Wednesday, August 10, 2011

Marc Faber – The Best Thing The Federal Reserve Could Do Is Resign

One of our favorites is on Bloomberg TV sharing his always sardonic view of central banker’s endless stupidity and timely remarks about the global economy.

How many times over the last six years have we said that the Federal Reserve cannot fix the economy?  Faber is theoretically right that under the current monetary and economic system the U.S. should save more but he is fundamentally wrong in his assumption that capital spending will eventually pick up if we do so.  Completely.   As we wrote well before the 2008 collapse, capital spending is and has been at the lowest levels in U.S. history.  That is not going to change without a new economic model.  And how the hell is anyone going to save anything given the wage structure in this country?  I think Faber is well too ingrained in current failed economic ideology.  Need I repost the quote below for the umteenth time? 

"We are justly proud of the high wage rates which prevail throughout our country and jealous of any interference with them by the products of the cheaper labor of other countries. To maintain this condition, to strengthen our control of home markets and, above all, to broaden our opportunities in foreign markets where we must compete with the products of other industrial nations, we should welcome and encourage every influence tending to increase the efficiency of our productive processes"
--Henry Towne, President of the American Society of Mechanical Engineers, 1911

By the way, the U.S. productivity miracle that Alan  Greenspan spewed endless bullshit about during his time as head dummkopf of the Federal Reserve is a complete myth.  More economic junk science.  (The latest survey I saw is that 99 out of 100 economists have their head so far up their ass that there is no hope of ever pulling it out.  The economic profession’s failed ideology is systemic.  These college degrees are a complete failure or systemic brainwashing and propaganda.  If the system wasn’t rigged, there wouldn’t even be an economics profession.   How can someone so systemically incompetent expect to ever be hired in a merit-based job market?  They can’t.   Cronyism and rigging the game is the only method through which the profession survives. )

Today’s economic ideology is based completely on bullshit and corruption.  Both parties.  Scott Walker in Wisconsin or Barack Obama in Washington.  They are both equally clueless. (Although Walker is magnitudes more so.)  And, frankly, as much as I like Marc Faber, he has been very wrong on a lot of substantive issues that we called out before they came to pass.  And he is going to be wrong about how this ends up as well.  That is because Faber, for all of his insight, and he is very insightful, only knows current failed economic ideology that is crumbling before our eyes.  it has created his livelihood and even if it is subconsciously, he can’t see beyond it just like other financial wizards.    And unlike throughout his life time when this system always recovered at some point, this it is.  It’s over.   The future will not be decided by what worked over the last thirty years.   The future will be decided by new ideas, new ways of thinking and new solutions.  We simply need to shove aside the status quo to get there.  All in due time.

Faber is right that quantitative easing in its prior form recreated asset bubbles and disproportionately hurt underprivileged people through Wall Street’s criminal rigging of commodities markets and food prices.  And we wrote that was going to happen.  But future quantitative easing will most assuredly be much more precise.  It will almost certainly not be free money given to Wall Street to speculate in assets but instead will be used as a tool to either fund the government or fund capital projects or fund a public bank for infrastructure projects or fund public involvement in the housing mess or something in this vein of thinking.  And we should be doing that right now!  Not government handouts to corporations or Wall Street.  Government spending that benefits our society.  That is, take the easing out of the hands of Wall Street crooks and corporate welfare recipients and put it back into the hands of democratic government.   That may not even be politically possible until another end of the world crisis given the massive political corruption in this country.

The Fed can keep giving money to Wall Street all day long and the minute they stop, the asset bubble will start to pop.   Again and again and again.   And that means all of that perceived wealth will evaporate again and again and again taking the investor class down with it.  The Fed can give free money to banks all day long to speculate in asset prices.  But the minute that stimulus is gone, fundamentals take over and we quickly see there simply isn’t enough money in the underlying economy to support those prices and all of that artificial asset wealth begins to be wiped away again.   In other words, quantitative easing in its current form of handing money to financial criminals is and will prove to be a perfect failure every single time.

We can let the Federal Reserve blow bubbles Wall Street’s way (quantitative easing in its current form) five billion times and the result will always be that the artificial wealth of asset inflation will collapse the minute they stop the underlying economy is fixed.   It’s just like the movie Groundhog Day.  We simply relive the same endless stupidity. 

The Fed cannot fix an issue that is not a result of monetary policy.  Which, by the way, is not the prevailing belief on Wall Street and in Washington.   Everyone thinks the Federal Reserve created this crisis.  That includes more than a few Nobel Prize winning economists and almost every financial blogger.  They are all wrong.  Every single one of them.  And why wouldn’t they be?  Prevailing wisdom is always proven to be wrong at some point. 

This economic crisis is because of political corruption.  That’s it.   And that means only the government can fix the problems they created.  How likely is that given the ingrained structure of the fascist state? 

posted by TimingLogic at 9:37 AM

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