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BLIND leading the Blind March 21, 2014

Posted by hslu in Economics, Global Affair, Politics, stocks.
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Look at this picture and tell me what you see.

A beacon of light above the entrance of a building with menecing clouds gathering in the sky in the background.
The building is the Federal Reserve building in Washington DC. The beacon of light gives out hope of chiarman Benanke or Yellen leading the US economy out of the recession into a bright future.

Benanke created QEs but they barely kept the US economy creeping along at ~2.2%. He knew his QEs made inequality in the US worse and he wanted to get taper started while he was still in the office.

Lo and behold, the moment he started taper in December 2013, the job market in November 2013 tanked: 74,000 new jobs vs. 200,000 expected. December’s number isn’t much better: 113,000 vs. 185,000. January 2014 saw 175,000 new job but still much lower than what is needed to absorb new entrants into the economy.

So what’s going on here? Do we have a recovery or do we not?

No wonder the beacon of light is’t very bright. The US economy is in the dark just like the cloud behind the building. The one who’s supposed to lead the economy out of the dark couldn’t see very far out either.

Read this from Yellon when she was pressed in the Q&E session to put a date on when the short rate will rise after QE ends:

I — I, you know, this is the kind of term it’s hard to define, but, you know, it probably means something on the order of around six months or that type of thing. But, you know, it depends — what the FOMC statement is saying is it depends what conditions are like at the time.”   

In plain English:

“Yes, it depends and I don’t know. What else do you want? Give me a break.”

It’s kind of blind leading the blind. And we are left in the dark to guess what’s going to happen next. For the emerging markets, I am sorry, you are on your own. The US federal Reserve only cares about what happens in the US. You countries can take care of your own problems: raise interest rate to 10+%, devalue your currencies, cut your federal budgets, reduce pension benefits, what ever. That’s your problem. Not mine.

That’s was Bernanke’s position. It will be Yellen’s too.

That’s simply not fair. The US government through its crony Wall Street too-big-to-fail investment banking firms and too-big-to-prosecute bank CEOs created the financial crisis in the first place. The Great Recession was instigated by the United States and QEs followed. Now QEs’ unintended consequences begin to surface and the US washes its hands and leave other nations to face the consequence on their own.

This is the classic behavior of a bully.

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