LOOKING FOR SOME INFLATION

Abernomics takes another hit to its economic recovery story as in an unexpected move the JCB eased monetary policy, sending the market to a seven year high.

The Bank of Japan said it would increase its asset purchases by between 10 trillion yen and 20 trillion yen ($90.7 billion to $181.3 billion) to about 80 trillion yen ($725 billion) annually.

The absence of inflation, falling oil prices and a weak job market were reasons some analysts cited for the added stimulus as Japan faces another proposed national sales tax increase next year.

That may be off now given the weakness of the latest report for September.

BLINDER LEADS THE BLIND

  

Anything economist Alan Blinder gripes about is just that, Blinder griping

Blinder is just another empty suit. An academic economic empty suit. But not one without an agenda.

In today's WSJ opinion page, "Enough With European Austerity, Bring on the Stimulus," Blinder rolls out MSM's tried and trite criticism of austerity. The object of his objections is none other than those rule-abiding Germans, Keynesians everywhere love to criticize--and secretly abhor.

Usually I don’t gripe about other countries’ economic policies—at least not on this page. It’s their own business. Besides, there is normally more than enough bad policy right here at home. But I have to make an exception for current macroeconomic policy in the eurozone, for two main reasons. One is that it is impacting other countries, possibly even our own, though that effect is often exaggerated. The other is that the mistakes are so painfully obvious.

European economic performance since 2008 makes the lackluster U.S. look marvelous by comparison. Unemployment in the eurozone today is higher than it was in 2009-10. Not only is real GDP still below its 2008 level, but it hasn’t grown for more than three years and may be heading down again. Meanwhile, deflation is more of a worry than inflation.

Coming from a guy who was Vice Chair of the Federal Reserve Bank under Greenspan during the creation of one of the worst stock market bubbles that was so painfully obvious in history, if his comments weren't so pathetic, they'd be laughable. That's for openers, Mr. Blinder.

Blinder then tackles Germany's current economic picture. 

But what about Germany? Isn’t it the success story of Europe? Well, cumulative German GDP growth over the five-year period 2008-13 is a paltry 2.2%. That’s not 2.2% a year, but 2.2% in total. Germany looks good only because the rest of the eurozone looks so bad. Furthermore, Germany’s comparative success can be traced mainly to reforms made prior to the financial crisis, not to what’s happened since.

This is the old economic apples-to-oranges sham, the equivalent to the question: If you're so rich, why aren't you smart? To which the answer is: If you're so smart why aren't you rich?  The two are about as unrelated as academics are to common sense.

But here's the best part of Blinder's rant. Notice the word creative in his description of ECB President Mario Drahgi's Keynesian-MIT-trained leadership.

First, Germany’s central bank, the Bundesbank, is doing its level best to restrain the European Central Bank, which, under Mario Draghi ’s creative leadership, would like to do more to spur growth. “More” includes quantitative easing along Federal Reserve lines, which in Europe might mean buying sovereign debt, corporate bonds, or asset-backed securities. But Bundesbank President Jens Weidmann objects strenuously to further ECB stimulus, recently telling this newspaper that purchasing more government bonds would be moving down a “dangerous path.” 

Whatever Keynesians do is creative, those who favor economic common sense are obstreperous and obstructive.

Then Blinder tosses out the real those-damn-stubborn-Germans hate bomb. 

Second, the German government is cajoling other European governments to continue (or resume) the budgetary austerity programs that have held back European growth in recent years. Earlier this month Finance Minister Wolfgang Schauble opined that “the worst thing we could do would be to repeat yesterday’s mistakes” by using deficit spending to boost growth. No, the worst thing German policy could do would be to push Europe, including Germany, back into recession.

The damage done, Blinder then resorts to one of the ploys of one of the left's most hated political figures, Richard Nixon, when he once noted: "I like Kennedy. I don't know why he doesn't like me."

To be fair, the Germans are not alone in paying homage to fiscal austerity. You hear that sentiment in other countries, too—even in the U.S. But Chancellor Angela Merkel , Europe’s most powerful leader by far, has hitched her luminous political star to balancing the budget, and her nation is Europe’s dominant economy. If Germany says no, it is hard to get to yes.

There's no semblance of anything even remotely fair in the minds of political-economic-agenda wonks like Blinder.

Make no mistake, these are dangerous people to the everyday health of everyday Americans and the WSJ ought to be ashamed of itself for printing such tripe.

THE RUSSIAN RUBLE

 

We recently wrote in "The Next Move" the following:

If one is long BP in particular and oil in general one is long the Russian ruble which has taken a huge hit. We think there's much money there once the sanctions get lifted and they will barring Armageddon.

The link below gives an excellent example of just how hard the Russian ruble has been hit. If you follow the investment philosophy of one of the legends, the late John Templeton, you're looking at, give or take, maximum pessimism.

Or if you're a Warren Buffett groupie here's a quote from him dating to 2008 when all this gloom erupted.

"...A little history here: During the Depression, the Dow hit its low, 41, on July 8, 1932. Economic conditions, though, kept deteriorating until Franklin D. Roosevelt took office in March 1933. By that time, the market had already advanced 30 percent. Or think back to the early days of World War II, when things were going badly for the United States in Europe and the Pacific. The market hit bottom in April 1942, well before Allied fortunes turned. Again, in the early 1980s, the time to buy stocks was when inflation raged and the economy was in the tank. In short, bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.
 
No risk, no opportunity. Just don't try to tell the regulators.

http://static4.businessinsider.com/image/54516b726bb3f7fb324beeda-960/cotd-russia-currency-tom-keene.jpg

OVERNIGHT

LOS ANGELES (MarketWatch) — Japanese stocks extended their gains in early Thursday action, helped by some strong earnings and a weaker yen. The Nikkei Stock Average was 0.7% firmer in initial moves, adding to a 1.5% rise a day earlier, while the Topix also added 0.7%. Helping underpin the market was a bump up for the U.S. dollar after what some economists saw as a hawkish tone to the Federal Reserve policy statement out overnight. Early in Tokyo session, the greenback was changing hands at ¥108.94, up from around ¥108.11 at the previous close.

US companies reporting later today include:

  Q3 2014 Avon Products Inc                 
  Q3 2014 ConocoPhillips                    
  Q3 2014 Kellogg Co.                       
  Q4 2014 Starbucks                         
  Q3 2014 Time Warner Cable Inc             

NOT ALL OF THEM ARE GOOD

 
Here is a quote from Former Fed Chairman Alan Greenspan we posted earlier in our "House Painters" article.

But quantitative easing has been a “terrific success” in getting the real rate of return on long-term assets down, boosting all income-earning assets.

“It hasn’t been a success in the demand side,” he said, because banks are simply parking the reserves at the central bank.

 They just let it sit. Unless or until that happens, you don’t galvanize economic activity,” he said. “When that starts, all things can happen - and not all of them are good,” he said.

It's important because you have an ultimate insider telling you where most of the money from QE given to the banks wound up. Now view the chart on the below link.

The key point here is those who argue, as one Bloomberg columnist noted today, Speculation that the Fed’s almost $4 trillion of bond purchases since 2008 would cause runaway inflation has yet to be proven.  Even Greenspan hints at the reason why.

http://www.economicpolicyjournal.com/2014/10/so-what-has-fed-been-doing-since-start.html

STUPID STATEMENT FOR THE DAY

The news is out. The Fed has ended its QE hand-holding fiasco. For now.

Commentators, like a bunch of kids on Halloween night, were out in droves. Opinions and reactions are about as varied as those costumes people don on Halloween, too.

There's never been a paucity on Wall Street of stupidity. So here's our post-Fed report for the most stupid comment of the day.

Jack Bouroudjian of Index Financial Partners, also on "Closing Bell," said he thinks Fed skeptics are full of hot air. In a rather heated exchange he said Janet Yellen and the Federal Reserve deserved nothing but praise.

"I call this brilliant. I think what Janet Yellen has been doing is absolutely wonderful. They have been able to maneuver through the cycle with low inflation; they're starting to create jobs and we have companies making money."

He added: "It's about time we quit knocking the Fed. People are not unemployed because the Fed is keeping rates low."

Well now, Mr. Bouroudjian, you're correct. People are not unemployed because Yellen and her mad band of house painters kept interest rates artificially too low too long. 

They're just too income poor to purchase the necessities they need to live a relatively dignified life.

WAKE UP BUREAUCRATS

 
What do you expect is usually a fair question to ask.

And it couldn't be more appropriate when you put an infectious disease specialist in charge of a huge bureaucratic organization like the World Bank.

Open the curtains and let the saga begin. Doctor Jim Yong Kim, the Iowa-born Korean former president of Ivy League Dartmouth College took over the bank's presidency a little more than two years ago, an unlikely choice to many at the time, given Kim's apparent lack of credentials in this area.

But who among either his supporters or detractors saw the Ebola virus turmoil coming? It just goes to show the only real expected certainty is the unexpected. Even before the recent Ebola uproar, Dr. Kim started a funding program for those areas with the virus by pledging $200 million from the bank's special humanitarian crisis fund, a sum recently increased to $400 million, according to the Financial Times.

World Bank economists calculate the Ebola outbreak could whack west Africa for $32 billion by the end of next year as fear fuels the fallout to much of the rest of Africa as tourists and others cancel their plans to travel there. Think business conferences and such.

What comes to the fore in the debate about the World Bank's unusual response to what is seen as a health crisis, not the usual fare on the WBO's menu, is it a one time thing in a clear-cut time of crisis or something else again?

At a time when global central banks with their stress tests and so forth have been trying to gauge the financial system strength to withstand future calamity, Dr Kim noted:

"We really have to look carefully at these downside risks to the global economy that only come to our attention in these kinds of disastrous moments."

Should the Ebola crisis spread significantly outside Africa's borders, $32 billion will be a pittance of the real global costs.

To be sure, Ebola is not just an individual health risk. Out of control it's a global economic risk.

So wake up bureaucrats.

HOUSE PAINTERS

Despite what we've all been repeatedly told, Federal Reserve policy has nothing to do with stimulating jobs or increasing or decreasing inflation. Not at all.

In reality the Fed is little more than of bunch of incompetent sunshine makers. And their motto is an old one, Make hay while the sun shines because it won't last.

After what is now nearly six years of ZIRP, the Fed is about out of rays and their sweaty palms are beginning to show. The recent less-than-10 percent market correction brought the verbal interventionists out quicker than you can spell, well, interventionists.

A pure act of fear, it was.

After blowing $4 trillion on what is essentially an external paint job, the old pathetic structure remains unchanged. In real estate it's called curb appeal. What you need to know is these masters of monetary curb appeal are more dangerous to your economic health than the Ebola virus federal officials are so confused about.

No less a monetary curb appeal specialist than retired Fed chairman Sir Alan Greenspan yesterday admitted as much.

Inflation is “dead in the water” because effective demand is “dead in the water,” he said.

But quantitative easing has been a “terrific success” in getting the real rate of return on long-term assets down, boosting all income-earning assets.

“It hasn’t been a success in the demand side,” he said, because banks are simply parking the reserves at the central bank.

“They just let it sit. Unless or until that happens, you don’t galvanize economic activity,” he said.

“When that starts, all things can happen - and not all of them are good,” he said.

Greenspan said monetary policy is in uncharted territory. He said he was worried the “real pressure” will come when the markets demand higher rates from the Fed to keep reserve balances where they are, he said.

The former Fed chairman said he still has doubts about the viability of the euro. He said that without full political integration in Europe, the euro zone would break up.

There is so much economic gobbledygook in these Greenspan statements that it's defies all common sense. Here are just a few. 

Sure, Mr. Greenspan, it boosted "all income-earning assets," but killed the income stream from those assets. You know, Mr. Greenspan, the ones the infirm, the old and the fixed-income crowd live off. 

Yet one of your Fed successors wants us to believe she's mightily concerned about income inequality, an inequality she and her band of house painters helped create.

Your compatriots at the ECB and its Keynesian-steeped backers are screaming for more American style QE. In short, they wish to emulate a program which you just acknowledged up to now has failed to do what it was touted to do, loosen the lending purse strings of bankers. And that's after nearly six years and $4 trillion has been toss its way. 

Greenspan is well-known for his "irrational exuberance" statement, a phrase reportedly he lifted from Yale economist Robert Shiller. 
Now that he's expressed his concern about "the viability of the euro," we're sure his European friends are duly thrilled also.

According to history, Adolph Hitler was a retired house painter. One wonders how long it will be before the public demands the retirement of another group of house painters?