Best of the Week
Most Popular
1. Ray Dalio: This Debt Cycle Will End Soon - John_Mauldin
2.Stock Market Dow Plunge Following Fake US - China Trade War Truce - Nadeem_Walayat
3.UK House Prices 2019 No Deal BrExit 30% Crash Warning! - Nadeem_Walayat
4.What the Oil Short-sellers and OPEC Don’t Know about Peak Shale - Andrew_Butter
5.Stock Market Crashed While the Yield Curve Inverted - Troy_Bombardia
6.More Late-cycle Signs for the Stock Market and What’s Next - Troy_Bombardia
7.US Economy Will Deteriorate Over Next Half Year. What this Means for Stocks - Troy_Bombardia
8.TICK TOCK, Counting Down to the Next Recession - James_Quinn
9.How Theresa May Put Britain on the Path Towards BrExit Civil War - Nadeem_Walayat
10.This Is the End of Trump’s Economic Sugar High - Patrick_Watson
Last 7 days
UK House Prices Momentum Forecast 2019 - 18th Dec 18
Will US Government Shutdown Cause The Stock Market To Crash? - 18th Dec 18
The Coming Financial Storm - 18th Dec 18
Jeff Gundlach thinks that a Stocks Bear Market has started. Is he Right? - 18th Dec 18
Gold’s Not An Investment – You Won’t Get Rich - 17th Dec 18
Stock Market At Medium-Term Lows, Which Direction is Next? - 17th Dec 18
This Stock Will Drive America’s 5G Buildout - 17th Dec 18
Stock Market Turn In The Tide - Have a Happy Bear Market! - 17th Dec 18
How A NASA Scientist Could Trigger The Next Cannabis Boom - 17th Dec 18
iShares Russell 2000 IWM Leading Stock Market Decline - 17th Dec 18
Where is the Dow Stock Market Santa Rally? - 17th Dec 18
With Weaker Climate Consensus, Expect Elevated Climate Change - 16th Dec 18
SMIGGLE Advent Calendar 2018 UK Contents - What You Get Look Inside Review - 16th Dec 18
Is there a Lump of Coal in Santa's Stock Market Bag? - 16th Dec 18
This Market Will Drive Gold in 2019… - 16th Dec 18
Gerald Celente:Central Banks Can’t Stop a 2019 Debt Disaster - 16th Dec 18
Gold Stocks Triple Breakout - 15th Dec 18
The stock market fails to rally each day. What’s next for stocks - 14th Dec 18
How Low Could the S&P 500 Go? - 14th Dec 18
An Industrial to Stock Trade: Is Boeing a BUY Here? - 14th Dec 18
Will the Arrest of Huawei Executive Derail Trade War Truce? - 14th Dec 18
Trump vs the Fed: Who Wins? - 13th Dec 18
Expect Gold & Silver to Pullback Before the Next Move Higher - 13th Dec 18
Dollar Index Trends, USDJPY Setting Up - 13th Dec 18
While The Stocks Bulls Fiddle With The 'Fundamentals,' Rome Burns - 13th Dec 18
The Historic Role of Silver - 13th Dec 18
Natural Gas Price Setup for a Big Move Lower - 13th Dec 18
How to Get 20% Off Morrisons Weekly Supermarket Shopping - 13th Dec 18
Gold Price Analysis: Closer To A Significant Monetary Event - 13th Dec 18
Where is the Stock Market Santa Claus Rally? - 12th Dec 18
Politics and Economics in Times of Crisis - 12th Dec 18
Owning Precious Metals in an IRA - 12th Dec 18
Ways to Improve the Value of Your Home - 12th Dec 18
Theresa May No Confidence Vote, Next Tory Leader Betting Market Analysis and Forecasts - 12th Dec 18
Gold & Global Financial Crisis Redux - 12th Dec 18
Wow Your Neighbours With the Best Christmas Projector Lights for Holidays 2018! - 12th Dec 18
Stock Market Topping Formation as Risks Rise Around the World - 11th Dec 18
The Amazing Story of Gold to Gold Stocks Ratios - 11th Dec 18
Stock Market Medium term Bullish, But Long Term Risk:Reward is Bearish - 11th Dec 18
Is a Deleveraging Event about to Unfold in the Stock Market? - 11th Dec 18
Making Money through Property Investment - 11th Dec 18
Brexit: What Will it Mean for Exchange Rates? - 11th Dec 18
United States Facing Climate Change Severe Water Stress - 10th Dec 18
Waiting for Gold Price to Erupt - 10th Dec 18
Stock Market Key Support Being Re-Tested - 10th Dec 18
May BrExit Deal Tory MP Votes Forecast, Betting Market Analysis - 10th Dec 18
Listen to What Gold is Telling You - 10th Dec 18
The Stock Market’s Long Term Outlook is Changing - 10th Dec 18
Palladium Shortages Expose Broken Futures Markets for Precious Metals - 9th Dec 18
Is an Inverted Yield Curve Bullish for Gold? - 9th Dec 18

Market Oracle FREE Newsletter

How You Could Make £2,850 Per Month

Obama's Economic Recovery Hits a Snag

Economics / Economic Recovery Aug 23, 2010 - 03:14 AM GMT

By: Mike_Whitney

Economics

Best Financial Markets Analysis ArticleBarack Obama's "Recovery Summer" tour has turned into a public relations disaster.  The whole idea of claiming "mission accomplished" over the recession was wacky from the very beginning. It just shows how out of touch with reality Obama's economics team really is. These guys need to stop pouring over their own rosy projections and get out more. The recovery hasn't reached "escape velocity" as economics czar, Lawrence Summers boasted earlier in the year. That's baloney. The economy is headed for the shi**er and the prospects of a another slump loom larger than ever.


Obama's woefully-undersized $787 fiscal stimulus package (ARRA) may have slowed the rate of decline, but the economy's going to need another trillion-dollar jolt before it shows any sign of life. In the meantime, jobless claims are rising, manufacturing is slowing, housing sales have fallen off a cliff, and GDP is shrinking. That's why the "Recovery Summer" meme has been shelved and Obama has been packed off to Martha's Vineyard with his golf clubs for another photo op. Because the brainiacs at the White House are beginning to grasp how bad things really are. But the damage has been done. Now everyone knows that Obama is out-to-lunch and that his chief advisor is a blowhard who doesn't know how to read the data. The whole P.R. debacle just proves that Obama needs to bust-out of his executive bubbleworld and that Summers needs to be fired.

This is from the New York Times:

   "Investors withdrew a staggering $33.12 billion from domestic stock market mutual funds  in the first seven months of this year, according to the Investment Company Institute,  the mutual fund industry trade group...If that pace continues, more money will be pulled out of these mutual funds in 2010 than in any year since the 1980s, with the exception of 2008, when the global financial crisis peaked....

On Friday, Fidelity Investments reported that a record number of people took so-called hardship withdrawals from their retirement accounts in the second quarter. These are early withdrawals intended to pay for needs like medical expenses." ("In Striking Shift, Small Investors Flee Stock Market Graham Bowley, New york Times)

Retail investors are saying "enough" and heading for the exits. The market-flight has gone on for some time, but it's gained momentum since the May 6, "Flash Crash" when the Dow Jones plunged nearly 1,000 in less than an hour. That really put the stampede in motion. A late-day rebound did nothing to allay investor fears or convince traders that the problems had been fixed. The trust is gone.  Investors feel that the new architecture of the markets has fundamentally changed and that innovations like high-frequency trading, dark pools and complex derivatives have stacked the odds against them making it impossible for them to succeed. That's why they continue to leave in droves. They've lost confidence in the markets.

Economist John Maynard Keynes examined the issue of confidence in his masterpiece "The General Theory of Employment, Interest and Money". He said:

    "The state of long-term expectation, upon which our decisions are based, does not solely depend, therefore, on the most probable forecast we can make. It also depends on the confidence with which we make this forecast — on how highly we rate the likelihood of our best forecast turning out quite wrong....The state of confidence, as they term it, is a matter to which practical men always pay the closest and most anxious attention."

  Who has confidence in these markets? Who believes that a well-informed investor that has reasonable expectations of future performance can compete with high-speed speculators who get a peak at every trade before the transaction is even consummated? No one. When the system is deregulated to accommodate cheaters, then cheating flourishes. It's as simple as that. That's why confidence is eroding. That's why more money is being stuffed in mattresses than stock funds.

THE CENTRAL BANK: Chief facilitator of fraud

The Fed's task is to perpetuate the fraud for as long as possible. To that end, it has pushed for "regulatory forbearance" so that insolvent, capital-starved banks can conceal their losses from the public. The Fed has transferred $1.7 trillion in toxic securities and non-performing loans from the banks balance sheets onto its own to preserve the illusion that "all is well" and that asset prices will eventually return to precrisis levels. What a joke. Market analyst Max Keiser explains how the Fed's charade effects the US middle class in a recent posting titled, "America: A walking dead zombie country":

   "...The banking system works on the basis of loans used as the collateral for more loans. That means that the origination of all the fractional reserve lending that is going on is just more debt. There are no retail deposit reserves or wholesale deposit reserves, just original issue dollar based junk debt. And when you understand that debt is at the bottom of the pyramid and that there’s no equity at all, or capital as this term is usually understood, then you understand that the banks and the policy makers are continuing a programme at the behest of Wall Street to commit a Financial Holocaust to eliminate the majority in America, which is the middle-class. Wall Street banks with their CDS's, High Frequency Trading and bogus market making are injecting the equivalent of financial Zyklon B into the American and world economy." ("America: A walking dead zombie country", Max Keiser, On The Edge with Max Keiser)

Repeat: "There’s no equity at all." Zero. It's a mug's game run by charlatans in Brooks Brothers suits.

Securitization, derivatives trading, and repo market activity are all based on the same principle, which is, to give the financial giants the ability to generate windfall profits on microscopic morsels capital that have been leveraged into monstrous, hulking debt-balloons. The banking system is not funded on loans derived from deposits, but through the exchange of high-risk securities with shadow banks in the repo market. This is the system that crashed after Lehman Brothers collapsed in September 2008. The Fed and Treasury have committed trillions in public funds to stitch this inherently crisis-prone system back together to preserve the profit-centers of their primary constituents--the big banks and Wall Street. The very system itself is a fraud and a cheat designed to shift wealth from the middle class to under-capitalized financial predators who've wrapped their tentacles around the congress, the media, the courts and the White House.

 Is it any wonder that confidence is at an all-time low?

By Mike Whitney

Email: fergiewhitney@msn.com

Mike is a well respected freelance writer living in Washington state, interested in politics and economics from a libertarian perspective.

© 2010 Copyright Mike Whitney - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Mike Whitney Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

David Dzidzikashvili
28 Sep 10, 13:55
Economic Recovery Summer Party

Some “economic experts” or politicians (wonder where they got their knowledge from…) claim that data (one or two positive economic facts that could be manipulated for political reasons, or as these “experts” call - reliable economic data that supports their views) shows that we are in the phase of economic recovery.

First three facts that come to mind put the aforementioned assumption/hypothesis in question: what data are you talking about when we are amassing massive debt that we have no idea how to pay and the American middle class is in deep trouble, the middle class (backbone of the US economy) is shrinking!

We are still being lied to. Very bad start.

Add to that market fears & instability and then lets start talking what’s recovery, how do we define it and the ultimate question – are we in recovery mode yet?

"The Fed has transferred $1.7 trillion in toxic securities and non-performing loans from the banks balance sheets onto its own..." - Great fact - the FED does not have any resources in dealing with today's economic problems.

"The very system itself is a fraud and a cheat designed to shift wealth from the middle class to under-capitalized financial predators who've wrapped their tentacles around the congress, the media, the courts and the White House."

100% VERY WELL SAID!


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules