The Fed no longer has credibility, and you can see that. The divergence between the futures markets and the Fed’s own projections about what they’re going to do about interest rates—this is a huge problem,” he told CNBC’s “Squawk Box.” – Senator Pat Toomey on CNBC
Sorry Pat, the entire U.S. financial system has lost all credibility. While the economic condition of the United States continues to deteriorate rather quickly, the S&P 500 and Nasdaq continue to push insanely higher on a historically unprecedented tidal wave of printed money.
“Printed money” is electronic money that is created BOTH by the Fed’s electronic printing press AND the electronic printing press that creates debt certificates. Why the latter? Because debt behaves like money until that debt is repaid. Simply printing money to repay existing debt while printing enough to issue more debt is not the definition of “repayment.” This process in fact forces even more “printed” electronic money into the system.
This is why the broad measures of the stock market are moving higher despite deteriorating real economic fundamentals and it’s why housing prices have soared, despite mediocre transaction volume and a recent influx of supply. All of that printed money is going into paper financial assets. After all, with the financialization of mortgages, the housing market itself has become “financialized.” Just ask the Fed, it’s injected $1.7 trillion of printed money into the housing market via financialized mortgage paper.
Today’s action on the Comex is emblematic of the complete loss of legitimacy of the U.S. financial markets. Gold and silver were slammed hard when the housing starts and permits data was released at 8:30 a.m. EST – click to enlarge image:
Here’s the problem with the highly questionable housing report: The big spike in housing starts occurred in multi-family units. Even if this this number is legitimate, the expansion in apartment buildings is occurring as a massive influx of rental buildings that have been in process over the last year are hitting the market.
In other words, the apartment rental building market is in the midst of a bubble that is bigger than the mid-2000’s bubble. Not only can I confirm this fact in Denver – almost all new buildings, though not advertised, will give new tenants two free months as a move-in incentive – but I have been getting flooded with emails from readers from other large cities who are confirming the same dynamic in their area. I will have a lot more on the housing market later. What I have discovered is stunning.
If anything, the housing market data today should have received a very bearish response from the equity markets and a very bullish response from the gold and silver market. Instead, the Fed is working overtime to prop up stocks and it dumped close to $350 million of paper gold onto the Comex in the span of one minute.
But not only was the housing market report bearish for the system, we learned right before that report that more layoffs are coming in the oil industry; we learned right after that report that U of Michigan’s measure of consumer “confidence” dropped and missed Wall Street’s expectations by the most since 2006.
Furthermore, how can the price of silver be declining when the U.S. mint acknowledged last week that these is no supply for it to mint silver eagles? This after huge spike in silver eagle sales in June.
So you see, Pat, its not just the Federal Reserve that has lost all credibility. It’s the entire U.S. financial system. The financial markets have become a complete fairytale. In fact, the Fed lost all credibility back in 2012 when Ron Paul asked Ben Bernanke if gold was money, to which Bernanke replied, “no” after he uncontrollably flashed a facial expression which “tells” he’s about lie. When further asked why Central Banks continue to buy and own gold, Bernanke flashed that “I’m about lie” expression again and stuttered, “out of tradition.” Were we watching the modern version of “Fiddler On The Roof?”
At that split moment in time Bernanke’s hubris prevented him from responding with a credible answer. Anyone with any remaining shred of faith in Bernanke’s/the Fed’s credibility – his ethics, morals and spirituality – had their hopes nuked by hubris. It was perhaps the most fraudulent statement ever issued by a Central Banker.
After all, It sure seems like China, Russia and India are converting a lot of paper U.S. dollars into something that was summarily dismissed by the head of the Fed as being a “tradition.”