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The S&P 500 stock market index rose a blistering +1.12% today on positive economic news, albeit much of it seasonal. The run up in stock prices following the collapse in 2008 (both stock market and house prices) has fueled speculation of another Hindenburg Omen event. That is, another stock market correction. But with Ben Bernanke and The Fed supporting asset bubbles with the expansion of The Fed’s Balance Sheet (green dotted line), investors continue to roll the dice on the stock market rising. Likewise, the Elliott Wave is being sustained by The Fed’s Balance Sheet. Let’s see what happens when...

... Quantitative easing has had the intended effect of holding down interest rates, which has in turn encouraged borrowing by businesses and individuals with good credit and stabilized the housing market. But persistent economic uncertainty has dulled the positive impact of the Fed's program. U.S. gross domestic product has broken above a 3 percent annual rate of growth in only six quarters since 2009. Some of the money has instead inflated asset bubbles, to the benefit of mostly wealthy investors seeking high yields. The Fed's "real intention was capital investment would be stimulated, jobs would be created, incomes of the...

The Financial Times reports that “the U.S. Federal Reserve is considering the possibility of arbitrarily cutting the amount of interest it pays on money that it borrows from private commercial banks.” Private banks, of course, make a great deal of money this way. But should the Fed make this decision, banks which have historically paid their customers a small amount of interest for the use of their money may well begin “…charg[ing] private individuals and businesses for the privilege of “parking” their money in an account for a time.” Could such a policy create a bank run? That’s what happened...

The ADP employment report was released today and blew past expectations of 170,000 jobs added with a print of … 215,000 jobs added. Of course, we don’t know the composition of full-time versus part-time/temporary holiday employment, but at least employment increased. Change-in-Nonfarm-Private-Employment-November-2013 In fact, ADP job creation seems to be in a similar point to the previous decade in terms of level of ADP jobs added. Historical-Trend-Change-in-Total-Nonfarm-Private-Employment-November-2013 Here is the composition of jobs added. Notice that is mostly small firms. ADP Dec_0 Will The Fed begin tapering with this “good” news on employment? Well, interest rates are rising this morning...

On December 23rd, the Federal Reserve will turn 100 years old. We can look back on its few successes... but its many failures far outweigh any positives it may have achieved. What's at stake now is the Fed's future. And it looks bleak. In fact, the Fed won't even exist in 100 years... America's First Three Central Banks Central banks and fiat money have been a major point of contention ever since the founding of America. Between 1775 and 1779, as the colonies delved deeper into rebellion, the fiat money supply grew by over 5,000%. Within just four years, the...

Several economic indicators for the US show deceleration. Yet the stock market and house prices continue to grow. Here is a chart of three economic indicators with clear downward momentum: civilian labor force participation (blue), the US homeownership rate (red) and real median household income (green). homessss And Goldman Sachs just downgraded Q4 2013 real GDP growth to 1.3%. These downward indicators compliment the declining M1 Money Multiplier and M2 Money Velocity. m1m2vel120213 Why? There are enormous excess reserves in the Fed system that aren’t leaking out to Main Street. And The Fed’s Balance sheet has exploded! (in terms of...

There is a lot of talk about a new housing bubble. If you look at a chart of house prices, you can see why. cs2009 This is a faster acceleration rate in house prices than during the much-discussed housing bubble of the last decade. csindices112613 Can it continue to accelerate? There are a couple of factors that say no. First, real median household income has been falling since 2000 and particularly since 2009. It is difficult to maintain price growth under these conditions once investors pull out. csrealinc Second, home ownership rates continue to fall …. along with real median...

She’s about to become one of the most influential financial leaders in the world, but a classmate who sat in front of Janet Yellen at Brooklyn’s Ft. Hamilton HS says he was “shocked” at her career path.

In the wake of all the misguided pleas for negative interest rates in Europe (hoping to get banks to lend), comes news US banks warn Fed interest cut could force them to charge depositors. Leading US banks have warned that they could start charging companies and consumers for deposits if the US Federal Reserve cuts the interest it pays on bank reserves. Depositors already have to cope with near-zero interest rates, but paying just to leave money in the bank would be highly unusual and unwelcome for companies and households. The warning by bank executives highlights the dangers of one...

What is driving the stock market to dizzying heights? Try stock margin accounts and Fed Monetary easing. Here is a chart of NYSE Member Firms Debit Balances in Margin Accounts and the Standard and Poor’s Index. margindebtspx And here is a chart of the SPX against The Fed’s Balance Sheet size. spxfedbal You must admit, there seems to be a pattern here. Particularly since real median household income seems to be shrinking (although house prices are rising). cs20realmedhinc Margin accounts + easy Fed money = bubbles.

Two years ago, a few days after the victory of Cristina Fernandez de Kirchner in Argentina’s presidential election, the government decided to impose a new system of foreign exchange controls that the press called “the cepo.” Initially started as an effort to crack down on tax evasion, it became clear later that the new measures were part of another exchange-market intervention by the central bank. In a system of flexible exchange rates, the central bank limits its activities to controlling the money supply. Therefore, the price of foreign currency acts only as an indicator of the correctness or incorrectness of...

The S&P Case-Shiller repeat sales house price indices were released this morning. The U.S. National Home Price Index rose 3.2% in the third quarter of 2013 and 11.2% over the last four quarters. Call me crazy, but the recent expansion of house prices (red) looks faster than the rapid expansion during the housing bubble (orange). The recent rapid expansion of house prices coincides with the unprecedented monetary stimulus by The Federal Reserve. csindices112613 The big winner from August to September? Bankrupt Detroit! And in the LPS house price report from yesterday, bankrupt Modesto showed a good gain. Other winners in...

Leading US banks have warned that they could start charging companies and consumers for deposits if the US Federal Reserve cuts the interest it pays on bank reserves. Depositors already have to cope with near-zero interest rates, but paying just to leave money in the bank would be highly unusual and unwelcome for companies and households. The warning by bank executives highlights the dangers of one strategy the Fed could use to offset an eventual “tapering” of the $85bn a month in asset purchases that have fuelled global financial markets for the last year.

The recent confusion from The Fed over the future of quantitative easing (or money printing) can be addressed with a few charts. Here is a chart of real GDP growth PER CAPITA since 1960. Real, of course, indicates that it is Gross Domestic Product adjusted for inflation. Note that Q1 1984 was the peak of real GDP growth … and it has been a steady decline since then. realgdppercap I added the S&P 500 index to the real GDP per capita chart and you can see that the S&P 500 index spikes when real GDP growth is higher than average...

Yellen currently serves as vice chairman of the Fed and as a reliable dove would represent continuity with Bernanke. She has consistently supported Bernanke’s easy-money policies and even seems open to more aggressive moves to fight stubbornly-high unemployment. "I consider it imperative that we do what we can to promote a very strong recovery," Yellen said during her confirmation hearing. Yet Senate Majority Leader Harry Reid announced plans on Thursday to enact the so-called "nuclear option," which would change Senate rules to allow him to approve certain motions with a simple majority rather than 60 votes. Yellen, who was among...

Still unnoticed by a large part of the population is that we have been living through a period of relative impoverishment. Money has been squandered in welfare spending, bailing out banks or even — as in Europe — of fellow governments. But many people still do not feel the pain. However, malinvestments have destroyed an immense amount of real wealth. Government spending for welfare programs and military ventures has caused increasing public debts and deficits in the Western world. These debts will never be paid back in real terms. The welfare-warfare state is the biggest malinvestment today. It does not...

Janet Yellen has been approved as Federal Reserve Chair by the US Senate Banking Panel. And the Philadelphia Fed Index plunged to 6.5 in November from 19.8 in October. Economists were expecting a read of 15. Philly Fed Nov More troubling in the Philadelphia Fed report is the decline in average employee workweek. Philly Fed Details Oct Of course, Janet Yellen being approved by the Senate Banking Panel has nothing to do with the Philly Fed Index plunge. Or does it? Yellen has been on the Bernanke QE team and we know that it has not been successful restoring life...

The Federal Reserve released the minutes of the most recent meeting today. The prognosis? Clear as a muddied lake. As clear as smog-covered sky of a thermal inversion summer. In other words, total confusion. The Federal Reserve of Chicago’s Charles Evan tweeted yesterday his opinion: #CharlesLEvans our purchases will continue to be open ended. We may need to purchase 1.5 trillion in assets until January 2015. Now for the minutes and the possibility of a taper: “During this general discussion of policy strategy and tactics, participants reviewed issues specific to the Committee’s asset purchase program. They generally expected that the...

NEW YORK (AP) -- Stocks edged lower Wednesday after minutes from the Federal Reserve's latest meeting indicated that the central bank's top policymakers are nearly ready to start pulling back on its economic stimulus program.

The Chicago Fed’s President Charles Evans sent this Tweet today: #CharlesLEvans our purchases will continue to be open ended. We may need to purchase 1.5 trillion in assets until January 2015. Well, that’s not good. Although he is only one person, this seems to be the mindset of soon-to-be-Fed Chair Janet “Bubbles” Yellen. This is a statement about how markets are addicted to the sugar high of easy money and declining expectations of inflation (at least how the Federal government measures it). In other words, lethargic growth is in our economic future. Here is a chart on nominal GDP growth...

Between Oct. 1, 2013, the first day of fiscal 2014, and Nov. 14—which was less than a month after Congress agreed to temporarily suspend the legal limit on the federal debt—the Treasury was forced to issue more than $1 trillion in new debt. During that time, according to the Daily Treasury Statement, the Treasury issued $1,014,215,000,000 in new bills, notes, bonds and other securities. The government needed this $1,014,215,000,000 to cover government obligations and expenses that exceeded the $255,080,000,000 it raked in through tax revenues during the same six-week period. Where did that combined $1,014,215,000,000 in newly borrowed money and...

Authored by Guy Haselmann of Scotiabank,FED – Encouraging the Melt-Up Trade, While Regulating Bubbles Away       The Fed moved ‘all-in’ in 2008/09 when it pushed rates to zero and embarked on QE. Since the Fed basically used its final chips via this action, it became trapped playing ‘this hand’ until the bitter end. The stakes are enormous and grow over time. The only way the Fed can ‘win’ is – as Yellen said today – “to do everything possible to promote a very strong recovery”. Tapering too soon could be calamitous toward this objective. Yet, the longer it continues, the...

Federal Reserve Chair nominee Janet Yellen sang Do Ho’s classic tune “Tiny Bubbles” in the US Senate confirmation hearing. Yellen claims that there is no bubble in asset markets. Apparently, The Fed is unconcerned about the blistering house price increases compared to real median household income. realmedincomcase One reaction in the markets on Yellen’s statement was a rise in gold prices of 1.25%. goldkitco Senator Chuck Schumer asked Yellen about income disparity in the US. She replied that it has grown since the 1980s. {Note to Yellen: the GINI coefficent has been rising since the 1960s. Nice try at blaming...

Janet Yellen, nominated to be the next chairman of the Federal Reserve, signaled she will carry on The Federal Reserve’s unprecedented stimulus until she sees improvement in an economy that’s operating well below potential. Here is her prepared statement. “A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases. Supporting the recovery today is the surest path to returning to a more normal approach to monetary policy.” “Unemployment is still too high, reflecting a labor market and economy performing far short of their potential.” Of course, unemployment...

For years doctors have been focused on specific cholesterol numbers to help patients prevent initial and recurrent heart attack. New guidelines mean only those at high risk will be recommended to take the drugs. So how will doctors decide who is at high risk? More importantly what are physicians already saying about changes? Dr. Neil Stone of Northwestern University chaired the committee that wrote the new guidelines, which was a collaborative effort between the American Heart Association and the American College of Cardiology. No more statins to control cholesterol numbers say expertsInstead of looking at cholesterol numbers Stone said physicians...

The Fed keeps buying roughly $85 billion in bonds a month, chronically delaying so much as a minor QE taper. Over five years, its bond purchases have come to more than $4 trillion. Amazingly, in a supposedly free-market nation, QE has become the largest financial-markets intervention by any government in world history. And the impact? Even by the Fed's sunniest calculations, aggressive QE over five years has generated only a few percentage points of U.S. growth. Having racked up hundreds of billions of dollars in opaque Fed subsidies, U.S. banks have seen their collective stock price triple since March 2009....

Recently, FF Wiley and Ginger Snap at Cynicomics posted an interesting article entitled “M.C. Escher and the Impossibility of the Establishment Economic View.“ In their article, they discuss the latest budget forecast from the Congressional Budget Office (CBO). They point out that the CBO is abnormally bullish on near-term growth, based on its long-standing assumption that the gap between actual and potential output will swiftly close. But the longer-term growth forecast is … bearish. 44521-LTBOSupplementalData2013 escherchart1_thumb1 (1) The CBO also forecasts the REAL 10 year Treasury rate (nominal less inflation). escherchart21 According to the CBO, the real 10 year rate...

Speaking at a Democratic fundraiser, held at a private residence in Dallas, Texas, President Obama stated, “we are remaking the courts.” The President’s statement is especially important, due to the fact that critics of the President have long accused him of attempting to change the American court system, in order to ensure his leftist agenda is deemed to be constitutional. The President, however, has denied doing this, until now... Continue reading at BeltwayExaminer.com

An essay comparing the collapse of the Tacoma Narrows Bridge, 73 years ago today, to the near future collapse of the American civil society, from a blogger with the FR Seal of Approval. -- I. TACOMA NARROWS 73 years ago today, the Tacoma Narrows Bridge in Washington State collapsed. The way in which it collapsed was brought on by a positive-feedback situation, where the destructive force was only bounded by the structural integrity of the bridge itself. There are some serious lessons in this collapse for the future of American society. First, let's get a basic understanding of why the...

As of October 31st, the Federal Reserve of St. Louis monetary base keeps accelerating. stlouismonetarybase Here is the monetary base (white) and the Fed’s balance sheet (pink). monbasefedbal And the M1 Money Multiplier keeps falling. So, $1 created recirculates through the economy very slowly. m1multip110113 And the M2 Money Velocity keeps falling as well. Low GDP is the culprit and M2 Money supply growth isn’t firing up the economy. m2velo110113 Here is M2 Money Velocity and the Case-Shiller 20 metro index since 2000. House price growth and lending helped spur velocity through 2006, but it has been downhill since then....

The Federal Reserve decided Wednesday to hold monetary policy steady, saying that conditions remained too weak to pull back from its bond-buying program. By a vote of 9 to 1, the Fed decided to maintain the pace of its monthly asset purchases at $85 billion-a-month.

The banks would hold a buffer of liquid assets - such as government bonds - to draw on to ensure they can meet withdrawals by depositors, to post collateral due to credit rating downgrades and to meet other needs. U.S. government debt and excess reserves held at the Fed are deemed the most liquid under the Fed's proposal, while claims on government-sponsored enterprises, such as mortgage finance giants Fannie Mae and Freddie Mac, are less liquid and may make up only 40 percent of the buffer.

The UK is an interesting counterpoint to the US housing and mortgage finance system. Oct. 29 (Bloomberg) — U.K. mortgage approvals rose to the highest in 5 1/2 years in September, adding to signs of a strengthening property market. Lenders granted 66,735 mortgages, the most since February 2008, compared with a revised 63,396 the previous month, the Bank of England said in a report in London today. Gross mortgage lending was 15.6 billion pounds ($25 billion), the highest since October 2008. The September mortgage approvals figure exceeded economists forecasts. They predicted an increase to 66,000, based on the median of...

S&P Case-Shiller house prices rose by 0.93% in August (MoM) and 12.82% (YoY), the biggest Year-over-Year rise since 2006. csyoy And the Case-Shiller 20 metro index is back to August 2008 levels. spcs102913 Well, we know that it isn’t households borrowing to purchase a home that is driving this bubble. Here is a chart from CoreLogic on Purchase Mortgage Credit Production. It remains low. skfig1-purchasemortgage And the MBA Purchase Application index (due out tomorrow) is similarly low (at 1995 levels). mbapurchase1995 In fact, house prices are rising as mortgage purchase applications are falling. csaugmbapurch In terms of metro area price...

The world's first Bitcoin ATM will be ready for use this week at a coffee shop in Vancouver, Canada. Created by Las Vegas based Robocoin, the new ATM in Vancouver will allow users to turn bitcoins directly into Canadian dollars, or turn Canadian dollars into bitcoins. As The Telegraph reports, the ATM first scans the user's palm to ensure security and transfers are limited to CAD$3,000 per day. Until now, the currency existed only on the web but the introduction of these ATMs brings bitcoin-as-cash usage closer.

Pending home sales in the USA fell 5.6% in September, the biggest drop since 2010. phs102813 Of course, the rise in the US Treasury 10 year yield has cooled off pending home sales. phsmortgagesept13 Meanwhile, capacity utilization in the USA rose to 78.3%, shy of the point when The Fed has historically raises The Fed Funds Rate Target to cool down the economy. caputefed102813 Back in the Reagan Recovery in the 1980s and the Clinton Recovery in the 1990s, we saw capacity utilization rise above 80% signalling an over-heating economy. And The Fed reacted with increases in The Fed Funds...

The next Federal Reserve Open Market Committee meeting in on October 30th, a preview of Halloween. Despite the lack of evidence of positive growth in the economy, The Fed will likely keep on printing. fedbalshet102613 Two of The Fed’s tools in its arsenal are the Fed Funds rate and longer-term asset purchases (aka, quantitative easing). So, what is the record on the employment front with regard to Fed policies? Let’s take a look. Here is a chart of the unemployment rate (white line) compared to the Fed Funds Target rate (gold) and The Fed’s Balance Sheet (longer-term asset purchases). u3fedpol2...

The next Federal Reserve Open Market Committee meeting in on October 30th, a preview of Halloween. Despite the lack of evidence of positive growth in the economy, The Fed will likely keep on printing. Two of The Fed’s tools in its arsenal are the Fed Funds rate and longer-term asset purchases (aka, quantitative easing). So, what is the record on the employment front with regard to Fed policies? Let’s take a look. Here is a chart of the unemployment rate (white line) compared to the Fed Funds Target rate (gold) and The Fed’s Balance Sheet (longer-term asset purchases). u3fedpol2 So...

Folks, if you have read me recently you know that I've said that you are the problem and that the reason this is true is that you won't go on strike, you won't picket DC and refuse to leave until the government stops stealing from you and debasing the currency, you won't reduce your spending and income to only that which provides necessities, and most of you go on to justify your behavior with "my kids (and/or family) deserve what I can provide."You're fools and I'm going to prove it.  Further, I'm going to prove -- by arithmetic -- that if...

Yesterday, I posted charts showing the deceleration of economic indicators in the USA, as The Fed’s Balance sheet continues to grow (white). The indicators are labor force participation (purple), M2 Money Velocity (gold) and the 10 year Treasury yield (green). charming Today, we got another deceleration warning from durable goods orders (non-airline, non-defense). Orders for U.S. equipment such as computers and machinery unexpectedly declined in September for the second time in three months, indicating business spending was weakening ahead of the partial government shutdown. Bookings for non-military capital goods excluding aircraft decreased 1.1 percent, the Commerce Department reported today in...

The Federal Open Market Committee meets in the coming week to discuss monetary policy after the 16-day U.S. government shutdown took at least $24 billion out of the economy. The Federal Reserve is likely to delay lowering its $85 billion in monthly bond purchases until March, according to a Bloomberg survey. Sorry to break this to you, but the downward trend has been building since 2000. Here is a chart of The Fed’s balance sheet (white line) which has been growing rapidly since late 2008. The other indicators: 1. the 10 year Treasury yield (green): it has been falling steadily...

According to the National Association of Realtors, existing home sales fell and fell by the most since June 2012. ehssep13 And now for the bad news. Home affordability plunged to the lowest level since the end of 2008, and the beginning of The Fed’s quantitative easing (QE1) program. haffor102113 Of course, increasing home prices coupled with rising mortgage rates will put a damper on affordability. While the Freddie Mac Mortgage survey rate is still lower than it was at the end of 2008, house prices (using CoreLogic’s home price index) are higher than at the end of 2008. loanhpfreddieinded We...

The US dollar hit 8-1/2-month low on worries about U.S. economy, the headline blares. usdeur101913 True, but the USDEUR rate took its biggest beating during the 2002-2008 period. But since the latter half of 2008, the dollar has been floating around in a relatively narrow band (although it seems larger on a day-to-day basis). bfmB3 And if we look at a longer term pictures of the US dollar spot rate (DXY), we see the Reagan economic recovery and asset bubble and then the Clinton/Bush economic recovery and asset bubble. dxy1960s But the asset bubble that followed the Clinton economic growth...

Diddy Wah Diddy is the last stop on the mythical train to Hell. “It ain’t a town and it ain’t a city, but oh how they love in Diddy Wah Diddy.” Well, it didn’t take long for the Obama Administration to start spending and borrowing again in … Diddy Wah Diddy. In fact, they just broke the $17 trillion debt barrier. The official US debt is now $17,075,590,107,963.57, an increase of $327 billion overnight. Debt To Limit_1 And The Federal Reserve increased its balance sheet By $50 billion in just one week, not to mention $ trillion over the last...

When President Obama nominated Janet Yellen to be the next Chair of the Federal Reserve Board the praise he offered was similar to what had already poured in from around the country. In their assessments of Ms. Yellen's long career, Congressman, editors, and academics have underscored how her prescience and caution distinguish her from the reckless overconfidence that have plagued her male colleagues at the Federal Reserve. As proof of her wisdom supporters have pointed to speeches she delivered in 2005 and 2006 in which she supposedly issued clear warnings about the dangers then building in the frothy real estate...

According to The Federal Reserve G.19 Report for August, consumer debt topped $3 trillion! Of course, Federal government debt has topped $16 trillion, over 5 times the amount of consumer debt. Note that pickup in Federal debt growth compared to consumer debt growth after Q2 2008 (red box). feddebtconsumer Here is a chart of revolving consumer credit versus non-revolving credit. Non-revolving debt (e.g., auto loans) have effectively replaced revolving debt. revnonrev Business loans have finally grown past the prior peak in 2008. frbusloasn On the government side, current expenditures (purple line) continue to grow, but the rate of growth flattened...

The stock market has rallied significantly since President Obama nominated Janet Yellen to replace Ben Bernanke as Federal Reserve Board of Governors Chair. Yellen is committed to both sides of The Fed’s dual mandate of bolstering employment while keeping inflation in check. But the equity markets like Yellen’s record as a dove meaning looser monetary policy and a possible delay in any tapering. djia1010 Alternatively, the market could be responding to a possible debt ceiling stall by House Republicans that President Obama approve of. But Yellen’s record as a dove (she was the architect of quantitative easing) is greeted with...

On September 17, 2008, the US total debt stood at $10.615 trillion and The Fed’s balance sheet was almost $1 trillion ($996 billion). Since that time, US total debt has skyrockets to … the statutory debt limit! That means that over President Obama’s Presidency (and the last couple of months of Bush’s Presidency), total debt climbs over $6 trillion. debtceilgst And The Fed’s balance sheet rose over $2.78 trillion. dcfeed With The Fed enabling massive Federal government waste (and Janet Yellen likely a willing enabler). Democrats and President Obama are refusing to negotiate on the budget or the debt ceiling....

As former Reagan adviser David Stockman said about Obamacare, “It is a massive entitlement to end all entitlements.” But housing is an entitlement as well. Last week, no less than 63 members of the House and 13 Senators wrote to Financial Housing Finance Administration chief Ed Demarco demanding that he not lower the maximum loan limit for mortgages guaranteed by Fannie Mae and Freddie Mac. In earlier correspondence to DeMarco, first reported by National Mortgage News, National Association of Realtors (NAR) President Gary Thomas questioned the legality of FHFA reducing the loan limits at this time. “Our nation’s housing market...

We now know where we stand. Janet Yellen is to take over the US Federal Reserve, the world's monetary hegemon, the master of all our lives.