Markets Can Remain Manipulated Longer Than You Can Remain Solvent

Markets can remain manipulated longer than you can remain solvent

In this week’s podcast:

Podcast Summary

0:00-3:28 Introduction

So What if the Fed Raises Rates?

3:28-6:20 discussion of Janet Yellen’s comments about raising rates after the Fed’s June Federal Open Market Committee (FOMC) meeting. Ms. Yellen noted that a rate hike is no big deal because she did not expect a mechanical raising of rates after the first rate hike. The Fed will raise rates. Near zero interest rates, however are here to stay.

“Solid”existing home and new home sales numbers!

6:20-8:10 The Fed is just preparing the markets for it token rate hike so when they do it the reaction will be muted. The Fed’s policy will remain “hoily accalmaudative”.

Markets Want to Be Deceived

8:10-12:30 Discussion of how the market wishes to be deceived on the economy or the Greek situation. The real estate and labor markets are weak by the Fed and the media characterize them as strong.

Will Things Change in 2016?

Political Change

12:30 The prospects for a change of course in 2016 and Donald Trump’s presidential bid are discussed. Lack of grass roots support for change and the quashing of the Tea Party by the Republicans show how firmly in control the power structure is.

Change in Markets

13:50-19:40 the stock market has been out of synch for years with the real economy, yet it continues to make new higher. Markets are not irrational, rather they are manipulated. Markets can remain manipultated longer than you can remain solvent. The three legged propaganda stool of the labor, real estate and stock markets is discussed as a mechanism to hype growth in the economy. Because the narrative has taken hold that the economy is “sturdy” the Democratic Presidential candidate will have an edge in 2016.

Issues of faulty monetary policy and ending the Fed are not on any major politician’s agenda. Entitlement programs and the confederate flag and Greece are discussed.

What Type of Data Does the Fed Need to See To Make Rate Hike Decisions?

19:40- 29:39 Yellen’s unwillingness to give precise information or a road map of what the Fed must see in order to raise rates is discussed. The Fed’s role and expertise is questioned. An argument for a marketplace driven economy rather than an interventionist monetary policy driven economy is made. Discussion of some of the inherent flaws in democracy (i.e. voting for benefits). The Fed and government are characterized as counting agencies rather than productive ones.

What Does the Data Tell The Fed?

29:39-33:09 the data appears to be weak and should tell the Fed NOT to raise rates. Yet the Fed will interpret the data as strengthening and project it to get better and use that diagnosis as justification to raise rates.

Do Rising Asset Prices Add Much to the Economy?

33:09-50:50 Discussion of the impact of the Fed’s “wealth effect” objective of boosting asset values (home and stock prices) on the economy and its limitations because no new products or services are created and many people do not own stocks or real estate. The Fed’s policies create wealth inequality. Existing and new home sales are still at multi year lows highlighting that the housing recovery is not impacting a broad segment of the population.
Rising home prices don’t add to the productive capacity of the economy. Paying more for a used house doesn’t create value.

Bernie Sanders presidential campaign and economic ideas are discussed. Interventionist government economic policies vs. laissez faire are discussed. Presidents Cooledge and Eisenhower are not given enough credit for not doing that much or enough. Central planners don’t believe in the “genius of the American people” rather they believe in the genius of themselves.

Smaller government would be less corruptible, yet the U.S. trend is towards larger government to combat corruption-i.e. more socialism. Wealth inequality vs. standard of living is discussed. Once socialist style government programs like social security, public schools and health care are enacted, they do not get repealed; not even by “conservatives”. Public schools teach state worship of politicians, civil rights leaders and Presidents. Governments encourage more school and more indoctrinaton of their principles.

The Fed Will Never Normalize Interest Rates

50:50 The Fed isn’t ever going to “normalize” rates- they just want to get their quarter point raise in to act like they are serious. Bernanke admitted as such to hedge fund managers “rates will not normalize in my lifetime.” Rates CANNOT normalize because this would instantly implode the financial system.”

The Fed is hoping for an external event (like Greece) so they dont have to raise rates. Even if they raise rates they won’t go far. The Fed also indicated they will not sell off its balance sheet. Analogy-the Fed burns down the village, pitches a tent and acts as if they are the only ones try to help the housing market.

Hillary Clinton’s email server and deletion of her emails is discussed as long with Jeb Bush’s candidacy.