Wholesale Prices Rise Most in 6 Years as Gasoline, Food Jump

By Associated Press – Re-Blogged From Newsmax

U.S. wholesale prices rose by the most in six years last month, led higher by more expensive gas, food, and chemicals.

The Labor Department said Friday that the producer price index — which measures price increases before they reach the consumer — leapt 0.6 percent in October, after a smaller 0.2 percent rise in September. Producer prices increased 2.9 percent from a year earlier.

Job Growth Slows

From Thomson Reuters – Re-Blogged From  Newsmax 

U.S. job growth slowed more than expected in August after two straight months of hefty gains, but the pace of increase should be more than sufficient for the Federal Reserve to announce a plan to start trimming the massive bond portfolio it built to support the economy.

Persistently sluggish wage growth could, however, make the U.S. central bank cautious about raising interest rates gain this year.

The Labor Department said on Friday nonfarm payrolls increased by 156,000 last month. The economy created 399,000 jobs in June and July.

“We see nothing here that prevents the Fed from initiating its balance-sheet reduction plan at the September meeting,” said John Ryding, chief economist at RDQ Economics in New York.  Continue reading

The Fed Just Admitted It No Longer Has A Clue What’s Going On

By Graham Summers – Re-Blogged From http://www.Gold-Eagle.com

The Fed July FOMC minutes that were released last week were nothing short of extraordinary. However, to fully appreciate just what the Fed admitted, we first need a little background.

From November 2016 until June 2017, the Fed was pushing a hawkish agenda. The running mantra at this time was that the Fed would raise rates 3-4 times in 2017. As the year progressed, the Fed also began talking about shrinking its balance sheet.

The Fed’s justification for these moves was that inflation was rising and the economy was strong enough to tolerate these moves. As a result the Fed hiked rates twice, first in March and then again in June 2017.

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Bond Bear Bubbleheads

By Brady Willet – Re-Blogged From http://www.Silver-Phoenix500.com

Conventional wisdom holds that with central banks’ beginning to throw their experimental policies into reverse the strings holding the asset price boom together are slowly being cut.  No disagreement here. But while the divergence between the fundamentals and asset prices suggests things like equities are in/near bubble territory, the bond market is not so much a ‘bubble’ as simply a rigged game. Some would disagree…

Former Fed Chairman Alan Greenspan recently offered his opinion about market ‘bubbles’ (or the very subject matter he spent his tenure at the Fed proclaiming could never be identified):

“By any measure, real long-term interest rates are much too low and therefore unsustainable. When they move higher they are likely to move reasonably fast. We are experiencing a bubble, not in stock prices but in bond prices. This is not discounted in the marketplace.”  Bloomberg

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Is The Yellen Fed Planning To Sabotage Trump’s Presidency?

By Stefan Gleason – Re-Blogged From http://www.Silver-Phoenix500.com

The Federal Reserve can make or break a president.

Monetary policy influences all financial markets as well as the cycles in the economy. No president wants to have to run for re-election when the stock market and economy are turning down.

Recall that President George H.W. Bush was sitting on sky-high job approval numbers in 1991 and was expected to coast to victory in his 1992 re-election bid. But then the economy swooned toward recession, giving Bill Clinton the opening he needed.

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Fed QT Bearish For Stocks

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

Ominously for the stock markets, the Federal Reserve is warning that quantitative tightening is coming later this year.  The Fed is on the verge of starting to drain its vast seas of new money conjured out of thin air over the past decade or so.  The looming end of this radically-unprecedented easy-money era is exceedingly bearish for these lofty stock markets, which have been grossly inflated for years by Fed QE.

Way back in December 2008, the first US stock panic in an entire century left the Fed frantic.  Fearful of an extreme negative wealth effect spawning another depression, the Fed quickly forced its benchmark federal-funds rate to zero.  Once that zero-interest-rate policy had been implemented, no more rate cuts were practical.  ZIRP is terribly disruptive economically, fueling huge distortions.  But negative rates are far worse.

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The Fed May Show Trump No Love

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

Typically, US Presidents are wary of claiming stock market performance as a referendum on their success. Most have seemed to understand that taking credit also means accepting blame, and no one would want to make the tortured argument that the positive moves reflect well on their presidency but that the negative moves do not. But Donald Trump has shown no reluctance to make any argument that suits his political purpose of the day, no matter its absurdity, and no matter if he has to contradict the arguments he made last year, or last week. Perhaps he assumes, as most investors seem to, that the risks are minimal because the Federal Reserve will jump in to save the markets if things turn bad. But in binding his performance so closely to the markets he overlooks the possibility that the Fed will be far less charitable to him than it was to Obama.

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Jobs and Inflation: Gradually and Then Suddenly

By Ben Hunt – Re-Blogged From Wolf Street

If you’ve been reading my notes immediately before and after the June Fed meeting (“Tell My Horse” and “Post-Fed Follow-up”), you know that I think we now have a sea change in what the Fed is focused on and what their default course of action is going to be. Rather than looking for reasons to ease up on monetary policy and be more accommodative, the Fed and the ECB (and even the BOJ in their own weird way) are now looking for reasons to tighten up on monetary policy and be more restrictive. As Jamie Dimon said the other day, the tide that’s been coming in for eight years is now starting to go out. Caveat emptor.

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Gold Summer Doldrums

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

Gold has spent most of June grinding lower on balance, damaging sentiment and vexing traders.  Usual selling leading into the Fed’s latest rate hike contributed, but the summer doldrums are also in play.  Gold has typically suffered a seasonal lull this time of year, on waning investment demand as vacations divert attention from markets.  But these summer doldrums offer the best seasonal buying opportunities of the year.

This doldrums term is very apt for gold’s summer predicament.  It describes a zone in the world’s oceans surrounding the equator.  There hot air is constantly rising, creating long-lived low-pressure areas.  They are often calm, with little or no prevailing winds.  History is full of accounts of sailing ships getting trapped in this zone for days or even weeks, unable to make any headway.  The doldrums were murder on ships’ morale.

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Curve Inversion and Chaos to Begin by December 2017

By Michael Pento – Re-Blogged From PentoPort

The bounce in Treasury yields witnessed after the election of Donald Trump is now decaying in the D.C. swamp. If the Fed continues to ignore this slow growth and deflationary signal from the bond market and continues along its current rate hiking path, the yield curve will invert by the end of this year and an equity market plunge and a recession is sure to follow.

An inverted yield curve, which has correctly predicted the last seven recessions going back to the late 1960’s, occurs when short-term interest rates yield more than longer-term rates.  Why is an inverted yield curve so crucial in determining the direction of markets and the economy? Because when bank assets (longer-duration loans) generate less income than bank liabilities (short-term deposits), the incentive to make new loans dries up along with the money supply. And when asset bubbles are starved of that monetary fuel they burst. The severity of the recession depends on the intensity of the asset bubbles in existence prior to the inversion.

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Fed Will Cause a 2008 Redux

By Michael Pento – Re-Blogged From http://www.PentoPort.com

Truth is a rare commodity on Wall Street. You have to sift through tons of dirt to find the golden ore. For example, main stream analysis of the Fed’s current monetary policy claims that it will be able to normalize interest rates with impunity. That assertion could not be further from the truth.

The fact is the Fed has been tightening monetary policy since December of 2013, when it began to taper the asset purchase program known as Quantitative Easing. This is because the flow of bond purchases is much more important than the stock of assets held on the Fed’s balance sheet. The Fed Chairman at the time, Ben Bernanke, started to reduce the amount of bond purchases by $10 billion per month; taking the amount of QE from $85 billion, to 0 by the end of October 2014.

The end of QE meant the Fed would no longer be pushing up MBS and Treasury bond prices (sending yields lower) with its $85 billion per month worth of bids. And that the primary dealers would no longer be flooded with new money supply in the form of excess bank reserves. In other words, the Fed started the economy down the slow path towards deflation.

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Gold In Fed-Rate-Hike Cycles 2

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

Gold suffered heavy selling in early March leading into the Fed’s latest rate hike. Speculators frantically dumped gold futures ahead of the Fed’s meeting as implied rate-hike odds soared. This is nothing new. This key group of traders has long feared Fed-rate-hike cycles, convinced they are the mortal nemesis of zero-yielding gold. But this view is highly irrational, as history proves gold actually thrives in rate-hike cycles!

The Federal Reserve’s primary and dominant tool for setting monetary policy is its target for the federal-funds rate. Commercial banks are required to maintain reserve balances at the Fed, with necessary levels fluctuating daily based on each bank’s underlying business activity. So banks with surplus reserves can lend them on an overnight basis to other banks running deficits through the federal-funds market.

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Will Mid-March Madness Maul the Stock Market in 2017?

By David Haggith – Re-Blogged From Great Recession Blog

Many of the 2017 economic headwinds I’ve described will hit during the Ides of March, just as the Trump stock-market Rally shows signs of topping out. This might not be the Great Epocalypse — not all at once anyway — but a large and likely correction is looming. I think the bear is about to be let out of his cage.

Chaos emerged in emerging-market stocks last week, bond prices plummeted (yields rose to match their last 2016 high), stock-market volatility rose, and the Dow took its worst drop in 2017. Copper prices, a bellwether for recessionary conditions, saw their worst week since last September. It looked like the Trump rally in almost everything was rolling over last week, and that takes us into this week when several likely big bangs are scheduled to hit on the same day.

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Loosening is the New Tightening

By Steve Saville – Re-Blogged From The Speculative Investor

The Fed meets to discuss its monetary policy this week. There is almost no chance that an outcome of this meeting will be another boost in the Fed Funds Rate (FFR), but there’s a decent chance that the next official rate hike will be announced in March. Regardless of when it happens and regardless of how it is portrayed in the press, the next Fed rate hike, like the two before it, will NOT imply a tightening of US monetary policy/conditions.

The two-part explanation for why hikes in the FFR no longer imply the tightening of monetary policy has been discussed many times in TSI commentaries over the past few years and was also addressed in a March-2015 post at the TSI Blog titled “Tightening without tightening“. The first part of the explanation is that with the US banking system inundated with excess reserves there is no longer an active overnight lending market for Federal Funds (banks never have to borrow Federal Funds anymore because they have far more than they require). In other words, when the Fed hikes the FFR it is hiking an interest rate that no one uses.

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Radical Gold Underinvestment 3

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

Gold was again blasted to new post-election lows this week, further trashing contrarian sentiment.  The Fed proved more hawkish than expected in its rate-hike-trajectory forecast, unleashing heavy selling in gold futures.  This catapulted gold bearishness back up to extremes not seen in a year.  Investors are once again convinced gold is doomed, and thus radically underinvested.  That’s actually super-bullish for gold.

It certainly wasn’t the Fed’s second rate hike in 10.5 years this week that hammered gold.  Actually that was universally expected.  Federal-funds-futures traders had assigned it an average 96% probability in the two weeks leading up to that rate hike.  If the Fed had simply raised its federal-funds rate by 25 basis points to a 0.50%-to-0.75% range, gold-futures speculators would’ve likely yawned.  They knew it was coming.

The unexpected hawkishness came in the FOMC’s Summary of Economic Projections that is published quarterly at every other policy meeting.  Also called the “dot plot”, it shows where each FOMC member and regional Fed president expects the FFR to be in the next several years and beyond.  The collective expectations of these top officials who actually set monetary policy grew from two rate hikes in 2017 to three.

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10-Year US Treasury Yield Will Break Out Of 35-year Range By Yearend 2016!

By Gijsbert Groenewegen – Re-Blogged From http://www.Gold-Eagle.com

Why Interest Rates Will Break Out: Illiquidity, NO Vote Italy And Increasing Risk

Gundlach believes that Trump’s policies can raise the bond yields to 6% in the next 4 to 5 years. I believe that the recent surge in interest rates worldwide, with global bonds posting the biggest two-week loss ($1.8trn) in 26 years (since 1990) as President-elect Donald Trump sent inflation expectations surging, will rise above 3% before the end of 2016. Why? Because investors, mainly the hedge funds, and not so much the life insurance and pension companies that often hold their bonds until maturity, must get wary that the 10y Treasury Yield might break the 2.5% (we have already reached the 2.40% level on Wednesday November 23) and subsequently the very important 3% – see below.

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Bond Bubble has Finally Reached its Apogee

By Michael Pento – Re-Blogged From http://www.PentoPort.com

Boston Fed President Eric Rosengren recently rattled markets when he warned that low-interest rates were increasing the temperature of the U.S. economy, which now runs the risk of overheating. That sunny opinion was echoed by several other Federal Reserve officials who are trying to portray an economy that is on a solid footing. And thus, prepare investors and consumers for an imminent rise in rates. But perhaps someone should check the temperatures of those at the Federal Reserve, the idea that this tepid economy is starting to sizzle could not be further from the truth.

In fact, recent data demonstrates that U.S. economic growth for the past three quarters has trickled in at a rate of just 0.9%, 0.8%, and 1.1% respectively. In addition, tax revenue is down year on year, S&P 500 earnings fell 6 quarters in a row and productivity has dropped for the last 3 quarters. And even though growth for the second half of 2016 is anticipated with the typical foolish optimism, recent data displays an economy that isn’t doing anything other than stumbling towards recession.

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The Fed Has Set Us Up For A Massive 50% Market Collapse

By Graham Summers – Re-Blogged From http://www.Gold-Eagle.com

The Fed is running a virtual repeat of 1937.

The common narrative is that the Fed “didn’t do enough” during the Great Depression. This is used to justify the Fed’s use of non-stop extraordinary monetary policy post-2008.

But it’s a total lie.

The Fed went bananas in the aftermath of 1929, expanding its balance sheet by 300%. On a relative basis, the Fed’s balance sheet grew from 5% of US GDP to 23% of GDP.

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Jackson Hole Saturday, When the Real Hyperinflationary Fireworks Occurred

By Andrew Hoffman – Re-Blogged From http://www.milesfranklin.com/

Pardon me if this article starts out a bit disjointed, as I accidentally erased the notes I took last night, amidst the 155th “Sunday Night Sentiment” attack of the past 161 weekends.  And afterwards, the 689th “2:15 AM” raid of the past 793 trading days, which I was able to document in real-time because someone called me at 3:00 AM, acting surprised that I wasn’t on “European time.”  I mean, do I have a French, German, or British accent?

Thankfully, the amount of notes was minimal, as amidst the “summer doldrums,” trading volumes are exceptionally low – with “volatility” at 20-year lows, care of the most maniacal, relentless market manipulation in global history.  Which, of course, is occurring because the global political, economic, and monetary situation has never been uglier.  Not to mention, the powers that be MUST maintain the status quo to enable a Hillary Clinton victory – as if Trump wins, their ability to staunch the bleeding, and control the future, will be dramatically weakened.  For what it’s worth, I strongly believe Trump will win – as like the “surprise” Brexit result, I believe Americans’ actual political leaning is far different than the propagandized “strong Clinton lead.”  Frankly, it strains credibility that anyone would believe this to be true, given the historically horrible economy, the e-mail server scandal, and all out criminality of the Clinton Foundation.

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Sacrificed To The Inflation Gods

By Michael Pento – Re-Blogged From http://www.Gold-Eagle.com

Our Federal Reserve is composed of labor market economists who place their faith in the theory that inflation is spawned from too many people working. They believe there is a trade-off between employment and prices, where price stability and full employment cannot exist peacefully together the same time.

Given this view, the Fed’s maximum employment and stable inflation mandates are played as a zero-sum game–the lower the unemployment rate the higher the rate of inflation. Therefore, they set about to fulfill this task of low inflation as though it were a sort of Ancient Mayan sacrificial system: ceremonially counting how many job seekers need to be sacrificed on the altar of labor slack to placate the inflation gods.

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The Fed’s Loud Talk Policy

By Peter Schiff – Re-Blogged From Euro Pacific Capital

Theodore Roosevelt’s famous mantra “speak softly and carry a big stick” suggested that the United States should seek to avoid creating controversies and expectations through loose or rash pronouncements, but be prepared to act decisively with the most powerful weaponry, when the time came. More than a century later, the Federal Reserve has stood Teddy’s maxim on its head. As far as Janet Yellen and her colleagues at the Fed are concerned, the Fed should speak as loudly, frequently, and as circularly as possible to conceal that they are holding no stick whatsoever.

Roosevelt’s “stick” was America’s military might, which in his day largely boiled down to the US Navy, which he had enlarged and modernized. To demonstrate to a potential adversary that he was prepared to use these weapons, Roosevelt sent the fleet around the world in a massive show of force. However, he took care to couch the expedition in soothing rhetoric. He even ordered the battleships to be painted white to create the impression that they were angels of mercy rather than instruments of power. The combination proved effective. America’s global influence increased dramatically during his presidency even though few shots were fired.

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Fed’s Rate Normalization Will Be Far From Normal

By Michael Pento – Re-Blogged From http://www.Gold-Eagle.com

The Fed traditionally embarks on an interest rate tightening cycle when inflation has started to run hot. This decline in the purchasing power of the dollar will nearly always manifest itself in: above trend nominal GDP, rising long-term interest rates and a positively sloping yield curve.  These prevailing conditions are all indications of a market that is battling inflation; and thus prompts the Fed to start playing catch up with the inflation curve.

For example, the last time the Fed began a rate tightening cycle was back on June 30, 2004, when the Fed moved the Overnight Funds rate from 1% to 1 ¼%. At the time, the Ten-year Note yield was 4.62%, and the Two-year Note was 2.7%, creating a 1.92% spread between the Two and the Ten-year Note. To illustrate the fact that the long end of the yield curve was pricing in future inflation, the Ten-year yield climbed to 5.14% two years into the Fed’s rate hiking cycle. And perhaps more importantly, real GDP was 3% and rising, while nominal GDP posted an impressive 6.6% in the second quarter of June 2004.

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The Keynesians Stole The Jobs

By Ron Paul – Re-Blogged From http://ronpaulinstitute.org

Late last week the markets were shocked by a surprisingly bad May jobs report – the worst monthly report in nearly six years. The experts expected the US economy to add 160,000 jobs in May, but it turns out only 38,000 jobs were added. And to make matters worse, 13,000 of those 38,000 were government jobs! Adding more government employees is a drain on the economy, not a measure of economic growth. Incredibly, there are more than 102 million people who are either unemployed or are no longer looking for work.

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Gold – A Reasonable Correction?

By Alasdair Macleod  ReBlogged From Gold Money

Gold weakened during May by about $100…from a high point of $1300 to a low of $1200. For technical analysts this is entirely within the normal correction zone of a third to two-thirds of the previous rise, which would be 84 to 167 dollars.

So the price decline is technically reasonable…and therefore doesn’t in itself signify any underlying challenge to the merits of a long position in gold. However, when looking at short-term considerations, we should look at motivations as well. And those clearly are the profit to be made by banks dealing in the paper bullion market, which they can simply overwhelm by issuing short contracts out of thin air. This card has been played successfully yet again, with the bullion banks first creating and then destroying nearly 100,000 contracts, lifting the profits from hapless bulls in the COMEX market.

The banks get the money, the punters get the experience…and the evidence disappears. The futures market is demonstrably little more than a financial casino, where the house, comprising the establishment banks, always wins. Financial markets are not about free markets and purposeful pricing, which is why the vast majority of outsiders, including hedge funds, those Masters of the Universe of yore, usually lose. This leads us to an important conclusion: the fall in prices has less to do with a change in outlook for the gold price, and more with the way a casino-like exchange stays in business.

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Euro Breaks Above $1.13 After Staggeringly Weak Jobs Report

By Joseph Adinolphi – Re-Blogged From http://www.MarketWatch.com

Report likely takes June rate hike off the table, analysts say

Bloomberg
Friday’s abysmal jobs data drove the dollar lower.

The euro traded above $1.13 on Friday for the first time in more than two weeks after official U.S. data showed the rate of jobs growth decelerated last month to its slowest level since late 2010.

Labor Department data showed the U.S. economy added just 38,000 jobs last month, the slowest pace of growth since September 2010. The number was far short of the 155,000 jobs economists polled by MarketWatch had expected.

Gold Experiences First “Golden Cross” In Two Years

By Frank Holmes – Re-Blogged From http://www.Gold-Eagle.com

Last Friday, gold experienced a “golden cross,” a technical indicator that occurs when an asset’s 50-day moving average crosses above its 200-day moving average. It’s the first such movement in nearly two years and is a sign that gold might have further to climb.

'Golden Cross' for Gold

Strengths

  • The best performing precious metal for the week was gold, by a significant margin. Gold experienced its first “golden cross” in two years, as the 50-day moving average moved above the 200-day. This week Georgette Boele from ABN Amro, who switched her gold outlook from bearish to bullish, noted that investors are now buying the metal on dips, rather than selling on rallies as they’ve done previously.

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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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Groundhog Day At The Fed

By Peter Schiff – Re-Blogged From EuroPacific Capital

Every dictator knows that a continuous state of emergency is the best means to justify tyrannical policies. The trick is to keep the fictitious emergency from breeding so much paranoia that routine activities come to a halt. Many have discovered that it’s best to make the threat external, intangible and ultimately, unverifiable. In Orwell’s 1984 the preferred mantra was “We’ve always been at war with Eurasia,” even though everyone knew it wasn’t true. In its rate decision this week the Federal Reserve, adopted a similar approach and conjured up an external threat to maintain a policy that is becoming increasingly absurd.

In blaming its continued inaction on “uncertainties abroad” (an excuse never before invoked by the Fed in the current period of zero interest rates), the Fed was able to maintain the pretense of a strong domestic economy, and its desire to lift rates at the earliest appropriate moment while continuing the economic life support of zero percent rates. Unbelievably, the media swallowed the propaganda hook, line, and sinker.

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