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:
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.