One of the nicest E.O.Q.W.D’s (end of quarter window dressings) I’ve seen – the Dow popped up 134 points on Monday and the techs were up over 1% as the Fed boss came out and started to hint around at what I told you would be an inevitable necessity: The Fed is going to print for as long as it takes to get the economy back to the old “way it used to be.”
The Fed, where it seems the dynamic stochastic general equilibrium (DSGE) model is pushing policy to some extent, seems to be beset by the lack of a good algorithm to project how people will revise their long-term lifestyles in the face of repeated screwings.
What’s amazing to me is that the Fed boss sees what Americans are feeling yet her faith in “the models” is still pretty darn high. That’s why she can say on the one hand:
“…In some ways, the job market is tougher now than in any recession. The numbers of people who have been trying to find work for more than six months or more than a year are much higher today than they ever were since records began decades ago. We know that the long-term unemployed face big challenges. Research shows employers are less willing to hire the long-term unemployed and often prefer other job candidates with less or even no relevant experience.”
But then turn around, on the other, and promise to repeat the same policy approaches that got us there in the first place…In other words, they’re going to keep being accommodative.
Yellen spoke the answer, but maybe didn’t hear herself:
“…If unemployment were mostly structural, if workers were unable to perform the jobs available, then the Federal Reserve’s efforts to create jobs would not be very effective. Worse than that, without slack in the labor market, the economic stimulus from the Fed could put attaining our inflation goal at risk. In fact, judging how much slack there is in the labor market is one of the most important questions that my Federal Reserve colleagues and I consider when making monetary policy decisions, because our inflation goal is no less important than the goal of maximum employment.
The problem faced by the Fed is simple. As the number of people losing jobs to offshoring and robotics continues to increase, and as self-driving cars and other employment “category killers” are coming down the pike, printing all the money in the world will not keep up with the voracious growing need for increased tax revenues to minimally feed and house a massively increasing underclass.
If there’s a failing to DSGE model reliance, it is likely that it fails to address society-wide tipping points that are now coming into view, as outlined in Saturday’s Peoplenomics report.
What’s coming to gobble the Western Empires within three or four years is a variant of “future shock” – a term coined by futurist Alvin Toffler.
In Peoplenomics, we labeled this FutureCrock because in addition to disruptive technologies, not the least of which will be modular manufacturing (there go more jobs!) we will have the added bonus of mass cognitive dissonance igniting SocialRevs right and left.
The Fed boss was (perhaps rightly) proud when she pointed to local Fed steps to help communities get back on their feet:
“…Leadership recruitment is also at the heart of a grassroots-oriented program called Economic Avenue that was developed by the Kansas City Fed. In Northeast Kansas City, Kansas, residents and neighborhood leaders are forming a leadership council that will have responsibility for managing the program, which aims to create and grow local businesses, create jobs, and promote homeownership. The bank’s community development staff is providing education and training to get the council off the ground, will measure and evaluate
But in a counter to that, a sane observer of mass change would have to note that humans are self-organizing and that there is another “Economic Avenue” being built spontaneously. And that all lives under the headings of “barter and bitcoins.”
Unlike the global world order that’s struggling to market a global tax system to support global government, or the US government which is printing paper six-ways to Sunday to attempt a restart, the new internal breakaway civilization (NuCiv) is laying out its own alternative financial foundation.
I don’t think Ms. Yellen has ever worked construction (just a guess, mind you, but I think a safe one). But a concrete worker would recognize what’s going on in a heartbeat.
“What’cha got is a crumbling foundation. So I can either mix up a sack of topping mix and trowel it on to make it look good, so it will pass inspection for a little while. Or, I can rebuild the foundation right, one section at a time…”
The wise observer will see both tracks in play: The Fed is opting for the topping mix. But off on the sidelines, barter is booming and so is BitCoin. Regular people will find workable solutions, even if it means trading in silverware and home gardening.
Crumbling Foundations Detail
As our work on pricing has projected, BitCoin has continued to fall. As of this morning, it’s down to $482 and likely to continue falling toward our projected possible low of $325.
The reason is – in part – the IRS guidance of last week that BitCoins would be treated as property.
However, lest you think Capitalism of the Old School sort is out of the woods, guess again.
One group of the April Fools today are likely to be the high frequency Wall St. traders who now find themselves the object of a very serious FBI investigation into how high speed trading “front running” us wage plebes when we do a little trading in our IRA accounts, or whatever.
If you missed 60-Minutes interview on how it’s all rigged, check out the Steve Kroft report over here with Michael Lewis.
[‘I don’t know if CBS has an unintentional sense of humor, but I thought it was cute how the story about “trying to keep it all up” was sponsored by Cialis… Perhaps I read too much into subtle signs and portents but the Universe is full of mirth.]
Put the new Michael Lewis book on your reading list:
Hard cover Kindle
The point is it’s too early to tell who will win: The printing/topping mix side, or the build a new foundation side. But that’s the game, then, isn’t it? Trying to bet your whole life on calling this one right….
Real Estate Recovery
Still, real estate seems to be benefitting from easy money. A home in LA just went for $102 million. I shudder to think of the cooling bills on a 50,000 square foot home, but with that kind of squares, a football team could almost play in the living room…no word on ceiling height, though, drat!
Up the coast, reader Mark, who deals in RE in the Bay area alerts us to this gem:
The craziness that is the Bay Area real estate market is on full display here in this article. Its not just San Francisco either. Pockets of San Mateo, Santa Clara, Contra Costa and Alameda counties have exceeded 2007 as well. At our last California Association of Realtors meeting, a local politician stated that 1000 people a day are moving to the Bay Area now…either being recruited for the myriad of jobs starting up or testing their luck at being the new Elon Musk.
Easy money magic! Maybe I’m just too much of a realist, anymore…Then there’s the drought. 5.7” of rain year to date, 11.21” is normal and last year was 1.36” so gamblers can flock to the Embarcadero instead of Reno? I’ll send you Mark’s # if you need it. We prefer Circus Circus over Circus California, but to each their own.
Dow looks up 40 at the open with real estate data due in at 10 AM Eastern. I keep expecting a price beat-down to give the commercials a chance to load up for Q2…but that’s just me.
Lacking my “earthquake tiredness” we made get through this week without a 7.0 which will stretch us out to five or six months, isn’t it – without a biggie?
There was a 4.7 up north but mostly west of Vancouver Island overnight, but not widely felt.
Since this is such a fine day for it, we’ll just take unfair advantage of the calendar here and let it all hang out. Today’s nominees, please?
* David Cameron of the kneelers. Yes, the Brits have decided to launch an investigation into the MuBros because they might have connections to political extremism and terrorism. You’d think after being in the headline for a half dozen years, the Brits would have figured this out sooner. But political correctness trumps common sense in the UK and elsewhere.
* NATO of Europe. Seems that NATO is all worked up over the fact that Russia is not moving their troops around inside their own frigging country as NATO says they should be. I mean, this is like the Chinese demanding all US troops be pulled out of California. Genuinely insane, unless you’re trying to pick a war, in which case…
*The CIA for being found out in a 6,300 page report that they torture and lie. Oh, and they didn’t have any confirmation of a protest ahead of Benghazi….
* Both Koreas for aiming at the water in front of each other’s positions as they continue playing a kind of military “shell game.” Shoot straight, or stop wasting ammo and valuable headlines, puhleeze…
* Upper crusty Westbury on Long Island which is now going to use cops to execute search warrants to charge people for having “unlawful” tenants. Purely a police state tactic to maintain city housing valuations and raise money. Since when is sharing your home a crime? Starting right now in America is the wrong but correct answer.
By the way, Bruce in Ecuador sent me a note correcting my quote of him. It’s not that the power-mad abuse power, because they can, corrects el Bruce. “They do it because they LIKE to…” Which is why neither of us live on Long Island. I sit corrected.
Another reader corrects me: “Police: “compensated psychopath” is a spectrum disorder. People with this disorder flock to careers in law enforcement, banking, politics and high ego driven corporate positions.”
Let’s make this National Correct George Day, shall we?
* News Editors for making the botched MH370 a huge story that has no impact on anyone’s life except families of those onboard. Only one of which was a US national, if I don’t have my facts twisted.
To put things into perspective, in the same period, just under 3,000 people will have died in traffic accidents before today is done. Thailand and China have sent no satellite images and there is effectively zero interest in our ongoing highway carnage. And stories about mandatory backup cameras for vans and light trucks get covered but not wall to wall.
* Dog owners for being irresponsible. Some are simply unconcealed weapons. 32 US dog bite fatalities in the US last year. Denial is a powerful force but that doesn’t help victims. Bites were running 876 a day in 2008 data. And itI don’t suppose you want to guess which way they gone since?
Still, it’s an economic eco-system: Animal lovers suckered into donations, the pet food giants, the emergency rooms, the silly clothing for dogs….so yeah, sensible pet numbers would crash the whole freaking economy, so I will shut up. And yes I’ve owned dogs and have two cats. But the dogs went bye-bye and the cats have to earn their keep…