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January 2, 2015


In case you haven’t noticed, I have not been blogging much lately. Why? Mostly because I’m tired of listening to so many pontificators, with present company included. Everyone seems to know everything these days and we all feel free to express our meaningless opinions (mostly anonymously), because those opinions — or “facts”— no longer need to be supported by sound evidence or reason. We are now a society that can find an internet site that reinforces our existing biases and prejudices so that we may maintain and justify them. Understand, I am not pointing my finger at anyone else here; I’m looking in the mirror.

Do you ever wonder just how overloaded we are with information in this information age? I used to think the more I read the more I would know. Now I think the more I read the less time I have to think. This is not a new idea. In fact, I would argue it is in the same vein as: Information overload (also known as infobesity or infoxication), which refers to the difficulty a person can have understanding an issue and making decisions caused by the presence of too much information. (I have to be honest here — I had never heard the term “infoxication” prior to looking up the definition of information overload on Wikipedia. I feel a little better since infoxication keeps getting the red underline by spell check.)

I mention all of this only to suggest we need breaks from our favorite internet sites. I gave up watching television “news” long ago and lately I have given up much more of my computer time — as those who know me can confirm by my lack of response to emails. I have found it hard to give up two of my favorite websites, however. and nearly always get a daily glance. But I have made an observation: this is something I can do when I’m not too busy jumping from website to website; the accuracy of my weather site is directly related to how predictable the weather is. For example, I am a hell of a good weather forecaster in July (sunny and in the 90s). I obviously look at the weather sites when the weather is much less predictable, or more volatile, because I can’t predict whether my outdoor plans may be spoiled by a storm (and yes I’m learning that the weather forecasters can’t either).

We do this same thing with other news, particularly with financial news. Don’t we spend a lot more time reading financial news when the markets are in turmoil (showing volatility)? But I fear, much like weather, this is when your prognosticators (economist/financial media) are going to be wrong the most often. Even though our financial markets are setting new record highs, our economy has never been more volatile. We can no longer focus on one subject for more than a nano-second. We jump from one news headline to the next, never contemplating what the last bit of information we digested actually means in the big picture or for the long term. More information does not mean we are better informed, but it is teaching us not to think, or to reflect, or to contemplate, or to analyze…

With that said…

Zero Hedge recently made the following statement:

So with all of this pessimism behind us, does that leave us more optimistic heading into 2015?

We don’t know: as frequent readers know, we do not pretend to be able to predict the future. We do know, however, that with $11 trillion in liquidity injected just by the world’s developed central banks, and the tens of trillions of credit money created… the entire world is floating on an ocean of excess money, which for one more year has succeeded in masking just how ugly the truth beneath the calm surface is. Sooner or later, the tide always comes out, and those swimming naked are always exposed. However, this time it will be the very final backstoppers of the status quo regime, the central banking emperors of the New Normal, who are finally revealed as wearing absolutely nothing. What happens then, and when that happens, is anyone’s guess.

This same concern is the reason I began blogging. I have written many times about the Central Bank’s unprecedented monetary experiment, including a very similar blog post written in October 2012 titled, “Money Aplenty.” The real question that still has not been answered is whether this “economic recovery” can stand on its own two legs. In the past, allowing the economy to stand on its own, without the Fed’s massive manipulations, repeatedly caused the markets to begin to melt down, which caused the Fed to stop mentioning that the punch bowl might be taken away in the near future. Instead, now when the party-goers begin to complain, the Fed begins to up the verbal ante by suggesting maybe more stimulus is in the works. The markets respond with a cheer and continue the march toward new record highs. In reality, these are moments we need to stop reading and begin reflecting. How many times have the Feds told us that we are in a recovery, yet they continue stimulating? It is now 2015; we are now nearly eight years into this grand experiment and the economy can’t stand on its own two legs. Last October we had a rare moment of contemplation where a few ‘mainstreamers’ dared to ask the question: “What if the world central banks’ policies don’t actually work?” That question alone sent the markets into a tailspin. However, instead of dealing with that question honestly, we elected to put our head back in the sand.

This is not a matter of deep contemplative reasoning or thinking. The answer is clearly in front of us. While the Fed has ‘tapered’ its ongoing monthly purchases of treasuries, absolutely nothing else has been done to normalize monetary policies. The Fed still fosters the zero interest rate policy, they still have a massively unprecedented balance sheet, they still own toxic assets, the government is still growing its unprecedented debt, they still haven’t reined in dangerous derivatives, and on and on the list goes. But why is this? It is my humble opinion it is because they know the economy cannot stand on its own two feet! Eight years of this experiment and counting and what do we have to show for it? Other than far-reaching asset bubbles, we have seen a significant reduction in unemployment; but I would argue that with $11 trillion of liquidity and even more in debt, every able body person should have a job. I agree with Zero Hedge that one day the central bankers will be revealed to be wearing no clothes and then something will happen, but I’m not sure what.

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