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It’s a Mad, Mad, Mad, Mad World—or, at least, it’s a Mad Economy

22 Jan

QEs 1, 2 & 3 didn't really work in the US.  QE in Japan hasn't worked.  Now, the European Central Bank wants to try QE in the EU. [courtesy Google Images]

QEs 1, 2 & 3 didn’t really work in the US. QE in Japan hasn’t worked. Now, the European Central Bank wants to try QE in the EU.  Good luck with that, hmm?
[courtesy Google Images]

Mohamed A. El-Erian is Chief Economic Adviser at Allianz, a multinational financial services company.  He recently authored an article in Business Insider about the A.D. 2014 stock markets entitled “Traditional Factors Alone Don’t Explain This Remarkalbe Year For US Stocks”.

Mr. El-Erian observed that,

 

“2014 has been a remarkable year for US equities–not just in terms of the handsome return for investors (15% for the S&P) but also because of how this was delivered.

“In 2014, the S&P,

“Registered 51 record highs (that’s an average of one a week, the most since 1995);

“Never had more than three days of consecutive losses (a new record);

“Consistently decoupled from potentially damaging historical correlations with other markets, most notably government bonds and commodities; and, in the process,

“Always managed to recover quickly from sudden and scary air pockets.”

 

You have to admit that, when viewed from Mr. El-Erian’s perspective, last year’s US equity markets were almost as surprising as flipping a coin that came up “heads” 50 times in a row.  All this “good luck” makes you wonder.  It makes you want to check the coin to see if it has two “heads”.

Clearly, something strange (or even a little crazy) dominated last year’s markets.

•  Egon von Grayerz (founder and managing partner of Matterhorn Asset Management based in Zurich, Switzerland) seems to agree with Mr. El-Erian. During a recent radio interview, Mr. von Grayerz said,

 

“Just take the Dow Jones as an example of this madness:  The Dow went down 900 points in seven trading days, and in two days it went up 700 points.

“Why?

“Because the Fed changed a couple of words in their outlook for the coming year.  They now say they could be “patient” and stock market investors saw that as a sign of buying unlimited amounts of stocks without any regard to what’s happening in the rest of the world.”

 

Mr. von Grayerz is right.  The US markets no longer reflect objective, economic reality.  They’re being manipulated and deceived to the point of madness.

Janet Yellen said the word “patience,” and the Dow jumped 700 points to a new record high.  That’s crazy.

What if Ms. Yellen (who bears a remarkable resemblance to the Fairy Godmother in Disney’s Cinderella) had said “BIbbidy-Bobbity-Boo!” or maybe, “Abra-cadabra!”–would the Dow have “magically” jumped another 1,000 or even 5,000 points?

Whatever’s going on in US markets, it’s not easily described as “rational”.

 

•  A lot of these word choices and taboos seem silly. This article, discussing the seeming significance of Fed word choices, may seem silly.

But the point is this: What’s the value of a stock market index that can be dramatically moved up or down by a handful of words rather than fundamentals like Price to Earnings ratios?  Isn’t this dependence on words evidence that the markets have become more “political” than “economic”?

Isn’t this evidence that our stock markets aren’t about the profitability of corporations so much as about the “expectations” of people who buy or sell stocks in the markets.

Today, it doesn’t much matter if a particular corporation finds a brilliant new technology or invention.  What matters is the public’s “expectations” about the corporation, its invention and, most importantly, the market itself.  A stock’s price will rise or fall, depending on whether or not its performance for the past quarter did, or did not, meet or exceed Wall Street’s “expectations”.

Increasingly, what’s important is not the inherent value of the investment, but the mood of the investors.  The Dow Jones and S&P 500 don’t tell us about the value of the stocks they represent.  They tell us about the sentiment of people and entities who invest in stocks.

The market indices don’t measure investments.  They measure investors.

A stock doesn’t rise simply because the corporation is objectively profitable.  It rises because of the investors’ subjective belief that the corporation has been, and will continue to be, profitable.

Insofar as that’s true, it becomes possible to manipulate stock market indices by simply focusing on investor sentiment.  If investors can be made to believe that stocks are more valuable, then stocks are more valuable—regardless of any objective reality to the contrary.

It’s hard to find new technologies or efficiencies that will increase a corporation’s profitability and thereby justify an increase in the price of its stock.  It’s comparatively easy, however, for government to change the public’s sentiment concerning a stock, an industry, a particular market, or even the US and global economies.  They just say a few “magic” words, falsify some economic indicators, and—Presto-Changeo!—happy days are here again!

See?  This economics stuff is simple.  It’s all about public confidence.  Public belief.  Public sentiment.  It’s all in your head, see?  Who needs productive factories when we have economic propaganda?

All we have to do to restore economic prosperity is to make the idiots (a/k/a “voters”) believe they’re prosperous and, magically, they’ll be prosperous!  We don’t have to work harder or smarter.  We don’t need to find new inventions, or even keep our industries and jobs in this country.  No.  All we gotta do is “consume” with greater enthusiasm and abandon.

Saving our economy is simple.  Just pull out the ol’ credit card, go to the mall and Shop ‘Til You Drop!  By shopping enthusiastically, we demonstrate our confidence in our economy and political system.  By shopping with abandon, we vote for “happy days”.  The more we shop, the more confidence we inspire in others.  The more other shop, the more confidence they inspire in us.  Given enough confidence, we can magically go on shopping forever.

We don’t even have to work.  (Work is bad; it cuts into our shopping time.)  All we have to do is shop and consume and leave the work to the idiots in China or Mexico or some other third world country.  And how will the idiot foreign workers be paid?  Well, Barack Obama and Janet Yellen will simply print more fiat dollars and treasuries, see?  We’ll give the idiot foreign workers some paper-promises-to-pay and they will love and respect us for our ability to produce promises-to-pay that can never be kept.

While we wait for the foreigners to finally get smart (they, too, can’t distinguish between paper-promises-to-pay and payments), we can be a nation of consumers who can “shop till we drop”.

But drop, we will.

In fact, after a couple of generations of intense “shopping,” we are now, inevitably, “dropping”.

 

•  We’re already on the front edge of a recession and/or depression that may last for years into the future. Most people don’t believe our circumstances are so dire.  But why don’t they believe?  Because they believe the government’s words.  What difference does it make that our national debt (paper-promises-to-pay) is so great it can never be repaid so long as Janet Yellen can say words like “patience” and thereby make fresh promises?!)

And Janet, the Fed and the government didn’t stop with oral promises.  They’ve changed the formulae they use to calculate economic indicators in order to create the illusion of economic strength.  They’ve outright falsified economic numbers.  They’ve artificially suppressed some prices and artificially inflated others.  Since A.D. 2008, they’ve issued $4 trillion in phony currency and recently guaranteed at least $300 trillion in “derivatives” (which promise we couldn’t pay/keep in less than a century).

So far, our central planers’ schemes have generally worked to create a false confidence in the public.  But it’s all nothing but words.  It’s not objective measurements.  It’s not economics.  It’s propaganda of the same sort the former Soviet Union published until it collapsed.

All that Soviet propaganda seemed so funny to Americans back in the 1990s.  All the lies and bluster seemed hilarious.  But, today, the same propaganda, coming from our own government seems plausible, objective and trustworthy.

Nothing funny going on in our economy, right?

Or maybe not.

In fact, the public’s confidence, based substantially on government’s lies, makes me laugh.

Reminds me of William Shakespeare’s most profound and timeless line: “Lord, what fools these mortals be!”

After all, we can’t just blame the Fed and government for lying.  We’ve also got to blame the people—ourselves—for accepting lies with such relish.

As a people, we plead to our leaders to “tell us lies, tell us lies, tell us sweet, sweet lies”.  And they do.  And we love it.  We thank ‘em for it by repeatedly reelecting our best liars to public office.

 

•  So long as the Dow continues to rise—no matter how irrationally—we can have confidence in our government—right? If the Dow is rising, the President et al must be doing something right.  Right?

And so, by hook or by crook, the Dow is made to rise with little regard for objective reality.  Our government has become as political as the former Soviet Union—lots of speeches from the central planners but little or no production.

Given the market’s increasingly political objectives, the markets have become irrational.  A mere word can make them jump up or down dramatically.  Insofar as the markets are less about economics and more about politics, the markets have “decoupled” from reality.

Increasingly, when we go to the Dow or S&P 500, we aren’t really investing in General Motors or Apple.  We’re investing in Barack Obama, Congress and even one-world government.

I have no doubt that something similar took place in the former Soviet Union before it collapsed.  Although Communism claimed to be some sort of brilliant economic theory, Soviet investments were politically controlled and politically motivated by the central planners for reasons that suited the political interests of the central planners rather than the public or the general economy.

No one invested in Russian steel mills.  They ultimately invested in the Politburo, Mikhail Gorbachev, and the system.  That’s what “central planning” is all about: maintaining confidence in the “central planners” system rather than in the economy’s objective capacity to produce.

Investing in that non-productive “system” (rather than investing in productive businesses and corporations), eventually destroyed the Soviet Union, its national economy, and the “system” itself.

Insofar as today’s Americans invest based on a mere word or two uttered by Janet Yellen, Barack Obama or John Boehner, aren’t we investing in our non-productive political system more than in our productive corporations and economy?  Can we continue to invest “politically” and still avoid a fate like that of the former Soviet Union?

 

•  My point is that markets that move based on someone saying a particular word aren’t responding to market fundamentals. Such markets are political rather than economic.  Markets that move in response to a mere word are motivated by magic or madness.

Q:  Which market motivation do you think is more likely—magic or madness?

Q:  Which market motivation do you think is more sustainable?

Q:  Which markets do you think are more likely to crash—ones based on “magic” or ones based on “madness”?

A:  Both.

Despite all the fun and frolic we feel when Janet Yellen says “patience,” and the Dow jumps 700 points, it’s hard to imagine a better reason for getting out of the equity markets.  The markets aren’t magic.

They must be mad.

Really.

What’s the source of the madness?

Fiat currency.  A debt-based monetary system that treats debt as wealth and paper-promises-to-pay as if they were payments.

If you think that debt is wealth, you’re crazy.  You might not know it.  Your friends might not suspect.  You might be just like (almost) everyone else.  But you be crazy.

At its foundation, all fiat currencies—even the US dollar—are crazy.  They’re designed to defy reality.  They’re intended to not only rob but even destroy the productive elements of society and simultaneously enrich and empower the indolent and non-productive.  Fiat currencies may seem sane for quite a while, but sooner or later, their inherent madness can no longer be concealed and their financial world collapses into chaos.

Those who invest in the paper-promises-to-pay that we call stocks, bonds, pension funds, bank accounts and fiat dollars are crazy.  Ohh, they’ll get away with it for a while.  For decades.  They’ll enter the paper markets and emerge with apparent profits.  But, even so, they’re treating paper promises-to-pay as if they were payments.  That’s as crazy as doing crack.  They treat paper as if it were wealth.  They don’t know the difference between an actual “payment” and a mere “promise to pay”.

But they’ll learn.

And when they do, they will howl (or sob) like madmen at the moon.

 

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16 responses to “It’s a Mad, Mad, Mad, Mad World—or, at least, it’s a Mad Economy

  1. gary

    January 22, 2015 at 12:54 PM

    Now that the Spanish and British astronomers have ‘discovered’ there may be at least two, much-larger-than-earth “planet-like objects” (something actually KNOWN, but hidden from the public by GovCo since the 40s) , NASA has had to admit publicly that they ‘may’ exist. Since ‘they’ is a mini-solar system, orbiting a brown dwarf start (Nemesis), and on a 3600 year-long elliptical orbit, approximately 20 degrees off of our solar ecliptic, and ‘they’ are going to do a pass-by of earth probably some time next year, GovCo knows that there will probably be a considerable ‘upset’ in world geopolitics that will render the current posturing, lies, etc, moot points.

    Not unlike the business man who KNOWS he is going to go bankrupt, so goes out and simultaneously gets as many ‘credit’ cards as he can, then SPENDS, SPENDS, SPENDS, because he KNOWS for a fact, he is NEVER going to have to pay it back, because he will declare bankruptcy. Sound familiar?

    ‘They’ is a system with a brown dwarf star, 56x the size of earth, and 171,000x denser than earth as a sun, and apparently 3 planets, one 6x the size of earth, one 3.5 times the size of earth, and one 2.5x the size of earth. Apparently, in ‘recorded’ history, when this system came by the sun (perihelion) in the past, earth was in conjunction, or on the opposite side of the sun, BUT, this time around, earth and the system will be on the same side of the sun during fly-by, subjecting earth to some…unusual gravitational forces…..and potentially redistributing the political landscape, and I am pretty sure the ‘new world order’ has planned around this for a while, given that it was a 200 year plan, conceived in 1814 by the likes of the Warburgs, Carnegies, Rothschilds, etc and, well, here we are: 200 years down the road, and possibly facing earth-changing events that may make their ‘transition’ to the ‘New World order’ a piece of cake…..since the rest of humanity may be worrying about survival, not political landscape….

    it may become clearer, or, perhaps less clear, in a couple of months, when the brown dwarf system currently behind the sun ( but photographed by the ESA space probe Rosetta last month) peeks around the west side of the sun, signaling our catching up to it and passing between it and the sun. Sun is one ‘astronomical unit’ from earth (approximately 93 million miles), and our fly-by of this mini solar system is forecast to be at a distance of approximately (their best guess, I suppose) .1 astronomical units (9 million miles, or 36x the distance of the moon), and it should look bigger than the moon, so, it may be a bumpy ride, and GovCo KNOWS it is coming, working very hard to hide it from the masses. Might explain why they are not worried about the debt, paybacks, etc, and just keep SPENDING ( at your expense, unless you have been wise enough to extract yourself from the system)…

    As Alfred has pointed out numerous times, GovCo can’t keep up this market illusion up forever, but, thanks to the Spanish astronomers (and people like Marshall Masters, http://www.yowusa.com), maybe they already know they don’t need to…they only need to keep it up just long enough…..

     
  2. russ

    January 22, 2015 at 3:15 PM

    After the Cypress “bail-in”, I closed all bank accounts and retirement accounts. After reading the bank contract and the laws of various countries implementing the “bail-ins”, they now treat bank account depositors as merely unsecured creditors. When they fail, they will “bail-in” and keep your account balance.

    I do not endorse FRN’s and have not used them in over a year. It is a paradigm shift, and has taken some getting used to, but is a lifestyle choice good for me and my beliefs.

     
  3. henry

    January 22, 2015 at 3:30 PM

    As long as the Fed keeps pumping money, the government is giving out bogus statistics, and the CIA is destabilizing countries around the world, economics don’t matter. Every time they say they might stop the pump, the markets fall. By telling everybody that the country is on the right track, they get Americans to continue spending money even if they have to borrow it. Once the pump breaks, things will get pretty ugly very quickly.

     
    • russ

      January 23, 2015 at 5:23 PM

      I agree that economics don’t matter with todays rigged centrally controlled markets, in the sense that because of all the fraud, any economic theory is out the window. If you do your due diligence before you act, it don’t matter. Because everything is rigged and controlled, LIBOR, precious metals, labor stats, inflation rates, everything. Like WOPR said in Wargames, the only way to win is not to play.

       
  4. Christian Gains

    January 22, 2015 at 3:50 PM

    Al, I’m just a bit surprised that you do not simply recognize the “ab cao orden” (probably misspelled it, but you get the point), of 2014’s oddities. “Out of Chaos, Order”.

    After half a Century of research, I’ve come to realize that 2 MAJOR PRINCIPLES apply, for comprehending, (generally speaking), what’s a foot.

    PRINCIPE #1] Luke 4:5 – 8 is the GENUINE FACT and displays, [reveals], the ACTUAL powers that are manipulating and driving History. and

    PRINCIPLE #2] The physical world is merely a shadow reflection of the spiritual world.

    I must admit that gary’s thesis, {monstrous “planet like objects”, [PLO –hmmmm? MIGHT that have some significance?], are barreling towards us, with astoundingly high densities, impact potential has some weight. Not that I FULLY believe it as he’s described the potentials, but, I do see where such an event sequence might offer the Power Elite some opportunity for launching their, long sought after, GLOBAL CENTRALIZED POWER STRUCTURE, aka: “The New World Order”.

    But, I still stand by my 2 Principles: “Hele ben Shakar” {his original name}, aka: {“Lucifer”, “the devil”, and that “old dragon”}, is REALLY running the show, HIS show, to over throw Yahweys celestrial authority, and establish his own kingdom, (With his Capital in Yeru-Salem (the city of peace).

    EVERY THING that doesn’t make sense to our finite minds, these days, must be relegated as the product of other-dimensional beings.

    And, then, (to understand this PRINCIPLE one MUST be aware of the statement Helel made to Yeshuah in Luke 4:5 – 8: “all this power…[of all the Kingdoms of the World]…and the glory of them, is delivered to me, and to whomsoever I will, I give it…”.

    Helel is therefore claiming that he possesses the authority “gift” over BOTH the POWER of every kingdom in History, as well as, all the GLORY of them, [we now call “glory”, “fame”].

    Well, don’t those two “gifts” pretty much describe the POWER ELITE’S actual “gifts”. So…is it possible that they’ve “bowed down and worshiped” Helel ben Shakar?

    I think so.

     
    • FittySense

      January 22, 2015 at 5:55 PM

      {“Lucifer”, “the devil”, and that “old dragon”}, is REALLY running the show, HIS show, to over throw Yahweys celestrial authority, and establish his own kingdom, (With his Capital in Yeru-Salem (the city of peace).

      I SEE IT THE SAME WAY EXACTLY !!!

       
  5. Peg-Powers

    January 23, 2015 at 2:24 PM

    Christian Gains: You don’t seem to understand that the “devil” mentioned in Luke 4 is first of all a LIAR. What he deceptively claimed was a lie and our Lord did not acknowledge of give credence to his claim of jurisdiction/power/wealth. Our Lord had just been baptized and had received the fullness of the Holy Spirit POWER and did not bend to the Liar’s wishes. (Our Lord gave this example of experience to all who follow Him in spirit and in truth.) Perhaps we need to recognize the POWER that is ours! Why is it so hard for us to follow and fight from a SUPERIOR and powerful position which He paid for and freely hands to us? We must be more than conquerers and go forward in faith, victory and praise…..and we will see the “walls of Jericho” fall to the ground. Though Satan has built up his own ramparts, the Almighty is the creator and ruler of all.

     
    • russ

      January 23, 2015 at 5:31 PM

      Some interpret that when Adam rebelled against what God had deeded to him, Satan stepped in on the defaulted deed and now rules the nations, and is Prince of the Powers of the Air.

      In the end, the Lamb is worthy to break the 7 seals and open the book. He has paid the price. The Kinsman-redeemer will hold the title deed in His right hand and take possession of His inheritance. He will evict the deceiver. It will be glorius.

       
      • Fritz

        January 23, 2015 at 8:24 PM

        russ
        @ He has paid the price. The Kinsman-redeemer will hold the title deed in His right hand and take possession of His inheritance. He will evict the deceiver. It will be glorius.

        Hallelujah !!! AMEN!!!! However, the Scripture says, the Bible is not to be interpreted. How do we handle that? IF there are many interpretations, and they ALL conflict with each other, & IF one is right, all the other interpretations are wrong, RIGHT? The Bible interprets itself. WE should not rely on any one scripture alone to say for sure what it means. 2 or 3 is what is needed, at least 2 or 3.

         
    • Fritz

      January 23, 2015 at 7:28 PM

      Peg-Powers
      @ Our Lord had just been baptized and had received the fullness of the Holy Spirit POWER and did not bend to the Liar’s wishes.

      OUR LORD did not NEED to be baptized. OUR LORD did this as an EXAMPLE & only for an example for US to follow, that’s all. WE must REPENT FIRST. OUR LORD did not have anything to repent of.

       
    • Fritz

      January 23, 2015 at 9:05 PM

      Luke 4 And Jesus answered and said unto him, Get thee behind me, Satan: for it is written, Thou shalt worship the Lord thy God, and him only shalt thou serve.

      Jesus ANSWERED. His answer DID NOT DENY what Satan, the Devil TOLD HIM he, Satan COULD DO !!!. God’s WILL is NOT being done now “Like it IS in Heaven. AND, the WILL of God HAS NOT been AT ALL “Like IT IS” in Heaven for almost 6,000 years. BUT, it will be done & NOT to far into the future. Are you familiar with 19 year time cycles, “Biblically” ? Check it out. I SEE 2019 as being a very “interesting “year”

       
  6. Fritz

    January 23, 2015 at 8:29 PM

    Video is 18:28 minutes long. Nothing interesting happens until 5:35 into video
    At 6:30 + is where you will hear, The Officer say, “Well the problem is, when you’re “on”
    “United States Territory” You are required to abide by all State & Federal laws.
    I sure hope you can bring this video up because it will make you laugh out loud !!!

    LAPD 12 Squad cars and shotguns for a parking ticket #6 …

     
  7. Fritz

    January 27, 2015 at 5:51 AM

    Another “interesting” thing is, the occupant said, I’m Black & they do not know how to handle it. Earlier, the “vehicle” was going to be towed. The occupant must have said something to make the Sarg change his mind because he told another “Peace Officer” No, I’ve decided to handle this in a different way. This is on the # 4 video.My experiences have been quite different than the “Black” occupant’s. IF I even asked a question & in a polite way, I have been arrested, for interfering with the “lawful duties of a “Peace Officer” concealing ID. & my (?) vehicle was towed SEVERAL TIMES.

     
  8. dog-move

    January 31, 2015 at 3:42 PM

    The madness is that everyone thinks this market is moving higher , the indexes of course, dow jones, nasdaq, s&p, etc . The reality is that the price discovery may appear to be advancing, but the as measure by momentum indicators it is actually dropping currently , the illusion. Most are usually wrong at market turning points, this one will be one for the record books. This bull began in A.D.1982 it’s a little “long in the tooth” I would not say its manipulated, perhaps the tulip bulb mania may have ended similarly. The common stock indexes have been providing the investing public ample time to get out but they are getting in instead, go figure. I have commented before on the technical pattern called the MEGAPHONE topping pattern in stocks, check it out this bull market in stocks is over. On to silver mr mannerino echoed my sentiments , he said silver is the most undervalued asset in the history of the world, I agree. At least the last 500 years or maybe in the days of Solomon when silver was valued as common stones. Cycles always come around.
    I thought silver had a bull market advance from 2001 to 2011 , I believe I was incorrect. AT current levels this is the bottom of the bear market that started over 500+ years ago. At current levels we should begin the bull market in silver , bounces off of a completed 500+ year bear trend should be spectacular. Forget common stocks they are toast!

     
  9. Ummer Farooq

    February 2, 2015 at 8:49 AM

    They called my prophet mad, they called him a magician!

    No his message was a word from God, that there is none to turn to except God. And there you see the anti Christ fraud hoopla as, God brings the world under the power of a word.

    Go back before there was a dictionary or even a word, and then perhaps you’ll believe God.

     

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