Economists and Weathermen

The End of QE?

JM Bullion
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The End of QE?

Podcast Summary:

0:00-3:50 Intro

Quantitative Easing Equals Bailonomics

3:50 -9:12 Discussion of Bernanke’s exit from the Fed Chair of the Federal Reserve and the value of the dollar as a safe haven in a crisis (even ones involving the US), emerging markets turmoil and currency wars. The ostensible purpose of QE was to help employment and housing by buying Mortgage Backed Securities and U.S. Treasuries but home ownership is down as is the labor participation rate. Review of bailonomics from the Troubled Assets Relief Program (TARP) in 2008 and the removal of toxic assets from the banks’ balance sheet through successive QE programs that served to further bailout the too big too fail (TBTF) banks. Discussion of how QE helped the rich buy expensive homes. Discussion of how rising home prices have been the measure by which to measure the “housing recovery”. The Fed spent $4 trillion paying their TBTF shareholders and tells us with a straight face it is to help employment and the economy.

9:12 -11:45 What impact will tapering have on the direction of interest rates? The Fed has tapered many times, that is why we have had successive QEs, and notes that even with the taper the QE program is still a massive money printing program and greater than the prior QE’s. Louis predicts that Yellen will request a wait and see approach given that the Fed has now tapered twice.

Fourth Quarter GDP

11:45 -13:00 Discussion of how the decision to taper was made when the economy appeared to be improving as evidenced by the good 4th quarter GDP (which will be revised downwards) which plays into the concept of giving the Fed credibility for “fixing” the economy and then having the sense to “taper” at the right moment. Louis notes that the 4th Qtr GDP was strong supposedly because of good retail sales, yet recent retail reports from Walmart, Sam’s Club, Sears, JC Penny and Best Buy indicate otherwise. When the Fed sees adjusted GDP numbers and other signs that the economy is not doing as well as they has anticipated, they can return to monetary easing.

Economists and Weathermen

13:00 -16:00 discussion of the weather being used an excuse for economists missing their forecasts. Louis suggests that economists should have meteorologists on their staffs. Discussion whether the weather really does impact home buying decisions. Louis notes that bad weather can not explain the drop in pending home sales as the entire country did not have cold weather

Unemployment Claims

16:00 – 18:40 discussion of why have rates dropped even though the Fed has tapered QE. The decline in rates may be temporary or that the Fed is manipulating interest rates in another way. (it could also be emerging market money is returning to the U.S.) When QE 3 started gold and silver would have been expected to rise but they did not and were smacked down and suspects manipulation. Discussion of the employment situation. Louis notes that there are 330-350k new unemployment claims each week and when they go down 5k they media claims it’s improving.

Housing Recovery?

18:40- 19:40 discussion of the volume of home sales and new home sales. Louis notes that homes bought by those taking out mortgages and sales of new homes are dramatically lower than they were five-ten years ago yet the media mantra of housing recovery persists.

Labor Market and the Housing Market

19:40 – 23:20 Discussion of the labor and housing markets and how millennials are not able to participate in the housing market. Discussion of inventory levels and their impact on housing prices. Discussion of the impact of a stock market collapse on the housing market and the economy.

Obama’s myRA

23:20 -28:23 Discussion of how a rising stock market is used (falsely) as a barometer for the health of the economy. Discussion of the contradictions in Obama’s State of the Union presentation of his myRA executive order. Louis notes myRA is a way of getting people used to funding the government via the purchase of U.S. Treasuries. Louis notes that myRA is being pitched as being for our benefit rather than admitting the US is broke and needs the money. Discussion of the efficacy of the minimum wage.

Regulating J.P. Morgan

28:23 -34:22 Discussion of the entitlement culture across all demographics. Discussion of government vs. free market solutions. Discussion of how regulatory agencies operate. Louis notes that when J.P. Morgan pays a regulatory find it should be characterized as a related party transaction. Discussion of the role of banking in a society. Louis notes that banking has been raised to a level far more important than food and energy.

34:22- Credit tip of the week.

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