Fed Money-Printing Near 16 Percent Annualized!!!

Now that I have your attention, we’ll freeze-frame that headline for a minute and run through some of the macro madness of this-here rock, and then we will get into the nitty-gritty of economic reality.

We’ll begin this morning – like we do every morning – with a look at the flow of the news and a quest for a common thread that ties it all together.

Some mornings it’s difficult:  Often the news seems as chaotic (and manufactured) as always.  But this morning was a no-brainer:  It’s all about predictions which is how the timid dress-up outlooks..

For example, here’s a story that looks ahead to the coming world of artificial intelligence.  The prediction comes through that somehow machines will be able to rise to the level of consciousness. 

Count us skeptical of this:  Few humans have accomplished that feat – consciousness –  so to say machines are going to do it faster than the mess of 7-billion people who haven’t gotten their (language alert) shit together, is a stretch.

I’m going out on a limb here and proposing Ure’s Rule of A.I. which reads as follows:

For any culture, the level to which A.I. will propagate will be limited to the evenness of the distributed consciousness of the global population.  While there may be individual breakthroughs in A.I., their widespread implementation to benefit the whole planet will be limited by economics, and these, in turn, are bounded by the consciousness of all participants.  Under this notion, A.I. may be self-limited.  Those of top will still want to rule.

Still, it’s an uneven prediction – either in the referenced article or my “rule” that suggests that if man is making machines in his own image, they will suffer from the same personality defects.  Seems to have worked that way on the religiousity front, mostly, throughout history.  We’re just building the next layer of the cosmic onion, more’n likely.

Outlook #2

Our second uneven outlook is courtesy of The Atlantic which normally gets things very close to right.  Their article today “Is it Time for Jews to Leave Europe” starts with a very uneven assumption.  I’d offer that the Jews have been in Europe for a very long time.  Since they were kicked out of England in 1200 something.

What the magazine ought really to have asked is “Is  it time to kick Muslim Invaders out of Europe – Again?”

However, in today’s age of political correctness, the longer-view of history is often muddled and muddied.  Whether this is by accident or design, I will leave to your discernment.

But I expect if someone were to suggest in a headline that we kick all Methodists out of North America that someone would call BS on such a headline.  So there:  Cat’s out of the Bag. Is it time for all Christians to Leave North America?  That would be an equally wrong-headed headline.

Outlook #3

Our third uneven outlook comes from former UN ambassador John Bolton, who claims the Obama administration is on a collision course with reality in their six-nation talks trying to cut a deal with Iran to ensure they don’t becomes owners of nuclear weapons.  Bolton, over here, likens this to a massive surrender.

While it skirts around our Outlook #2 above, this one is interesting in that while I’m not fan of John Bolton, the reality is that appeasement as public policy has a very poor track record. 

It’s like the playground bully who wants a quarter or he’ll “mash your face, punk.”  As soon as the first quarter appears, with a dime as its companion, the school bully is going to renegotiate with more threats until you’re broke.

Power just works that way.  You’re either bright enough to see it, or you have a brilliant future ahead in the Obama Sellout State Department.

Outlook #4

Let’s call this one “Perpetually Late Homework.”

This is the 16th day of the month and normally (like five years ago) we would be waking up to some real economic news to report…like the Consumer Price Index.

However, since narrators are used for story-telling, and since life has morphed from a series of facts to a series of stories, we find on this week’s schedule of economic events over here, that there’s no sign of the consumer price data this week.

Maybe next week…maybe the week after.  You know it came out on the 26th last month, right?

The reason is simple…government has never recovered from the shut-down – they need the addition time to get their homework done, or so goes the story.  but, in reality, something else is likely going on:  When you’re writing “narrative this complication and convoluted” it takes time to check the plot and make sure all the characters are in the right place.

So with that, we can now move on to the really IMPORTANT stuff of the day.

Feds in Fear, Panic Looks, Printers Ink Flows

No question about it, the Federal Reserve which begins two days of meetings tomorrow is scared out of its mind by deflation.  And we know this is true, how, exactly? 

A check of the M1 and M2 money supply figures from the Fed website outs the ugly:

Yes, that’s right:  M1 printing for the past three months is screaming ahead at 15.,8% and the M2  print rate is 8.9%.  which when you consider that price inflation is running somewhere around 2% means that the core Deflation Rate is really on the order of 6%, depending how you weight M1 vs. M2.

Which means what, exactly?  Turnover of the money supply is lower than it has ever been before in your working lifetime. Hint:  Deflation looks like this.

Think of the velocity of money like tools or parts in a warehouse. 

You can make parts all day long, but if no one comes along to buy them, and use them for something, you’re going to have just a shiny turd of an economy. 

The same things hold true for money.  The Fed can print dough all day long (as previous chart hints) and as long as the money is being minted, but is not going into useful things like building freeways, new homes, and increasing consumption, you can have an economy where a few more people are working (even if as welfare checkers) and the economy can be “narrated” as “continuing it’s recovery.”  If you’ve got a crack pipe, that might sell.

Meantime, the NY Fed Empire State Manufacturing survey is out:  What is shows is not particularly surprising:  The index has pulled back in March and that’s not a good thing.

All of this means mounting pressure on the Fed to keep rates where they are, or – perhaps – they will engage in a “one mo’ time” with quantitative easing.

You know that QE’s work, since in Ure-Up this morning, the German market is blasting to new highs and that says something about recovery being made to look as though it’s real if you just throw enough paper at the problem.

But then people aren’t especially bright, which is why those of us in the working class have to do ugly chores like get up and go to work for them again.

But all of this leaves me feeling uneasy as hell.  The likely reason the market is running up?

We’re probably headed back to Ure’s Zone of non-linearity where the value of things will go to the moon (as stocks demonstrate with futures up 100 this morning) while bond yields will likely fall because there’s no way in hell the Fed can raise rates for the foreseeable future.

And certainly not with the rest of the world playing the new game of “Global competitive inflation via QEs.  And yes, that’s why the  money supply is going up faster than an Atlas rocket and why prices haven’t followed at the store, yet.

It’s the financial equivalent of nuts in a vise, so look for the market to rally into the Fed Meeting which increases the chance of disappoint by week’s end…or not – after FedSpeak Wednesday.