpile, the world’s fifth- biggest, by 37.2 metric tons in September to 1,149.8 tons, according to data on the International Monetary Fund’s website. The increase, valued at about $1.5 billion, was the biggest since November 1998. Russian reserves, which overtook those of Switzerland and China this year, almost tripled since the end of 2005 and are at the highest since at least 1993, the data show. ...
What in the world could Russia want with all that gold? ;-)
“How can this happen?” Ms. Hinders said in a recent interview. “Who takes your money before they prove that you’ve done anything wrong with it?”
The federal government does…
The topic of civil asset forfeiture has been high on our agenda recently as federal ‘agents’ discover how to steal Americans’ hard-earned cash with zero repercussions, and decide unilaterally how much cash a ‘common man’ is allowed to carry.
But as The NY Times reports, the escalation to the IRS brings a whole new world of possibilities with regard asset confiscation based on no actual crime being proved…
This news item is growing and I've heard a number of people talking about it of late. Even my mechanic. It raises again a distant issue that I didn't think we'd see again, the seizing of gold, ie gold confiscation.
But I may have to reconsider that with this new power the government is wielding.
Submitted by Julian Adorney via the Ludwig von Mises Institute,
Most defenders of the state assume that government services help the poor. And, sometimes, some poor people do benefit financially from government programs. But there’s a hidden cost: taxation and mandatory programs (Social Security, for instance) that hurt the needy by restricting their choices. Government taxes away income that low-income households could invest in improving their lives. At the same time, state-sponsored benefits create incentives that keep the poor trapped in poverty.
Many assume that government barely taxes the poor, but the reality is otherwise. The poorest fifth of Americans pay 16 percent of their incomes in taxes (including federal, state, and local). One in six dollars they earn goes straight to the government. For a family living at the margin, those taxes can be the difference between food on the table and hungry children.
Admittedly, a big chunk of government expenses is for programs designed to help the poor. But even when this money actually helps — and it rarely does — it’s important to note the pernicious effects of taxation. Consider: every dollar of taxes is one dollar that a worker must give to the government first, regardless of whether that dollar could help him feed his family or improve his livelihood. If a poor man is faced with the choice of paying taxes or starting a business, he had best choose the former, otherwise he’ll go to jail.
Despite the sharp recovery in the stock indices, strength in the US dollar and increase in bond yields, precious metals ended last week mostly flat in anticipation of the FOMC meeting this week. Physical market tightness supports Gold
Thru today (Oct 28) the U.S. mint has sold 4,365,000 silver eagles. This is by far the highest total for October on record, with 3 business days left in the month. It remains to be seen if 2014′s yearly total will exceed last year’s 42,675,000. But if November and December continue at the September/October 4 million-plus rate, 2014 will smash last year’s record. Either way, the U.S. mint is selling more ounces of silver than all U.S. mines combined produce annually.
As most of you know the roughly 93% of the physical silver inventory – 1,062 tonnes has been removed this year from the Shanghai Futures Exchange ...
China sent investigators to the southern province of Guangdong to probe a seven-fold surge in precious-metals exports as the government intensifies scrutiny of irregularities in the country’s trade figures.
The team includes staff from the Ministry of Commerce and General Administration of Customs, according to people with knowledge of the matter who asked not to be identified because the information hasn’t been made public. Shipments of precious metals, including jewelry, rose to about $10.8 billion in September from $1.39 billion a year earlier, according to customs data released Oct. 13. Gold prices in Shanghai today dropped the most since December.
Some one is in some serious trouble. Letting that precious stuff out of the country is a no-no.
Yesterday’s hawkish tone from the FED, coupled with the consequent surge higher for the US dollar, appears to have finally provided the catalyst for silver’s breakout from its recent extended phase of price congestion which has seen the industrial metal trade in a narrow range throughout October, and neatly defined by the red and blue dotted lines of accumulation and distribution. The move lower for gold on the news, has continued this morning, with the precious metal plunging further and down to test the $1200 per ounce area in early trading, dragging silver down with it and through the $17 per ounce level, to currently trade at $16.85 per ounce on Globex. This morning’s price action for silver is key, as it has now moved through the potential support platform in the $17.25 per ounce region, and provided today’s price action holds well below this level, then the metal looks set to move deeper still as the bearish tone picks up the momentum from gold and the US dollar. ...
The Fed announced that it was ending QE yesterday because unemployment was improving and the economy was fine. But it’s a lie. The Fed is not ending QE. It will still be reinvesting the proceeds of the bonds on its balance sheet – $4 trillion worth of bonds – as they mature. It also reinvests the interest income on this portfolio. Interest that is paid with printed money. This is not “ending QE.” It’s perpetual QE.
Click through for the rest. He makes some valid points.
Why do I say this? As expected, the FOMC ended QE3 and left in the forward guidance of “considerable time.” Some analysts believe that the balance of the statement was HAWKISH because the phrase of “significant underutilization of labor resources” to “underutilization of labor resources is gradually diminishing.” The problem is that Chair Yellen has adopted the Labor Market Conditions Index (LMCI) and its 19 variables so without a press conference or until we read the FOMC minutes we have no basis for the change in “significant underutilization” language. The lack of a press conference left investors dazed and confused because there was no explanation for the Fed’s decision. In September we heard about the headwinds of global slowdowns and a strong dollar, but there is no a word about GLOBAL HEADWINDS in the Fed’s statement.
We're being hit with a double-whammy: Wages are under deflationary pressure, and almost everything else is exposed to inflationary pressure.
As correspondent Mark G. observed in Globalization = Permanent Instability, it's impossible to understand inflation and deflation now except in a global context.
Now that prices for commodities such as oil and grain are set on the global market, local surpluses don't push prices down. If North America has record harvests of grain, on a national basis we'd expect prices to fall as local supply exceeds local demand.
But since grain is tradable, i.e. it can be shipped to other markets where demand and thus prices are much higher, the price in North America reflects supply and demand everywhere on the planet, not just in North America. ...
In the aftermath of the Fed announcement that they are officially ending the asset-backed purchase program know as QE, today King World News spoke with the man the Fed called on to execute QE1 and who also set up the Fed’s massive trading room, former Fed member and former Managing Director at Morgan Stanley, Andrew Huszar. What he had to say will surprise KWN readers around the world. Below is what Huszar had to say in this powerful interview.
Andrew Huszar: “What happened today with the Fed was expected. The Fed has been angling for the end of QE for quite some time. The reality is that they are not entirely ending QE. As I mentioned to you previously, the Fed is committed to maintaining the current size of its portfolio. As some of their bonds mature, the Fed will be going out and buying bonds to replace them. So we will still see the Fed buying hundreds of billions of dollars of bonds each year....
Although China’s growth has slipped the Asian dragon remains the key driver for metals and minerals prices and trade.
Author: Lawrence Williams Posted: Wednesday , 29 Oct 2014
LONDON (MINEWEB) -
Consensus opinion at last week’s Bloomberg East meets West seminar in London was that the latest growth figures from China, which have been considerably lower than those of the previous few years, are indeed the ‘new normal’ rather than just a downwards blip.
Government policy now seems to have abandoned the growth-at-any-costs scenario, which saw double digit GDP growth, to a more sustainable level which seems more likely to encompass annual growth figures of between 5% and 8%. ...
We just learned that the homeownership rate in the United States has fallen to the lowest level in 19 years. But of course this is not a new trend. As you will see in this article, the homeownership rate in the United States has been in a continual decline for more than 7 years. Obviously this is not a sign of a healthy economy. Traditionally, homeownership has been one of the key indicators that you belong to the middle class. When people define "the American Dream", it is usually one of the first things mentioned. So if the percentage of Americans that own a home has been steadily going down for 7 years in a row, what does that tell us about the health of the middle class in this country?
People want to know the answer to the all-important question: Have we seen the bottom in gold and silver? To help answer this major question, below are two important charts which cover two of the largest gold and silver producers in the world. The first one features Barrick Gold. The stock has fallen back to an extremely important support level dating back to 1998. Since then, Barrick has never traded below this
Globalization continually creates imbalances that fuel a perpetual instability that gradually impoverishes every sector other than global capital.
Globalization has two guaranteed consequences: permanent instability and endless boom-and-bust cycles. As noted in Forget "Free Trade"--Focus on Capital Flows, the key engine of globalization is mobile capital: capital that can borrow money for next to nothing in one nation and then move that capital to other nations where yields are higher and opportunities for exploitation riper.