Lost Faith In Central Banks And The Economic End Game
By Tyler Durden
Submitted by Brandon Smith via Alt-Market.com,
We live in strange economic times, stranger perhaps than at any other point in history. Since 2007-2008, the globally intertwined and dependent fiscal system has suffered considerable declines in every conceivable area. Manufacturing around the world is in a slump, from Japan to China to Europe, with the minimal manufacturing accomplished in the U.S. also fading. Consumption is falling, most notably in petroleum and raw materials. Employment is truly dismal, with the U.S. posting over 94 million people as “non-participants” in the national work force.
High paying jobs are disappearing, and the only jobs replacing them are in the low wage service sector. This problem is becoming so pervasive that certain more socialist states including California and New York are attempting to offset the loss of sustainable income jobs by forcing retail and service companies into paying an inflated minimum wage. That is to say, states hope to stop the bloodletting in wages by magically turning low paying jobs into high paying jobs.
As anyone with any economic sense knows, you cannot have a faltering consumer sector in which people are buying less and force service based companies to pay their employees far more per hour than the job is worth. Those companies will simply lay off more employees, cut hours or shut down entire branches of their operations in order to maintain their profit margins. Either that, or those companies will go out of business.
One sector, though, has continued to reap certain benefits (for now), and that is equities. There is a good reason for this.
The stock market is a kind of Pavlovian control mechanism, a mental trigger in the minds of the masses that dominates their perceptions of the world’s financial health. The drooling public sees green lines and they hail impending “recovery;” they see red lines and suddenly they begin to wonder if all is not well. As the former head of the Federal Reserve Dallas branch, Richard Fisher admitted in an interview with CNBC, the U.S. central bank in particular has made its business the manipulation of the stock market to the upside since 2009:
“What the Fed did — and I was part of that group — is we front-loaded a tremendous market rally, starting in 2009.
It’s sort of what I call the “reverse Whimpy factor” — give me two hamburgers today for one tomorrow.
I’m not surprised that almost every index you can look at … was down significantly.” [Referring to the results in the stock market after the Fed raised rates in December.]
Fisher went on to hint at the impending danger:
I was warning my colleagues, “Don’t go wobbly if we have a 10-20% correction at some point…. Everybody you talk to … has been warning that these markets are heavily priced.”
Central banks have focused most of their efforts on levitating the Dow as well as energy markets for some time now.
Why? …read more
Source: Lost Faith In Central Banks And The Economic End Game
