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Can we Trust Government Statistics on the Economy?Gary Dorsch Whenever speaking before a Congressional committee, former Fed chief, “Easy” Al Greenspan was fond of saying, “I guess I should warn you. If I turn out to be particularly clear, you’ve probably misunderstood what I’ve said.” His protégé, Fed chief Ben “Bubbles” Bernanke borrowed the script from his mentor, and speaking in the shadow of the majestic Grand Teton mountains, before a symposium of G-20 central bankers, in Jackson Hole, Wyoming on August 26th, - left most his audience wondering what he meant. “Everything depends on proper listening. Of ten people, who listen to the same speech or story, each one may well understand it differently - perhaps only one of them will understand it correctly.” Traders were anxiously waiting to hear whether Mr Bernanke would send a crystal clear signal about another round of “Quantitative Easing,” (QE), designed to artificially inflate the value of the stock market, with the principal aim of defending the wealth of the financial aristocracy. At the end of the day, it was generally understood that while the Fed hasn’t made a final decision so far, Bernanke was careful to keep the dream of QE-3 alive. “The Committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools as appropriate to promote a stronger economic recovery in a context of price stability,” Bernanke said. Adding a new twist, he said the September policy meeting will be extended to two days, instead of just one, to allow for a fuller discussion, suggesting a pleasant surprise (ie QE-3) could be in the offing next month, for today’s buyers of risky assets. In last year’s Jackson Hole speech, Bernanke clearly telegraphed QE-2, a plan to buy $600-billion of US Treasury-bonds, used to monetize the debts of the US-government and spur more spending by the wealthiest Americans. Immediately afterward, the S&P-500 Index started rising and gained +28% until May 2011, when it leveled out.
As if by déjà vu, Bernanke ignited yet another powerful rally in the stock market, by hinting it is safe to buy risky stocks. He dispelled fears of a looming “double-dip” recession, by simply saying he is optimistic about the outlook for the US-economy, even after the stock market took a drubbing in the month of August. “With respect to longer-run prospects, my own view is more optimistic. The growth fundamentals of the United States do not appear to have been permanently altered by the shocks of the past four years.” Immediately after uttering these words, the Dow Jones Industrials found good support at the psychological 11,000-level, quickly reversed an intra-day -200-point loss, and managed to close +134-points higher on the day, thereby forcing short sellers to scramble to cover losing positions. It is very interesting to note, that a year ago, Bernanke was telegraphing QE-2, as the Dow Industrials were teetering at the psychological 10,000-level, and quivering on latent fears of a “double-dip” recession. This year, Bernanke was defending the Dow Industrials at a slightly higher 11,000-level, by hinting at QE-3. Whereas a year ago, the yield on the Treasury’s 10-year note hit a bottom at 2.50%, this year it found a bottom at 2-percent. Nowadays, most traders and the public at large are mentally conditioned to look to the White House and the Federal Reserve, to ride to the rescue of the US-economy, whenever there is a crash in the stock market, or when the economy runs into a rough patch.
The Fed’s willingness to print trillions of US-dollars is part of Bernanke’s unprecedented effort to keep the stock market artificially inflated and trending higher along an upward trajectory. It’s dubbed the “Bernanke Put,” and at its core is the explosive growth of the high-octane MZM money supply. It’s expanded by roughly $1-trillion since April 2010. Even as the US-economic growth rate was stumbling towards stagnation in the first half of 2011, the hallucinogenic effects of QE were lifting US blue-chips higher. As the MZM money supply reached a record $10.45-trillion in August 2011, the Dow Industrials rose to the 12,750, before the rally was rudely interrupted – by the specter of a “double-dip” recession. Bernanke and Goldman Sachs alumni, NY Fed chief William Dudley paid no heed to angry criticism from Brazil, China, and India, Tea Party Republicans and other Fed officials, that the Fed’s QE-2 scheme had also lifted North Sea Brent crude oil to $115 /barrel, and contributed to a doubling of corn and soybean prices, thus stifling the global economy, with a massive tax on producer profits and consumer incomes. In fact, the “commodity shock” generated by the Fed’s QE-2 scheme is one of the primary causes behind the anemic state in the US-economy, averaging just +0.7% growth for the first half of 2011. The Fed has already kept short-term interest rates locked near zero for 2-½-years, and says it would keep the fed funds rate pegged near zero-percent through mid-2013. Such a move is hurting American retirees, earning about $368-billion /year less on their bank CD’s compared with a few years ago. Also, a prolonged time period of unlimited and nearly free credit is a huge windfall to the banks, hedge funds, and speculators of all sorts, who can now feel more confident that the Fed will underwrite new bubbles in the markets. Everything was proceeding nicely, for the financial aristocracy, until the Fed decided to take a brief hiatus from money printing. Once the printing presses turned silent on July 1st, the QE addicts on Wall Street began to suffer from severe withdrawal symptoms. The stock market bulls suddenly got wobbly knee caps, and the Dow Jones Industrials crashed -2,000-points, without warning. Likewise, the S&P-500 Index plunged -18% lower, tumbling dangerously close to the threshold of bear market territory. Quickly, the illusions of increasing wealth on Wall Street, conjured-up by the Fed’s hallucinogenic QE-drug, began to wear off. To read the rest of this article, please click on the hyperlink below: http://www.sirchartsalot.com/article.php?id=157 ### Aug 30, 2011 321gold Ltd |
