Strap yourself in for a busy week! We kick off today with a speech from RBA governor Glenn Stevens and the release of building approvals data for June. Aussie credit data comes out on Wednesday and in the US the Federal Reserve meets on Wednesday and Thursday, giving investors the chance, once again, to fret about the outcome of the meeting.
Bernanke will likely speak out of both sides of his mouth, meaning it will be up to John Hilsenrath of the Wall Street Journal to clear things up a few days later with an article explaining what the Fed meant to say. Or perhaps he already did. Last week, Hilsenrath wrote the following:
‘At their July 30-31 meeting, Fed officials are likely to discuss whether to refine or revise "forward guidance," the words they use to describe their intentions for the next few years.
‘There are other rhetorical steps the Fed might take in its forward guidance. One would be to match its publicly set upper bound for inflation with a new lower bound. The central bank has said it will raise short-term rates if inflation is seen as rising above the 2.5% target. It hasn’t said what it would do if inflation drops much below the Fed’s 2% medium-term objective. One option is to say that short-term rates won’t rise if inflation falls below some threshold, perhaps 1.5%. Mr. Bernanke has already suggested as much.’
We hope that clears things up.
Then on Friday we get US non-farm payroll data. This determines the official unemployment rate which in turn determines when Bernanke may or may not turn the monetary spigot off. So in short, the circus continues.
There seems to be some weird correlation between central bank policy (which, in the US has now morphed from the actual to the rhetorical) and general market absurdity. The more that policy focuses on making things better, the more absurd things get.
In today’s Daily Reckoning we’ll focus on two such absurdities, one dripping in irony and the other soaked in confused disbelief. In preview, we’re talking about President Obama’s economic comprehension and Australian property prices.
First, let’s look at Obama. We think this is important because it gets to the heart of the why the world is so screwed up. Not that we’re sitting astride a high horse. We have no particular insights into making the world a better place. But doing nothing would be a good start. Empowering people to come up with own solutions would be a far more enriching policy than spreading the propaganda that it’s the government’s role to improve people’s lot.
But that’s not Obama’s narrative. Consider the following from today’s Financial Review:
‘United States President Barack Obama has warned that years of widening income inequality and the lingering effects of the financial crisis have frayed the country’s social fabric and undermined Americans’ belief in opportunity, threatening growth and employment.
‘Upward mobility…“was part and parcel of who we were as Americans…and that’s what’s been eroding over the past 20, 30 years, well before the financial crisis…if we don’t do anything, then growth will be slower than it should be. Unemployment will not go down as fast as it should. Income inequality will continue to rise. That’s not a future we should accept.”’
Stirring words from the commander-in-chief. No, it’s not an acceptable future. But has he stopped to consider that despite the apparent best efforts of successive governments, it is a future that has unfurled nonetheless?
What did he do about it in 2008 when he put Wall Street’s interest before the people of main street, the ones he claims to look out for? What is he doing about the fact that the Fed’s policies are encouraging financial speculation rather than real investment, to the detriment of economic growth and employment?
Nothing, because he can’t do anything. The US political/ financial system is a web of deceit and narrow self-interest. It is driven by short-term political needs which ensure no genuine reform can take place.
And this ensures we’ll just get more of the same until the system blows itself up. That’s because corrupt narcissists run the system and their sole aim is the attainment of power. To do this, they need to mollify the voters. They need to convince them that they are their saviours…their benefactors.
These narcissists regulate to steal wealth from the middle class then make empty speeches about how they are working hard to improve their lot. Ironic incompetence or just a bare-faced lie? Hmmm.
for The Daily Reckoning Australia
From the Archives…
Has the Chinese Economy Hit the Great Wall?
26-07-13 – Bill Bonner
Crisis, Capital Controls, and Accidents of Birth
25-07-13 – Doug Casey
Australia’s Mysterious Natural Gas Shortage
24-07-13 – Nick Hubble
Bernanke’s QE Train Wreck That’s Heading Our Way
23-07-13 – Vern Gowdie
The Misallocated Savings of the Chinese Banking System
22-07-13 – Dan Denning