This is the ultimate stimulus measure, money will continue to be free, let the final stage of the mad scramble for resources begin. With this statement, the FED has confirmed that the currency will be destroyed. Plan accordingly!
We saw a chart at the Wall Street Journal site today which was entitled “Downward Dow.” The name hearkens to the canine/yoga position better seen that described:
A Canine demostrates the new Dow pattern that is forming for the next two years
The FED sees what is going on and is taking a long, running, Charlie Brown style kick at the Downward Dow before it. Unfortunately for us all, like Charlie Brown, Ben and the gang are going to whiff on the Dow, which is more likely to lie down than resume its forward gait, and pull a hamstring in the process.
In other words, the FED, with today’s statement, has severely injured itself and will do nothing more now than sit on the sidelines and hand out free money. With Congress paralyzed, the helicopters (the FED member banks) will be in charge of dropping the money on the populace.
Sound the alarms! The today the BLS took the pulse of the labor market today and market observers jumped back, aghast that the patient, the US labor market, should be so weak. According to the charts, he was well on his way to recovery. After being in a coma for the past three years, it appeared that he would be back to his old self and dancing in the halls in a matter of months.
Now, the prognosis has taken a turn, albeit a small one, for the worse.
Here at the Mint, we take numbers with a grain of salt. We have nothing against numbers; on the contrary, we are rather fond of them. They give one the ability to appear to make sense of extremely complex phenomena. They make mankind appear intelligent, cunning, even clairvoyant at times.
It should come as no surprise, then, that mankind, specifically those bent on “improving the world,” should place so much faith in them. To understand and interpret numbers and then act on the data gives man a power rush that is exhilarating.
It is a fatal conceit.
It is illogical, perhaps insane, to think that something as complex as creation and the countless phenomena that occur every nanosecond can be adequately expressed (much less understood) in numbers.
On a small scale, such as a family farm, a small town, or even a remote island, numbers can prove very useful. They can provide accurate, timely information about productivity and relative scarcity. In these instances, numbers can be invaluable.
Begin to aggregate theses numbers and try to use them to understand phenomena on a large scale and they become not only devoid of meaning but dangerous.
Why does this happen? Simply because the farther removed that the decision maker reviewing the number is from the processes on the ground, both in space and time, the less able he or she is to react in a coherent manner. This, in a nutshell, is why Socialism, Communism, and any other form of Centralized planning or “world improvement” does not work on a large scale.
With this in mind, we will interpret today’s BLS unemployment numbers for you. Economic observers have been trained to understand that 9.2% unemployment is bad for the economy. Why it is bad, few stop to wonder, but that is a rant for another day.
It is simply understood to be bad, and since the economy needs to be “good,” the world improvers must do something. What will they do? First, they will use this as an excuse for the FED to keep the short term rates insanely low for a longer period of time. This will not create employment but will create hyperinflation.
Second, the US Congress will raise the debt ceiling and resort to the Bush era style of stimulus, they type where every taxpayer gets a check in the mail from the Treasury.
Third, and most importantly, this announcement is a desperate attempt to keep domestic inflation in check. Inflation, and then hyperinflation, will begin once wages increase. The rise in unemployment sends the subliminal message to the working classes that they cannot demand raises because they are just “lucky to have a job.”
Are you really lucky to have a job? The not so subliminal truth is that YOU ARE IRREPLACEABLE AND ARE WORTH MUCH MORE THAN YOU ARE CURRENTLY MAKING!
Lives and economies were never meant to be measured in numbers. Numbers used to make large scale policies generally do more harm than good. Numbers produced by a central authority often are done so either with the intent to deceive or are so untimely and incompetently compiled that they become deceptive as they do not accurately reflect present circumstances.
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*See the MINT Perceived target Rate Chart. This rate is the FED Target rate with a 39 month lag, representing the time it takes for the FED Target rate changes to affect the real economy. This is a 39 months head start that the FED member banks have on the rest of us on using the new money that is created.
With consumer credit in a long term downtrend, the US Congress unable to come to an agreement to raise the debt ceiling, and the Euro system on the verge of collapse, The FED appears desperate. Our speculation is that they are now plotting something we call “Helicopter Phase.”
Helicopter Phase happens when money is literally showered on the American people in a desperate attempt to keep the currency regime from disintegrating. Ben Bernanke attempts to describe it in his own words in the latest edition of Mint Finger Puppet Theatre:
Helicopter Phase will most likely take the form of the stimulus checks that have been mailed out to taxpayers in the past as giving away money to the banks, defense contractors, and other special interests has failed to create any long term growth.
In rural areas, however, we suspect that Ben Bernanke‘s famous helicopter method is likely to prove useful:
*See FED Perceived Economic Effect Rate Chart at bottom of blog. This rate is the FED Target rate with a 39 month lag, representing the time it takes for the FED Target rate changes to affect the real economy. This is a 39 months head start that the FED member banks have on the rest of us on using the new money that is created.
Rationale: Nearly all asset classes are going to begin to cave in to a perceived deflationary spiral that is taking hold as inflation in food and energy costs begins to take its toll. This will temporarily bring Gold and other precious metals down with it. Government likely to announce new stimulus plans in the near future.
Result of Call for June 8, 2011: Yield on 10yr US Treasury bond to fall (price to rise). Was 2.962%, Currently 2.991%. Bad Call.
Calls to Date: Good Calls: 28, Bad Calls: 20, Batting .583
*See FED Perceived Economic Effect Rate Chart at bottom of blog. This rate is the FED Target rate with a 39 month lag, representing the time it takes for the FED Target rate changes to affect the real economy. This is a 39 months head start that the FED member banks have on the rest of us on using the new money that is created.
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