Friday, January 10, 2014

Waking Up From A Fed-Induced Dream

     Persons whose delusions have made it impossible for them to draw a distinction between reality and fantasy are given psychotropic drugs, therapy, and sometimes committed to institutions and made to wear funny jackets with arms that tie around the back, or they are given positions on Wall Street. The stock market over recent years has made a transformation from analysis which leads to the markets being a leading indicator of the nation's economic health, to a body of reactionaries who buy or sell equities based on current data manufactured by the propaganda machine housed in what use to be the most venerated symbol of this country's principles. Gone are the days when those who drove the market did so based on future prospects for the nation's economy and the companies that operated within it.
     Two recent examples that prove my thesis are the lower than expected first time claims for unemployment and the fewest number of corporate layoffs in almost 15 years in the month of December. Both of these data bits are seen by the folks on Wall Street as good economic indicators, but they are not. Both statistics are masquerading as a positive, costuming over the core problem in the economy, i.e., the lowest Work Force Participation Rate in 35 years.
     The fewest corporate layoffs in almost 15 years is due to the fact that over the last five years corporate America has cut their labor force to the bone, and their skeleton work force has very little left to be cut. The lower than expected first time claims for unemployment are a result of the same driver of the lowest corporate layoffs in almost 15 years; more persons are already unemployed long term and the lowest percentage of working age adults are actually working in the economy in almost half a century. In other words, the entire economy is operating with a skeleton crew, which means there are fewer working persons who can lose their jobs. It is analogous to a parent of an F student being happy because their child can not do any worse.
     The equities and bond markets have been so skewed and bastardized by government interference through the Federal Reserve's meddling with their bond buying program, and holding interest rates at an all time low for the last 6 years, that it is hardly a viable gauge of where the economy has been or where it is going. This disconnection of the market from the real economy is going to come to a crashing end as they become reconnected vis-à-vis the Federal Reserve pulling away the artificial supports propping up the market.
     As the dolts of Wall Street begin to remove the blinders of quantitative easing and see the Obama economic disaster of more unemployed Americans than ever, sub-standard economic growth, and mounting poverty, they will pull their money out of stocks, causing a collapse. If there is one thing the market movers do well, it is protecting their own financial interests. And the stock market will seem like a much less friendly place for them and their money sans the 85 billion dollars a month that Ben Bernanke and the Federal Reserve have been printing in order to keep it buoyant in the waters of the worse economy since the Great Depression.

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