Feed aggregator

The most compelling evidence of speculative frenzy in these markets comes from the volume of stocks bought on margin.

The Death of Hope and Belief


Cognitive Dissonance



You will always find original articles by Cognitive Dissonance and other authors first on www.TwoIceFloes.com before they are posted here on ZH. To become a Premium or Basic member click here. If you wish to subscribe to ‘Dispatches’, a periodic newsletter from Cognitive Dissonance and TwoIceFloes Creations, please click here.


As much as we would like to ‘believe’ we are all clear headed, logical individuals who only deal with verified ‘facts’ while shunning hearsay, rumor, ‘hope’ and ‘belief’, the reality is to some degree or another we integrate all of the above, and so much more, into our personal cognitive operating system. The tendency when reading such a statement is to immediately emotionally trigger, become annoyed or even angry, and then listen to that soothing inner egoic voice as it assures us we are not the one Cog is looking for.

Regardless of whether we attribute this cognitive juxtaposition to raging ego, genetic predisposition, normalcy bias, cultural conditioning or simply denial, critical thinking, if ever truly deployed, is often limited to those times when we ‘believe’ it is in our best interest to think outside the box. But even then, our effort is severely limited by the tendency to hold on tightly to the comforting handrails when venturing into foreign territory.

Try as we might to convince ourselves otherwise, hope is just the ugly stepchild of belief, interchangeable and indistinguishable, especially during periods of high emotional stress and cognitive fight or flight. Naval gazing, pretty much all we see when engaging in hope and belief, is the ultimate human blinder and the chains that bind.

Once we accept something as ‘true’, essentially a non specific condition arrived at with minimal critical thinking and even less logical reasoning, rarely if ever do we revisit the subject to check our premises. And why would we since we ‘believe’ what we want and not what is actually there. Since the only unchanging ‘truth’ throughout the universe is that change is constant, ‘We the People’ often hope our beliefs still hold true………assuming we honestly question our beliefs in order to discover if they ever rang true.

Often we pig pile falsehoods, misconceptions, hearsay and the ‘trusted’ opinion of authorities and acquaintances on top of each another and call the resulting mishmash our opinion, a cleverly encrypted carrier signal demonstrating the true genesis of our underlying hope and belief. While we bitterly complain about mainstream media reporters all repeating from the same contrived script, we might just be the most egregious of all serial repeaters. After all, it takes one to know one.

Since so few of us have the actual courage to walk the path alone and be truly contrary to the dominant groupthink, why then would we expect ourselves to take the first step and think deviant thoughts in blatant opposition to the consensus of the hive mind? Even when we finally do break from the majority, both exhilarated and frightened by the audacity of hope that personal salvation could be found elsewhere, we immediately seek out the comfort of the nearest like minded minority.

Nothing soothes the savage ego beast quite like collective affirmation and psychic reintegration into a colluding collective. Our desperate attempts to be perceived as unique and special in the eyes of our fellow herd members is the egoic trap that keeps us chained to false hope and belief and all its various complications. Only the strongest among us willingly withstand the pain that springs from self isolation. Knowing this to be the truth, how can anyone declare themselves original thinkers, free from significant cognitive influences and meme traps?

I will be the first to admit I hold no original thought, only slightly unique word constructs and voluminous regurgitations. But contrary to consensus thinking, ‘knowing’ this is not a deficit but in ‘fact’ a valuable strategic asset. I am content in the knowledge I will most likely not blaze new cognitive ground, but instead simply follow faint trail sign left by many others before me. Knowing this, and being settled with it, I can then busy myself with the recognition and disarming of my ego. In the process I might possibly gain some personal insight and enlightenment, a perfect example of winning by not playing.


Settled Sand

Even Shifting Sands can be Settled


We are our own worst enemy simply because we self identify with our ego, the ultimate slave master. If we were to recognize and then fully embody this ‘truth’, suddenly the mind and spirit soar to heights unimagined but easily attainable. Completely ignorant of our enemy, in a cognitive judo match with our ego we are the perpetual white belted novice pitted against the black belt sensei. The only way to win is not to play at all because the egoic sensei knows us so much better than we know ourselves.

Since few will actually withdraw when their ego is egging them on, all the sociopaths need do to manipulate and control us is to remotely leverage the power the ego already commands. And that power is exercised primarily through our mostly false hope and belief. I often say we are only as sick as our deepest darkest secrets. How better to control us than by accessing those secrets via the ego and leveraging them against us, sort of spooky blackmail at a distance.

While there are always exceptions to every rule, one merely needs to examine the mindset of both the children and adults of any household to discover where many long held and cherished ‘truths’ (aka ‘hope and belief’) are formulated before going forth to multiply. Born of pride and prejudice, fired in the crucible of stereotypical hatred and ignorance, then cemented firmly in place via constant repetition and familial affirmation, for the most part we are the product of our upbringings, be they the good, the bad and the unimaginably ugly. It really doesn’t matter if the propaganda we integrate when young comes from mother dearest or fascist Fatherland. In practice it winds up being a toxic stew of both.

Particularly with regard to personal relationships (and make no mistake about it, our cultural ‘hopes’ and ‘beliefs’ are extremely personal in nature) rarely is logic or reason employed when rushing out another label carefully disguised as knowledgeable fact. All this is done to demonstrate our steadfast conviction in truth, justice and the American way less we appear weak and indecisive to our fellow egoic slaves. Believe what you want, but never let them see your sweaty indecision. Labels are the lazy man’s prodigal thinking, the more derogatory the better to feel superior while fanning the flames of self righteous indignation or despondent victimhood.

But alas hope springs eternal, especially for those of us who are a product of our rigid belief system and the certainty we are the exception to the norm, therefore we alone can see what no one else is able to behold. Banishing all doubt from our mind, steeled with the singleness of our purpose to bestow upon those poor unfortunate others not blessed with our insight, we echo each other when declaring the utter ruination we’re all headed towards. Endless doom porn is such an aphrodisiac that I’m a bit surprised we aren’t all walking around permanently aroused. On second thought, maybe we are. After all, there is an ever so fine line between titillation and terror.

Even those who have lost all faith in the ability to correct the present state of affairs and are simply awaiting the ‘inevitable’ collapse and re-set, still retain hope and belief that once the collapse is complete and the debris has been cleared a new beginning will emerge. Thus it is indirectly but clearly inferred those most responsible for the Empire’s fall will be purged from the system, paving the way for sanity to return and a new era to follow, a renaissance if you will, a cleansing of the filth, decay and corruption that rejuvenates the mind and body politic.

Seen from this perspective, how can anyone claim this isn’t unadulterated hope and belief, especially when thousands of years of history indicate this will not be the case? Of course, if our history is manipulated and altered to deliberately keep us lost in the historical wilderness, how can we learn from our ancestor’s mistakes if we do not question our historical premises? At some point during our maturing process we really do need to take personal responsibility for our hope and beliefs and everything they intersect. I guess this explains why so many remain childlike in thought and deed.

I have argued time and time again a very simple proposition, that we support the system even when we claim to oppose it. Direct opposition, often expressed as personal polarization, tends to increase the support we lend to the system by playing into its strength in much the same way those we claim are deaf, dumb and blind mindlessly engage with the system. Being polarized pits “We the People” against each other, leaving us all exhausted and discarded on the side of the road.


Side of the Road

Exhausted and Discarded on the Side of the Road


The opposite of support is not to oppose, though any competent dictionary will claim otherwise, but instead to withdraw and withhold. The insanity will wither and die on the vine only when there is little active participation of any kind. And by this I do not mean apathy, a sucking psychic nothingness of total cognitive and spiritual disability. Instead I speak of an active and purposeful redirection of our power and spirit away from the psychopathic parasites and towards creating our own healthy and self enabling reality.

We are desperate to believe ‘they’ alone control us in order to absolve us from personal responsibility. It is our blindly proffered hope and belief which nourishes the sociopaths who then peddle their insanity, the ultimate symbiotic codependent dialectic speaking louder than words ever could.

Believing’ ourselves powerless (because we want to be) we blithely and blindly empower those whom we ‘know’ are already powerful (because we want them to be). Conceding defeat before the blade is even drawn, the battle is over before it ever began. One must admire such brilliant tactics, so Sun Tzuesque even he would stand in awe of the majesty of such total and complete self defeatism. Then again, it is the only way the few can control the teaming masses and still reap the rewards of the plebs ever increasing productivity. Welcome to the new slave plantation.

The system as presently constructed thrives on mindless zombie consumers and disgruntled malcontents/disaffected souls (as well as everyone else in-between) because what is most important to the perpetuation of the system is not actually physical in nature. The sociopathic system controls us not by subjugating our physical bodies, bound as they may be by their fictional fiat chains and by their threats of fatal force. Rather their power is derived from our ‘belief’ in those chains and guns and their declared divine right to use them.

Instead, or maybe I should say in addition, what feeds them is a mental, emotional and spiritual energy which springs from within us (metaphysical some might say) a concept so far off the radar screen of the average person who ‘believes’ the only energy that matters is petrochemical or thermonuclear in nature, that all other possibilities are dismissed outright. Our false hope and beliefs, which perpetuates and propels our utter blindness to nearly everything else that is possible, exposes our vulnerable Achilles Heel as we travel the road to perdition.

Many years ago when I first attempted to apply critical thinking on a consistent basis, the best I could come up with was to minimally recognize the very denial I employed to reject the notion I was in some respects complicit. I began to recognize my denial was the chain that bound me to all my impossible situations. Because I believed myself the victim rather than an enabler, clearly I wasn’t the problem. Therefore I would make no effort to withdraw since that would solve nothing and only hurt myself in the process.

It was only some time later, during deep conversations with a more aware and enlightened friend, that I came to see my false hopes and beliefs were actually anchor stones around my mind and spirit, deliberately harnessed by outside forces to hobble and weaken me. It was then I remembered a mindlessly repeated Latin phrase from my childhood days as an altar boy/server. Recognizing it as ‘truth’ I accepted and embodied it using the strength of humility rather than the constraint of self righteous piety. “Mea culpa, mea culpa, mea maxima culpa.” Through my fault, through my fault, through my very great fault.

We are witnessing the blooming of unprecedented sociopathic evil in the present day that is quite frankly unimaginable, therefore ‘unbelievable’ to the average sleep walker, let alone those of us who claim clarity of vision and mind. And as we all know, anything unbelievable is considered not ‘real’ or ‘true’ and thus there is nothing we need to do about the non-thing. This is how we bargain with our hope and belief in order to minimize the threat and therefore our need to become involved.


Hiding Behind the Mask of Hope and Belief

Hiding Behind the Mask of Hope and Belief


In the interest of clarity the term ‘evil’ is not used to infer a religious connection of non divine intervention, but simply to describe something thoroughly and dangerously alien to nearly all by using a term commonly understood as terrible and ominous, all powerful and consuming. Left speechless otherwise, when covering new territory one must occasionally employ old words to describe new worlds. The trick is to take ownership of the words rather than succumb to the propagandized version of them. Either we (re)make our own reality or we live in someone else’s.

Once finally recognized for what it truly is, the evil of the sociopathic perpetrators is obvious and self evident. Which then begs the question; if I go along to get along, what does that make me? What if I am not actually forced to participate, but instead see it as simply in my best interest in order to survive? From that point of view the road from rags to riches, modern crony capitalism at its best, is the path of least resistance and greatest self interest. If this is the path I follow, how am I superior to those I claim are the problem?

Regardless of whether I recognize the lead psychopathic dogs as evil or inspiring, what is my responsibility when stepping on those below in order to gain advantages from above? Do I declare it a dog eat dog world simply to get in the first and last bites? What is ‘evil’ other than maximum self interest run riot? Just because I tithe ten percent doesn’t wash my hands clean of the blood.

In the ultimate act of victimhood we solemnly declare force majeure via evil doer, which neatly absolves us of any responsibility for the state of current affairs and our supposed ‘coerced’ participation. When viewed with hope and belief, material science completely and competently explains all there is to know about how the physical and metaphysical world ‘works’. Confidently assured that our present paradigm is just human nature, there is nothing left to do but wash our hands of the entire affair and bunker down to await the global blast and follow-on shock wave.

And there is no doubt some will be crushed under the falling fiat landslide, thereby lending perceived credibility to the idea bunkering is the best and only option. However, dug in deep like a tic while screaming at the computer monitor about some anonymous asshole commentator whom we claim knows nothing only perpetuates our support for the system. Do our childish minds really think those whom we blindly empower will scurry away like cockroaches exposed by the refrigerator light and leave us be after the fall? Really? Are we serious?

The playbook employed against us is thousands of years old and consists of one simple rule. Leverage the plebs’ hope and belief against them time and time again. When the cycle ends in a flash of self-immolation, start it up all over again with fresh actors and a whitewashed stage. Rinse and repeat endlessly because no matter what, the mind memes deeply implanted within the survivors of the present generation spawns the next generation, creating new zombies needing only small adjustments to fit the present day circumstances. WE are the problem, an insight glaringly obvious since our children become part of the next problem and we raise our children to be little replicas of us.

Only when patently false hope and belief are thoroughly uprooted and destroyed, then replaced with awareness of our personal responsibility to be honest with ourselves in all our affairs, will these self destructive cycles come to an end. I am not suggesting the reader is responsible for all that is wrong with the world today nor is it his or her responsibility to fix all of it. But I am suggesting we are responsible for cleaning up our own house.

Once we begin this process we quickly discover we have been carrying around dozens of pounds of needless cognitive and emotional weight, a needless burden which has obscured our vision and understanding from birth while leaving us cognitively impotent, emotionally immature and growth impaired. As individuals we cannot change the world today. But we can change ourselves, and in so doing we plant the seeds that will change the world tomorrow. It all begins within.



Cognitive Dissonance    


Blind Hope and Belief (Collective Self Portrait)

Blind Hope and Belief

Shadow Banking

Despite seeing the world economy and global financial system experiencing a total meltdown and despite multiple pledges from policy makers all over the world to ban shadow banking procedures, no steps have been taken at all. In fact, the world of shadow banking continues to expand and the total size of the shadow banking sector is expected to reach 100 trillion USD before the end of this decade (and very likely even sooner).

According to the number one of Hong Kong’s securities and futures commission in a Reuters article, more and larger players have entered the shadow banking market as in the current low yield environment more groups (think private equity) are looking to increase their returns. Consumer lending is obviously a preferred choice as it’s also quite easy to get into. It also causes some sort of Catch 22 problem. On the one hand are these new credit providers adding additional oxygen to the local economies as it enables families to keep or increase the consumption pattern. That’s also the main reason why regulators aren’t too keen on taking strict measures to shut these ‘enablers’ down.

Shadow Banking China


And the culprits don’t necessarily have to be searched for in the Western world, not at all. The previous chart shows that it’s actually China that is causing the huge increase in the shadow banking sector. Whereas the total size of shadow banking was just 15 trillion RMB in 2010, this number has increased (not just increased but it truly EXPLODED) to 50 trillion RMB last year. That’s a Compounded Annual Growth Rate (CAGR) of a stunning 35% per year. If this growth rate continues for three more years, the total size of the shadow banking-style business in China will have grown to in excess of 130 trillion RMB.

This shouldn’t be a surprise as for instance AliBaba is being pointed out as one of the main facilitators of this system as it regularly teams up with lenders so consumers are more enticed to buy the products on the website. But wait, it doesn’t end there. Looking at the official numbers for 2014, no less than 87% of China’s GDP is fueled by shadow banking as the total size of the latter stood at in excess of 8 trillion USD vs the total size of the Chinese economy of $9.24T.

Conventional Market Finance


An earlier article on ZeroHedge pointed out the ‘conventional’ financing markets are still contracting and this obviously paves the way for new entrants on the shadow banking scene. Does this also mean the solution could be found in expanding the conventional credit markets again? Well, yes, but the main problem there is that there’s no incentive at all to do so. All Western currency areas have been trying to pump more oxygen in the economy and there really isn’t much more that could be done.

Shadow Banking Western Countries

Source: IMF data

But you should also look at the other side of the equation. As the shadow banking sector in the USA is larger than the conventional financial sector you don’t even have to look at China to start to get worried. As the previous chart shows, there’s a disaster in the making and a collapse of the shadow banking system will drag entire fully-developed economies down. It’s time to start preparing yourself.

>>> Check Out Our Latest Gold Report!

Sprout Money offers a fresh look at investing. We analyze long lasting cycles, coupled with a collection of strategic investments and concrete tips for different types of assets. The methods and strategies from Sprout Money are transformed into the Gold & Silver Report and the Commodity Report.

Follow us on Twitter @SproutMoney

The cost of QE is greater than the income lost to savers and investors. The long-term consequence of the new monetary orthodoxy is likely to permanently impair living standards for generations to come while creating a false illusion of reviving prosperity," Minerd claimed.
So a political framework is possible in the coming days, perhaps in the form of principles that have been agreed to on both enrichment capabilities and on sanctions relief. But the Obama administration won’t get the signed agreement that it is seeking with the quantitative limits to which Iran has agreed if a detailed agreement on lifting sanctions has not reached as well. And that won’t happen unless the P5+1 makes an extraordinary climb-down from its starting position on the issue.
  Shabby Immensity Today, we continue mouth wide open … staggered by the shabby immensity of it … a tear forming in the corner of our eye. Yes, we are looking at how the US economy, money and government have changed since President Nixon ended the gold-backed monetary system in 1971. It is not pretty. […]
The conservative, cantankerous hedge fund manager thinks economic stimulus in Europe isn't likely to work and that the U.S. political system will remain dysfunctional, even with Republican midterm gains.
35 years of demonizing caricature mask an essential fact: the Islamic Republic of Iran, as the Middle East’s only successful participatory Islamist order, has been able to pursue an independent foreign policy that has steadily bolstered its influence in critical arenas across the Middle East. If America is to recover its strategic position, it must devise a fundamentally different relationship with this rising power.
Markets are the best capital allocators and capitalism works if the authorities let it take its course. Had they let markets correct all the excesses in previous business cycles instead of printing more and more money, the world would be in a much better shape today. But our authorities had the dream to smooth the business cycle by not allowing the markets and the system to correct itself. It is difficult to correct this in a painless way, which is what the authorities are trying to do. That won’t work......
In the never-never land of how the mainstream U.S. press covers the Ukraine crisis, the appointment last year of thuggish oligarch Igor Kolomoisky to govern one of the country’s eastern provinces was pitched as a democratic “reform” because he was supposedly too rich to bribe, without noting that his wealth had come from plundering the country’s economy.

Preface:  I am a patriotic American who loves  my country. I was born here, and lived here my entire life.

So why do I frequently point out America's warts?  Because - as the Founding Fathers and Supreme Court judges have explained - we can only make America better if we honestly examine her shortcomings.  After all:

“Dissent is the highest form of patriotism.”

Only when Americans can honestly look at our weaknesses can we become stronger. If we fail to do so, history will repeat ...

While Americans rightly condemn the Nazis as monstrous people, we don't know that America played both sides ... both fighting and supporting the Nazis.

Americans also aren't aware that the Nazis were - in part - inspired by anti-Semites in America.

Backing Nazis

Large American banks - and George W. Bush's grandfather - financed the Nazis.

American manufacturing companies were big supporters of the Nazis.   here are 6 historical examples ...

(1) IBM.  CNET reports:

IBM has responded to questions about its relationship with the Nazis largely by characterizing the information as old news.


"The fact that Hollerith equipment manufactured by (IBM's German unit) Dehomag was used by the Nazi administration has long been known and is not new information," IBM representative Carol Makovich wrote in an e-mail interview. "This information was published in 1997 in the IEEE Annals of the History of Computing and in 1998 in Washington Jewish Week."




IBM also defended Chairman Thomas Watson for his dealings with Hitler and his regime.




On September 13, 1939, The New York Times reports on Page 1 that 3 million Jews are going to be "immediately removed" from Poland, and they appear to be candidates for "physical extermination." On September 9, the German managers of IBM Berlin send a letter to Thomas Watson with copy to staff in Geneva via phone that, due to the "situation," they need high-speed alphabetizing equipment. IBM wanted no paper trail, so an oral agreement was made, passed from New York to Geneva to Berlin, and those alphabetizers were approved by Watson, personally, before the end of the month.


That month he also approved the opening of a new Europe-wide school for Hollerith technicians in Berlin. And at the same time he authorized a new German-based subsidiary in occupied Poland, with a printing plant across the street from the Warsaw Ghetto at 6 Rymarska Street. It produced some 15 million punch cards at that location, the major client of which was the railroad.


We have a similar example involving Romania in 1941, and The Sunday Times has actually placed the IBM documents up on their Web site.... When Nazi Germany went into France, IBM built two new factories to supply the Nazi war machine. This is the 1941-'42 era, in Vichy, France, which was technically neutral. When Germany invaded Holland in May 1940, IBM rushed a brand-new subsidiary into occupied Holland. And it even sent 132 million punch cards in 1941, mainly from New York, to support the Nazi activity there. Holland had the highest rate of Jewish extermination in all of Europe; 72 percent of Jews were killed in Holland, compared to 24 percent in France, where the machines did not operate successfully.




When Hitler came to power in 1933, his desire to destroy European Jewry was so ambitious an enterprise, it required the resources of a computer. But in 1933 no computer existed. What did exist was the Hollerith punch-card system. It was invented by a German-American in Buffalo, New York, for the Census Bureau. This punch-card system could store all the information about individuals, places, products, inventories, schedules, in the holes that were punched or not punched in columns and rows.


The Hollerith system reduced everything to number code. Over time, the IBM alphabetizers could convert this code to alphabetical information. IBM made constant improvements for their Nazi clients.




Our entry was of course precipitated by the bombing of Pearl Harbor on December 7. Shortly before that, with sudden new trading-with-the-enemy regulations in force--this is October 1941--Watson issued a cable to all IBM's European subsidiaries, saying in effect: "Don't tell us what you're doing and don't ask us any questions." He didn't say, "Don't send machines into concentration camps." He didn't say, "Stop organizing the military forces of Nazi Germany." He didn't say, "Don't undertake anything to harm innocent civilians."




He then bifurcated the management of IBM Europe--one manager in Geneva, named Werner Lier, and the other one in New York, in his office, named J.L. Schotte. So all communications went from Switzerland to New York. Ultimately there was a Hollerith Department called Hollerith Abteilung--German for department--in almost every concentration camp. Remember, the original Auschwitz tattoo was an IBM number.




IBM put the blitz in blitzkrieg. The whole war effort was organized on Hollerith machines from 1933 to 1945. This is when information technology comes to warfare. At the same time, IBM was supporting the entire German war machine directly from New York until the fall of 1941 ....




IBM did more than just sell equipment. Watson and IBM controlled the unique technical magic of Hollerith machines. They controlled the monopoly on the cards and the technology. And they were the ones that had to custom-design even the paper forms and punch cards--they were custom-designed for each specific purpose. That included everything form counting Jews to confiscating bank accounts, to coordinating trains going into death camps, to the extermination by labor campaign.


That's why even the paper forms in the prisoner camps had Hollerith notations and numbered fields checked. They were all punched in. For example, IBM had to agree with their Nazi counterparts that Code 6 in the concentration camps was extermination. Code 1 was released, Code 2 was transferred, Code 3 was natural death, Code 4 was formal execution, Code 5 was suicide. Code 7 was escape. Code 6 was extermination.


All of the money and all the machines from all these operations was claimed by IBM as legitimate business after the war. The company used its connections with the State Department and the Pentagon to recover all the machines and all the bank accounts. They never said, "We do not want this blood money." They wanted it all.

(2) Standard Oil.   The Nazi air force - the Luftwaffe - needed tetraethyl lead gas in order to get their planes off the ground. Standard Oil sold tetraethyl to the Nazis.

After WWII began, the English became angry about U.S. shipments of strategic materials to Nazi Germany. So Standard changed the registration of their entire fleet to Panamanian to avoid British search or seizure. These ships continued to carry oil to the Nazis.

(3) Ford.  Ford made cars for the Nazis.  Wikipedia notes:

Ford continued to do business with Nazi Germany, including the manufacture of war materiel.  Beginning in 1940, with the requisitioning of between 100 and 200 French POWs to work as slave laborers, Ford-Werke contravened Article 31 of the 1929 Geneva Convention.  At that time, which was before the U.S. entered the War and still had full diplomatic relations with Nazi Germany, Ford-Werke was under the control of the Ford Motor Company. The number of slave laborers grew as the war expanded ....

(And see discussion under GM, below.)

Wikipedia also points out that Henry Ford was one of the world's biggest anti-Semites ... inspiring Hitler, Himmler and other high-level Nazis:

In Germany, Ford's anti-Semitic articles from The Dearborn Independent were issued in four volumes, cumulatively titled The International Jew, the World's Foremost Problem published by Theodor Fritsch, founder of several anti-Semitic parties and a member of the Reichstag. In a letter written in 1924, Heinrich Himmler described Ford as "one of our most valuable, important, and witty fighters." Ford is the only American mentioned in Mein Kampf.  Adolf Hitler wrote, "only a single great man, Ford, [who], to [the Jews'] fury, still maintains full independence...[from] the controlling masters of the producers in a nation of one hundred and twenty millions." Speaking in 1931 to a Detroit News reporter, Hitler said he regarded Ford as his "inspiration," explaining his reason for keeping Ford's life-size portrait next to his desk. Steven Watts wrote that Hitler "revered" Ford, proclaiming that "I shall do my best to put his theories into practice in Germany," and modeling the Volkswagen, the people's car, on the Model T.
Grand Cross of the German Eagle, an award bestowed on Ford by Nazi Germany




James D. Mooney, vice-president of overseas operations for General Motors, received a similar medal, the Merit Cross of the German Eagle, First Class.




Testifying at Nuremberg, convicted Hitler Youth leader Baldur von Schirach who, in his role as military governor of Vienna deported 65,000 Jews to camps in Poland, stated,

The decisive anti-Semitic book I was reading and the book that influenced my comrades was ... that book by Henry Ford, "The International Jew." I read it and became anti-Semitic. The book made a great influence on myself and my friends because we saw in Henry Ford the representative of success and also the representative of a progressive social policy.

(4) GM.  The Washington Post reports:

"General Motors was far more important to the Nazi war machine than Switzerland," said Bradford Snell, who has spent two decades researching a history of the world's largest automaker. "Switzerland was just a repository of looted funds. GM was an integral part of the German war effort. The Nazis could have invaded Poland and Russia without Switzerland. They could not have done so without GM."


Both General Motors and Ford insist that they bear little or no responsibility for the operations of their German subsidiaries, which controlled 70 percent of the German car market at the outbreak of war in 1939 and rapidly retooled themselves to become suppliers of war materiel to the German army.


But documents discovered in German and American archives show a much more complicated picture. In certain instances, American managers of both GM and Ford went along with the conversion of their German plants to military production at a time when U.S. government documents show they were still resisting calls by the Roosevelt administration to step up military production in their plants at home.




When American GIs invaded Europe in June 1944, they did so in jeeps, trucks and tanks manufactured by the Big Three motor companies in one of the largest crash militarization programs ever undertaken. It came as an unpleasant surprise to discover that the enemy was also driving trucks manufactured by Ford and Opel -- a 100 percent GM-owned subsidiary -- and flying Opel-built warplanes ....




The relationship of Ford and GM to the Nazi regime goes back to the 1920s and 1930s, when the American car companies competed against each other for access to the lucrative German market.




In 1935, GM agreed to build a new plant near Berlin to produce the aptly named "Blitz" truck, which would later be used by the German army for its blitzkreig attacks on Poland, France and the Soviet Union. German Ford was the second-largest producer of trucks for the German army after GM/Opel, according to U.S. Army reports.


The importance of the American automakers went beyond making trucks for the German army. The Schneider report, now available to researchers at the National Archives, states that American Ford agreed to a complicated barter deal that gave the Reich increased access to large quantities of strategic raw materials, notably rubber. Author Snell says that Nazi armaments chief Albert Speer told him in 1977 that Hitler "would never have considered invading Poland" without synthetic fuel technology provided by General Motors.


As war approached, it became increasingly difficult for U.S. corporations like GM and Ford to operate in Germany without cooperating closely with the Nazi rearmament effort. Under intense pressure from Berlin, both companies took pains to make their subsidiaries appear as "German" as possible. In April 1939, for example, German Ford made a personal present to Hitler of 35,000 Reichsmarks in honor of his 50th birthday, according to a captured Nazi document.


Documents show that the parent companies followed a conscious strategy of continuing to do business with the Nazi regime, rather than divest themselves of their German assets. Less than three weeks after the Nazi occupation of Czechoslovakia in March 1939, GM Chairman Alfred P. Sloan defended this strategy as sound business practice, given the fact that the company's German operations were "highly profitable."




After the outbreak of war in September 1939, General Motors and Ford became crucial to the German military, according to contemporaneous German documents and postwar investigations by the U.S. Army. James Mooney, the GM director in charge of overseas operations, had discussions with Hitler in Berlin two weeks after the German invasion of Poland.


Typewritten notes by Mooney show that he was involved in the partial conversion of the principal GM automobile plant at Russelsheim to production of engines and other parts for the Junker "Wunderbomber," a key weapon in the German air force, under a government-brokered contract between Opel and the Junker airplane company. Mooney's notes show that he returned to Germany the following February for further discussions with Luftwaffe commander Hermann Goering and a personal inspection of the Russelsheim plant.


Mooney's involvement in the conversion of the Russelsheim plant undermines claims by General Motors that the American branch of the company had nothing to do with the Nazi rearmament effort.




At GM and Ford plants in Germany, reliance on forced labor [from concentration camp inmates] increased.




In a court submission, American Ford acknowledges that Iwanowa and others were "forced to endure a sad and terrible experience" at its Cologne plant ....


Ford has backed away from its initial claim that it did not profit in any way from forced labor at its Cologne plant.




Mel Weiss, an American attorney for Iwanowa, argues that American Ford received "indirect" profits from forced labor at its Cologne plant because of the overall increase in the value of German operations during the war. He notes that Ford was eager to demand compensation from the U.S. government after the war for "losses" due to bomb damage to its German plants and therefore should also be responsible for any benefits derived from forced labor.


Similar arguments apply to General Motors, which was paid $32 million by the U.S. government for damages sustained to its German plants.

(5)  Kodak. During World War Two, Kodak's German branch also used slave laborers from concentration camps. Several of their other European branches did heavy business with the Nazi government.

And Wilhelm Keppler - one of Hitler's top economic advisers - had deep ties in Kodak. When Nazism began, Keppler advised Kodak and several other U.S. companies that they'd benefit by firing all of their Jewish employees.

(6) Coca Cola. Coke made soda for the Nazis.  Fanta was specifically invented for Nazi-era Germans.

Leading American financiers Rockefeller, Carnegie and Harriman also funded Nazi eugenics programs.

And the U.S. government actively backed the Nazis in Ukraine 70 years ago.

Inspired By America

As noted above, Hitler and his top henchmen were inspired by Henry Ford's writings.

The American author Lothrop Stoddard was the source of the concept of "under-man (sub-human)" adopted by the Nazis in regards to Jews and communists.

According to the San Francisco Chronicle, the idea of killing Jews, communists and gypsies in gas chambers originated in the U.S. ... not Germany.

And Nazis were also apparently inspired by America's treatment of Native Americans.   Specifically, retired Major in the U.S. Army Judge Advocate General Corps, Todd E. Pierce - who researched and reviewed the complete records of military commissions held during the Civil War and stored at the National Archives in Washington, D.C. as part of his assignment in the Office of Chief Defense Counsel, Office of Military Commissions - notes:

Stories of the American conquest of Native Americans with its solution of placing them on reservations were particularly popular in Germany early in the Twentieth Century including with Adolf Hitler.

Finally, the Nazis copied American propaganda techniques.

Postscript: After WWII, America imported and protected many high-level Nazi scientists and spies, and put them into prominent positions within the U.S.

And many allege that we're supporting neo-Nazis in Ukraine.

 Tulane Public Relations || James Carville wants to be "reincarnated" as the bond market, to scare everyone -- boo!

Photo Credit: Tulane Public Relations || James Carville wants to be “reincarnated” as the bond market, to scare everyone — boo!

I was reading this article at Reuters, and musing at how ludicrous it is for the Fed to think that it can control the reaction of the bond market to tightening Fed policy, should it ever happen.  The Fed has never been able to control the bond market, except on the short end, and only with the highest quality paper.

The long end is controlled by the economy as a whole, and its rate of growth, while lower quality bonds and loans also respond more to where the credit cycle is.  The Fed has never been able to tame the credit cycle — the boom and the bust.  If anything, they make the booms and busts worse.

Now they think that their new policy tools will enable them to control the bond market.  The new tools are nothing astounding, and still mostly affect short and high quality debts.

One thing is certain — when the Fed starts tightening, some levered parties will blow up.  Even the mention of the taper caused shock waves in the emerging bond markets.  And when something big blows up, the Fed will stop tightening.  It always happens, and they always do.

So please give up the idea that the Fed can do what it wants.  It looks like it can in the short-run, but in the long run markets do what they want, and the Fed has to respond, rather than lead.

Submitted by John Whitehead via The Rutherford Institute,

Do exactly what I say, and we'll get along fine. Do not question me or talk back in any way. You do not have the right to object to anything I may say or ask you to do, or ask for clarification if my demands are unclear or contradictory. You must obey me under all circumstances without hesitation, no matter how arbitrary, unreasonable, discriminatory, or blatantly racist my commands may be. Anything other than immediate perfect servile compliance will be labeled as resisting arrest, and expose you to the possibility of a violent reaction from me. That reaction could cause you severe injury or even death. And I will suffer no consequences. It's your choice: Comply, or die.”— “‘Comply or Die’ policing must stop,” Daily KOS

Americans as young as 4 years old are being leg shackled, handcuffed, tasered and held at gun point for not being quiet, not being orderly and just being childlike—i.e., not being compliant enough.

Americans as old as 95 are being beaten, shot and killed for questioning an order, hesitating in the face of a directive, and mistaking a policeman crashing through their door for a criminal breaking into their home—i.e., not being submissive enough.

And Americans of every age and skin color are being taught the painful lesson that the only truly compliant, submissive and obedient citizen in a police state is a dead one.

It doesn’t matter where you live—big city or small town—it’s the same scenario being played out over and over again in which government agents, hyped up on their own authority and the power of their uniform, ride roughshod over the rights of the citizenry. In turn, Americans are being brainwashed into believing that anyone who wears a government uniform—soldier, police officer, prison guard—must be obeyed without question.

Franklin Graham, the heir to Billy Graham’s evangelical empire, offered up this “simple” piece of advice for “Blacks, Whites, Latinos, and everybody else” hoping to survive an encounter with the police:

Most police shootings can be avoided. It comes down to respect for authority and obedience. If a police officer tells you to stop, you stop. If a police officer tells you to put your hands in the air, you put your hands in the air. If a police officer tells you to lay down face first with your hands behind your back, you lay down face first with your hands behind your back. It’s as simple as that. Even if you think the police officer is wrong—YOU OBEY.

Clearly, Graham’s message resonated with a core group of Americans: almost 200,000 individuals “liked” the message on Facebook, with an astounding 83,000 fans sharing his words of advice with their own friends, none of whom seem to recall that Jesus Christ, whom they claim to follow and model their lives after, not only stood up to the police state of his day but was put to death for it.

It’s not just mainstream evangelicals who have been brainwashed into believing that a good citizen is a compliant citizen and that obedience will save us from the police state. In the wake of a grand jury’s decision not to indict the police officer responsible for the choking death of Eric Garner, Patrick Lynch, president of the Patrolmen’s Benevolent Association, declared:

“We have to teach our children, our sons and our daughters, no matter what they look like, to respect New York City police officers, teach them to comply with New York City police officers even if they think it’s unjust.”

Similarly, Officer Sunil Dutta of the Los Angeles Police Department advises:

If you don't want to get shot, tased, pepper-sprayed, struck with a baton or thrown to the ground, just do what I tell you. Don't argue with me, don't call me names, don't tell me that I can't stop you, don't say I'm a racist pig, don't threaten that you'll sue me and take away my badge. Don't scream at me that you pay my salary, and don't even think of aggressively walking towards me.”

In other words, it doesn’t matter if you’re in the right, it doesn’t matter if a cop is in the wrong, it doesn’t matter if you’re being treated with less than the respect you deserve. If you want to emerge from a police encounter with your life and body intact, then you’d better comply, submit, obey orders, respect authority and generally do whatever a cop tells you to do.

In this way, the old police motto to “protect and serve” has become “comply or die.” As I point out in my book A Government of Wolves: The Emerging American Police State and in my forthcoming book Battlefield America: The War on the American People, this is the unfortunate, misguided, perverse message being beaten, shot, tasered and slammed into our collective consciousness, and it is regrettably starting to take root.

Despite the growing number of criminal charges (ranging from resisting arrest and interference to disorderly conduct, obstruction, and failure to obey a police order) that get trotted out anytime a citizen voices discontent with the government or challenges or even questions the authority of the powers that be, the problems we’re experiencing in terms of police shootings have little to do with rebellion or belligerence or resistance.

Rather, the problem arises when compliance doesn’t happen fast enough to suit the police.

For instance, 15-year-old Jamar Nicholson was shot in the back by police after they spotted him standing next to a friend holding a toy gun. “Officers ordered the boy to drop the weapon multiple times,” reports the Los Angeles Times. “When he didn’t comply, one of the officers opened fire.”


Martese Johnson, a 20-year-old college student, unarmed and in the process of walking away from a bar where he’d just been denied entry for being underage, was tackled by police and had his head slammed to the ground and bloodied, allegedly for being intoxicated, belligerent and using a fake ID. Johnson, who it turns out was polite, had a legal ID and was not drunk, survived the encounter after 10 stitches to his head.


And then there was Christopher Lollie, who was tasered, arrested and charged with trespassing, disorderly conduct and obstruction of the legal process for refusing to identify himself to police while waiting to pick his children up from their daycare. Footage of the encounter shows Lollie asking, “Why do I have to let you know who I am? I don’t have to let you know who I am if I haven’t broken any laws.” The charges against Lollie were eventually dropped.

Nicholson, Johnson and Lollie aren’t the only Americans being taught a hard lesson about compliance at the end of a government-issued gun.

World War II veteran John Wrana, 95 years old, dependent on a walker to get around, and a resident of an assisted living center, was rushed by five police officers—one with a Taser and riot shield, others with handguns and a 12-gauge Mossberg pump shotgun—after refusing treatment for a urinary tract infection and brandishing a shoehorn. One of the officers, allegedly fearing for his safety, fired multiple beanbag rounds at Wrana at close range, who bled to death from internal injuries.


James Howard Allen, 74 years old and recovering at home from a surgery, was shot and killed by police who were asked by family members to do a welfare check on him. When police crashed through the man’s back door, they found Allen, perhaps having just awoken and fearing a burglary, armed with a gun.

These shootings and deaths, and many more like them, constitute a drop in the proverbial bucket when it comes to police killing unarmed American citizens, and yet you’d be hard-pressed to find exact numbers for how many unarmed citizens are killed by police every year. Indeed, while police go to great lengths to document how many police are killed in the line of duty, police agencies aren’t actually required to report the number of times police officers engage in homicide. Suffice it to say, however, that the numbers are significantly underreported.

One website estimates that police kill on average three citizens a day in the United States. In 2014, 1100 individuals were killed by police in the U.S. That’s 70 times more than other first-world nations, and almost 20 times more than the number of U.S. troops killed in the same year in Afghanistan and Iraq.

Rarely are these officers given more than a slap on the wrist. More often than not, they operate with impunity, are shielded from justice by the governmental bureaucracy, and are granted qualified immunity by the courts.

A recent report by the Justice Department on police shootings in Philadelphia, which boasts the fourth largest police department in the country, found that half of the unarmed people shot by police over a seven-year span were shot because the officer saw something (like a cellphone) or some action (like a person pulling at the waist of their pants) and misidentified it as a threat.”

Now it’s one thing for those who back the police—no matter what the circumstance—to insist that if you just obey a police officer, you’ll be safe. But what happens when compliance isn’t enough?

What happens if you play it safe, comply and do whatever a police officer tells you to do, don’t talk back, don’t threaten, and don’t walk away—in other words, don’t do anything that even hints at resistance—and still, you find yourself staring down the wrong end of a government agent’s gun? After all, the news is riddled with reports of individuals who didn’t resist when confronted by police and still got tasered, tackled or shot simply because they looked at police in a threatening manner or moved in a way that made an officer “fear” for his safety.

For instance, Levar Jones, pulled over for not wearing a seatbelt, was shot after complying with a police officer’s order to retrieve his license. The trooper justified his shooting of the unarmed man by insisting that Jones reached for his license “aggressively.”

What more could Jones or anyone have done to protect himself in that situation? How does a citizen protect himself against a police officer’s tendency to shoot first and ask questions later, oftentimes based only on their highly subjective “feeling” of being threatened?

The short answer is you can’t.

The assurance of safety in exchange for compliance is a false, misguided doctrine that has us headed towards a totalitarian regime the likes of which the world has seen before.

Rest assured, if we just cower before government agents and meekly obey, we’ll find ourselves repeating history. However, history also shows us a different path, one that involves standing up and speaking truth to power. Jesus Christ walked that road. So did Mahatma Gandhi, Martin Luther King Jr., and countless other freedom fighters whose actions changed the course of history.

Indeed, had Christ merely complied with the Roman police state, there would have been no crucifixion and no Christian religion. Had Gandhi meekly fallen in line with the British Empire’s dictates, the Indian people would never have won their independence. Had Martin Luther King Jr. obeyed the laws of his day, there would have been no civil rights movement. And if the founding fathers had marched in lockstep with royal decrees, there would have been no American Revolution.

The long answer, therefore, is that we must adopt a different mindset and follow a different path if we are to alter the outcome of these interactions with police.

No matter what path you follow, it will be fraught with peril. America is in the midst of a nervous breakdown, brought about by prolonged exposure to the American police state, and there are few places that are safe anymore.

A good test is this: if you live in a community that has welcomed the trappings of the police state with open arms (surveillance cameras, forced DNA extractions, Stingray devices, red light cameras, private prisons, etc.), all the while allowing its police forces to militarize, weaponize and operate beyond the reach of the Constitution, then you don’t live in a democratic republic—you live in a microcosm of the American police state.

If you have no real say in how your local law enforcement operates, if the only oversight of police actions is carried out by fellow officers, if any attempt to criticize the police is edited out or not covered by your local newspaper or TV station, drowned out by your fellow citizens, or intimidated into silence by your local police, then you have no recourse when it comes to police abuses.

Finally, if, despite having done nothing wrong, you feel nervous during a police encounter, you fear doing or saying the wrong thing in front of an officer will get you shot, and your local police dress and act like extensions of the military and treat you like a suspect, then it’s safe to say that you are not the one holding the upper hand in the master-servant relationship anymore.

This is the death rattle of the American dream, which was built on the idea that no one is above the law, that our rights are inalienable and cannot be taken away, and that our government and its appointed agents exist to serve us.

When "very serious people" (even if it is those who once ran now defunct Bear Steanrs) announce it, with a 6 year delay, they make the Financial Times.

On the other hand, when Zero Hedge said precisely this 6 years ago, it was cast as a tin-foil clad group of conspriators who see the worst in every situation.

What is "it"? This:

The long-term consequences of global QE are likely to permanently impair living standards for generations to come while creating a false illusion of reviving prosperity.

In this case, it was said this week by Guggenheim's Chairman of Investments and Global Chief Investment Officer, Scott Minerd. We are happy that increasingly more "serious people" come to the same conclusion which we posited first a 6 years ago.

* * *

Here is the full note:

The Monetary Illusion

As economic growth returns again to Europe and Japan, the prospect of a synchronous global expansion is taking hold. Or, then again, maybe not. In a recent research piece published by Bank of America Merrill Lynch, global economic growth, as measured in nominal U.S. dollars, is projected to decline in 2015 for the first time since 2009, the height of the financial crisis.

In fact, the prospect of improvement in economic growth is largely a monetary illusion. No one needs to explain how policymakers have made painfully little progress on the structural reforms necessary to increase global productive capacity and stimulate employment and demand. Lacking the political will necessary to address the issues, central bankers have been left to paper over the global malaise with reams of fiat currency.

With politicians lacking the willingness or ability to implement labor and tax reforms, monetary policy has perversely morphed into a new orthodoxy where even central bankers admittedly view it as their job to use their balance sheets as a tool to implement fiscal policy.

One argument is that if central banks were not created to execute fiscal policy, then why require them to maintain any capital at all? Capital is that which is held in reserve to absorb losses. If losses are to be anticipated, then a reasonable inference is that a certain expectation of risk must exist. Therefore, central banks must be expected to take on some risk for policy purposes, which implies a function beyond the creation of a monetary base to maintain price stability.

Global Nominal GDP Growth, as Measured in Dollars, Is Projected to Decline

With a surging U.S. dollar and growth remaining sluggish in much of the world, Bank of America Merrill Lynch forecasts that world output measured in dollars could fall in 2015 for the first time since the financial crisis. Over the past 34 years, this has happened just five times.

Source: IMF, BAML, Guggenheim Investments. Data as of 2/6/2015.


What kinds of risk are appropriate for a central bank? Well, the maintenance of a nation’s banking system would plainly be in scope, given the central bank’s role as lender of last resort. The defense of the currency as a store of value and medium of exchange is another appropriate risk. This was the apparent motivation of Mario Draghi, European Central Bank president, for his famous promise to defend the euro at all costs in the summer of 2012. The central bank balance sheet has proven a flexible tool limited in use only by the creativity of central bankers themselves.

In response to those who argue against the metamorphosis of monetary policy into fiscal policy, one need only point toward the impact of quantitative easing (QE) on interest rates. The depressed returns available on fixed-income securities, largely as a result of QE, are acting as a tax on investors, including individual savers, pension funds, and insurance companies.

Essentially, monetary authorities around the globe are levying a tax on investors and providing a subsidy to borrowers. Taxation and subsidies, as well as other wealth transfer payment schemes, have historically fallen within the realm of fiscal policy under the control of the electorate. Under the new monetary orthodoxy, the responsibility for critical aspects of fiscal policy has been surrendered into the hands of appointed officials who have been left to salvage their economies, often under the guise of pursuing monetary order.

The consequences of the new monetary orthodoxy are yet to be fully understood. For the time being, the latest rounds of QE should support continued U.S. dollar strength and limit increases in interest rates. Additionally, risk assets such as high-yield debt and global equities should continue to perform strongly.

Real Median Household Income Has Been Flat for 20 Years

Despite ultra-loose monetary policies over the past several years, incomes adjusted for inflation have fallen for the median U.S. family. With the benefits of monetary expansion going to a small share of the population and wage growth stagnating, incomes have been essentially flat over the past 20 years.

Source: Haver Analytics, Guggenheim Investments. Data as of 12/31/2013.

In the long run, however, classical economics would tell us that the pricing distortions created by the current global regimes of QE will lead to a suboptimal allocation of capital and investment, which will result in lower output and lower standards of living over time. In fact, although U.S. equity prices are setting record highs, real median household incomes are 9 percent lower than 1999 highs. The report from Bank of America Merrill Lynch plainly supports the conclusion that QE and the associated currency depreciation is not leading to higher global output.

The cost of QE is greater than the income lost to savers and investors. The long-term consequence of the new monetary orthodoxy is likely to permanently impair living standards for generations to come while creating a false illusion of reviving prosperity.

* * *

Wait, you mean printing money won't fix the world's problems? Unpossible.

Yet what is truly amazing is how many "experts" revealed themselves as useful, if utterly clueless idiots believing that one could create prosperity by printing money.

Submitted by David Stockman via Contra Corner blog,

The most important number in yesterday’s GDP revisions for Q4 was $16.20 trillion. That’s the annualized constant dollar (2009 $) value of final sales during the quarter and, naturally, it was not mentioned in any of the media reports. But its important because the final sales figures strains out the noise of quarterly inventory fluctuations, and thereby provides a reasonable benchmark for where the overall economy currently stands.

In that context, the second most important number was $14.97 trillion—the real final sales number recorded for Q4 2007 on the eve of the Great Recession. As a matter of calculation, the rate of change between those two points over the last seven years is 1.1% per annum, and it embodies the tale of how main street is lagging while Wall Street is booming.

The starting point for appreciating that proposition, therefore, is to recognize that there is no point whatsoever in comparing the Q4 figure with the prior quarter—–or even with the cumulative gain since the bottom of the recession back in June 2009.  Those kinds of comparisons are the gist of the Keynesian narrative that both Wall Street and Washington assiduously peddle—-but they are designed to rationalize the status quo, not to elucidate the real condition of our national economy.

As to the standard quarter/quarter comparisons, they are just plain irrelevant and more often than not misleading. The quarterly GDP data is seasonal maladjusted, full of short-term quirks and subject to so-called benchmark revisions in the future that can wash out today’s apparent Q/Q incremental changes entirely.

For instance, the national defense spending component of GDP dropped at a 12.8% annual rate in Q4, but not because Washington has gotten around to reining in the military-industrial complex. Actually, it reflected more nearly the opposite impulse—–a timing correction for an equal and opposite surge in Q3. During that period, national defense spending was up at a 15% annual rate, reflecting the fiscal year end scramble in the last days of September to spend the Pentagon’s available dollars.

In fact, on an apple-to-apples basis defense spending went nowhere over the course of the full year. At an annual rate of $699 billion in Q4, defense spending compared to $701 billion in Q4 2013, thereby neither adding to or subtracting from GDP over the past year. The quarterly numbers were just noise.

Nor is this example an outlier. On a year over year basis, the massive $1.87 trillion health care component of GDP grew at a 3.7% annual rate—undoubtedly reflecting the fact that Obamacare is adding smartly to reported GDP, even if its not adding to the efficiency and productivity of the nation’s already bloated medical care system. Yet within the course of 2014, the health care component dropped at a 1% rate in Q1 and then surged at a 7.6% annual rate in Q4.

Those extreme quarterly fluctuations obviously represent dislocations and measurement problems owing to the sweeping changes in the health care sector legislated by Washington, not real change in the size of the US economy. And they had absolutely nothing to do with improvements in the nation’s wealth or welfare.

Sometimes these short-term fluctuations in the GDP accounts get downright comical. For instance, beginning around Christmas eve of 2000, the Greenspan Fed went on a 30 month stimulus rampage during which it slashed the federal funds rate from 6.25% to 1% to ward off what were alleged to be severe recessionary pressures.  And in due course the official economic watchdogs at the NBER declared a recession for March to November 2001 based on negative real GDP and related factors recorded for that period.

Ooops.  During subsequent benchmark revisions, the 2001 recession disappeared entirely!  As shown below, real GDP during the final quarter of the recession is now actually posted at a higher level than during the quarter before this phantom “downturn” incepted.

Here’s the thing. There is absolutely no reason to focus on short-term changes in the published GDP numbers - given the endless quirks, revisions and timing anomalies of the type illustrated above. In fact, their only use is to provide talking points to politicians bragging about the benefits of their policies or criticizing the failures of their opponents, as the case may be.

Likewise, the quarterly GDP numbers keep Wall Street economists and strategists busy digging out clues as to why it is a good time to buy stocks; and most especially they provide an all-seasons basis for the monetary politburo to justify its chronic efforts at short-term micro-management of the US economy.

But that gets to the related reason why comparisons with the recession bottom are an even worse idea than the quarterly chatter that animates the financial media. As I have previously argued, we are now in the era of the Great Immoderation, not the self-congratulatory Great Moderation that Bernanke proclaimed back in February 2004.

That means that rather than flattening or even smoothing-out the business cycle, modern monetary policy has actually exacerbated the natural fluctuations of our capitalist economy. By systematically fueling financial bubbles that ultimately burst, they periodically send the main street economy into a nose-dive during which excess inventory and labor artificially built up during the central bank fueled boom are abruptly liquidated.

But capitalism is not a doomsday machine that inexorably veers toward collapse absent the ministrations of the state and its central banking branch. In fact, when excess payrolls, plant capacity, inventories and other operational inefficiencies are cured, the downward dynamic stops on its own, enabling business to regenerate and idle labor and capital to be redeployed.

In the context of a macro-economy that is already at peak debt—-and the US economy with $58 trillion of public and private debt outstanding surely is—–there is no reason for monetary “easing” whatsoever in response to a business liquidation; and most certainly there is no case for zero nominal interest rates, negative real rates and the accompanying torrential money printing spree that we have had during the last several decades.

The truth of the matter is that the FOMC amounts to a monetary chorus of lip-syncers. The 2% GDP growth they claim credit for has nothing to do with their monthly jawing sessions, the word clouds they emit after the meeting or the instructions they give to the open market desk to buy government bonds hand-over-fist.  All of that artificial liquidity and fiat credit never leaves the canyons of Wall Street.

By contrast, the main street economy is more than capable of producing 2% growth without any help from the Fed, and has actually done so almost uniformly year after year since the Great Recession ended - and regardless of which phase the Fed’s money printing campaign was under at the moment.

At the end of the day, therefore, our modern Keynesian central bank amounts to little more than a serial bubble machine. Its cheap money and severe financial repression campaigns inexorably fuel leveraged speculation in the financial markets which eventually cause asset prices and valuations to become unhinged from the real main street economy. Then the bubble bursts, as it has already twice this century - even as the Fed drives the financial markets to a third and even more spectacular meltdown in the not too distant future.

So the valid way to look at the GDP numbers is on a bubble-peak- to-bubble-peak basis. That is, to assess the rate of output expansion between the successive financial breakdowns which are embedded in the heart of current monetary policy.

And that’s where the 1.1% CAGR for real final sales during the last seven years since the last bubble peak comes in. Its actually the worst trend rate ever recorded in the post-1950 period—-and by a long shot.

Even the Greenspan-Bernanke housing/subprime bubble period did better, sporting an annual growth rate of 2.5% during the 7-years after the 2000 bubble peak.

Needless to say, earlier cyclical “recoveries” all generated real final sales growth rates that were 2X to 4X greater than the meager 1.1% trend rate which occurred after the housing bubble crash was supposedly “cured” by an even more stupendous spasm of money printing. During the 7-years after the 1981 inflation peak, for example, real final sales grew at an annual rate of 3.6%.

Even during the stagflationary 1970s, the record was far better. The 7-year growth rate after the 1973 peak averaged nearly 3X the annual rate recorded since 2007.

The bottom line is this. Since the credit channel of monetary transmission is broken and done due to the arrival of peak debt, the only thing that the Fed’s massive money printing campaigns actually reflate is the financial markets. Since the last peak the S&P is up by 31% as shown below.


By contrast, the main street economy is plodding along, making modest headway on its own two feet—notwithstanding the headwinds of financialization and the channeling of income and wealth to the top of the economic ladder in the Wall Street casino. Not surprisingly, therefore, the gains have been disproportionately among the top households which own more than 80% of financial assets.



At the end of the day there is a considerable irony. The Fed has now become the tool of liberal Keynesian do-gooders - exemplified by the school marm who heads it. But its policies are exclusively benefiting Wall Street and the top 1%. They are redistributing income and wealth to the top, not the bottom of society as liberals have always claimed.

Needless to say, main street does not need that kind of “help”. And it would do far better on its own hind legs if the monetary politburo joined its Soviet colleagues in the afterlife of mistaken ideologies.

With speculation growing of a Greek pivot from The Twilight Zone to The Eurasian Zone, the following somewhat mind-numbing chart tells you all you need to know about how The Greek people feel...


Despite all the western propaganda...

the gap grows...


Chart: Goldman Sachs

Iran says enough progress has been made at nuclear talks to start working toward a draft accord that would end the 12-year standoff over its nuclear work........Foreign Minister Mohammad Javad Zarif made this assessment after meeting in Lausanne, Switzerland, with Laurent Fabius, the French foreign minister who has expressed reservations about a potential agreement. A Russian negotiator said chances of reaching a preliminary deal before a March 31 deadline were “significantly” better than 50-50.

While Kyle Bass is usually the smartest man in the room, among this crowd he is Einstein as he carefuly explains - while sitting politely during status quo interruptions - the real state of the world "the unintended consequence of QE has been to widen the income gap," what is behind the Potemkin Village of the stock markets, how The Fed is "backed into a corner" of raising rates against their will, and why bond yields (at the long-end) will drop further. Currency wars are net positive, as Greg Ip suggests, and will not end well, as he concludes in one section, "why haven't all the Yen left Japan already?"

"How many rich people do you know today that are poorer than they were at the peak in 06/07 (apart from Dick Fuld), I don't think I know any.. QE has been distributive to the rich... but now that the world has started this policy it is unable to end it...


the next recession will be a hard one because the tools in the toolbox are not there to avert a severe downturn..."


"2015 will be +/-0% return in the equity markets"


[Re: crowded trades and liquidity] - where are the liquidity worries at the moment? Equities would be the toughest to exit.. it's like a 5-lane highway going in and goat trail coming out... Brazil is great example"

What Tomorrow Will Bring...

The bigger problem is the black line: it shows that after peaking at $215 billion in 2008, the fund now has only $60 billion left as of the end of 2014, having burnt through nearly three quarters of its assets in 6 years. The biggest problem: unless the pace of cash burn slows down dramatically in the immediate future, the Disability Insurance trust fund will do something it has never done before in its history: its assets will go negative.


Zircon - This is a contributing Drupal Theme
Design by WeebPal.