Too Little Too Late?

As the year of 2015 dwindled down to a slow close the markets sought the increased interest rate as a measure that insured financial stability as well as an economic recovery. This increase, with the promise to slowly increase rates over 2016, was a long-time waiting. Finally as financial traders and political economists released a sigh of relief as the doom days of endless QE come to a close, right?

Logically one must admit that the FED sure waited a while before being able to actually raise interest rates a historic .25% increase. Historic!? After years and years of printing money and propping up the stock market with artificial asset swaps and purchases, an increase of a .25% interest rate from a 0.25% interest rate is still lower then the Greenspan years, will help slow down the possible inflationary trends?

So while major financial analysts are now taking the position that 2016 is a year of recession, the question is what are the indicators? Well for start we see the Chicago PMI closing q4 at a horrible 42.9%, and layoffs have already started. Dow Jones is down near 500 points on the year, and retail is having a horrible ending quarter as shares dump.

All of this screams recessionary trends, yet the FED raises interest rates? This is due to the fact that the FED wanted to act like the economy is not as weak as it actually is. Currently, we see levels of dollar devaluation getting to extreme levels, and the FED is pretending to use the tools necessary to combat the inflationary trends of the currency printing. So while Janet Yellen raised the interest rates, the question of motive is still in play. Why now? Simple, because the recession is already here and in a few months from now when the FED finally accepts that we are in a recession, Yellen can reverse the interest rates and simply say that the rising of the rates were premature. Again, to escape blame from the endless QE policies.

This recession will not be an easy one, and the question then remains; what can we do to reverse the recession in the most allocative manner to stabilize the economy? Raise rates even more! Feel the blow, take the hit, power through a hard recession and liquidate all the bad assets that had been propped up by the horrid fiscal and monetary policies. We need to pop the bubble. However, what can we do in the meantime to protect our financial assets? Invest in foreign equities and hard metals like Gold. This is because Gold and Silver tend to do well in recessionary trends as well as historically during times of QE. If you look at the NASDAQ 10 yr chart you can see gold prices spike up in times of instigated recessionary tools like QE, during the great recession years, and drop when times of market confidence. This recession is going to hit like a storm, and it might be a good move to re-adjust financial assets now because this year will be a bad year for the global economy.

The real speculation everyone should be asking is if the political motives can continue to prop up wall street speculation. Yellen does not want the recession to fall at the end of Obama’s presidency; its much easier for propaganda reasons allow recessions to hit when a new president enters office. Will the FED be able to prop up Obama’s false legacy of fixing the economy? One thing is for sure, 2016 will be an astonishing year.

 

Stock Market Crash… Again?

At the beginning of the week on the NYSE we saw another massive liquidation of assets, thus resulting in another “crash”. The question is, whether or not this is another crash or the long awaited hangover due directly to the easy money policy that has plagued us time and time again. Such as, when we hit the subprime recession, people initially decided to opt out of taking the hit and decided to go after the “Hair Of The Dog’ approach.

When you stay up all night drinking, the next day you will  pay the consequences of the night of partying. These consequences are being sick and possibly throwing up, in a sense it is your body rejecting all the alcohol that your body has retained. After a few hours, maybe the whole day, you will be regretting the night of drinking. When you hit the worst of the hangover, you begin to feel better and eventually get back to normal. What will make that hangover more harsh is when you resort to the hair of the dog, or the drinking of more alcohol to overcome the horrid feeling you have. In the long run, your body will reject more alcohol making the hangover last longer.

This is much like an inflationary boom and the consequential  recession, the night of easy money policy creates a sense of tranquility. That we can now live beyond our means in a stage of inflationary trends, and dollar devaluation. However, once the market creeps back up and decides that we really are not able to live outside of our means; we will hit a wall and have an asset liquidation. This liquidation acts as a hangover, in the same sense that our body is rejecting the alcohol, the market is now rejecting the bad assets created by an inflationary boom. The best way to deal with the liquidation of assets, much like the hangover, is to allow the bad assets to escape the market. Thus, after the grueling process of liquidation, we will be back to a state of stability.

The worse thing to do  in the case of asset liquidation is to expand easy money, because all it will do is prolong the “hangover” and, much like the hair of the dog, cause a longer harsher recovery. This is what we see happening in the stock market right now. What’s even worse is the market is rejecting the 0% interest rate the Fed decided to continue.

Since Q.E we have seen spontaneous price inflation in financial assets, resulting in liquidation, which has sent us into a perpetual stage of constant easy money and constant liquidation. However; now our fiscal tools are preventing the easy money policy. Plain and simple, there is such high leveraged debt in the market, no one trusts the fed and their interest rate scheme anymore. The stock market took a nose-dive, and things really are not looking up for the United States right now. Now, the bureaucrats are coming up with excuses for the constant easy money policy, though what really needs to occur is for us as a society to bite the bullet, take the hit, then re-establish tight money policy to offset the years of inflation. After such has occurred, we can start allowing long term investment to take place and reintroduce actual capital into the market, rather than over-valued assets.

Janet Yellen, and the Fed, will refuse to allow this to happen. Why? Because it is her job to lie to the people in an attempt to let them know the Fed actually benefits society, rather than causes harm to it. So in the next few days, while the liquidation continues, the people at the Fed and in Washington will scramble to figure out what caused it. Anywhere from the GOP possible Gov. shutdown, or looking to blame China or Russia, in the same manner an alcoholic will say “my neighbors upset me so I’m going to get drunk tonight”. Without realizing, the market has grown dependent on the easy money policy and is now at a stage of rejection; or as the alcoholic negates to realize it is due to their excess drinking that is causing alcohol dependency.

This, the liquidation, is because of the QE policies in place to respond to the inflationary boom and the continual recession of 2007. Just as the elongated hangover is a response to the hair of the dog. We can deduce, through sheer logic, that the biting of the bullet of 2007, as opposed to the bailouts and QE, would have already corrected itself and we would not be in the sense of market turmoil we are in today. I see, QE 4 looming around the corner. Which will only prolong the inevitable.

GOP “Debate”

After the grueling 3 hours of banter between the top republicans over who can lie and bribe the public more “effectively”, Carly Fiorina has moved up in the poles to second place. The disgruntled Donald Trump did not hesitate to attack her on her previous business experience as the ex C.E.O of H.P. Accusing her of “running the company into the ground” by expanding the company too quickly then hitting the tech crash, causing a massive H.P. liquidation. She responded with “we doubled the size of the company”. Donald Trump responded with “the company [HP] was a disaster”

While the two discussed both business ventures during the “debate”, Donald Trump missed the point on all of this. The fact that Carly Fiorina was able to expand her company so quickly makes her a great politician. The fact that she was capable of expanding her company, means she can expand government. If elected, she can continue to expand the government right on track and will not hit that pesky market to restrict the growth.

Since the government has free access towards monopoly power, and does not require on bending towards consumer demand, means she will no longer need to worry about hitting a tech bubble to stop her expansion from occurring. However, not one candidate even discussed the fact that the Fed was adjourning to discuss the raising of interest rates!

Considering the fact that the Fed will not raise interest rates, means that dollar devaluation will continue to flourish. Initially, the access to easy credit is there for investors. This means that the traders within the stock market are still able to leverage debt continually on top of previous financial assets, which will speed the ultimate fall of the US dollar.

The fact that not one single nominee even discussed this, shows the complete lack of care the runners really have towards how devastating this can be for our standard of living. Leveraging debt on top of other highly leveraged debt, has caused a leverage effect. When the dollar fails, that will liquidate a majority of US financial assets, due to highly pyramided debt, which is based on a US Dollar, that is quickly being devalued.

All we need to stop this from occurring is to replace the dollar with specie. Seemingly since the leverage ratios are so high, no one will replace the dollar with specie. This is the inevitable destruction of the dollar, the fact that Carly Fiorina is excellent at expanding business, and excellent at missing the mark on bubbles, makes me wonder that if she is elected will she expand the government even more in the face of this currency bubble, like she did with HP?

Big Week For The United States

At the beginning of this new week, again we saw a minor bear market in the NYSE. The DOW Jones only fluctuated roughly 100 index points within the span of the day, comparing the openings of the past few weeks it seems more stable. Is the market really “stable”? Was this past few weeks a minor liquidation of bad assets, that resulted in a crash in the markets, or is there a more serious underlying issue?

Considering the Fed is going to decide on whether to finally give some sort of “tightening” to the markets, might be the major role in this seemingly speculative stability. The question  is whether or not the 0.25% interest rate hike, if allowed, will actually do anything at all? As stated earlier this will not do any significant change, it might cause a speculative bubble at the most. This is because, now that interest rates have gone up a tiny bit, it will show traders that maybe there is still some value to the dollar after all. Considering the interest rate will only be a 0.25% rise, it will not be significant in its aims at contracting the expansions the Fed made in the rounds of QE.

But the underlying issue still remains on what is currently happening to the markets, its like a wheel falling off of your car, all the nuts and bolts are missing ,besides one last very loose one, and you decide to tighten it by cranking the tire iron a couple times. Will that honestly achieve any hopeful results?

The fact is that the monetary printing of the federal reserve has gone on for far too long, and is now in a stage where all of it’s assets are pyramided so tremendously that it can only end in a bust. It can only truly collapse, and it will be a bad collapse. This is because the United States has been leveraging loans continually, for free, for over 6 years straight, yet we have not seen any significant growth! Considering the PPI has not had any significant change over the past 5 years, compared with stagnate new order capital goods shows us that people are not spending money on capital goods. Also, not creating more capital goods where prices should be falling. In a healthy economy prices should fall! This is because over time technology will produce more of a given product, causing the supply to shift rightward, which will correlate to a fall in prices. The fact that the index has not had any significant fluctuations over the past 5 years, keeping supply constant and increasing the demand for capital goods, shows that the rise in asset prices has not gone to any real production, rather just an over-valuation of the asset prices.

If you look at the GDP we see a steadily rise, yet that is only the asset prices rising. Asset prices rising, without any increase in capital, means there is an asset bubble. This asset bubble, as stated before, comes from the strictly easy money policy of the Fed. Can the rate hike help? At best it will prolong the economic disaster for a while longer, and people will be duped yet again by the “omnipotent” cartel we refer to as the Federal Reserve.

Also, strangely enough, we will be tuning in to watch the Republican debate on September 16th. This debate will go along the same lines as every other debate, where politicians are capable of dodging questions, and not giving clear decisive responses. I doubt the actual cause of the stock market turbulence will even be brought up, as the politicians do their best to lie to the American public as to which one of them is better for the “job”. Obviously, for sound economic theory, I must support Rand Paul. The nationalists, like Trump, will continually blame the natural division of labor that brings us all the amazing things we use today, and it will be interesting to watch. This week will be a big week for the United States’ Political Economy.

Negative Effect of Fiduciary Institutions

       The effects of fractional reserve banking is tremendous in expanding the power of L’État, corruption, bribery, and all of the lovely things centralized coercion brings you and I. The entire fiduciary system is flawless in its ability to undermine the integrity of warehousing currency, and is a systemic ingenious way to vacuum the purchasing power from every single person that falls victim to the inherent fraud.

       The a prior law of praxeology explains that human beings will always act in a way to satisfy wants. This epicurean feat transforms our scientific understanding of human action, meaning people will advance their means to find satisfactions. This can only be possible in a world of scarcity, and disequilibrium. Holding a system of money proper, and not substitute, will always allow the functions of monetary units to reflect calculations for producers, and allow praxeology to accomplish its task in a less diluted manner. Returning our socially accepted currency to a unit of hard currency will cause an effect that will dissipate all confusion, just as a farmer may pasteurize a cow’s milk, we as praxeologists are forced to “pasteurize” the market economy, and doing so with a fiat currency is very problematic.

     When a person decides to place their money into a banking institution, that person has now elected to trust the bank with their monetary power. This bank now, is forced to maintain the unit of exchange and hold the monetary unit as if it were placed in a warehouse. When the consumer elects the bank it is because the consumer trusts the bank with their money. How would said consumer reflect their interest if they found out that the bank in question was merely using that monetary purchasing power to expand their assets through things like making loans?

   When person X decides to deposit $500 into Bank of Trust, that bank is now responsible for that $500. However, what the Bank of Trust effectively does is hold a percentage of the deposit as “reserves” and then commences to loan out the remaining. So, with deposit that X placed in the bank, they will hold $100 and then loan out the additional $400. This is fraud.

   Considering that person X did not grant specific permission to the Bank of Trust, the bank is effectively stealing the monetary purchasing power from person X, and gambling with it by loaning out the currency. This is theft and deserves punishment. The most deserving punishment for this theft is by the forces of the market society, however, we will not get into those effects in this article. The worst of this is that the fiduciary institution, Bank of Trust, will actually charge their consumer for this theft! Not only will the fiduciary institution charge the consumer, but the institution will not distribute any marginal gains made by this comportement criminel to the rightful owner of the monetary purchasing power

   This theft can not withstand a market society, so how would it effectively maintain its pyramid structure? The banks will collectively merge together to form a cartel and create a coerced “legal tender”on the people, with the promise to the state to finance all meaningless wars, and pay off all debts the state owes. The way it can do this is by expanding the monetary supply and financing the state while doing this.

   So when person X deposits the money, the fiduciary institution is now responsible for $500 to person X. However, the Bank of Trust loans out the $400 to person Y, which in turn deposits money into a separate institution. The Bank of Trust now has expanded the money supply an additional $400, because person X still has their claim on the original $500 deposit. The additional $400 loan has been created only in the form of money substitute, and thus has expanded the money supply but not the original money proper.

      There are many restrictive effects that results in this illusive expansion, too many to analyse in this article. The main concern we are dealing with, in this article, is in the terms of economic calculations through praxeaology. When the person Y receives the loan of $400 he then will go and spend the $400 depending strictly on the subjective time preference person Y holds. However, the mere fact that this money expansion never existed in the proper form we have now reduced the scarcity of medium of exchange. While reducing the scarcity of the medium of exchange the fiduciary institution has now distorted the a priori law of human action stated above. The fact that now person Y’s ends are met by an illusive expansion, it complicates the scientific data a praxeologist relies on. This is because the action of person Y is no longer organic, but rather stimulated.

      When outside entities stimulate human action, it can lead  to mere confusion towards whether society is wasting scarce resources or producing proper means of scarcity. This is due to the fact that we have disturbed the proper effect of human action. So, if person Y sees certain lucrative resources that adds psychic revenue, person Y will act to attain that end. If person Y’s means were less scarce, the marginal value calculation the person places in their ordinal utility-scale, would result clearer data as to which project is lucrative and which project is a “sinkhole”. Thus, the effect of this expansion distorts the functions of praxeology in respect to the study of human action. This distortion results in more inefficiency, that can only be rectified by a stable money proper. How can a human act on scarcity when their means have been met by an illusion of non-existent scarcity? If I convince myself that I no longer need food for nutritional value, but require an illusive pill to stimulate my hunger how will I know when i am on the verge of starvation or bodily satisfaction? For us, praxeologists, we need to search through the fog of data to understand the catallactics in present society.

      The task of removing the fog is a difficult task, even for the premiere members of society. There is no economic justification to support the creation of adding additional variables towards the catallactic dissection. The clear analysis of this article proves the truth towards to the original a priori law that humans act. Considering the fact that humans act leads us to understand that,at present, humans are at a state of dissatisfaction. Since  the cronies have used state force to cartelize this theft, shows this truth. For the swindlers have acted to attain an epicurean revenue. This mere fact leads to the question then, how can anybody defend these fiduciary institutions of fraud. This aggression committed by the state will only result in inefficient expansion and a lower standard of living for the class of society that does not receive any direct benefit surplus from the existence of state coercion, I.e the majority of consumers.