Throughout the West, politicians from Australia via London and Berlin to Washington and Beijing are determined to conceal the truth. The latest data prove, however, that there is no alternative to disaster….and the markets have this well and truly sussed.
I’m indebted to St Andrews investments for supplying most of the information laid out below. As a body of data, it represents what one might call A Bonfire of The Inaccuracies, blowing apart forever the bollocks out out by the Obama White House since October 2011 about US ‘recovery’.
These are the key headlines:
* The US labour market participation rate dropped to 63.2% in July, the lowest level since the late 1970s. The participation rate for men is at an all-time low. The unemployment rate has been falling, but chiefly because so many people are giving up hope and dropping off the rolls. (You read it here first)
* After five years of transferring over $3 trillion of mad banker bad debts onto its balance sheet – and overseeing a 65% increase in the US national debt, the Fed wants us all to believe that a few more one last heaves are still required….to the tune of $85 billion each and every month. More of a tapeworm than a taper, I’d say.
* A decline in the T-Bond price down to 110.00 would put the yield well above 6.5%….even at the Fed’s bullish target of 4.3%, that’ still nearly double what it was eighteen months ago. (Rates are rising: you read it here first)
* With the US national debt currently at $17 trillion and rising, for every one percent rise in rates we have, the Fed has to print an additional US $200 billion a year to pay for that rise. A rise to 6.5% would mean an additional $800 billion in printing. And in classic Gordon Brown style, the cost of recent overseas wars are “off balance sheet”.
* In fact, you don’t have to have a first in Pure maths see that the current US Fed’s $85 billion per month of QE isn’t going to be enough. So instead
of tapering, Uncle Ben’s Mice will eventually have to inflate the amount of easing. Bernanke (and Yellen is more pro-QE than him) will be forced to print yet more greenbacks, and that will drag the dollar down while forcing rates higher as investors perceive an increase in risk. This is the vicious circle outlined here at The Slog recently, when I noted that ‘…the Federal Reserve will struggle to extract itself from QE if it delays until 2014, and could drown in losses on its $3.6 trillion of bond holdings as yields rise.’
* The Swiss Franc has of late been rising in value not just when the dollar falls, but also when it rallies. That suggests strongly that the move into the Franc is a case of fear that the Buck is in the kind of serious trouble that can’t be fixed by a bit of fine tuning and secret printing here and there.
The fears are justified because the US fiscal and economic situations are dire, and have been for nearly four years now. QE and Zirp haven’t worked, and there’s nothing left in the Fed’s tool kit to replace them. By buckling in the face of Wall Street yet again, the Federal Reserve is pulling America ever closer to the cliff, and being assisted in that desperate endeavour by an empty-suit President constantly looking for green shoots and shooting wars.
Ignore the bromides coming out of Washington, Berlin, London, Frankfurt and Beijing: fiscal and financial globalist capitalism is in a deep pit of poo created by naive neoliberal academics and psychotic banking greed. There is no way out: accept that, and prepare accordingly.