Why do we still listen Economists when Vast Majority Forecasting Wrong?

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I have always been appalled with highly paid Ivy League economists and central bankers who sit in their Ivory Tower and pontificate what they think will happen to the economy…. From Alan Greenspan, Ben Bernanke and Paul Kruger down the list.

They are treated with the reverence the ancient Greeks bestowed on the Oracle of Delphi and project this aura of such smartness despite the fact that they keep erring again and again.

If they were such smart asses, why they wouldn’t be making millions and hundreds of millions of dollars building, financing and trading companies than selling us a completely empty bag of goods? …. Go figure.

It looks in fact like there’s no overestimating the hubris of both central bankers and economists….And I am not just picking in here on Bernanke but on all central bankers who think they’re infallible. The Bank of England has had by far the largest QE program relative to the size of its economy (though the Bank of Japan is about to show it a thing or two). It also has the worst forecasting track record of any bank, and the worst record on inflation.

When most people think of economic forecasts, they almost always think of recessions, while economists think of forecasting growth rates or interest rates. But the average man in the street only wants to know, “Will we be in a recession soon?” And if the economy is actually in a recession he wants to know, “When will it end?” The reason he cares is that he knows recessions mean job cuts and firings.

Let’s remind ourselves what a recession is and how economists decide that one has started. A recession is a downturn in economic activity. Normally, a recession means unemployment goes up, GDP contracts, stock prices fall, and the economy weakens. The lofty body that decides when a recession has started or ended is the Business Cycle Dating Committee of the National Bureau of Economic Research. It is packed with eminent economists – all extremely smart people. Unfortunately, their pronouncements are completely unusable in real time. Their dating of recessions is authoritative and more or less accurate, but this exercise in hindsight comes long after a recession has started or ended.

To give you an idea just how late recessions are officially called, let’s look at the past three. The NBER dated the 1990-91 recession as beginning in August 1990 and ending in March 1991. It announced these facts in April 1991, by which time the recession was already over and the economy was growing again. The NBER was no faster at catching up with the recession that followed the dotcom bust. It wasn’t until June 2003 that the NBER pinpointed the start of the 2001 recession – a full 28 months after the recession ended. The NBER didn’t date the recession that started in December 2007 until exactly one year later. By that time, Lehman had gone bust, and the world was engulfed in the biggest financial cataclysm since the Great Depression.

The Federal Reserve and private economists also missed the onset of the last three US recessions – even after they had started. Let’s look quickly at each one.

Starting with the 1990-91 recession, let’s see what the head of the Federal Reserve – the man who is charged with running American monetary policy – was saying at the time. That recession started in August 1990, but one month before it began Alan Greenspan said, “In the very near term there’s little evidence that I can see to suggest the economy is tilting over [into recession].” The following month – the month the recession actually started – he continued on the same theme: “… those who argue that we are already in a recession I think are reasonably certain to be wrong.” He was just as clueless two months later, in October 1990, when he persisted, “… the economy has not yet slipped into recession.” It was only near the end of the recession that Greenspan came around to accepting that it had begun.

The Federal Reserve did no better in the dotcom bust. Let’s look at the facts. The recession started in March 2001. The tech-heavy NASDAQ Index had already fallen 50% in a full-scale bust. Even so, Chairman Greenspan declared before the Economic Club of New York on May 24, 2001, “Moreover, with all our concerns about the next several quarters, there is still, in my judgment, ample evidence that we are experiencing only a pause in the investment in a broad set of innovations that has elevated the underlying growth rate in productivity to a level significantly above that of the two decades preceding 1995.”

Charles Morris, a retired banker and financial writer, looked at a decade’s worth of forecasts by the professionals at the White House’s Council of Economic Advisers, the crème de la crème of academic economists. In 2000, the council raised their growth estimates just in time for the dot-com bust and the recession of 2001-02. And in a survey in March 2001, 95% of American economists said there would not be a recession. (John forecast it in September 2000 in this letter). The recession had already started that March, and the signs of contraction were evident. Industrial production had already been contracting for five months.

You would have thought that failure to forecast two recessions in a row might have sharpened the wits of the Federal Reserve, the Council of Economic Advisers, and private economists. Maybe they would have tried to improve their methods or figured out why they had failed so miserably. You would be wrong. Because along came the Great Recession, and once again they completely missed the boat.

I am afraid it looks like they are becoming more stupid than ever at every recession/crisis and we seem to never learn they are clueless and keep believing their crap more than ever.

Share your thoughts.

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Is this Capitalism?

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I believe there is nothing normal about what Ben Bernanke and the Federal government have done post the 2008 crisis and continue to do today.

The Greenspan led Federal Reserve created two epic bubbles in the space of six years which burst and have done irreparable harm to the net worth of the middle class. Rather than learn the lesson of how much damage to the lives of average Americans has been caused by creating cheap easy money out of thin air, our Ivy League self-proclaimed expert on the Great Depression, Ben Bernanke, has ramped up the cheap easy money machine to hyper-speed. There is nothing normal about the path this man has chosen. His strategy has revealed the true nature of the Federal Reserve and their purpose – to protect and enrich the financial elites that manipulate this country for their own purposes.

Despite the mistruths spoken by Bernanke and his cadre of banker coconspirators, he can never reverse what he has done. Frankly, I believe the country will not return to normalcy in our lifetimes. Bernanke is conducting a mad experiment and we are the rats in his maze. His only hope is to retire before it blows up in his face. Just as Greenspan inflated the housing bubble and exited stage left, Bernanke is inflating a debt bubble, stock bubble, bond bubble and attempting to re-inflate the housing bubble just in time for another Ivy League Keynesian academic, Janet Yellen, to step into the banker’s box. This genius thinks Bernanke has been too tight with monetary policy. It seems inflated egos are common among Ivy League economist central bankers who think they can pull levers and push buttons to control the economy…. Insanity at its best.

The gradual slide towards our national bankruptcy of wealth, spirit, freedom, self-respect, morality, personal responsibility, and common sense began in 1913 with the secretive creation of the Federal Reserve and the imposition of a personal income tax. Pandora’s Box was opened in this fateful year and the horrors of currency debasement and ever increasing taxation were thrust upon the American people by a small but powerful cadre of unscrupulous financial elite and the corrupt politicians that do their bidding in Washington D.C. The powerful men who thrust these evils upon our country set in motion a chain of events and actions that will undoubtedly result in the fall of the great American Empire, just as previous empires have fallen due to the corruption of its leaders and depravity of its people. Creating a private central bank, controlled by the Wall Street cabal, and allowing the government to syphon the earnings of workers through increased taxation has allowed politicians the ability to spend, borrow, and print money at an ever increasing rate in order to get themselves re-elected and benefit the cronies, hucksters and bankers that pay the biggest bribes. None of this benefit the average American, who sees their purchasing power systematically inflated and taxed away. This is not capitalism and it is not a coincidence that war and inflation have been the hallmarks of the last century.

When I critically scrutinize the economic, political, financial, and social landscape at this point in history, I come to the inescapable conclusion that our country and world are headed into the abyss. This is most certainly a minority viewpoint. The majority of people in this country are still oblivious to the disaster that will arrive over the next decade. Poor souls.

The unsustainability of our economic system built upon assumptions of exponential growth, ever expanding debt, increasing consumer spending, unlimited supplies of cheap easy to access oil, impossible to honor entitlement promises, and a dash of mass delusion should be apparent to even the dullest of government public school educated drones inhabiting this country.

It is sad to see that the citizens of this country have allowed those in control of the government and media to convince them the situation confronting us is just a normal cyclical variation that will be alleviated by tweaking existing economic policies and trusting that Ben Bernanke will pull the right monetary levers to get us back on course. The stress inflicted on their brains in the last thirteen years of bubbles and wars has clearly made the average person incapable of distinguishing between normality and abnormality. What they need is a rude awakening and I am afraid they will get it sooner than later.

Frankly, you have to be really blind or just plain stupid to convince yourself that everything that has happened since 1996 is normal. Every fact supports the reality that we’ve entered a period of extreme abnormality and our response as a nation thus far has insured that a disaster of even far greater magnitude is just over the horizon. Anyone with an ounce of common sense realizes the social mood is deteriorating rapidly. We are in the midst of a Crisis period that will result in earth shattering change, but the masses want things to go back to normal and don’t want to face the facts. The dissonance created by reality versus their wishes will resolve itself when the next financial collapse makes 2008 look like a walk in the park.

Sticking your head in the sand will not make reality go away. The existing social, political, and financial order will be swept away. What it is replaced by is up to us. The choice is ours. What are you going to do about it?

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America Tear down the wall before it’s too late

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I am afraid America makes less sense every day.

Little children are randomly slaughtered in their schoolrooms. Predator drones roam the skies over foreign countries exterminating bad guys, along with innocent women and children (collateral damage when it occurs in a foreign country). Drugged up mentally ill kids with no hope and no future live lives of secluded quiet desperation until they snap. Ignorant, government educated, welfare dependent drones with no self respect or respect for others, assault, kill and rob within their government created urban ghettoes. Sociopaths who committed the largest financial crime in world history walk free and continue to occupy executive suites in luxury office towers in downtown NYC, collecting millions in bonuses as compensation for crushing the American middle class. Academics, whose theories have been thoroughly disproven, continue to steer our economy into an iceberg while accelerating the money printing and debt issuance that will sink our ship of state. Corrupt, bought off politicians pander to the lowest common denominator as their votes are only dependent upon who contributed the most to their election campaigns, which never end. Delusional, materialistic, narcissistic, math challenged consumers (formerly known as citizens – live for today, enslave themselves in debt, vote themselves more entitlements, and care not for future generations.

We have increasingly foresworn the concept of citizenship and replaced it with the me-first culture of entitlement. We are no longer members of a community with civic values. We have become predators, parasites, consumers, contributing nothing to those around us except carbon dioxide and the bills and responsibilities for our mess. The alienation and isolation created by our sprawling, automobile dependent, technology obsessed, government controlled, debt financed society has spread like a cancerous tumor, slowly killing our country. We are a society of paradoxes. We have many connections, but “connect” with fewer and fewer. We communicate with many more people but seem to communicate only rarely. We use earbuds, IPods and other devices to shut off reality, then feel exasperation when we sense that no one understands us. We give up our privacy voluntarily, forgetting the proper boundaries between the public and private, then feign outrage when the government surveills us. We rush to judge and condemn others mercilessly, yet our new national pastime is the search for the approval of others, to be “liked” on Facebook. We demand genuineness in others yet employ public relations specialists and technology gurus to scrub our Internet reputations. We communicate with abandon, then feel shame when we realize we can neither choose our audience nor compel its approval of us.

The government oppression and never ending wars waged by the American Empire around the world have created a society built upon fear of disapproval and loathing of rejection. We are a “soft” nation, a “soft” people, and all this dysfunction is rooted in psychological, collective dysfunctions. This nation can be brought to its knees if its enemies can merely “shut us down” and make us feel uncomfortable. Removing our creature comforts — the technology which feeds our need to “keep up,” to be “plugged in,” — which have become a form of mental addiction to many in our educated classes leaves too many of our opinion leaders and elected leaders vulnerable to pressures. We fear adversity, shun responsibility, yet root for sports teams and stars — others — who embody these values. We are a lazy nation. Work has become something for other people to do.

Since 1979, Total Credit Market Debt in the United States has risen from $4.3 trillion to $55.3 trillion, a 1,286% increase in 33 years. Over this same time frame total wages and salaries have risen from $1.3 trillion to $6.9 trillion, a 531% increase. GDP has grown from $2.6 trillion to $15.8 trillion, a 608% increase. Luckily for the oligarchs, the math challenged masses don’t understand that 375% of the increase in GDP is strictly due to Federal Reserve created inflation, as the U.S. dollar has lost 68% of its purchasing power since 1979. This GDP growth was driven by debt, with consumer expenditures rising from 61% of GDP in 1979 to 71% of GDP today. In the one hundred years since the creation of the Federal Reserve the country’s population has tripled, while our public debt and unfunded liabilities have risen from $2 billion to over $200 trillion, a ten million percent increase. The masses have been programmed and conditioned to love their debt servitude and yearn for more debt to fix an economic system that collapsed due to excessive debt. The cadre of ruling elite are obliging by creating debt at hyper speed levels. The corporate media, Wall Street shysters and low-life captured politicians assure the sheep-like masses that this is normal and beneficial to their interests, as the sheep are sheared and led to slaughter.

Just a cursory examination of our society reveals a population of salivating consumers (dogs) who can be stimulated to buy the latest iPhone or techno-gadget with a simple Madison Avenue advertising campaign (bell). Everyone has seen the videos of the masses lining up like cattle on Black Friday, stampeding through aisles, and fighting each other like their the entertainment at Michael Vick’s house on a Saturday night. All the mega-corporate retailers and the corporate media have to do is ring a bell (SALE) and the dogs start salivating. Product placement, Hollywood star endorsements and influential people using a product immediately convince the easily manipulated dogs to salivate and purchase the products. The difference is that these dogs have credit cards issued by the Wall Street banks and funded by the Federal Reserve with dollars created out of thin air. We are inundated with millions of TV, newspaper, radio, billboard, and internet advertisements designed to make us salivate (spend).

In reality our “technological progress” has done nothing more than create a humorless, shallow, superficial world of alienation and egocentric desires. Just as in Huxley’s Brave New World, science and technology have not been used to seek truth and advance our culture. They have been used by the State to censor, control, and monitor the citizens. They use technology as a means to create electronic entertainment machines that generate both harmless leisure and the high levels of consumption and production that are the basis of societal stability and state designed happiness. When those in control talk about progress, they mean greater control over our lives. When the consumption of material goods isn’t enough to fill the holes within our souls, our owners are quick to prescribe a pill to smooth over those feelings of unease and discontent.”In America the government controlled drug industry has thousands of pills to treat every ailment or unhappy thought that might ail you. Just don’t try and treat yourself with an unapproved natural or banned substance. The threat of imprisonment always lurks in the shadows. They just want us to be interchangeable bricks in the wall.

We glorify technology even though it encourages the building of brick walls, creating a self-imposed isolation from society. The traditional family unit has been discarded, with 50% of marriages ending in divorce and 43% of all children born out of wedlock. Millions of families are dysfunctional, with parents too busy with their careers and acquiring material possessions, to bother with raising their children in a loving nurturing way. One in ten American adults choose to escape their man made cells with prescription anti-depressants. Almost one in four women in their 40s and 50s are popping pills to escape their depressing lives. The wealthy think medicating their kids, spoiling them with toys, gadgets and cars, and occupying their days with organized sports and activities passes for involved parenting. Poor urban children are lucky if they ever lay eyes on their father. Ignorance, violence, and dependency are a given for most of these kids. And all of these children are matriculated into the government run schools whose sole purpose is to teach kids what to think, rather than how to think. Indeed, the recent emphasis on testing and performance seems to be at the expense of actual teaching of critical, analytical thinking. Our owners need to keep us “happy” and focused on feelings, material possessions, and an infinite number of distractions, so they can retain control and continue their pillaging of the national wealth.

Our leaders have attempted to design their own Brave New World, retaining control by making America’s citizens so contented and superficially fulfilled that they no longer care about their personal freedoms, liberties and civic responsibilities. The consequences of increasing state power are a loss of dignity, morals, values, and emotions. We are losing our humanity. Decades of media propaganda, public education mind control, and peddling of debt convinced the majority that happiness meant immediate gratification of our desires for food, sex, drugs, clothes, iGadgets, and all the other consumer crap made in corporate sponsored slave labor factories across Asia. These delusional hallucinations of happiness are the prison walls we’ve built brick by brick.

It took the intellectuals and progressives that wield power across the land only moments to hijack the feelings of sorrow and pain sweeping the nation, to misdirect attention from the mental illnesses caused by the society they’ve created, towards the false storyline that gun violence is sweeping the land. In reality, violent crime has been falling for over a decade as gun sales have soared. The homicide rate in this country is the lowest since 1964, with the vast majority of homicides occurring in the urban kill zones created by the five decade long progressive war on poverty. The truth is of no interest to those brandishing power. After decades of conditioning, the masses are psychologically captive to the messages designed to make them salivate. They will be compelled to think, feel and act as instructed by the Alphas. There will be calls for more police, despite the fact that police rarely stop a crime. With all of their armaments, technology, high powered weaponry, and political clout, they can be counted on to arrive five minutes after the tragedy is over. But they are brilliant in luring clueless Muslim teenagers into terrorist plots, picking the target, providing the fake bombs, and taking credit for foiling the plots they created. More union police officers will increase our safety as much as more union teachers have made our kids smarter. This tragedy will be used by the propagandists to impose further restrictions upon those who choose personal responsibility and self-reliance over dependency and trust in the efficiency and fairness of our benevolent government overlords.

I mourn for the children being raised in a society run by evil psychopathic liars that use the power of propaganda and the tools of debt to control and manipulate its citizens. I mourn for unborn generations that will be forced to confront the dreadful depraved chaos created by our culture of egocentric greed and narcissism. The things we value in this culture – accumulating wealth, outward beauty, acquisition of material possessions, instant gratification, access to debt, government control, and curing our ills with drugs – are driving us insane. Who is really abnormal in a profoundly abnormal society? The ‘new normal’ is anything but. Believing that possessions, more laws or another medication will truly make us happy — or safe — is insane. Popping a pill, buying a new iPhone, or passing another law will not cure the disease that permeates this nation. We need to recapture the humanity, civic pride and self-responsibility that built this country. Only an awakened populace can change our course.

George Orwell was afraid that what we fear would ruin us. The oligarchs have pushed the Orwell vision to its sustainable limit. The avarice and greed of these invisible power brokers has devoured the vast resources of the nation. These psychopaths weren’t satisfied with siphoning off most of the wealth of the country. They wanted it all and wrecked the global economy in their odious pursuit of mammon. We are now in the death throes of the most decadent, delusional, debt engendered era in the long history of mankind. Those in power realize it is slipping away. Their “solutions” reflect an air of desperation. Their propaganda efforts have been redoubled. As more middle class workers lose their jobs, more young people graduate from college with tens of thousands in student loan debt and a future of dramatically reduced expectations, and more people are driven beyond their breaking point, this materialistic shroud of happiness will be torn asunder. Anger is building like a lava dome within a volcano. A critical thinking minority are questioning the motives of those in power. There is already a palpable degradation in behavior, a rise in passive-aggressive behavior as people try to respond rationally, to compensate for what they sense has been lost to the unfairness, hypocrisy and shallowness of the society and system around them. The unsustainability of our economic paradigm is certain. The seeds of revolution are being sown. Our society is only fantasy. The wall is too high. It will be up to an irate tireless minority of freedom minded citizens to tear down the wall. The alternative is to allow the worms to eat into our brains. Each of us must answer a simple question. Are you just another brick in the wall?

The oligarchs will not give up without a fight. Their realization that the Brave New World method of controlling the masses has run its course has convinced them to shift their methods towards Orwell’s 1984 tactics.

What are you doing to counter these growing threats in the making?

You’d better wake up to reality.

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Investing Post Crisis

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The crisis of 2007 has clearly created a new financial landscape out there and most of us are looking to thrive or at least survive in this new environment in the making.

Some food for thought:

  1. Nine out of 10 people in finance don’t have your best interest at heart and even worse are clueless.
  2. Don’t try to predict the future but understand the facts like no one. Read, learn and start discerning facts from propaganda.
  3. Saving can be as important as investing.
  4. Tune out the majority of news. All baloney worth nothing but divert your attention.
  5. Emotional intelligence is as important as classroom intelligence. High stakes investing has much to do with nerves of steel as market savvy.
  6. Never talk about your money. Smart people know better.
  7. Most financial problems are caused by debt. Debt can be only be good for you when you can borrow at insanely low interest rates.
  8. Forget about past performance. Change is the only constant out there.
  9. The perfect investment doesn’t exist.

Now go and make a killing…

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Is this a Housing Scam or What Exactly?

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We are told that there are only 1.74 million homes left for sale in this country and at current sales rates we’ll run out of inventory in 4.2 months….You better buy now and not miss the boom in the making and before it’s too late… Hilarious to say the least.

We must be running out of houses I guess. We need more houses built ASAP, before this becomes a crisis. The problem with this storyline for dummies? Existing home sales are falling. If there is an inventory shortage, why have new home sales fallen every month since May of 2012? Does this happen when you have a strong housing market? Do you believe the NAR inventory figure of 1.74 million homes for sale? The last time the months of supply was this low was early 2005 – during the good old days.

Let’s examine a few facts to determine the true nature of this shocking inventory shortage crap.

According to the latest U.S. Census Bureau:

There are 133 million housing units in the United States

There were 115 million occupied housing units in the country, with 75 million owners occupied and 40 million renters occupied.

For the math challenged this means that 13.5%, or 18 million housing units, are vacant.

Only 4.3 million are considered summer homes, and 3.9 million are available for rent. That leaves 9.8 million homes completely vacant.

The Census Bureau specifically identifies 1.6 million of these vacant housing units as up for sale.

Now do you want to know why housing prices have recently boomed?

Simply because (1) Lenders are artificially keeping vacant houses off of the market and 2) The Obama administration has thrown all sorts of artificial incentives at institutional investors to pump up prices…. Nothing else.

Even at the peak of the bubble in 2005, only 11.5 percent of homes in Los Angeles were purchased by absentee buyers — now 25 percent are.

It is a fact that much of the rebound in prices is attributable to institutional investors piling into housing — such players make up a much larger share of buyers than they did years ago, or should in a normal market.

Blackstone Group LP, the country’s biggest real estate investor–which has already invested $3.5 billion to buy 20,000 single-family homes. Meanwhile KKR & Co. just raised a $500 million fund for real estate investments. There seems to be no shortage of folks willing to provide money to invest in a housing upturn.

On the other hand and on the retail side, 12.6 million homes are still vacant and 1.5 million more homes are underwater. In other words, without artificial scarcity created by banks, there would be more available houses than there are underwater homeowners having problems paying their mortgage. There would – in a word – be a glut.

If this is the case, the housing recovery as it appears today could be nothing more than a mirage…same as the rigged stock market all funded with Quantitative Easing, Central Bank Purchases and Corporate Buybacks

Numerous institutional investors are already starting to cash out…. God forbids what will happen when they start selling in droves. Just watch out the mass layoffs coming in the mortgage finance industry already.

So it is clear by now that the government’s entire strategy is to try to paper over all of the real problems with the economy by artificially propping up asset prices in an attempt to hide the fact that big banks are insolvent.

It is unfortunately equally clear that all of the Obama administration’s “homeowner relief” programs are really just back-door bailouts to the big financial companies and are not even intended to help homeowners.

There’s no shortage of delinquent homes that will eventually be foreclosed. That means the process is being dragged out so the banks don’t have to fess-up to the losses on their fetid pile of nonperforming loans here’s a little more background from an article in Business week:

“About 6 million U.S. borrowers will lose their homes in the next five years because of inability to pay their mortgages, creating demand for as many as 4 million new rental households, according to Scott Simon, head of mortgage bonds at Pacific Investment Management Co. in Newport Beach, California….

Single-family rentals are priced to deliver unlevered total returns in the range of 7.5 percent to 8 percent, or about 0.5 percentage point to 1 percentage point higher than institutional-quality apartments, according to a June 8 report by Ray Huang, senior associate at Green Street Advisors in Newport Beach, California.

Despite the propaganda, hyperbole, and cheerleading from the corporate media at large, the fact remains that national homeowner’s equity is barely above its all-time low of 38%, down from 62% in 2000 and 70% in 1980.

The NAR shills, Federal Reserve drug pushers, Wall Street shysters, and pliant media lured the middle class and still are playing those idiots out there into the false belief that housing was and remains an asset class that could make you rich.

Despite the destruction of middle class hopes, dreams, and net worth, the ruling plutocracy has decided the best way to revive their fortunes is to lure the ignorant masses into more student loan debt, auto debt and mortgage debt.

This other house of cards and illusions cannot last as all is being revealed by the day.

Now you know what is real and what is fiction.

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