Five years have passed since the beginning of the Great Recession. Growth is slow, joblessness is elevated, and the knock-on effects continue to drag down the global economy. The panic in financial markets in 2008 that caused a systemic crisis and a sharp fall in asset values still weighs on markets around the world. The primary difference between today and the 1930s, when the U.S. experienced its last systemic crisis, has been the response by policymakers. Having the benefit of hindsight, policymakers acted swiftly to avoid the mistakes of the Great Depression by applying Keynesian solutions. Today, I believe we are in the midst of the Keynesian Depression that my father predicted. Like the last depression, we are likely to live with the unintended consequences of the policy response for years to come.
Bloomberg has released an excellent interview with one of our favorite market commentators (and perhaps the harshest and most vocal critic of the Fed outside of Ron Paul), Jim Grant.
Grant eloquently informed Bloomberg that there are no markets anymore, only interventions:
There is a systematic manipulation of values carried out by our central banks world over. They sit on money market interest rates, they muscle around the yield curve, and they levitate asset prices on the theory that higher stock and corporate bond prices will make us happier and more inclined to spend.
When Bloomberg’s blonde responded by asking, What’s the harm? Grant responded:
We haven’t got enough time to go through every item of harm.
Grant does go on to inform the Bloomberg hosts what he expects as a result of market manipulation/intervention to infinity by the Western Central Banks: I am expectant that these massive and unprecedented central bank musclings and interventions are going to backfire in the shape of inflation and higher interest rates.
Grant’s Full MUST WATCH interview below:
Grant compares life under the central banks to the fabricated reality experienced by Jim Carrey’s character in The Truman Show.
The thought that these banks are the ones that control interest rates is absurd, the central banks do it all the time!
The central banks manipulate MASSIVELY! Our outrage ought to be directed at them! The Fed, the BOE, the ECB, they all do it, all the time!!
Grant says the Fed manipulates the markets, the yield curve, & the expectations of the market.
The Swiss Central Bank prints $50 billion a month to manipulate the CHF exchange rate- thats 10% of the GDP of Switzerland every month in order to manipulate the exchange rate of the CHF, and yet people are willing to accept yields that are less than zero that are denominated in that very currency!
Near zero economic growth by 2050? Yes, America’s economy is collapsing. Fast. Yes, the “most depressing forecast ever,” says InvestmentNews, trusted source for 90,000 professional financial advisers across America.
Actually it’s worse than depressing if you read the details in “On Road to Zero Growth,” the latest Quarterly Letter from Jeremy Grantham, founder and chief investment strategist for the $100 billion GMO money managers.
Yes, today’s fiscal-cliff drama is just a warm-up for what’s coming. America’s economic future is a disaster. We are going over a bigger game-changing economic cliff, into a long-term chasm. And it’s unavoidable.
Why? Because our myopic Congressional leaders and Fed chairman are focused on short-term fixes, piling on more monetary-stimulus debt, while avoiding America’s systemic long-term problems. Yes, we are our own worst enemy and nothing will keep us from driving down the road to zero growth and into painful austerity, just like the 1930s.
Housing bubble in motion. Home prices only go up, right…
It will make sense once you see it working. The green bar represents median household income, the orange bars represent housing prices in selected cities.
Case Shiiler real estate data and median income compared in a time lapsed film using microsoft excel and camtasia software. The creator is Nick Gogerty…
The median net worth of American households has dropped to a 43-year low as the lower and middle classes appear poorer and less stable than they have been since 1969.
According to a recent study by New York University economics professor Edward N. Wolff, median net worth is at the decades-low figure of $57,000 (in 2010 dollars). And as the numbers in his study reflect, the situation only appears worse when all the statistics are taken as a whole.
According to Wolff, between 1983 and 2010, the percentage of households with less than $10,000 in assets (using constant 1995 dollars) rose from 29.7 percent to 37.1 percent. The “less than $10,000? figure includes the numerous households that have no assets at all, or “negative assets,” which is otherwise known as “debt.”
Over that same period of time, the wealthiest 1 percent of American households increased their average wealth by 71 percent.
With the foundation of our economy now one of gluttony and excess (at all costs), the significance of the slowdown in consumer spending in the latest GDP data cannot be underestimated. As Bloomberg Briefs notes, real consumer spending fell 0.3% in October, and is only 1.3% above year-ago levels – the US economy has a propensity to slip into recession any time the 12-month pace of real consumer spending falls below 2.0%. Their so-called ‘Fab Five’ indicators of discretionary spending took a notable turn for the worse in October. Dining out fell 0.4% MoM in October and is only +1.5% YoY – its slowest pace since April 2010. Spending on cosmetics and perfumes fell 0.04% in October, continuing the negative trend from its peak registered in the summer of 2011. Spending on women’s and girls’ clothing slumped 1.8% in October, following a 0.1% decline in September. Casino gambling fell 1.6% in October, while spending on jewelry and watches fell 0.1% in the same month. All-in-all, the consumer’s balance-sheet-recession continues…
“I detect the first signs of people shifting more towards Europe than the U.S.,” explaining how the looming “fiscal cliff” is impacting global investors.