U.S. Financial Markets Have Lost All Credibility

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:

COMEXGOLD

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.”

18 thoughts on “U.S. Financial Markets Have Lost All Credibility

    1. I think you are right.
      Often markets go totally parabolic and insane just before they break just to lure the remaining last idiots in on the long side.

      When the markets violently turns down, the gates are closed and people are stuck with their holdings because there are no bids.

      We are almost there but I wonder what kind of event we could have thet could trigger panic selling of that magnitude forcing the PPT to give up their manipulation?

  1. I have private investments in apartment building complexes, nice places, located in the sun belt-been doing it for 12 years now. 4 different funds opened a couple of years apart . Returns have been double digit-nice. not wild.

    called the fund manager a few months ago to see whats happening as he has not offered a new fund lately and the old funds are being liquidated one property at a time so cash is available.’

    he told me the apartment market is too frothy for them so on balance they are sellers. They just cannot find decent value as an investment so basically they are on sidelines till easier potential returns. so no new fund til they find a few things that will work.

    its a sign of a disciplined manager.

    1. “Frothy?” He’s understating because he has to or he’ll lose his investors. The apartment market is
      in a bigger bubble than it was in the original housing bubble.

  2. Here is that 1417 contract slam in %GC_F at 08:33 ET
    Eric Scott Hunsader retweeted
    stephen q ‏@quanholdingsllc 1h1 hour ago

    @nanexllc if you saw the #GOLD $GLD $GC_F SLAM … some algo sold 3x as much Gold in a few minutes as the ENTIRE #COMEX has in its warehouse

    rockhowse ‏@rockhowse

    @quanholdingsllc @nanexllc Here is that 1417 contract slam in %GC_F at 08:33 ET
    Embedded image permalink

    https://twitter.com/rockhowse/status/622028167121735680

    1. We’re headed for much worse than happened to Germany in the 1920’s. MUCH worse. The world is headed for much worse.

        1. Dude, hitting with an ex-pro later today – he was ranked 139 in the world in doubles and 280 in singles at one point – then going for a long high altitude hike in the Rockies tomorrow!

  3. Dave:
    Just a reminder – I am a man without a country – I am an exile in my own land.
    Nothing that has gone on for a very long time represents anything I hold dear or value in what was the USA. I therefore reside in a land to which I no longer hold any allegiance. I will continue to live as peaceably as I can in the midst of this terrible evil.
    When I realized this a few weeks back after the Supremes blew up on a Thurs. statutory law and then on Friday – within 24 hours of each other Civil law – any shred of hope I had for anything I valued in a vain thought that those in authority would make the correct decision and uphold the Rule of Law just went out the window. Funny thing is I am really not angry anymore as I choose to not fight against a Leviathan that consumes everything in its path . I am merely stepping out of the way and letting it all go over the cliff under its own power.

    1. RJ … the evil is in the imbalance. We need to use gold & silver as form of currency along side debt based fiat. Both will become stronger for it. I believe the combination has been a long term goal, but never spoken of.

  4. Dave,

    Homebuilders are taking a beating from lack of labor according to CNBC! The lack of “skilled” labor in housing has existed for twenty years. The best all work for themselves and pick and choose their projects. I’ve seen so many errors from framing to finish work it’s amazing. These illiterates can’t even read a tape or build a set of stairs. Let’s not talk about electricians and plumbers with chain saws! New housing is all about production which equals shoddy work.

    You and I know the problem and lack of labor is not it. I wouldn’t build or buy a new house for anything now. Buyer beware.

    Ray

    1. LOL. I think at any given point in the day, maybe 5k people are watching CNBC. Who cares what they have to say.

      1. If 5K are watching CNBS its because the batteries died in their remote controls and they are too lazy to get up and either put in fresh batteries or change the channel or turn off the TV. What a boob tube nation the US has become, with extra emphasis on boob.

  5. maybe we’re closer to the bottom than we realize…..

    Let’s Get Real About Gold: It’s a Pet Rock

    “A lot of investors have become disillusioned with gold,” says Suki Cooper, head of metals research at Barclays in New York. “Safe-haven demand hasn’t been strong enough to lift prices, but has only been strong enough to keep them from falling.”

    Many people may have bought gold for the wrong reasons: because of its glittering 18.7% average annual return between 2002 and 2011, because of its purportedly magical inflation-fighting properties, because it is supposed to shine in the darkest of days. But gold’s long-term returns are muted, it isn’t a panacea for inflation, and it does well in response to unexpected crises—but not long-simmering troubles like the Greek situation. And you will put lightning in a bottle before you figure out what gold is really worth.

    With greenhorns in gold starting to figure all this out, the price has gotten tarnished. It is time to call owning gold what it is: an act of faith. As the Epistle to the Hebrews defined it forevermore, “Faith is the substance of things hoped for, the evidence of things not seen.” Own gold if you feel you must, but admit honestly that you are relying on hope and imagination.

    Recognize, too, that gold bugs—the people who believe in owning the yellow metal no matter what—often resemble the subjects of a laboratory experiment on the psychology of cognitive dissonance.
    http://www.wsj.com/articles/lets-get-real-about-gold-its-a-pet-rock-1437174733

    the level of disdain by the ignorant is at an absolute pinnacle….

    1. LOL. Funny cuz I had the same thought as you when a friend told me about that article yesterday. Could be a definitive bottom-signal

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