Thanks to a reader, B, I present this nice 3-D evaluation of what is happening financially in the world right now. Smith is an honest man and admits it doesn’t make sense to him. Unless you leave 3-D financial/political thinking, it likely won’t make sense. When I started studying the financial markets about ten years ago, no one told me how to approach them, nobody told me what to think, nobody said to me, “This is the way it is.”
I’d already begun to learn to think for myself and to stand in my own truth. It wasn’t easy, because I was laughed at and pretty much for my own survival forced to leave a place and people I loved and still love. I realized I couldn’t judge them; they were coming from a totally different place than I was. They had their own path to walk, and as far as I know they’re still on it. While I might want to ask someone for facts, I didn’t need to ask anyone else’s opinion, or to have anyone tell me what to believe. Back then, I already knew that what was happening on the planet was the beginning of the end of our way of life and of our way of conducting our business together as a species.
The science of the times, kept so secret from us by our governments in order to control us, informed my opinion, as well as my personal knowledge of the quantum field which had everything to do with my own healing process. As the years have gone by I’ve been validated over and over again. It is my firm belief this cabal is going to collapse because such low vibrations as they carry cannot exist in the higher vibrations, and these vibrations are steadily rising. The last I read was that the Schumann Resonances had risen from a standard ’7′ (plus or minus and put very simply) to about a ’13′. Most good people involved in the markets are so busy in the day-to-day business of their lives, that they have no knowledge of such things and so cannot have any real perspective like mine. That’s just the way it is.
Mr.Smith is clear about what he sees happening, and he’s honest enough to admit there are huge gaps in his understanding. It makes for interesting reading. ~J
This Is an Extraordinary Time (June 22, 2013)
It’s as if we have two economies: the simulacrum one of stocks rising dramatically in a few months, and the real one of household earnings (down) and hours worked (down).
It is difficult to justify the feeling that we are living in an extraordinary moment in time,for the fundamental reason that it’s impossible to accurately assess the present in a historical context.
Extraordinary moments are most easily marked by dramatic events such as declarations of war or election results; lacking such a visible demarcation, what sets this month of 2013 apart from any other month since the Lehman Brothers’ collapse in 2008?
It seems to me that the ordinariness of June 2013 is masking its true nature as a turning point. Humans soon habituate to whatever conditions they inhabit, and this adaptive trait robs us of the ability to discern just how extraordinary the situation has become.
In my 59-year lifetime, the dramatic, this-is-history-happening moments are obvious: the Kennedy assassination, 9/11, and so on. Other tidal changes developed over a period of months or years: Watergate, which ballooned from a minor break-in to a constitutional crisis, is a good example. So is the financial meltdown of 2008, which actually began back in 2001 when the Federal Reserve chose a policy of super-low interest rates and super-abundant liquidity to lessen the post-dot-com recession.
I have an unavoidable sense that May-June 2013 is the high water mark of the political/financial response to the global financial meltdown of 2008. Nothing systemic has changed in the five years; the status quo financial and political systems have made cosmetic reforms, but the power structures have not changed at all.
The status quo has simply ramped up its traditional policies: since lowering interest rates didn’t spark a strong recovery, then lower rates to zero, and so on: more money creation, more credit creation, more bond purchases, more subsidies for housing, more transfers of private debt to the public ledger–more of what has failed spectacularly.
That’s what marks June 2013 as extraordinary: the Powers That Be have gone all-in. If their policies fail to ignite a self-sustaining recovery in the real economy, there are no policy options left.
Those who don’t follow finance might not have noticed the extraordinary nature of recent financial events: Japan’s stock market rose by 75% since December before reversing sharply, the U.S. S&P 500 climbed 24% in 2013, gold crashed by over $200 in a matter of hours, and the Japanese yen has lost a quarter of its value (in U.S. dollars) in a matter of months.
None of this makes sense in terms of the real economy: U.S. corporations didn’t suddenly become 25% more profitable; Japan’s economy did not expand by 75% in five months, and none of the fundamentals in the value of gold suddenly changed overnight.
These rapid, gargantuan fluctuations are disconnected from the real economy. This in itself is extraordinary. The financial press explains these bubble-like advances and collapses in terms that only make sense to financiers: the yen-dollar pair, the yen carry trade, etc.
That complex, abstract financier policies and trading strategies now dominate stocks, bonds and precious metals is also extraordinary.
I have endeavored to understand the fundamentals behind these wild fluctuations proposed by the media, and have concluded none of it makes any sense in conventional economic terms. To mention just one example: gold has traditionally been viewed as a hedge against inflation. Gold’s collapse is being attributed to lower expectations of inflation. OK, so there’s no inflation, ergo, the global economy is in slow-growth/no-growth mode, hence no inflation. Then what is powering global stocks higher? We’re told “an improving global economy” is the driving force, but the data on this supposed recovery is mixed at best.
Some observers claim gold dropped because the yen dropped and the U.S. dollar strengthened, but a glance at the 10-year chart of gold and the dollar quickly disproves any correlation: gold rose when the dollar dropped and when it rose.
This is another extraordinary thing about the present: none of these moves make any sense. Pundits and analysts are seeking explanations after the fact, postulating correlations as causes with little historical backing. It’s as if the financial media is incapable of confessing none of this makes sense, and instead the media piles one complex explanation on top of another to justify what is clearly an extraordinary disconnect between the real economy and asset valuations.
Bottom line: even if the global economy is improving (and there is ample evidence that data is being juiced or manipulated), it isn’t improving enough to justify stocks rising by 25% to 75% in a matter of months.
Real estate is also back in bubble territory, in those markets with plentiful capital and limited inventory: we’re back to bidding wars and dozens of people competing for the right to buy an ordinary home.
The bond prices of fatally insolvent European governments have fallen, as if these economies have suddenly been restored to health and fast growth by European Central Bank (ECB) intervention. European stock markets are roaring higher as well. Neither makes any sense in terms of traditional risk-pricing, price-earnings ratios and so on.
We are living in an extraordinary global financial experiment, in which financier tricks (zero interest rates and massive injections of credit and liquidity) have been pushed to their red-line limit in the hopes that these extraordinary measures will finally, after five long years, trigger a self-sustaining expansion of the real economy.
Those in charge of the experiment are constantly reassuring us it has already succeeded. I think the data shows the experiment is in the final blow-off stage in which the beaker full of toxic ingredients is bubbling with dangerous vigor.
There is one last extraordinary feature of this time: the data “proving” the experiment is successful is self-referential: drop interest rates to zero and subsidize housing, and voila, you get a surge in building permits. Take one full-time job and turn it into 1.5 part-time jobs, and voila, the unemployment rate declines and the number of jobs increases.
Then take these metrics (higher permits and jobs), weigh them heavily in your measure of leading indicators, and then declare the leading indicators “prove” the recovery is self-sustaining.
All this leads to a question: what would happen to the economy if all the financier tricks were stopped, and the price of risk, credit, assets, etc. were discovered by the marketplace?
It’s as if we have two economies: the simulacrum one of stocks rising 75% in a few months, and the real one of household earnings (down) and hours worked (down). Eventually these two economies will have to merge into one. I sense 2013 will be the critical year when the schizophrenia is resolved one way or the other.
This essay is excerpted from Musings Report 20. The Musings Reports are basically a glimpse into my notebook, the unfiltered swamp where I organize future themes, sort through the dozens of stories and links submitted by readers, refine my own research and start connecting dots which appear later in the blog or in my books.
The Musings Report includes an essay and three other sections: Market Musings, on the financial markets and trading, The Best Thing That Happened This Week and From Left Field.
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