An Astonishing and Persistent Denial of Economic Reality – Podcast

Denial of Economic Reality

JM Bullion
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The Fed Blames the Weather

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Podcast Summary:

Intro: 0:00 -4:55

Impact of U.S. Sanctions on Russia, War on the U.S. Dollar and Unintended Consequences

4:55-9:30 Discussion of how the media downplays the events in the Ukraine and exaggerates the pace of the economic “recovery”. Discussion of Russia’s move on the Ukraine which probably can not be stopped absent military action. Europe is reluctant to push back too hard on Russia because they get a lot of oil and gas from them. The United States is choosing to use sanctions against Russia which may have unintended consequences. Discussion of the U.S. dollar as the world’s reserve currency and the benefits (the ability to spend beyond its means to support a massive welfare warfare state) it provides to the United States and how sanctions against Russia can jeopardize that status. Russia, in response to sanctions may retaliate against the United State and start to drop the use of the dollar in its international trade. If Russia and China use currencies other than the dollar it, it will reduce demand for the dollar causing a drop in the value of dollar and a rise in interest rates and in inflation in the United States. Russia and China are building their gold reserves as they reduce their reliance on U.S. Treasuries as reserves. The Fed will not be able to control interest rates in that scenario.

Who will Buy the U.S. Treasuries that China, Russia and The Fed Stop Buying?

9:30-13:25 If interest rates rise due to circumstances outside the control of the Fed, the Fed would be forced to return to a massive bond buying program to keep rates low. Discussion of the Fed’s continued tapering. The Fed is continuing to taper to gain credibility for the recovery story and to appear that they are good stewards of the economy, neither is true. The Fed is saying that economic indicators are not strong enough to let rates rise but they are strong enough to taper QE! Five years of QE is probably the reason Russia and China have already stopped buying U.S. Treasuries. Russia and China have been adding to their gold reserves.

Europe to the Dollar Rescue? The Creation of the Euro Dollar?

13:25-14:04 Discussion of how Europe may become the next large buyer of U.S. Treasuries, perhaps part of a Euro QE program whereby Europe buys U.S. Treasuries in exchange for continued US NATO support.

Market Manipulation of Interest Rates

14:04 -15:27 Discussion of the manipulation of markets due to intervention by the Fed and other entities.

The 1st Quarter 2014 GDP Number

15:27-18:20 The GDP was up just 0.1% in the first quarter and the weather was blamed for the poor economic performance. Cold weather can’t derail an entire economy. Recent tornados in the south may also be blamed for a lack of 2nd quarter GDP growth, although Keynesians might argue that tornados might lead to economic growth as homes will need to be rebuilt. Discussion of the Fed and media spin on the poor numbers:

From CNBC:

“Yet the Fed statement did not reflect substantial concerns and in fact agreed with consensus from economists who believe the slowdown will be short-lived and growth will accelerate.”

From the FOMC statement:

“Information received since the Federal Open Market Committee met in March indicates that growth in economic activity has picked up recently, after having slowed sharply during the winter in part because of adverse weather conditions.”

Even though initial jobless claims are up, home sales are down, twenty percent of homes have no one employed , homeownership rates are down, there is a rise in food stamp usage, mortgage applications are down and new home construction is down, the media persists on peddling an economic “recovery” story.

From Reuters:

“U.S. consumer spending recorded its largest increase in more than four and a half years in March, cementing views the economy ended a dismal first-quarter on solid footing.”

The Dollar vs. Gold and Silver

18:22 -21:14 Discussion of the recent decline in the dollar without a corresponding increase in the prices of gold and silver. Discussion of the smash crashes of the prices gold and silver and how they are done to manipulate the price of gold and silver. Discussion of what is included in GDP- health care costs which increased 4.4% in the first quarter of 2014 thus boosting the GDP! All news is good news in the current economy.

The Job Market and the Unemployment Rate

21:14 – 24:28 discussion of the job market and how the Fed interprets it. Discussion of the lack of household formation by millennials. Home buying in the current low interest rate environment.

Obama vs. Franklin Roosevelt

24:28-26:40 Discussion of the Obama legacy and comparison to Franklin Delano Roosevelt. Discussion of how Franklin Delano Roosevelt used big government to prolong the depress and to confiscate U.S. citizens’ gold.

What’s Next for the Fed?

26:40- 30:50 Taper on. The Fed is determined to taper into the recession. $4 trillion in QE money printing has led to 0.1% GDP growth! Comparison of the Fed to a private enterprise that might produce similar results. Discussion how speculative stocks do well on Wall Street.

The Housing Inventory Shortage Myth

30:50-34:40 Discussion of the dynamic whereby housing inventory is increasing and sales are decreasing. Higher prices have attracted more sellers creating more inventory which results in no sales and lower prices!

What Will the Fed Do if it Sees Home Prices Falling?

34:40- Blame the Weather! It’s Temporary. Discussion of the Housing Recovery that Never Was. Discussion of the repeat of the mistakes in the housing bubble of the mid 2000’s. Discussion how the rise in asset prices gets passed off as economic gains, even though there is no corresponding productivity gains. Discussion of internet stocks and Overstock and bitcoin.

Question for investing-Would you buy the entire company at its current market capitalization?

Discussion of how the stock market is like a casino and how the Fed wants there to be confidence in the casino in that it pays out. Discussion how the fed can inflate bubbles and keep the mania going a lot longer than a typical mania might last.

An Astonishing and Persistent Denial of Economic Reality

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New homes sold since

*the current U.S. population is approximately 317 million. The U.S. population was approximately 226 million in 1980 and 203 million in 1970.

Further Reading:

How to Spot an Economic Recovery Addict

How a Stock Market Crash Will End The Economic “Recovery”

Obama Announces MyRA- Are 401K and IRS Plans at Risk of Conversion to U.S. Treasuries?

What Will You Do After the Next Stock Market Crash?

Waiting for Household Formation

The Housing Inventory Shortage Myth

Millennials Not Part of the Club Yet

Royal Canadian Mint

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