A most significant development: Central banks no longer trust money: Central banks begin to buy stocks instead
The article below sees it as a way of propping up the stockmarket but a student of history would see it as a belief that stocks will hold their value better than the Greenback, Euro or UK Pound will. That is certainly my belief and I have long ago put most of my money where my mouth is: Into blue chip shares
A small number of central banks around the world have begun investing their foreign exchange reserves in equities, according to Bloomberg News. These include the Swiss National Bank, the Bank of Israel, South Korea and others.
So far it’s not much, several billion in stock buys by central banks. But all over the world, there are about $10.2 trillion of foreign exchange reserves that could be tapped, according to the International Monetary Fund’s Currency Composition of Official Foreign Exchange Reserves (COFER) database.
Interestingly, the IMF notes that “COFER data for individual countries are strictly confidential.” So, when central banks flood equities markets with excess reserves, investors likely won’t know until after the fact, and then, only if such purchases are disclosed.
But why would central banks purchase stocks? Aren’t those… risky?
In 2000, none other than current Federal Reserve Chairman Ben Bernanke — then a professor — commenting on Japanese policies after their housing bubble popped in 1989, included corporate bond and equity purchases in his menu of options that might be pursued in an environment with near-zero interest rates.
Bernanke left no mistake that the reason to boost aggregate demand in this fashion is to raise prices: “The object of such purchases would be to raise asset prices, which in turn would stimulate spending”.
Vince Reinhart, then Fed Director of its Division of Monetary Affairs, at Federal Open Market Committee (FOMC) meeting in June 2004 described the circumstances under which a central bank might engage in such purchases: “if the policymakers believed that deflationary forces were severe.”
Reinhart also dismissed the possibility at the time, saying, “These options would change how we are viewed in financial markets, involve credit judgments of a form we are not used to, perhaps smack of desperation, and pull us into a tighter relationship with other parts of government.”
But let’s leave that aside. Consider carefully the circumstances Reinhart outlined when this might actually happen: “if the policymakers believed that deflationary forces were severe.” Uh-oh.
Now that central banks are actively buying stocks, this could be an extremely bearish signal for investors. Central banks may not believe that the current market rally is sustainable and that the means to propping it up is to step in and forcefully monetize the markets.
That alone would be outrageous enough, if the object is to socialize risks in the private sector, and to artificially bolster the capital gains of a select few. But let’s examine some numbers to see what the impact might be if central banks let loose their $10.2 trillion of foreign exchange reserves on the stock market.
According to the World Federation of Exchanges (WFE), the total value of equities worldwide fell from a high of $56.8 trillion in May 2008 to $42.9 trillion in Sept. 2008. By the end of 2008 it was $32.8 trillion. And in Feb. 2009, it had dropped to a low of $29.1 trillion.
In less than a year, over $27.7 trillion of wealth was erased.
Since that time, there has been a considerable recovery. The total value of equities rose to $54 trillion in 2010, and then came down slightly in 2011 to $47 trillion, with the WFE citing collateral damage from the sovereign debt crisis.
In Jan., it stood at about $50.8 trillion. So, global equity markets are currently about 74.5 percent off their lows and climbing. To look at it from the perspective of the Dow Jones Industrial Average, it hit a low of 6594 in March 2009, and has risen to about 13000 today. It’s nearly 100 percent off its low.
Does that mean it is time for a correction? Or even a cyclical recession?
For certain, central banks stepping into stocks now will be buying the market at or near a high. Why would they do that unless “policymakers believed that deflationary forces were severe”?
Perhaps that is just a pretext. One effect of central banks buying at a high would be to allow favored shareholders of companies to realize profits on their stock holdings (i.e. capital gains). It’s important to note that the high percentage gains in equity values over the past three years were actually a low-volume trade.
In other words, not too many people appear to be buying the Dow at 13000.
Are financial institutions sitting on a lot of overvalued assets and need to sell them to book the gains before the correction comes? Hmmm.
There’s over $20 trillion of gains at stake since the markets’ collective lows of 2009. But don’t expect a bailout in your personal portfolio solely from central banks’ foreign exchange reserves. There are not enough of those to buy all of the world’s stocks.
So, the privileged few will get a bailout — and a preemptive one at that. And the worst part is there will be no way to stop the intervention.
Outraged yet? You should be. But then, this is what happens when value is completely severed from currency. It is time to seriously reconsider this Monopoly money scheme.
20 Obvious Truths That Will Shock Liberals
1) The Founding Fathers were generally religious, gun-toting small government fanatics who were so far to the Right that they'd make Ann Coulter look like Jimmy Carter.
2) The greatest evil this country has ever committed isn't slavery; it's killing more than 50 million innocent children via abortion.
3) Conservatives are much more compassionate than liberals and all you have to do to prove it is look at all the studies showing that conservatives give more of their money to charity than liberals do.
4) When the Founding Fathers were actually around, there were official state religions and the Bible was used as a textbook in schools. The so-called "wall of separation between church and state" has absolutely nothing to do with the Constitution and everything to do with liberal hostility to Christianity.
5) The biggest problem with our economy today is Barack Obama. His demonization of successful people, his driving up gas prices, his regulatory overload and threats to increase taxes have terrified businesses into hunkering down, refusing to spend money, and declining to hire new people. Replacing him would do more than any government policy to spur economic growth.
6) Not only are conservatives more patriotic than liberals, but most American liberals "love" America in about the same way that a wife-beater loves his wife.
7) Out of every 100 cries of “Racism” you hear these days, 99 are motivated by nothing other than politics.
8) Anyone paying income taxes is certainly paying his “fair share" -- and then some -- compared to the people who pay nothing.
9) You don't have a "right" to anything that other people have to pay to provide for you.
10) If we can ask people to present an ID to buy alcohol, drive a car, or get on an airplane, then asking them to present identification to vote is a no-brainer.
11) There's absolutely nothing that the government does smarter, better, or more efficiently than the private market with roughly equivalent resources.
12) The biggest problem with education in this country is liberals. They fight vouchers, oppose merit pay, refuse to get rid of terrible teachers, and bend over backwards to keep poor kids trapped in failing schools.
13) Fascism, socialism, and communism are all left-wing movements that have considerably more in common with modern liberalism than modern conservatism.
14) The Democratic Party was behind slavery, the KKK, and Jim Crow laws. It was also the party of Margaret Sanger, George Wallace, and Bull Connor. It has ALWAYS been a racist party. Even today, white liberals support Affirmative Action and racial set-asides because they still believe black Americans are too inferior to go up against whites on an even playing field.
15) A man with good morals who falls short and becomes a hypocrite is still a far better man than a liberal who can never be called a hypocrite because he has no morals at all.
16) The most dire threat to America's future and prosperity in the last 150 years hasn't been the Nazis, the Soviets, or Al-Qaeda;, it's the spending and overreach of our own government.
17) Greed isn't someone wanting to keep more of what he earns; it's people demanding a greater share of money that someone else earns.
18) Most of the time in American politics, the liberal "victim" is really a bad guy who is absolutely delighted by the opportunity to pretend to be "offended."
19) Jesus Christ was not a conservative, a liberal, or a politician. He was also not a capitalist or a socialist. Still, you can say this: Jesus drew sharp lines about what's right and wrong, he wasn't tolerant of what the Bible categorizes as sinful behavior, and there's absolutely no question that he would adamantly oppose abortion and gay marriage.
20) When you demand that other people fund your sexual escapades by buying your contraception, your sex life becomes their business.
Islamic Rages Aimed at Enslaving the West
Six U.S. military men have been murdered by Afghan security forces seized by what may be labeled Quran-Burning Rage.
Quran-Burning Rage follows Pastor Jones Rage, which, after a Florida pastor burned a Quran in 2011, seized Afghan Muslims and inspired rioting. Some rioters overran a United Nations outpost and murdered seven U.N. personnel.
Pastor Jones Rage followed "Fitna" Rage, which seized Muslims worldwide even before the release of Dutch parliamentarian Geert Wilders' short 2008 film "Fitna." That film sparked rioting, arson, boycotts, death threats and, as a bonus, charges that led to the protracted trial in the Netherlands of Wilders for "insulting Muslims." (He was acquitted in 2011.)
"Fitna" Rage followed Teddy Bear Rage, which, in 2007, seized Muslims in Sudan after a British teacher, whose class named a teddy bear "Muhammad," was sentenced to 15 days for "insulting religion." Ten thousand Sudanese turned out to call for the teacher's head instead.
Teddy Bear Rage followed Pope Rage, which seized Muslims after a 2006 address in which Pope Benedict XVI noted a historic reference to Islam's propensity to spread by violence. Muslim rioting, arson (including church burnings) and the murder of a 65-year-old Italian nun in Somalia ensued.
All of these rages followed or coincided with the most sustained rage of all, Danish Muhammad Cartoon Rage, which, since the 2005 publication of a dozen Muhammad cartoons in a Danish newspaper, has seized countless Muslims in recurring waves of rioting, boycotts and arson. More than 100 deaths have resulted.
I could continue, but I think the pattern is clear. Critical discussion or representation of Islam -- including stated facts; satirical, political or religious commentary; or acts deemed by Islam to be "blasphemy" or "desecration" -- spur Muslims to violence. This violence spurs Westerners to apology. But apology is always an act of dhimmitude: submitting to Islamic definitions of crime or grievance that only under Islamic law require contrition.
Today, the pattern intensifies. Muslim violence is more brazen with the murders of American troops, and Western apologies are more exaggerated. The United States hasn't even quashed Afghan demands for a trial of those who last month disposed of several Qurans.
Meanwhile, the chorus for punishment grows. "After the first step of a profound apology, there must be a second step ... of disciplinary action," Jan Kubis, the United Nations representative in Afghanistan, said this week. "Only after this, after such a disciplinary action, can the international forces say, 'Yes, we're sincere in our apology.'"
Or, rather, yes, we're sincere in our dhimmitude.
Demonstrating his own "sincerity," Kubis continued: "We deeply, deeply, profoundly respect Islam. ... We were very hurt that the international military allowed the desecration of the Quran. We rejected and condemned this act; it doesn't matter that it was a mistake."
Kubis' example is most instructive. Speaking for the United Nations, he mimics the aggrievement of Islam. Indeed, Islam's aggrievement becomes the United Nations' own as it draws power from the demonstrably more kinetic Islamic position.
The fact is, this whole affair, like those that preceded it, is a power play. Feigned victimhood becomes a trap for the "perpetrator" -- in this case, the U.S. military. Falling for the trap means submitting to violent Islamic dictates for exactly the same reason a co-dependent family member submits to dictates of a mentally ill relative -- to stop the outburst, to make it all "better," even if "better" is only a lull before the next power play.
Just as such actions bring a co-dependent family member more closely into the behavioral orbit of the sick family member, they bring the United States more closely into the behavioral orbit regulated by Islamic law. They force the "perpetrator" into accepting the sacredness of an inanimate object; they force the "perpetrator" into accepting the Islamic position that a?Christian or Jew is unfit (unclean) to dispose of the sacred thing without desecrating it. They force the "perpetrator" to accept the Islamic belief that such "desecration" constitutes a crime of literally capital proportions.
They force the "perpetrator" to act Islamic. This is the pattern of dhimmitude, and we must break it.
Weak U.S. Economy Still the Leading Issue for Voters
President Obama may be getting great pleasure from the Republicans' lengthening battle over who can beat him in November. But he faces a much stronger opponent between now and then: a weakened U.S. economy.
The 3 percent fourth-quarter growth rate in the nation's gross domestic product was welcome news, but the fact is that the Obama economy grew at a sluggish 1.7 percent for all of 2011.
And it isn't expected to do a great deal better this year, either, according to the National Association for Business Economics. It is predicting only modest growth of 2.4 percent for the rest of this year.
Americans may not follow the economic growth rate that closely, but they do follow the unemployment rate, which has always been a lagging economic indicator. And that in the end may be Obama's political undoing this fall.
The government's unemployment rate, which has to be taken with a large grain of salt, is 8.3 percent. But the daily surveys conducted by the Gallup Poll put the jobless rate at 9 percent, and worse, the "underemployment rate," which includes people who can't find full-time work or who have dropped out of the work force, at 19 percent.
In another gloomy economic forecast, Fed Chairman Ben Bernanke told lawmakers Wednesday that the nation still faced major economic challenges before it was going to fully regain its health.
He reiterated that the unemployment rate isn't likely to drop much more than it has so far, and any further decline will "edge down only slowly" in coming years.
My Twitter.com identity: jonjayray. I have deleted my Facebook page as I rarely access it. For more blog postings from me, see TONGUE-TIED, EDUCATION WATCH INTERNATIONAL, GREENIE WATCH, POLITICAL CORRECTNESS WATCH, GUN WATCH, FOOD & HEALTH SKEPTIC, AUSTRALIAN POLITICS, IMMIGRATION WATCH INTERNATIONAL, EYE ON BRITAIN and Paralipomena
List of backup or "mirror" sites here or here -- for readers in China or for everyone when blogspot is "down" or failing to update. Email me here (Hotmail address). My Home Pages are here (Academic) or here (Pictorial) or here (Personal)