Posted on 10/16/2014 12:06:29 PM PDT by Kaslin
So now we know when bad news is actually bad: When the Federal Reserve Bank won’t continue quantitative easing.
The stock market has fallen out of bed in the past two weeks. You can pick its poison: Ebola, ISIS, Obama, Oil or any other proper nouns with bad intent. But my money is on, well, money.
The end of the money parade -- or quantitatively eased "bribes"-- is making it more difficult for traders to find the money to chase stocks up.
But don’t worry stock market. As our guest Chris Versace pointed out on the radio this week, the Federal Reserve already has QE4 ready and waiting if things get too dicey in the economy. Certainly they will keep interest rates ultra-low as a kind of "bribe" to business to keep thing...um...ehhh? So-so?
Why? Because there are some cases where bad news is still good news for interest rates—that is if you think interest rates should stay at or near zero forever.
There is certainly no good reason, you know besides a sound economy, to raise rates right now.
Producer prices came in down 0.1% in September, which is rather odd for an economy that is finally, finally, finally beginning to recover.Oh, and that inflation number? That’s excluding food and oil. When you add in food in oil…yep, you got it…deflation.
Dreaded deflation, which of course is like a pay increase for you and me.
No wonder they hate it so much.
Then there are retail sales, which disappointed, dropping by 0.3% in September, despite falling gas prices, which should have given consumers reason to spend more money. Analysts expected a drop of only 0.1%, an odd thing for an economy that has finally, finally, finally recovered.
Business inventories also rose less than expected, meaning growth likely isn't as robust as economists have forecast.
“U.S. business inventories rose less than expected in August,” reports Bloomberg, “which might lead economists to lower forecasts for economic growth in the third quarter.”
See isn't that all such good news?
Because the economy is weaker than we anticipated, interest rates will stay low, meaning cheap money is here to stay, therefore the stock market can go up forever.
Gosh, if we could just slow down the economy a bit more, think of all the great "bribes" that economists and politicians could give us for our own good.
And the stock market would never fall either.
For example, the White House is handing out $170 million in reparation payments, or “bribes” to the long-term unemployed, via grants, or “bribes” that will go to city governments and businesses, and not necessarily the long-term unemployed that are being “bribed”.
Get this: People have actually been hired, although of course it created no new jobs:
“The White House suggested its efforts have resulted in some actual hiring,“ reports the Huffington Post, “saying rural phone company Frontier Communications has hired 250 long-term jobless since January, amounting to 20 percent of all its hires in that time.”
Imagine if that money just went to the best-qualified applicants, rather than the longest unemployed.
I know: Crazy talk.
And since we are already celebrating more good news, we got great news that Obamacare is going to cost MORE again. More then the previous more it was already going to cost.
According to Republicans Obamacare will cost $311 billion more than was estimated by the CBO in 2012. So…now Obama’s refusing to say whether he voted for Obamacare in 2010, or for that matter Alison Grimes at ANY time.
And that’s the best news of all.
Or at least the funniest at a time when the news just isn't very funny at all.
“According to Republicans Obamacare will cost $311 billion more than was estimated by the CBO in 2012. So…now Obama’s refusing to say whether he voted for Obamacare in 2010, or for that matter Alison Grimes at ANY time.”
The Federal Government cannot afford to service the massive debt if interest rates go up. Therefore QE is permanent, trial balloons about ending it not withstanding.
For you and me, SHORT TERM deflation is good, yes. But medium or long term deflation is NOT good for you and me. Why?
Because you and me most likely have a mortgage, and that means our home prices fall, due to the dollar being worth more, but our $$$'s owed stay the same. That ain't good, because that will likely be a MUCH larger portion of your total assets than the raw cash savings you will benefit on from deflation that you have in the bank.
> but our $$$’s owed stay the same
Don’t most people pay a little equity rather than only interest on a mortgage?
>> Because you and me most likely have a mortgage
On the other hand, those of us who aren’t “you and me” and borrowed responsibly and paid off our loans early are MUCH more concerned by inflation. Especially inflation coupled with interest rates that are forced artificially low.
Yup, inflation/cost of living is much more worrying to those that have paid for their homes and are now living on retirement income. I bought 3# of lean hamburger yesterday for $4.49 a lb. If I had to pay a mortgage at this point in my life, on top of increased prices for food, gas, propane, electricity, etc., I would find it difficult to make it.
Almost 50% inflation on the essentials such as food, gas, toiletries, etc.
And yet, income declined by 10%.
US Census showed median income went from $56,000 to $51,000.
With real unemployment U6 well somewhere around 12-14% and shadowstats at about 24%, the economy sucks.
And also people are not spending money. There are now articles on how people are "hoarding" money. Well yes, people are not doing well in this Greater Depression, and as a result, they are tightening their belts, holding onto what little they have left, because they don't know what is around the corner, or in other words, how Obama and the democrats are going to screw them again.
I’m only 6 months into my first mortgage, and yes some of the payment is indeed equity, but in my position it isn’t that much yet since it is so new. I did put 29% down though! Still the loan $ is > than the amount of equity.
Am I supposed to recognize the woman in the photo?
That is Alison Lundergan Grimes, the demonRat from KY
She’s the rat who refuses to admit that she voted for that arrogant pos occupant of 1600 Pennsylvania Ave. yet she supported everything he did
But the bribes ARE working.
Here’s a sorry headline from Bloomberg earlier today: ‘’U.S. Stocks Erase Loss as Fed’s Bullard Suggests More QE.’’
So not only has the Fed destroyed its credibility on quantitative easing, but Mr. Bullard’s announcement actually failed to erase the market’s loss — the Dow ended down 24 points.
There was a serious reason why the Fed decided to end QE — because QE caused the Fed to spend $4-plus trillion, creating a towering debt for our central bank. The Fed acknowledged this debt was not sustainable when it announced it would end QE at the end of this month.
But, apparently, keeping the stock market from falling is more important that keeping the Fed from going bankrupt.
But what happens now when even the Fed’s announcement that it might continue QE is not enough to keep the Dow from falling for another day?
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