Congratulations 1%, You Win Again

So the Fed announced QE3, which in a nutshell means unlimited money printing until it decides when to stop. It will buy mortgage-backed securities from the too-big-to-fail banks, you know, the ones that were part of the cause of the financial meltdown in 2008. By selling crappy assets to the Fed, the banks get fresh dollars that they can use to speculate in stocks (front-running their clients and inflate the stock bubble) and buy US government securities that will pay them interest courtesy of the US taxpayer.

The Fed argues that the banks will loan money to people, who in turn will start businesses, hire people, who in turn will buy houses and hire construction workers. In reality, the banks will not loan the money because anyone who wants to borrow money, can't.

The Fed also said it will extend its interest rate manipulation through 2015. So those wanting to refinance or borrow to buy houses from the housing market that hasn't bottomed in many geographies don't worry, you have a lot of time.

The S&P 500 rejoiced and went up 1.7% in a couple of hours.

Source: http://www.bloomberg.com/news/2012-09-13/fed-plans-to-buy-40-billion-in-mortgage-securities-each-month.html
Source: http://online.barrons.com/article/current_yield.html

Big Day Tomorrow: Money From Nothing

Tomorrow is the big day that everyone's been waiting for since about 11 days ago. Ben Bernanke will announce QE3, also known as money printing. If he doesn't, that thing called the stock market will not be happy.

What will it be? Buying mortgage-backed securities? Trading short-term bonds for long-term bonds? Outright bond-buying (pure money printing)? Buying stocks from the S&P 500 (Japan does it)?

Source: http://www.calculatedriskblog.com/2012/09/qe-timeline-update.html
Source: http://articles.marketwatch.com/2012-05-08/markets/31609040_1_etf-stock-market-central-bank

Official Inflation Rate -- Seems Kinda Low

Official U.S. Bureau of Labor Statistics cumulative inflation from Sept. 11, 2001 to Sept. 11, 2012 is 29%.

Seems kind of low, doesn't it?

Here are other changes in prices:

Source: http://www.zerohedge.com/news/september-11-%E2%80%93-eleven-years-later-selected-statistics

Imagine if America was a Dictatorship.

“Why are you guys so anti-dictators? Imagine if America was a dictatorship. You could let 1 percent of the people have all the nation’s wealth. You could help your rich friends get richer by cutting their taxes and bailing them out when they gamble and lose. You could ignore the needs of the poor for health care and education. Your media would appear free, but would secretly be controlled by one person and his family. You could wiretap phones. You could torture foreign prisoners. You could have rigged elections. You could lie about why you go to war. You could fill your prisons with one particular racial group and no one would complain. You could use the media to scare the people into supporting policies that are against their interests.”



Source: http://www.youtube.com/watch?v=zIOPw0Ewj4Q
Source: http://www.imdb.com/title/tt1645170/

Sustainable Inflation?

Have you ever had a feeling that prices constantly increase, where you need to have a raise every year just to keep up the same standard of living?

Cumulative inflation (median of 24 countries):

Year-over-year inflation. Notice how consistent years after 1900 of positive inflation can lead to the exponential growth shown in the chart, above.

Source: http://www.zerohedge.com/news/chart-day-803-years-global-inflation

Pension Payments are Doing Just Fine. Just Don't Live Too Long.

Congratulations younger generations! You get to pay into pension schemes that pay out ridiculously high pension payments to your parents and grandparents.

If your state is >80% funded, you are fine, for now. For the rest of you, you too are fine for now...until you aren't. Which will be relatively soon.

Source: http://www.businessinsider.com/the-us-20-2012-9?op=1

Global Manufacturing is... Surprise!... Contracting.

Here's how to read the following table. Under the "Status" column, if it shows "Contraction" then it's a bad thing.

Germany, Japan, France, Italy, Australia are all being taken down by the 4-year high S&P 500 global economy.

What's this? Even China's official manufacturing index (blue line) is showing contraction (HSBC's measurement is the red line).

Source: http://www.zerohedge.com/news/global-manufacturing-update-indicates-80-world-now-contraction
Source: http://www.zerohedge.com/news/china-manufacturing-pmi-lowest-march-2009-market-response-bad-good-so-far