Totalitarians, like cheap Chicago street hustlers, are always spinning webs too and doing the ol’ okey doke. Did you watch this past Sunday’s “60 Minutes”? It was about the Age of Fake totalitarian style:
Incredible video isn’t it? Entire cities in China – fake. Potemkin villages like in the ol’ Soviet. Totalitarian tricks.
Of course 60 Minutes is a Potemkin village itself. 60 Minutes regularly conducts powder-puff “interviews” with their liege Barack Obama (the latest an interview scheduled by Barack Obama himself with Hillary Clinton beside him. No doubt that was Obama paying off – in his own mind – a campaign debt to Bill Clinton before the war between Barack and Hillary resumes.) But 60 Minutes cannot bring itself to do the same type of tough reportage about Barack Obama as in that very good China fakery report.
It would be great if 60 Minutes would focus its CBS eye on the flim-flams of Barack Obama. We’re not holding our breaths waiting. But with 60 Minutes failing to do its duty the surprise today is a remarkable editorial from USAToday:
“Dow Jones high on Fed steroids: Our view
Like all good things, the performance-enhancing policies must come to an end.
Four years after the stock market hit bottom, it is flirting with an all-time high. On Monday, the Dow Jones industrial average enjoyed its second highest close ever and was just 37 points away from a new record — more than double its level during the dark days of March 2009.
The turnabout is testament to healthy corporate profits and the resilience of America’s free enterprise system. And it’s a huge relief to workers whose 401(k) plans are tied to equities. But the risky little secret of the rebound is that it is powered in significant part by the easy-money policies of the Federal Reserve, which must one day end.
To combat the Great Recession, the Fed has bought trillions of dollars of mortgage bonds and U.S. Treasuries to juice the housing market and the economy in general. [snip]
The Federal Reserve’s purchases have driven interest rates to near zero. This has stimulated the economy but not without cost. Savers, particularly older ones trying to live on income from their investments, are starved for safe options. They’ve been forced into stocks, which is one reason the market has been acting as if it’s on steroids. Further, with borrowing costs low, Congress and the White House have less incentive to rein in the national debt. Rock-bottom interest rates have also distorted markets.
The best indication that the Fed’s bond-buying purchases are pushing stocks up artificially is that investors run for cover whenever there is a hint that the Fed might change course, as happened recently. On Monday, billionaire superinvestor Berkshire Hathaway CEO Warren Buffett told CNBC that markets are on a “hair trigger” waiting for signs of change from the Fed. The market is “hooked on the drug” of easy money, Dallas Fed President Richard Fisher told Reuters.”
The USAToday editorial notes that the FED portfolio is now at $3 trillion and on its way to $4 trillion. The editorial further warns about the perils of how to “unload such staggering sums.”
The line from the editorial that resonated with us is the one about how people who played by the rules and built up a little nest egg are “starved for safe options.” Read that sentence then watch the video about China again. The sight of money from investors in China buying brick and air in the empty cities built by their totalitarian overloads will be familiar.
There is no doubt Barack Obama and the FED are creating the Potemkin Wall Street market surge. Jim Cramer, a defender of the FEDs activities of late said on February 19 “You’re fighting the Fed if you’re selling stocks right now.”
It was in late December 2012 that the FED stomped its collective feet yet again to force stocks to rise:
“In an unprecedented and surprising move, the Federal Reserve announced on Wednesday that it will keep interest rates near zero and will purchase $85 billion in bonds every month until unemployment falls from its present 7.7% to 6.5%.
The new plan will maintain the $40 billion a month of mortgage-backed bond buying it began in September while adding another $45 billion in Treasuries. [snip]
The new round of so-called “stimulus” is meant to replace the soon to expire “Operation Twist” program that shoveled $45 billion a month into long-term Treasuries funded by the sale of short-term debt. Since that effort failed to create economic growth, and the Fed has no more short-term securities left to sell, the Wall Street Journal says the Fed will “effectively print more money” out of thin air to fund the scheme.”
According to Obama and the Sequester Doomsday Preppers the economy cannot live through an $85 billion reduction even if the figure for this year is closer to $44 billion. But the FED pumps out $85 billion a month to pump air into the Potemkin Wall Street! However the question is, “Why is the FED doing what the FED is doing?”:
“Officially, the Federal Reserve isn’t supposed to worry about keeping stock prices flying high. [snip]
As stocks flirt with the record highs reached just before the global financial crash of 2008, memories of that catastrophe loom large. Many Americans have abandoned equities since the crash, terrified of living through another one.
Yet the Fed’s efforts to keep the economy growing may not work unless the stock market keeps moving in one direction from here: higher.
“Too big to fail,” the label derisively given to the nation’s biggest banks, now could also be applied to stocks’ 4-year-old bull market.
“The Fed and the other central banks cannot afford to see a massive decline in equity prices,” said Mohamed El-Erian, who oversees $2 trillion as chief executive of money manager Pimco in Newport Beach.
Steven Ricchiuto, chief economist at Mizuho Securities USA in New York, puts it another way: If the stock market were to fall drastically, “You would have every economist screaming ‘Depression!’”“
The author of the article, Tom Petruno of the Los Angeles Times writes that a market slide would trigger from corporate executives “severe job cuts to protect their rich profit margins” as happened in 2008. A bear market with a drop of 20 percent or more “could be too big a shock for the economy to handle” he quotes some analysts.
According to Petruno the criticism is alive and well that “policymakers have become blatant market manipulators — a de facto “plunge protection team,” a term coined after the 1987 stock market crash.” Don’t understand any of this? Watch that video about the Potemkin villages of China again.
ZeroHedge quotes the quotable Jim Cramer along with some numbers:
“we all know it’s going to end badly, but in the meantime we can make some money” – ZH translation: “just make sure to sell ahead of everyone else.”
“Dow Jones Industrial Average: Then 14164.5; Now 14164.5
Regular Gas Price: Then $2.75; Now $3.73
GDP Growth: Then +2.5%; Now +1.6%
Americans Unemployed (in Labor Force): Then 6.7 million; Now 13.2 million
Americans On Food Stamps: Then 26.9 million; Now 47.69 million
Size of Fed’s Balance Sheet: Then $0.89 trillion; Now $3.01 trillion
US Debt as a Percentage of GDP: Then ~38%; Now 74.2%
US Deficit (LTM): Then $97 billion; Now $975.6 billion
Total US Debt Oustanding: Then $9.008 trillion; Now $16.43 trillion
US Household Debt: Then $13.5 trillion; Now 12.87 trillion
Labor Force Particpation Rate: Then 65.8%; Now 63.6%
Consumer Confidence: Then 99.5; Now 69.6
S&P Rating of the US: Then AAA; Now AA+
VIX: Then 17.5%; Now 14%
10 Year Treasury Yield: Then 4.64%; Now 1.89%
EURUSD: Then 1.4145; Now 1.3050
Gold: Then $748; Now $1583
NYSE Average LTM Volume (per day): Then 1.3 billion shares; Now 545 million shares”
Today Wall Street will almost surely close at a new high. Too bad it’s a Hopium high.