The New Year is here. . . ????

It should be interesting to see how the US Stock Markets put their recent program of misdirection to work from this point in time on. Do they entice the gullible back into the game long term, or is this no more than the hour or two of wandering in the wrong direction before the hammer descends and shuts off any hope of escaping a scalping?

The track of the indices to this early point in the New Year, leaves not much to the imagination. It begins its daily journey heading upward when they mean to push it down, plunges before the exuberant climb to the top and toys with the limits - top or bottom - leaving the outsiders in confusion as they attempt to go opposite to the planned finishing point for the day. It matters little that the plan is transparent, the amateur players still working on their wrong turn losses are desperate and in need of vindication. The market must be predictable without the road map the insiders work with. But, that road map is little more than intuition, or some mysterious means of sensing what is in the air that day - morning or afternoon.

Some may interpret the above introduction as a fanciful bit of imaginative play on serious minds at work in sorting out the advantages over the trash in play, but is it much more than that simplistic reality?

Voxeu has produced a new e-book on Quantitative Easing, an analysis before the script has played out. There is not yet any conclusion to the play acting drawn up much less to draw conclusions while the play is still in operation. The market has no firm concept of what the fundamentals of the economic mechanism are and feels no need for understanding the very real simplistic base behind "progress" or "growth" and go off winging through the series of short-lived ideas behind the professional explanation of why the market moves - perhaps every five or ten minutes (!). . Using the Hayekian mechanism that we act, then assign reason to the actions leaves us far behind the ambitious, fast churning mental schemes. Get the money! There is no follow up or second part of the phrase! . . Or purpose!

Without having read the vox e-book, with Wooten den Haan compiling the works of several dozen contributors to the voxeu.org site over the years past, from what appears to be 2010 on, and without a final unveiling of how and when the mystery of an ending will emerge, it's presumed that we'll encounter suggestions and more positive declarations of how effective the QE's - from QE1 ad infinitum - will finally be judged. In this case, a wing and a prayer are much more substantial than would be the opinions. If QE's were built on the foundation of real impeti (?) in economics, we might find some solace in looking at the (Friedman) "helicopter" money tossed willy-nilly at the markets. But, when used in the past, under other names, the money tossed out carelessly did no more than raise false hopes which led to another trap and more inflation. But, then, inflation is the basis or our "progress" so the hope is that the symptom can be turned around to become the cause of "growth".

The central idea of QE's then may be - Fabricate inflation and we are duplicating growth. The problem is, there is only one impetus for growth - population increase. All the rest is window dressing and delusion. Technical innovation is an appeal to the imagination of the consumer which can be misleading and destructive as well as beneficial - be that consumer in the household or in industrial production. Dreams that this is a new vista we are entering - the new paradigm, the new world order, or some such fancy, are no more than that - Dreams! And, stirring up the dust on the field of stagnant playgrounds is not a serious surge forward; it's more a promise that will be met with just another round of the enticement/disappointment sequence we call Boom/Bust following a trend line with a downward tilt more likely than an incline.

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[One paragraph footnote insertion is at the end of this posting - of later developing thoughts a propos population increase.]

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In the longer view of working economists, we're almost led to believe, they operate with the concept that one direction is as good as the other as long as the populace can be convinced that the economy is moving. With that outlook, down is better than stagnant every time. . . and the public ends up shorn of gains they believed they "progressed" toward, pushed down into desperation with the need to get back to work and rebuild their meager reserves.

Is that a viable scenario? Are we working toward the same end regardless of which way we move. If the path is incline or decline how do we escape the boom/bust denouement that lies ahead either over the hill ahead or descending in the other direction, straight down into the valley beyond - the one path being direct and the other slightly more drawn out and wandering? Does the more indirect seem more rewarding strictly on a time line that delays the introduction of the Bust phase? The more time we spend getting to the same point, the more opportunity for servicing that goal of more "reserves" - essential for "feeling good" about ourselves? But, then, the longer we spend between the two poles, it would seem, the more disastrous and expensive the descent and recovery. . . And, often, the more destructive of resources is the result of the struggle to recover. Assets are set back to a previous level, depleted, and the future has a bleaker appearance in our minds eye. Is that the REAL difference between a Recession and a Depression? It must have a foothold in human behavior mechanism since the two words are more a description of human emotions or perceptions than of inanimate mechanisms. . . And, when if ever is economics anything other than a matter or Marshallian "human activity"?

So, where is that New Year taking us. . . Or, rather what do the players on the practical or theoretical side have in store for us. Will either or both sides emerge from this mess with prestige intact? Or, will both suffer a loss in standing? Will the public go on with a policy of paying with no end or will the politicians ever see the light and intervene in the general public's favor? Does the dollar gain from the dilution we face from inflation - which is certainly on us - have meaning and/or the opposite - a promise of yet more devastating effect? Enough to justify the reliance on QE's? Does that inflationary effect measure a backward movement in stripping away value and resulting in little more than frustration for the majority and gains for the few?

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Can't wait to get to the e-book to see if there is a "consensus" of opinion as to the benefits of the QEs. It will need to be an impressive work to overcome the doubts that have germinated in this old mind since the beginning of these posts over the last seven - going on eight next month - years and which seem to indicate a heading toward a less constructive destination than either Minsky or Kindleberger envisioned. The central question being, how do we redirect human mental activity based on "grasping" toward the seemingly impossible goal of "helping"? Or, can that not be seen as "progress" either?

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[Footnote addition]

On re-reading this post O&G's memory kicked into recall mode and ran off a distant awareness of sociological studies of several decades ago (1950s or 1960s(?)) which concentrated on the notable oddity that when nations experienced severe downturns, population growth was stunted; new families started building later when better circumstances were presented and/or established families ceased additional growth. Which would indicate how apprehension under stress can induce a certain amount of self-sustaining and continuing decay in real economic growth based on population numbers. It might also add some consideration to population about how emigration/immigration movements contribute to area growth restricted to certain nations. , , such as the benefits immigrants brought to the US in large numbers from its beginning through the period following WWII with some notable ups and downs along the way. . Nothing similar has been encountered in recent papers so either of three options may be true - perhaps all three: (1) sociologists are no longer holding to that idea, or (2) no longer interested in the repercussions, or (3) O&G is not encountering the same literature these days; meaning they could still be of the same mind, but O&G is occupied with different matters. Nevertheless, it seemed appropriate to include the thoughts here. It would seem that immigration holds out some promise, yet,there is a point at which Shangri-La is no longer attractive or supportive of immigration and the trend and any of its benefits come to an abrupt ending. As an example, Florida has reversed its growth due to immigration; it has been on a reverse trend - emigration - for a few years now. Part of the current surplus of available housing and its damping effects on new construction may be due to that effect.

The price of oil dips again

Crude is down to $28.62!

The last time it was at this level, pump prices were about 75¢/ gallon! Anyone remember? That was in the 1970s. Local prices are at $1.73.9.

Where does that extra dollar come from? Could that be inflation? But, then, folks on social security received no Cost of Living adjustment.

Wonder how much increase the legislators in Washington will receive after denying an increase to the taxpayers because Washington can't afford to spend anymore?

Hollow argument if they come out with even a 1/2% increase for themselves.

supplier price increase

It's that time of the year when all my suppliers send out notices announcing price increases of 3%-5% due to "increase in raw material costs".
Enough is enough. I've replied to all of them saying raw material costs are down a minimum of 20% during the past year. My boss supports me but suggested that I leave out the part about Fed's 2% inflation target and the suggestion that they use a little more imagination when announcing the reason for price increases.

Talking Zombie

It's pretty awesome that each of us here are as "aware" as we are, but it is a drawback to employ it in real life. Sometimes appearing to be just another zombie can be a blessing or get out of jail free card. LOL.

A noteworthy... no matter what items they switch now to create a docile Inflation Index, all are. Some groceries are so high now that they are beyond ordinary budgets. Gas will feel the sting of these recent oil price spikes and the supplies will grow and stagnate.

There are 99.999999999999999999999999% of the rest of our economy and society awaiting a deviation from oil. Whole nations are stagnant because of it. It's day is over.

The New Oil Bonanza In Texas

So, the USGS comes out with a press release that the media immediately diffuse in terms of a great discovery: 20 million barrels, somewhere in Texas in a place called Wolfcamp. USA Today speaks of " The Largest Oil Deposit Ever Found in the US".
And how about the comments?
...As our new President will do - Drill Baby Drill! Energy independence - that sure has a nice ring to it. Middle finger to Middle East arabs.

...They are costantly finding more reserves. President Trump will open up more land and ocean for safe drilling.

...But of course the Radical Left, determined to return all of western civilization to the hunter-gatherer society of 10.000 years ago, will do all it can to prevent this once great nation from becoming energy dependent and permanently kicking the barbarian raghead arab oil nations out of this country.

Great fun, and all fact-free!

Let'us assume that those 20 million barrels are there for real. How does this amount stack up in comparison with the world's oil situation? The world's oil consumption, according to Index Mundi, is today a little more than 33 billion barrels per year.
But the essence of depletion is not how much of it there is, it is how much it costs to exract it.
Bloomberg calculates how much it would cost to extract all this bonanza of oil and concludes that, at the current price, it would result in a net loss of some $500 billion.

So aren't you happy to live in a fact-free world? You can keep that it is enough to poke a few holes in the ground to see it gush out in never ending abundance. Sure, and you can also walk on thin air, as Wile E. Coyote can do as long as he does not realize he does.

Wolfcamp

I think the number being thrown around is 20 billion. If this is true then the find is significant since Alaska has produced roughly 17 billion bbls so far.
The radical left is blind. Their motives are good but they have been swindled. The global Climate Initiative and other so called treaties are a farse. Capping CO2 emissions in the US and Europe (countries that at least had some pollution controls) and transferring the manufacturing to Asian giants that are exempt from the treaty and have very little pollution controls results in a more polluted world. It was simply a scam, and politicians were complicit, for offshoring manufacturing which keeps money interests happy.
It's a game that they intend to play for a long time. When, if ever, countries like China or India are forced to comply then the manufacturing will be moved to other regions (Africa for instance) that will be exempted.
Politicians that are influenced by corporate money are not patriots. They are beholden only to corporations whose only loyalty is seeking riches.
Both the radical left and the radical right need to wake up. Both suffer from tunnel vision. The result is that they are warring with each other. The corporate elite are laughing at both of them because it's a win-win for them.

Economic Growth Is Now Over

Wave the magic wand and the problem goes away. Donald Trump claimed that unleashing coal and fracking will create "many millions of high-paid jobs". But it won't come true. Even if we ripped the world to pieces in the search for fully employment, we would not find it.
Donald Trump's promise to bring back coal production, increase all fossil fuels extraction and rebuild manufacturing are simply not going to happen, not because of Trump but because policy is no longer in charge.
The remaining oil is too expansive to get to and extract. Oil companies can't make a profit at a price that customers in a contracting economy can afford to pay. Most politicians everywhere talked and continue to talk about "economic growth". Voters can forgive scandals, nastiness, stupidity and just about everything else but, when they see their standard of living falling, their jobs vanishing, their children with no future, they blame politicians. Politicians usually pretend to have solutions that almost always involve some path or other to growth. The fact is that because oil production cannot be increased, economic growth is now over.

We need a new sort of politics and economy: local, cooperative, community-based, low-energy, non-polluting, an economy that supports biological needs and health, rather than pursuing riches. I don't think any politicians are going to do that for us. We need to do it for ourselves.

God instructs Adam that his punishment for disobedience will be "In the sweat of thy face shalt thou eat bread."
Apparently humans did not like that very much.
A simpler life is coming, this is not a matter of virtue but of necessity. Whether or not we choose to embrace it.
I know, it is hard to leave...until you leave. And then it is the easiest thing in the world.

No magic wand today

I have to agree with you. Humans, for the most part, do not realize that there is no such thing as unlimited growth on a finite planet. The seas don't have enough fish for eight billion people to eat fish on a regular basis. There is not enough affordable oil available regardless of how efficient motor vehicles become for eight billion people.
We've perverted what a good standard of living is. We've wrongfully assumed it means how many toys one acquires, how large a house is, how much land does one "own". I don't think we will learn willingly. Man seldom changes willingly on his own. Something painful usually happens first. There are some exceptions, the Amish, who do not judge their well-being by the number of useless toys they have accumulated. But they are a rare exception.
The mood in this country is a combination of anger and suspicion. Neither camp is willing to embrace a simpler life. At least not seriously. They just happen to crave different toys.

"Beautiful loser, never take it all
Cause it's easier and faster when you fall,
You just don't need it all
Oh, oh, you just don't need it all."

The Crooked Gather At Davos

What is that extra $1 in gas price, O&G... TAXES. It's a core revenue generator for every extended government hand. Here in Michigan, two gas stations in Houghton Lake duke it out at 47 cents per gallon. How can they? Because the tax is consistent with the price. They cut their margin, crippled all the hands in that pocket.

NEOH... I lost $2. I won a priceless feeling... I didn't miss the $2.

As the crooked gather in Davos to talk up financial tyranny, it's obvious failure and how they will look in their casket after being hung for corruption...

I hear many are asking for Angela Merkel to step down and her party to exit the building.

I can't get through to my Senator (Gary Peters)-- particularly blocked.

The Dow has lost 100% of the 250 points it borrowed to bail at opening bell.

Catastrophic failure straight ahead.

Ivory Towers Be Crumbling...

http://www.telegraph.co.uk/finance/financetopics/davos/12108569/World-fa...

Hopefully the link will work. The article is: World faces wave of epic debt defaults, fears central bank veteran.
He is correct. The world has accumulated massive debt and as any lender worth his credential knows... when default happens, your paper is only as good as the collateral value secured to it.

When I went to the Telegraph website, the article above this one chronicled the FTSE (British stock index) fell so much already today that it validates a Bear Market.

Stocks are not a unique problem... debt is. It's a FACT that global moguls concentrated on globalization without a clue about three-dimensional ramifications. Moving jobs overseas brought their own customer to his knees and then wiped out the enterprise structure. In easy terms-- no business exists today in functionality. To lend to Big Oil- knowing it from a Risk perspective was and is suicide. The lender is grossly negligent for ignoring obvious flaws, weaknesses and threats. To allow the rise of Amazon knowing that it suppresses essential commerce everywhere else, sets the nation up for compromise.

Before this year ends--- the European Union dissolves, America faces or implements dis-incorporation, the Federal Reserve is shut down and Wall Street is seized to hold all financial instruments in a vessel. Wealth evaporates. I've said this before-- QE put FAKE money into markets, not currency into economy. It will need to be eliminated and the best way is to erase it. In the daisy chain of acts to make that happen, consumer debt will need to be forgiven. The real Wild Card will be which assets remain intact. My guess-- not traditional commodities, metals, wealth-manipulated tangibles and nothing virtual... think--- meek.

It worked

The link worked V_L.
An interesting quote from tae yesterday which I haven't heard in awhile (Mariner Eccles 1933):

It is utterly impossible, as this country has demonstrated again and again, for the rich to save as much as they have been trying to save, and save anything that is worth saving. They can save idle factories and useless railroad coaches; they can save empty office buildings and closed banks; they can save paper evidences of foreign loans; but as a class they cannot save anything that is worth saving, above and beyond the amount that is made profitable by the increase of consumer buying.

It is for the interests of the well to do – to protect them from the results of their own folly – that we should take from them a sufficient amount of their surplus to enable consumers to consume and business to operate at a profit. This is not “soaking the rich”; it is saving the rich. Incidentally, it is the only way to assure them the serenity and security which they do not have at the present moment.

I've Been Trying To Say That...

Right now, the majority of seemingly recognized money is in the stock market. People own stocks in companies that import product, don't hire, over-pay executives, buy politicians and have no usefulness to us. Really. Once they own the whole pond, they can only feed on themselves. It has to start making sense that more people are opting or falling out of the racket. Without people to victimize, it's really a big nothing that goes POOF.

Wednesday, January 20,2016

Asian markets are solidly in the red, the majors to the tune of a couple of percentage points; the U$D is down against most currencies reported on WSJ; at last look, Bloomberg Futures shows DJIA down triple digits (more than 200 at last viewing - now creeping up on <300>) with other US market indices also down; and oil is below $28 - down another 80¢ at this time.

Another day at the market is in store.

The Fed's Role In The Stock Market Crash

China is slowing. But mostly the world is doing so. Things are getting to get worse worldwide, so everyone will suffer and is to blame.
The original source is the US Federal Reserve and its ludicrous artificial interest rates caused by massive money printing which the world has copied.
The Fed reversed traditional investor behavior and turned the market on its head. Stock prices no longer had anything to do with earning potential or prospecte for future growth. They were determined by the availability of cheap money and infinite liquidity.
The market system which, in essence, is a pricing mechanism that adjusts according to normal supply-demand dynamics, ceased to exist.
The Fed's committment to begin a cycle of rate hikes threatens to throw the financial markets into reverse which will slash stock prices to levels that reflect their true market value absent the Fed's support.