Yellen’s Bluff – The Economy Is Getting Sucked Into A Black Hole

Dave, why is your Federal Reserve/Government so insistent on the idea of raising rates and coming up with truly insulting economic numbers to allegedly justify it? What is really going on behind the curtain?  – John Embry

Apparently, Janet Yellen is asserting that “gains” in the labor market show the economy is on a healthy track of expansion and this necessitates a need to raise interest rates.  First of all, this coming from a troll-like figure who stated in an FOMC meeting – per the 2009 FOMC meeting transcripts – that the employment report was bogus.  And second, it stretches any realm of credibility to assert that a one-quarter of one percent hike in the Fed Funds rate constitutes a rate hike.

But contrary to Yellen’s disingenuous rationalization supporting her threat to raise the Fed funds a smidgen, here’s what the markets are saying about the economy:

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Oil and copper are two of the best “barometers” of the relative level of economic activity.  The conspiracies about why oil is tanking are just ludicrous .  The price of oil is in collapse because the demand for oil is collapsing.  It’s that simple.   Copper confirms this.   Both commodities are being sucked into the same black hole into which they were getting sucked in 2008/2009, before Bernanke’s finger got stuck on the “GO” button of his electronic printing press.

On Monday the Dallas and Chicago Fed manufacturing indexes were released. Both plummeted below 50 (the Dallas index has been below 50 for awhile).   A reading below 50 from these Fed indices indicates economic contraction – i.e. economic output is declining. The “new orders” sub-component of all the regional Fed indices is dropping so low that it’s starting to dig a hole for China

To make matters worse, the holiday retail sales spending season is morphing – predictably – into a disaster.  Bank of America released its aggregate credit card spending data which tracks the first three weeks ending on Black Friday and found that early holiday sales were down 1.2% from last year (link from Zerohedge).   Keep in mind that “Black Friday” sales promotions began at the beginning of November, which – if anything – should have pulled sales forward.  In other words, there should have been a healthy gain in year over year sales for the measured period.

It’s become obvious to most that the housing market is rolling over.  I’m seeing the indications all around Denver and have received emails from people from all over the country confirming the same.  I’m no longer hearing ads for “house flipping” seminars on the local radio broadcasts, which had flooded the airwaves for most of the summer.  Sure there’s still going to be some tiny pockets where there’s embers still glowing from the trillions of dollars the Fed/Govt injected into the mortgage market.  But anyone who buys a house now will be significantly underwater on their mortgage a year from now.

I’m looking forward to watching the Fed navigate the next meeting.  I don’t see how they can slide by another meeting without raising rates.  Unless an “unexpected” exogenous event occurs that enables them to justify another round of deferral after running around  like idiots with their heads cut off on a daily basis since the last FOMC meeting issuing rate hike threats.

In the context of the Paris false flag event,  the recent escalation of anti-ISIS propaganda and the rising level of confrontation with Russia, there’s a lot of material available to the Central Planners of the U.S. which can be used to generate an “exogenous event” that would enable to Fed to moonwalk away from a rate hike and deflect the hoi polloi’s attention away from the reality of the U.S. economic system swirling into a black hole.

8 thoughts on “Yellen’s Bluff – The Economy Is Getting Sucked Into A Black Hole

  1. My guess is that the Fed will use the Friday’s jobs report as the justification for raising the interest rate, or not.
    If the Fed wants to raise then it will see to it that the jobs report is good, otherwise it will see to it that a bad
    report is issued. Either way it will create its own supporting data for what it decides to do. At this point I think they
    will raise come hell or high water.

    1. Mike F …. The price of gold and the trade level of the dollar should not be looked upon as being polar opposites, necessarily. That view is what I would refer to as a “dark side view” where gold does not act as a currency , but simply as an investment/store of value (static) and the dollar does act as a currency (medium of exchange).

      On the light side of this yin-yang reality, gold is a currency and the dollar still plays a vital role in this context. It is a real-time price measure in order to compare the price value of two debt-free widgets so that they may trade directly for each other with no debt involved in the settlement….. just like a new suit for some gold.

  2. People mistakenly point out the dollar is backed by nothing, when in fact, the dollar is backed by the Federal Reserve. If the world has faith in the institution that backs the dollar, then by proxy, they will have faith in the product they produce.

    However, if the world begins to increasingly question and doubt the credibility of that institution, which is where we are at now, then their product is brought into question as well. Rest assured, the “troll” and her minions know it and are shitting their britches.

    As a private cartel the Feds mandate is to save themselves first, banks second, and everyone else last. The pending rate increase is a last desperate act of an institution hell-bent on rescuing it’s reputation and thereby restoring faith in their product.

    Ironically, these feckless morons are on the eve of repeating the same mistake made 80yrs ago when the Fed raised rates into eye of the storm, which was credited with expediting and exacerbating the Great Depression.

    Yes, the Fed is trapped in a box. They are at the preverbal fork in the road. They must make a choice in December. I believe they will choose to save themselves and thereby sink the ship. History will repeat. Depression, war, recovery; wash, rinse, repeat.

    1. ZEN …. The FED is only trapped on the basis that the market does not respond by creating and entering its own brand of liquidity in order to give The FED’s debt-brand a rest.

      The dollar can just as easily be backed by transactions where the dollar plays a role, not as a currency, but simply as a price measure, a measure of value, regardless of how a trade is settled. The settlement might be gold or silver and any debt-free widget.

      Ever heard of trading gold for a man’s new suit ??? Each of those items has a price measure associated with them. This is how pricing supports debt-free trades.

      1. Rooster, enough. You keep regurgitating the same stuff. Buy a couple of my research reports and learn how to make money. One side of my 2-report mining stock special is up 8% this week WITH GOLD DOWN. The other one is working on a deal on their 49% in a massive copper project with the largest Chinese mining company that will net the company AT LEAST 2x their current market cap in CASH. That’s just one of their projects and I just met with CEO a couple weeks ago and it isn’t price of copper holding up the deal, it’s one last regulatory check-box that needs to be checked with regard to Russian regulatory laws. He told me he expects that to happen sometime in the next 6 months (Russia’s SIL – Strategic Investment Law). They are also about to get a big boost on one of their current gold royalty streams…

  3. You’ll take special note of what is not happening in the news. There is little to no mention of debt-free liquidity entering the market to support trade and eventually allows the FED to act responsibly in its management of debt currency as a symbiotic yin-yang of liquidity takes shape.

    The market is responding to a need for debt-free gold being used as a source of debt-free economic stimulus. When it gains a sense of “effectiveness”, look for rates to start to inch upward along with the price of gold as the gold price manipulation subsides.

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