Do We Need The Fed?

By Ron Paul – Re-Blogged From http://www.Silver-Phoenix500.com

Stocks rose Wednesday following the Federal Reserve’s announcement of the first interest rate increase since 2006. However, stocks fell just two days later. One reason the positive reaction to the Fed’s announcement did not last long is that the Fed seems to lack confidence in the economy and is unsure what policies it should adopt in the future.

At her Wednesday press conference, Federal Reserve Chair Janet Yellen acknowledged continuing “cyclical weakness” in the job market. She also suggested that future rate increases are likely to be as small, or even smaller, then Wednesday’s. However, she also expressed concerns over increasing inflation, which suggests the Fed may be open to bigger rate increases.

Many investors and those who rely on interest from savings for a substantial part of their income cheered the increase. However, others expressed concern that even this small rate increase will weaken the already fragile job market.

These critics echo the claims of many economists and economic historians who blame past economic crises, including the Great Depression, on ill-timed money tightening by the Fed. While the Federal Reserve is responsible for our boom-bust economy, recessions and depressions are not caused by tight monetary policy. Instead, the real cause of economic crisis is the loose money policies that precede the Fed’s tightening.

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Weekly Climate and Energy News Roundup #210

The Week That Was: December 19, 2015 – Brought to You by www.SEPP.org

By Ken Haapala, President, Science and Environmental Policy Project

COP-21: The Conference of Parties (COP-21) of the United Nations’ Framework Convention on Climate Change (UNFCCC) is over. With great fanfare, an agreement was signed. The parties agreed to agree to try to limit carbon dioxide emissions. The agreement will have no identifiable effect on global climate change, because the UN Intergovernmental Panel on Climate Change (IPCC) has failed to establish the influence that human carbon dioxide emissions (CO2) have on climate. This “scientific body” has failed to distinguish between natural variation of climate, which has been ongoing for hundreds of millions of years, and the human influence, if any, of CO2 on this natural variation. Multiple studies that have the same flaw are just more of the same.

Further, no global climate model has been validated and there has been no effort, announced to the public, to validate one, in spite of billions of dollars spent by governments. This failure indicates there is a major problem in the publicly announced IPCC science, most likely because the influence of CO2 on climate is small, rendering these costly efforts to regulate CO2 insignificant. As Richard Lindzen said of the effect of CO2 on climate: “[It is] trivially true and numerically insignificant.”

A diverse array of views on the agreement is found below. In the major additions, it is an agreement, not a treaty, in the sense that it has no binding effect on the United States. A treaty would require approval of two-thirds of the Senate present. One purpose of this requirement in the US Constitution is to provide a check on presidential powers. Unlike in many other countries, a treaty in the US has the force of law. The Obama Administration realized it would not obtain approval of two-thirds of the Senate, thus delegates representing the Administration made last minute changes to the Agreement making it nonbinding and thereby avoiding Constitutionally required approval.

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In Your Face “Black Swan!”

By bill Holter – Re-Blogged From http://www.Gold-Eagle.com

What happened last Wednesday deserves another look because I believe it marked a huge pivot point and very few are even talking about it.  Last Wednesday the Fed raised rates one quarter of a point but that was not the big story.  The big story was the about face the U.S. did geopolitically!

We saw markets around the world convulse on Thursday and Friday.  All attention has focused on the Fed rate hike which no doubt was a contributor.  How wise was it for the Fed to tighten credit conditions on a system already struggling and burdened with debt?  There is no arguing we have systemically moved from the 2008 crisis which is now widely understood as a “credit event”, into an even more highly levered situation.  The recovery that never was is now met with a central bank’s policy error.

I believe the “tell” on Friday was a weak dollar.  Much of what happened in the markets could have been expected as reaction to the Fed tightening credit conditions …but not a weak dollar.  The meeting between Mr. Lavrov, Mr. Putin and John Kerry far overrides anything the Fed could have done or said in my opinion.  The foreign policy about face where Mr. Assad no longer “needs to go” and Turkey being ordered to withdraw troops from northern Iraq was astonishing!  These statements were followed by Mr. Putin establishing a no fly zone over northern Syria.  In another twist, Turkey still maintains Mr. Assad must go and they are refusing to withdraw troops from Iraq http://www.zerohedge.com/news/2015-12-19/turkey-blasts-breakthrough-un-resolution-syria-it-lacks-perspective-assad-must-go .  When in your lifetime have you ever seen anything like this?  An “ally”, ANY ALLY publicly denying U.S. will?  We all saw an IN YOUR FACE BLACK SWAN but few have recognized it yet!

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Britain Authorizes Fracking Under National Parks

By Eric Worall – Re-Blogged From http://www.WattsUpWithThat.com

Britain has just controversially allowed fracking under National Parks. The fracking rigs can’t be erected inside the parks, but horizontal drilling from properties adjoining the parks, into land which lays underneath the parks, is now permitted.

MPs have voted to allow fracking for shale gas 1,200m below national parks and other protected sites.

The new regulations – which permit drilling from outside the protected areas – were approved by 298 to 261.

Opposition parties and campaigners criticised the lack of a Commons debate – and accused ministers of a U-turn as they previously pledged an outright ban on fracking in national parks.

The government said its plans would protect “our most precious landscapes”.

Energy Minister Andrea Leadsom also said there had already been “enormous debate” on the subject.

Read more: http://www.bbc.com/news/uk-politics-35107203

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Mission Accomplished

By Peter Schiff – Re-Blogged From http://www.Gold-Eagle.com

On May 1, 2003 on the flight deck of the USS Abraham Lincoln then President George W. Bush, after becoming the first U.S. president to land on an aircraft carrier in a fixed wing aircraft (in a dashing olive drab flight suit), declared underneath an enormous “Mission Accomplished” banner that “major combat operations” in Iraq had been concluded, that regime change had been effected, and that America had prevailed in its mission to transform the Middle East. 13 years later, after years of additional combat operations in Iraq, and a Middle East that is spiraling out of control and increasingly disdainful of America’s influence, we look back at the “Mission Accomplished” event as the epitome of false confidence and premature celebration.

The image of W on the flight deck comes to mind in much of the reaction to this week’s decision by the Federal Reserve to raise interest rates for the first time in nearly a decade. While many in the media and on Wall Street talked of a “concluded experiment” and the “dawning of a new era,” few realize that we are just as firmly caught in the thickets of failed policy as were Bush, Cheney, and Rumsfeld in the misunderstood quagmire of 2003 Iraq.

In its initial story of the day’s events, The Washington Post (12/16/15) declared that by raising the Fed Funds rate to one quarter of a percent The Fed is “ending an era of easy money that helped save the nation from another Great Depression.” Putting aside the fact that 25 basis points is still 175 points below the near 2.0% rate of core inflation that the government has reported over the past 12 months (and should therefore be considered undeniably easy), the more important question to ask is into what environment the Fed is apparently turning this page.

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Post ZIRP Era.

By Adam Hamilton – Re-Blogged From http://www.Gold-Eagle.com

The Federal Reserve finally mustered the courage to end its radical zero-interest-rate-policy experiment this week.  Its quarter-point rate hike announced on the seventh anniversary of ZIRP kicks off the long road to normalization.  This leaves the stock markets and gold in unprecedented uncharted territory.  The Fed has never before attempted to exit ZIRP, let alone in the midst of such extremely distorted markets.

The Fed’s ZIRP saga symmetrically ended 7 years to the day after it began way back in mid-December 2008.  That was just after the dark heart of that year’s once-in-a-century stock panic, which struck terror into the Bernanke Fed.  The benchmark S&P 500 broad-market stock index (SPX) had plummeted 30.0% in a single month in October, and then plunged another 11.4% from those brutal lows in the subsequent month.

The Fed deeply feared the sudden loss of 3/8ths of Americans’ stock-market wealth would cast the US into a new Great Depression.  History has proven the stock markets have a powerful wealth effect on consumer spending, which drives over 2/3rds of the US economy.  As stock markets drop, people feel poorer and more financially vulnerable so they slash their own purchasing.  That slows the entire economy.

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“All In”…Did We Back Down?

By Bill Holter – Re-Blogged From http://www.Silver-Phoenix500.com

Wednesday morning before the Fed announcement, a reader sent me this: “It is Janet Yellen’s turn to stoke the fire and evidently her news today of a rate increase has stoked the stock market fire to the tune of the Dow rising 138 points 10 minutes in.  It has the feeling of being on the Texas coast holding a hurricane party waiting for a hurricane to hit.  There are hundreds of people drinking and partying.”  SO TRUE …and party they did!  The rate hike was not even the biggest news of the day as you’ll see…and maybe they were all connected, we’ll get to that shortly.

Where do we go from here after a rate hike?  First and foremost we need to see several things.  First, can the Fed actually get rates to rise?  The longer end of the Treasury curve actually went down so there was some flattening.  Next, can they make the rate hike stick?  We also need to watch to see the mechanics of the rate hike.  The Fed will necessarily need to withdraw some (maybe up to $1 trillion) collateral from the system …a system already short of collateral.  This will tighten liquidity in an already illiquid credit market.

No doubt the world as a whole is treading water at best and most probably contracting economically.  The rate hike will only serve to put more pressure on the emerging markets in the form of a margin call.  This margin call will also be issued across the board.  I believe we now wait patiently to see where the stress is evidenced.  It may take only a couple of days or a couple of weeks but stress and weakness is coming.  Trade, growth and corporate profits and importantly “velocity” are all weak and declining, now the financial sector will need to deal with a withdrawal of liquidity equal to approximately what QE2 added.

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