Why Larry gets it wrong. World heads to financial meltdown.

Financial reporting in the US has gone in the same direction as the reporting of other news: part facts, part distorted facts and part fantasy. Let's dissect the issues one by one.

1. The employment picture.
The "conventional wisdom" (i.e. what is reported by the Media) is that the economy is getting better as can be seen in the employment numbers. For the sixth time since 2010, the Media see green shoots: signs of a robust and sustainable recovery. This will be followed by activating an exit strategy by the FED and things will return to normal. What is this based on? Why, none other than the ajusted numbers of the Labor Department. Initial jobless claims (on the adjusted basis) had dropped to 335,000 - the lowest since 2008. Unadjusted numbers tell a different story: the actual number was 437,000. The average work week decreased and the % of companies reporting an employment decrease (16%) exceeded the companies reporting an increase (11%). Thus, the siting of green shoots is once again a fantasy.

2. Is there an exit strategy for the FED?
The short answer is NO. The FED can not allow interest rates to return to what the market would dictate. The National Debt is now 16.4T and growing. If this were financed by 30Year Treasuries at 3% the payments on it are 480B, at 4% it is 640B and at 5% it is 800B. The Liberals claim that  the debt does not matter because we owe it to ourselves. But, that's not how it works. The Treasury prints the Treasury bills and sells it to private interests. That includes private individuals and banks. The FED then digitizes the Dollars to buy some of this and pays interest on it (by digitizing more dollars). Whether, the FED pays the interest to the banks or the Treasury Dept, the new money is added to the money supply. The reason we do not see inflation is because the new money is tied up in banks reserves or Treasuries. The FED owes about 1.7T in Treasuries, so the majority of Treasuries is owned by someone else. Larry believes that at some point people will dump Treasuries and go into gold.

3. The Chinese put for gold.
The Chinese are smart buyers of gold. Every time gold drops, they buy more and insist on delivery. Official figures put Chinese acquisition at 1,000 tons for 2012. Since, US gold holdings are reported as about 8,000 tons, at some point China's gold reserves will top ours. Where is all that gold coming from? Good question.

4. The looming shorts squeeze in gold and silver.
It is esimated that the amount of gold contracts exceeds the available gold by a factor as large as 100, maybe 150. People who own gold bars and coins own gold.  The rest own papers promising delivery. Supply of silver is getting short. A shorts squeeze is building. The longer the FED gets us into this Ponzi scheme, the greater the danger when the scheme unwounds.

5. Daren Jonescu, writing in American Thinker, explains the Liberal/Progressive march into the abyss. "Hillary Clinton's angry blurting out of the truth is applicable to much more than just the Benghazi fiasco. With that revealing little qualification -- "at this point" -- she actually gave away the entire progressive game that has been played on Western civilization for more than a hundred years, and has now all but shut the door on the five hundred year adventure the West has dubbed "modernity."

This is the big secret at the core of the progressives' conception of "progress": You cannot justify the unjustifiable in advance, or persuade people of the rationally unpersuasive. Rather, you must simply push "forward" into ever-deepening waters, repeatedly building reserves of social pressure and then releasing them in little thrusts of propelling energy to carry civilization ever nearer the vortex -- all the while promising to save men from the frightening depths, if only they will hold on tight, and follow you, the progressive, just a little farther forward, just a little farther forward.

The key to the progressive "ratchet," as it is often, correctly, called, is that no step forward may ever be retraced. Each stage of degradation is to be rationalized after the fact, precisely by the means exemplified in Hillary Clinton's stark question: "What difference -- at this point -- does it make?"

As the Treasury keeps printing and the FED keeps digitizing, we are pushed nearer the abyss every day. Th failure of Democratic Socialism is no longer just a theoretical possibility far on the horizon. At this point, we can hear the roar of the waters as the whirlpool of chaos sucks in the nations of the world. That's the difference it makes.

Some details of why FED prescriptions are't working.

Keynesian Policies Are a Flop

Dear Laissez Faire Today Reader,

Douglas French

World unemployment is on the verge of breaking new records. This trend will continue until 2017. That's the news from the International Labour Organization (ILO) in their annual employment report.

Currently, 2009 is the record year for world joblessness, at 198 million. In its 2012 Global Employment Trends report (source), the ILO believes unemployment numbers will rise by over 5 million this year to reach 202 million, topping 2009's record.

The report goes on to predict that unemployment will rise further in 2014, to reach 205 million. "Unemployment remains as dire as it was during the crisis in 2009," Ekkehard Ernst, chief of the ILO's employment trends unit, told CNBC.

 

But how could this be? More Keynesian monetary power has been thrown at the global meltdown than ever in history. And why? To bring down unemployment. That's the problem that the Keynesian prescription is supposed to fix.

The U.S. central bank has increased its balance sheet from less than $900 billion pre-crash to a new record of $2.946 trillion on Jan. 16. The growth is expected to continue to $4 trillion with its latest plan to purchase $85 billion in Treasury and mortgage debt each and every month until the headline unemployment rate in the U.S. falls to 6.5%.

The Japanese government insists it's a major change that the Bank of Japan agreed recently to launch an "open-ended" commitment to ending deflation through asset purchases and adopted, for the first time, a firm 2% inflation target in a document jointly issued with political leaders. Somehow, everyone forgets the Japanese central bank has been stimulating that economy for more than two decades to no avail.

ECB chairman Mario Draghi has become the leader of the European Union. He wasn't elected by the people, but was elevated as such when he vowed to do "whatever it takes" to preserve the euro. He's now the face of the ECU. The Daily Bell writes,

"Therein lies the evidence of Draghi's divinity. He has vowed, like Beowulf pursuing Grendel, to slay the beast of European dissonance. His weapon is currency debasement, and his lair is the magnificence of the ECB headquarters.

He is, according to Reuters, a hero for the ages, at once modest and savvy, confident and yet inclusive. He is a leader of men and a wonderful wielder of the public purse."

Draghi was the Financial Times person of the year last year, the same honor bestowed on Ben Bernanke by Time magazine in 2009. In fact, Time called Draghi the "savior of Europe" last year, while Bernanke's picture graced the cover of The Atlantic above bold letters "THE HERO."

Yes, Keynesians believe more money and lower rates equal less unemployment. Central bankers have been elevated to godlike status, but the BOJ's, Bernanke's, and Draghi's not-so-secret sauce clearly hasn't worked.

Sure, many of the newly unemployed live outside the developed world, but when Ben and Mario start printing, the effects are felt all over the world.

"The main transmission mechanism of global spillovers has been through international trade, but regions such as Latin America and the Caribbean have also suffered from increased volatility of international capital flows," the CNBC report said.

The ILO also added, "The indecision of policymakers in several countries has led to uncertainty about future conditions and reinforced corporate tendencies to increase cash holdings or pay dividends, rather than expand capacity and hire new workers."

Indecisive? Hardly. Central bankers have one tool -- money printing. They do it either fast or slow. They already collectively have the pedal to the metal and are on the verge of flipping the jet propulsion switch.

However, Christina Romer, former chairwoman of President Obama's Council of Economic Advisers, writes in the Gray Lady that the Fed has moved slowly, and wonders, "Why are some policymakers threatening to undo the recent actions?" She's referring to comments by presidents at two Midwestern Federal Reserve banks.

"It is a very aggressive policy, and it is making me a little bit nervous that we are overcommitting to the easy policy," St. Louis Fed President James Bullard told reporters after a speech to the Wisconsin Bankers Association. "We are taking risk."

Kansas City Federal Reserve President Esther George, sounding almost Austrian, said, "Monetary policy, by contributing to financial imbalances and instability, can just as easily aggravate unemployment as heal it."

Romer and her husband, professor David Romer, believe pessimistic attitudes have hampered the central bank's effectiveness. The Romers write in a paper titled "The Most Dangerous Idea in Federal Reserve History: Monetary Policy Doesn't Matter" that pessimists at the Fed during the early 1930s led to "inaction in the face of the largest downturn in American history."

That sounds good, except the Fed did all it could to expand the money supply. In his book America's Great Depression, Murray Rothbard chronicles the Fed's continued actions from after the stock market crash of 1929 to 1932. Jeffrey Tucker quoted Rothbard at length in a recent article.

Following the stock market crash, Rothbard writes that the government's easy money program dropped rediscount rates 42%. Despite this move, the money supply remained constant while production and employment fell.

In 1931, the Fed did its best to inflate by raising controlled reserves. Citizens foiled this plan by converting their bank accounts to currency. Rothbard writes that "the will of the public caused bank reserves to decline by $400 million in the latter half of 1931, and the money supply, as a consequence, fell by over $4 billion in the same period."

The next year, while the Fed stimulated, banks did not lend the money out, but instead piled up excess reserves. Just as banks have done in the current crisis. "Naturally," Rothbard continues, "the banks, deeply worried by the bank failures that had been and were still taking place, were reluctant to expand their deposits further, and failed to do so."

Rothbard, evidently, isn't on the Romers' reading list. Today, the Fed is peddling as fast as it can, but commercial bankers and their regulators have their feet on the brakes. Maybe borrowers want to borrow when rates are low, but lenders sure don't want to lend, especially while they are still licking their wounds from the real estate crash.

It was the same in the early 1930s. As Rothbard summarized:

"In a time of depression and financial crisis, banks will be reluctant to lend or invest, (a) to avoid endangering the confidence of their customers, and (b) to avoid the risk of lending to or investing in ventures that might default. The artificial cheap money policy in 1932 greatly lowered interest rates all around, and, therefore, further discouraged the banks from making loans or investments."

Businesses are storing cash, waiting for the smoke to clear. Hiring people is expensive, and the Fed has trampled the primary signaling mechanism to the market. Austrian economists would say that these low rates only serve to deceive entrepreneurs into believing that people have saved more than they really have and that money should be invested in higher-order goods, such as factories and equipment.

In that case, these low rates only prop up the prices of real estate and other capital assets that likely need more downward adjustment from the boom. A normalization of rates will hasten that process and get people back to work.

But don't hold your breath. After all, Romer isn't reading Rothbard, and central bankers aren't perusing this space. They'll keep printing money that goes only to Wall Street speculation, the press will call them heroes, and you'll still be stuck trying to find your way out of their mess.

How do you navigate the topsy-turvy world created by these superhuman central banker heroes? Addison Wiggin has seen this train coming for years. Here are 47 ways you can protect yourself from a shrinking dollar.

More unemployment will mean more money printing, which will mean more unemployment, which will mean... surely you have it by now.

Sincerely,

Doug French

P.S. Readers of F.A. Hayek's great book A Tiger by the Tail could easily have predicted this quagmire. Decades ago, Hayek showed how central banking policy designed to correct unemployment only ends in creating more. He shows precisely how this happens too. Hayek's analysis is like a decoder ring for the world macroeconomic environment today.

If you are a Club member, it is free. If you are not, join today and get this book, plus 30 other essential reads, curated just for you.

Western countries face poor economy.

The economic tinkerers of the developed world have met in Davos. Much wringing of hands and flapping of jaws. No one has the courage to name the roots of the problem: 1. too much debt to finance what the politicians have promised and 2. two many things that politicians have promised. One person (Guria) is quoted who admits: "This incipient, hesitant recovery needs to be consolidated. We ran out of room on the monetary side, we've run out of room on the fiscal policy side, so what you need is to go structural. " "You need to go for education, for innovation, for more competition, for tax structures that are conducive to investments and job creation, you need to go for flexibility in the labor markets, for flexibility in the product markets," he said. "These are the things that are going to keep you going long term." In other words - get rid of Social Democracy and have a freer market. Unfortunately, England is now ready to slip into a 'threepeat' a third recession. Back in the US, the propaganda machine of the Obama communists is getting in gear to: 1. tell us how well off we are and 2. whose fault it is that we aren't. We are starting to see articles by the likes of Dr Stieglitz that employment is going to be hard hit by the use of intelligent machines. In other words, employment is poor, because of future use of intelligent machines. Nice try.

Greeks shiver in smog, Spain hits record joblessness.

Socialists never learn that actions have consequences. They just assume that you can adjust taxes and subsidies up and down and that this will little effect people's behavior. Case in point is Greece's change in subsidies for heating oil and taxes on fuels. As wages plunged and benefits were cut, heating oil prices went up till it is now 50% cheaper to use wood than heating oil. So, all of a sudden Greece is inundated with problems that come from using wood in cities as heating fuel. Respiratory problems, smog and illegal logging have been added to Greece's economic problems.

On the other end of the Mediterranean, Spain's unemployment hit a record 26% and 60% for the young. It is fitting, because the young were the biggest supporters of putting Spain on track for failure that comes from Socialism.

Is 2013 the year?

• Larry Edelson's thesis is that a drop in the value of 30 year Treasuries will set off a scramble into gold, silver, real estate and out of bonds. So, here is the graph of 30 year Treasuries. The bond is indeed heading down, yet the yield has been increasing. This validates Larry, up to a point. He expect Treasuries to drop to 135.

 

 

European chill and the currency wars.

Kids in Beijing are making snow pandas and Russia is having record snows. French, British and German airports are canceling some flights because of snow. The cold of the Midwest is heading to the East. Australia had a heat wave and fires and Mongolians are losing their animals in the bitter cold. Yet the environmentalist whackoes of Lower Saxony(the Greens) and the Socialists of Germany had managed to eek out a one vote victory against Merkel's coalition. It's January across the globe.

While temperatures had dropped, currency wars are heating up. Foremost currency manipulator is Japan and the Yen hit a new low. South Koreans are complaining and getting ready to react or retaliate. The Euro had appreciated 11% against the Dollar and Sweden and Norway are lowering their interest rates. The whole Western world is ruining their currencies in the mistaken belief that this will compensate for government overspending and over regulation.

In the US, the little Satan was inaugurated to the delight of our Socialists. And the Republicans caved already and raised the debt ceiling. Time to run out my favorite Russian joke. Russian Pessimist: Things are so bad they can't get any worse. Russian Optimist: Oh, yes they can.

Gold and silver: Is the jig up?

1. I have given you the outline of how the price of gold and silver is suppressed;

2. I have also said that this scheme will unravel - one of these days.

3. The unraveling has started.

Now some comments.
a) People have wised up to the gold price suppression scheme. The scheme needs willing suckers who buy paper contracts on margin. Smart investors are buying the actual metal, or, buying the paper contract without margin and insist on taking delivery.

b) Actual metal supply has gotten short, especially the supply of silver. The US Mint and the Canadian Mint had to stop minting silver coins because they ran out of silver. (Would you have thought that paper silver can not be used in minting actual coins?) Even 90% silver coins are in short supply.

c) Other precious metals (especially platinum) have also started to increase in price.

d) As you can see, Larry's prediction about a crash in gold and silver prices are not coming true. Why? - you might wonder. It is due to the difference between Chartists ans Fundamentalists. Chartists believe that the chart tells all, so it does not matter why prices change, what matters is that prices change on volume changes. Fundamentalists believe that it is the fundamentals of an issue that will ultimately set the price. The precious metal market has been distorted and the distortion is now being overwhelmed.

So, is the German gold gone?

When I was working on the previous post I did not realize that new info has just come out. What new info? The size of the German gold hoard deposited at the NY FED is 1,536 tons. And it will take 6-7 years to repatriate it to Germany. Really? Is it going by a piper cub?

The German gold at the NY FED is gone. A further indication that the gold is gone is what the Germans said was the "reason" they are leaving the gold in NY. The Germans said that they are leaving the gold in NY, because the center of gold trading is in New York. False! And the Germans know it. Physical gold is sold in London and Zurich. The FED can not repatriate the gold, because they do not want to buy that much and drive up the price.

That is the only reasonable conclusion. It has been used in the price suppression schemes and found its way to China. In fact, it is reasonable to conclude that a lot more than a 1,000 tons had gone to the East.

China admits to have increased its gold hoard by 1,000 tons last year.

Supposedly, only 8oo tons came from imports and 200 tons from accelerated home production. China is mining 35% of its known reserves/year. Its goal is to have its Yuan backed by gold.

Not only gold, but silver is also short.

Again, China accounts for a lot of silver use and future demand.

More on Germany's gold hoard.

In an earlier post I have referenced a post that appeared elsewhere:

http://geezerbinexile.blogspot.com/2012/10/german-gold-hoard-is-gone.html

King World News had raised the issue that part of Germany's gold in custody of the UScontracts of gold delivery.  was characterized differently then the rest. The possibility was considered that this portion of the German gold was rented out. It might have been used to suppress gold prices by backing the periodic takedown of gold.

How does the price suppression work?

On the COMEX traders buy and sell contracts for gold delivery. The trader does not pay for the entire price of the gold the contract represents, but only part of it. The rest is covered by margin (borrowed money). In order to protect himself, the trader sets a "stop loss." If the price of gold falls below that price, the contract is automatically sold at a loss to the trader. Thus, an unscrupulous entity bent on controlling gold price can dump a bunch of contracts on the market (and do it in the middle of the night and in a very short time to maximize the effect), make the gold price drop then scoop up the contracts that will be sold because of the stop losses.

So, why is it necessary to borrow the gold?

Because the contracts have to be covered by actual gold. Buyers of the contracts can demand delivery and some do. Thus, the amount of gold that can be used in the suppression scheme gets smaller and more of it gets delivered to China and India.

How about the German gold?

The Germans admit that they can not repatriate their entire hoard. And we are talking about significant amounts. The US hoard is over 8,000 tons, while the German hoard is over 3,000 tons.

How short is the German hoard?

Unknown at present. We know that a certain amount has been rented out and may have gone to China.

Has Draghi won the financial battle of Europe?

Ever since the European Central Bank started buying Italian and Spanish bonds, the yield on these bonds started falling. That means that the respective governments need to pay less to service their debts. This has averted an immediate crisis of the debtor countries becoming unable to service their debts.

Does this solve the European economic problem? NO! In fact, the financial problem remains as the income from the bonds is no longer going to private investors, but to the ECB. To be sure, Socialists think this is a great thing, because they see lots of ways to redistribute the money. However, when money is redistributed without getting work done for it, the wealth of a nation is reduced.

There is another problem that has been created; the bloating of the balance sheet of the ECB. There is a new round of money printing going on in the world and some in finance are beginning to worry as to how the banks will reduce assets. If money printing (and subsequent bond buying) would be the way to grow the economy, leaders would not fret about the economy, they would just order their central banks to print more money. The problem is that as the money expands prices go up. If prices are fixed, goods disappear and show up in the black market where prices become exorbitant.

In the end, the economy does best in an environment of low taxes and sound money. Corruption is just another tax. In the US, regulatory costs act as corruption does in other countries. It is a break on the economy/

The Dieli model and the FED.

I would like to add that the Dieli Model is an empirical model. What does that mean exactly? It means that the Model is useful in predicting a recession, but the recession is not necessarily dependent on the factors considered. Not in a cause and effect mode, anyway.

Ever since the 2008 meltdown, I have been studying how the FED is affecting the economy. My first definitive post was published July 30, 2009 (on this website). The data show that the 2008 meltdown was caused by the FED changing the accounting rules. The new rules froze the money in the banks, causing M2 to drop which caused the GDP to nosedive.  The crisis created in Oct 2008 helped to elect Obama.

Since 2008, the FED has followed a deflationary policy, which increased unemployment while keeping down the inflation. Contrary to what Bernanke says publicly, the Dollars created in the several Quantitative Easings did not enter the economy, but became sequestered as bank reserves and Treasury Notes.

In terms of the Dieli numbers, the FED can keep us from slipping into a recession by keeping unemployment high and inflation low. One of the tools of keeping inflation low is keeping gold prices as low as they can get them. Larry predicts that gold prices will hit a low between Jan 2013 and June 2013 and then gold prices will take off. The general belief is that the longer a trend is delayed (such as the rising in gold pries), the larger and quicker the action will be when it can no longer be prevented.

Preventing recessions: the Dieli model.

The Dieli model is a predictor of a coming recession. It uses four numbers and arrives at a final number. When the final number drops below 200, a recession is expected within 9 months. The parameters used in arriving at the final number are expressed as basis points: meaning that percentage values are multiplied by 100. Thus, a Fed Funds rate of 0.13% becomes 13, while an unemployment rate of 8.10% becomes 810 basis points.

This is the way the Dieli number is calculated:

 

Long Treasury yield  (240)

- Fed Funds Rate (13)

_________________________

Yields the Financial spread of 227.

 

Inflation rate   (170)

-Unemployment    (810)

__________________________

This yields the Real spread

 

Dieli number = Financial Spread- Real Spread.

The current example is (240-13) - (170-810) =867

 

 

 

 

 

The Author* states that because the Dieli number is way in excess of 200,  we are not heading for a recession. There is a serious problem with the graph though. The Dieli number (i.e. the peak) is twice as high as we would expect. Since, the Treasury yield and the Fed Fund Rate are known constants, either the inflation or the unemployment must be wrong. We can trust the unemployment number more, because inflation ignores the price of food and gasoline. If inflation was closer to 8% then the Dieli number may be near the 200 magic number.What this tells us is that an increae in inflation will now put us into a recession by the end of the year. 

 

*This post is based on an article by a Mr Miller in Saturday's issue of Seeking Alpha. Since, Blogger made changes, several editings were needed because the spelling function was disabled.

Low interest rates are harmful.

Bernanke and colleagues emphasize that low interest rates help the economy. How? By making loans available at lower rates. That supposedly encourages private investors and business to borrow. So, how come that a short term interest rate of between 0.0 to 0.25% is producing an anemic economy and high unemployment? Could it be that low interest rates have harmful effects as well? It could, say several investment gurus:

http://www.bloomberg.com/news/2012-10-30/who-loses-when-fed-keeps-interest-rates-low-.html

What are the interacting factors?

1. How low interest rates are produced. The FED reduced the discount rate at which banks can borrow. Banks are then encouraged to invest in Treasuries which yield very little. The FED digitizes the money for the banks, which then sit there earning very little. The FED also buys Treasuries and pays the low rate to the Treasury which goes into  the bottomless pit of the government deficit.

2. Low interest rates produce low savings rates. These depress bond returns as well. Since, people can not earn enough from savings deposits, they must work longer and reduce job opportunities for the young.

3. Low interest rates reduce investment opportunities for pension funds and businesses must contribute more. This reduces the availability of cash for expansion, research.

The overall effect? Reduced movement of money (M2), as the new money digitized by the FED sits there doing very little positive. Stagnation. When inflation goes up, stagflation results. As long as the deficit remains high, the printing must continue. Higher taxes would reduce economic activity even further. So, why do such economists as Krugman advocate higher taxes and higher govt spending? Because they are Socialists and want to grow the government. OK, so why did Krugman turn down an appointment to Treasury? Because as it is common with academics, they do not want to be responsible for the effects of their opinions in action. Krugman knows that Socialism has a poor record. By being out of govt, he can blame the failure on the people in charge or on them not doing enough.

Greece and Spain: a pain in the banks.

There is a revealing article on the Greek banks in Seeking Alpha:

http://seekingalpha.com/article/1097711-massive-dilution-coming-for-national-bank-of-greece-shareholders?source=email_the_daily_dispatch&ifp=0

To make this short and comprehensible, this is the situation: National Bank of Greece has a negative value. It is broke in simple terms. It has been ordered to raise capital. Printing more shares will reduce he value of shares by nearly 50%. Meanwhile, this bank will be acquired by Eurobank which has an even worse balance sheet. This is not the only Greek bank that is broke and they, too will have to be recapitalized.

The Spanish banks are just as bad. Problem banks had been reorganized into one bank (Bankia), which is also broke and needs recapitalization.

Grand Deceptions.

1. The Deficit misdirection.

The Democrats in general and Obama in particular want to blame the tax cuts for the Deficit and the enormous explosion in the National Debt. Here is what Obama said about the "fiscal cliff" compromise:

"A central promise of my campaign for President was to change the tax code that was too skewed towards the wealthy at the expense of working middle-class Americans. Tonight we've done that. Thanks to the votes of Democrats and Republicans in Congress, I will sign a law that raises taxes on the wealthiest 2 percent of Americans while preventing a middle-class tax hike that could have sent the economy back into recession and obviously had a severe impact on families all across America."

Read more: http://www.politico.com/story/2013/01/obamas-statement-on-fiscal-cliff-deal-85662.html#ixzz2H5nPIrB6

Here is the truth: Forty seven percent of American earners pay no federal income tax at all. So, the goal of Obama (like the goal of all other Socialists) is to tax away the earnings of the high earners. The deficit grew by a trillion annually, because of the stimulus program. The Senate made that increase permanent by refusing to pass a budget. Instead of a Budget, the govt operates on a Continued Resolution plus a built-in increase.

2. The FOMC had published some notes from the Dec meeting. The notes mentioned a possible "EXIT STRATEGY" from buying bonds. The fact is that there is no exit strategy. The whole thing was an attempt to increase the value of the US Dollar and drop gold prices. Gold prices did indeed drop untill people realized that the notes were merely idle speculation not policy. Here is an article on the Notes and comments:

http://mam.econoday.com/byshoweventfull.asp?fid=455485&cust=mam

Here is perhaps the pragraph that gave rise to the misconception that QE would ease:

"The minutes of the December 11-12, 2012 FOMC meeting showed heavy debate about quantitative easing. On the economy, participants saw the economy growing about as previously expected although jobs growth was a little better. However, various members were concerned about monitoring quantitative easing. Some saw QE4 as complicating the Fed's exit strategy from extremely loose monetary policy. FOMC participants indicated that some of the quantitative easing programs should end before the close of 2013. This could mean the end of Treasury purchases or mortgage-backed securities sooner than believed if this view takes hold. It was noted that additional asset purchases could create difficulties. The worry is that inflation and/or inflation expectations could rise."

3. The Merkel statement on the debt crisis.
German Chancellor Angela Merkel announced that the worst part of the debt crisis is over. Is that right? Well, except for the Greek and Spanish Banks that will need a bailout again, that is.

4. Media hosannas about the improving jobs picture: 155,000 hires in December 2012. How good is that number? Well, we need 300,000 just to keep even. Even the 155,000 number is swelled by Hurricane Sandy hires and Christmas retail jobs. The work force is still shrinking.

Boehner - an inadaquate Speaker.

Energized by the Tea Party in 2010 Republicans gained a majority of the House seats. As a result, they got to replace the economic idiot Nancy Pelosi (she of the 'you grow the economy by unemployment checks') with John Boehner of Ohio. Mr Boehner has proven inadequate for the task. He has been played by the Socialist game and has been conned to negotiate with himself. See the Socialist game and how it is played:

http://ragingbull.quote.com/mboard/boards.cgi?board=CLB01354&read=1586

Barak Hussein has been emboldened and now sets out to complete the transformation of the US into a Socialist country. He has three aims:

1. To increase the proportion of the "low information" group by legalizing illegal Hispanics who can be easily conned by the Socialist game;

2. Raise taxes again;

3. Push gun control (meaning registration leading to confiscation) so we can not fight back.

The Country needs a Speaker who understands the Socialist game, can unmask it in public and leads us against it. John Boehner is not IT.

So, where are we?

The "deal" the Republicans struck with the Dems raises taxes for 77% of the taxpayers and as a bonus for Democrats, split the GOP. The majority in the Senate voted for the deal and the majority in the House opposed it. As  for fixing the Deficit? No. This was about raising tax rates on upper earners; a continuation of Obama's class warfare.

Too early to tell what will happen to the economy and when. Oil has gone past $93/bbl (now that the Saudis got their man in the WH), the VIX is rising and gold and silver are moving up also. We maybe close to the turning in gold price.

A phony agreement.

Senator McMumbles and VP Biden agreed to avert the Fiscal Cliff. How does this "agreement" stack up historically?

When Presidents Ronald Reagan and George H.W. Bush increased taxes in return for spending cuts—cuts that never ultimately came—they did so at ratios of 1:3 and 1:2.
“In 1982, President Reagan was promised $3 in spending cuts for every $1 in tax hikes,” Americans for Tax Reform says of those two incidents. “The tax hikes went through, but the spending cuts did not materialize. President Reagan later said that signing onto this deal was the biggest mistake of his presidency.
"In 1990, President George H.W. Bush agreed to $2 in spending cuts for every $1 in tax hikes. The tax hikes went through, and we are still paying them today. Not a single penny of the promised spending cuts actually happened.”

This time Sen McMumbles agreed to $41 in tax increases for every $1 of  spending cuts. When? Well, that's the trick you see. The Dems already know how to avoid the promised cuts.

How effective will these tax increases be in reducing the deficits? Not very. The tax increases will bring in $60B/year, assuming that higher earners will not be able to compensate. However, the deficit is near a Trillion/year and the Dems plan to increase spending.