The more things change, the more they stay the same. The financial world loves focusing on some future event that they think will change everything. There is always some economic data, an important meeting like G20, the Fed, the ECB or a speech by Yellen or some other central bank head who hasn’t got a clue what is happening or what will happen. So now at the end of August, markets have all been focusing on Yellen’s speech at Jackson Hole Wyoming. Jackson Hole is of course a very befitting name since what the Fed is starring into is a massive black hole into which major parts of the financial system will disappear.
The Fed like all central banks is speaking with a forked tongue. They have talked interest rates up since December 2015 and for a long time the market has believed them. So this time again, Yellen obliged and made the market believe that there will be one or two interest rate increases in 2016. To me it has always been clear since last December that there is no chance of further rate increases at this moment. But the Fed has a problem with not losing face. That’s way Fisher, the vice-chairman of the Fed last Sunday delivered an upbeat speech about the US economy saying that the Fed was “close to meeting its targets” of full employment and price stability. Obviously, when you base your assessments on false data and thus make false statements, you can tell the markets anything. And this is what the Fed does together with all other central banks. Anyone who studies the economic figures critically knows that they bear no resemblance to reality. Real unemployment in the US is not 5% but 23%. The difference is changing the method of calculation since the 1980s and to assume that anyone who has stopped looking for a job after 6 months never wants to work again. Isn’t it strange that 95 million people capable of working are not working and that the labour participation rate has gone from 66% to 62% since 2006! Is that full employment when 95 million people, most of whom who need a job, can’t get one? Full story...
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The Fed like all central banks is speaking with a forked tongue. They have talked interest rates up since December 2015 and for a long time the market has believed them. So this time again, Yellen obliged and made the market believe that there will be one or two interest rate increases in 2016. To me it has always been clear since last December that there is no chance of further rate increases at this moment. But the Fed has a problem with not losing face. That’s way Fisher, the vice-chairman of the Fed last Sunday delivered an upbeat speech about the US economy saying that the Fed was “close to meeting its targets” of full employment and price stability. Obviously, when you base your assessments on false data and thus make false statements, you can tell the markets anything. And this is what the Fed does together with all other central banks. Anyone who studies the economic figures critically knows that they bear no resemblance to reality. Real unemployment in the US is not 5% but 23%. The difference is changing the method of calculation since the 1980s and to assume that anyone who has stopped looking for a job after 6 months never wants to work again. Isn’t it strange that 95 million people capable of working are not working and that the labour participation rate has gone from 66% to 62% since 2006! Is that full employment when 95 million people, most of whom who need a job, can’t get one? Full story...
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