This note was originally published at 8am on February 07, 2012. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.
“Inspired by a common creed, the young Keynesians sought each other out in the corridors of power.”
Picture that. I just love the drama associated with that quote by Nicholas Wapshott in Chapter 11 of “Keynes Hayek” titled Keynes Takes America. He was referencing meetings these guys would have in Washington at the National Planning Association in the early 1930s.
A National Planning Association!
Back to the Global Macro Grind…
Evidently we are now centrally planning a tax on not only American Savers, but Global Consumers too. Nice.
The price of Brent Oil is up almost +6% ($115.95/barrel this morning) since The Bernank’s decision to pander to the Corridors of Power and adopt his conflicted and compromised 0% rate or return for American Savers through 2014.
This is not new, but since President Obama took office in January of 2009:
- The US Dollar Index = down -8.3%
- The Price of Oil = up +165.8%
Now before you get all heated for my using the name Obama (my wife and I voted for him – team vote), long-time readers of my morning rants will recall that I was equally critical of President Bush’s Keynesian Policies to Inflate. Democrat or Republican in this country, if you’ve been economically “advised” in the last decade within the Corridors of Power, you’ve been Keynesed.
So how is that working out for you?
- The net jobs added during the Bush/Obama decade in America = 0
- The Price of Oil = +460% in the last decade (since February 2002)
- Your Savings Account has been given The Gold Finger (Gold up for 11 consecutive years)
But say nothing of these common Keynesian Creeds because political life is easier that way. Or is it? And for whom?
Broadening our horizons beyond the World Bank and IMF’s headquarters (right next to the Fed in Washington, DC), what’s happening in the rest of the world right now (particularly in the East) is that, ironically enough, 80 years later, young economists are gathering at their own meetings – Hayekians, Thatcherites, and Chaos Theorists – all of them. They don’t believe in National Planning Boards.
Look at what’s going on outside of the Corridors of Washington Power this morning:
- The Prime Minister of Singapore is warning of a “rough landing” in China if food/energy inflation re-accelerates
- The head of the Reserve Bank of Australia, Glenn Stevens, refused to cut interest rates on his citizenry’s savings accounts
What about Greece? It’s literally the first time in 2012 that all 3 of the Most Read headlines on the Bloomberg machine are about Greece this morning. Now that the Greek stock market is down -54% since February of last year when your local Keynesian strategist was telling you Greece was a “one-off” and Global Growth was “going to be fine”, I guess it matters…
Or does it?
Bloomberg news also reports this morning that the “Irish Urge Children to Leave Amid Job Losses.” Great.
The Global Zeitgeist on these macro matters is fairly straight forward. No one trusts that any one of these aging Keynesians will get it right in the end. That’s one of the many reasons why the US Labor Participation Rate in last week’s glorified employment report hit a 30-year low. People are giving up.
Keynes nailed it – in the long-run, all of the politicians will be dead. That said, in the short-run the rest of us have to live.
Larry Kudlow asked me last night where I see the immediate-term economic pressure (growth expectations falling as inflation expectations are rising). With Energy stocks (XLE – we’re long inflation expectations) up +1.2% on the day and the SP500 flat, it was fairly obvious yesterday. That was good for my P&L – not good for the country.
Long-term US Treasury yields have been signaling Growth Slowing since Ben Bernanke made his move on January 25th. Just when free markets were getting ready to bust a move above my key intermediate-term TREND line of 2.03% resistance on the 10-year, boom – we got Bernanked.
Being Keynesed or Bernanked may be good for short-term stock sector and commodity market inflations, but they’re not good for the long-term economic health of this or any other consumption led economy.
My immediate-term support and resistance ranged for Gold, Oil (Brent), EUR/USD, Energy (XLE), 10-year UST Yield, and the SP500 are now $1704-1762, $112.56-115.93, $1.30-1.32, $71.93-73.76, 1.80-1.96%, and 1325-1348, respectively.
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer