US Recovery Bets Big on Technocratic Efficiency
By Staff News & Analysis - May 29, 2013

Confidence at Five-Year High as U.S. Housing Climbs: Economy Consumer confidence climbed to the highest level in more than five years and home prices advanced by the most in seven as the housing rebound gives the U.S. economy a lift. The Conference Board's sentiment index rose to 76.2 in May, exceeding all estimates in a Bloomberg survey of economists and the highest since February 2008, data from the New York-based private research group showed today. – Bloomberg

Dominant Social Theme: Everything is good, thanks to good, gray central bankers.

Free-Market Analysis: We don't see a recovery is taking place even though house prices are going up in the US and the stock market is scaling the skies. What's happening is that the central bank has printed money and debased the currency. First you get a wealth effect and then come the negatives, including price inflation that will bring a host of additional difficulties.

Right now, they are taking their profits, anyone who understands this game. And perhaps they are placing more bets, especially in the US stock market, depending on whether they believe Ben Bernanke can keep the balls in the air.

Of course, it has been duly noted by many that Bernanke is retiring. Presumably, he doesn't want to unwind what he has wrought. And in the meantime, the mainstream media will trumpet his almost sociopathic money printing as a kind of victory.

They already are. Obama is being hailed as a president who has presided over an unprecedented stock market rise. In fact, he's simply observed the effects of financial inflation. And listen to Bloomberg:

The S&P/Case-Shiller index of property values in 20 cities increased 10.9 percent in the year to March, the biggest 12- month gain since April 2006. Rising property and stock values are boosting household finances, helping Americans cope with an increase in the payroll tax and wage gains that have barely kept up with inflation.

Stocks climbed as the reports underpinned the outlook for consumer spending and earnings at companies ranging from retailers such as Williams-Sonoma Inc. (WSM) to homebuilders including PulteGroup Inc (PHM). "We're getting back on track," said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, the topranked forecaster of Case-Shiller data over the past two years, according to data compiled by Bloomberg. "Housing continues to look very solid in a broad-based manner. We're continuing to expand."

The Standard & Poor's 500 Index rose 0.6 percent to 1,660.06 at the close in New York. The S&P Supercomposite Retailing Index also climbed 0.6 percent. Treasuries fell, sending the yield on the benchmark 10-year note up to 2.17 percent, a one-year high. Survey Results The median estimate in a Bloomberg survey projected the consumer confidence index would rise to 71.2. Forecasts (CONCCONF) of the 75 economists polled ranged from 65 to 76. The April reading was revised up to 69 from a previously reported 68.1 in April.

Do you hear the almost triumphal tone? International socialism is cheering today. They believe they have done it again, created the basis of a "recovery" while keeping the con alive. It's a system all right, but one that entrenches certain players at the expense of others.

The Internet and the information it provides has given a view of just how the manipulations work. In this case, the Federal Reserve printed trillions even in the face of the greatest downturn since the Great Depression. And with the kind of "implacable rigor" shown until recently by Eurocrats with their austerity program, the Fed declined to hand out any money to the middle class directly. The channel as usual was the financial industry.

In a few months, by handing over money to individual consumers, the Fed could have short-circuited this tortuous journey of five years. But in doing so, the Fed would have illustrated that it presides over what is merely a facsimile of a real free-market economy.

People would have internalized the reality of what the Fed does, which is print money-from-nothing and hand it out to its cronies. These individuals in turn place funds in the stock market, which gradually ascends. Eventually, when it is high enough, the monetization spills out into the larger economy. But it can take a tortuously long time. And it has. Tens of millions are out of work and the gray and black economy in the US has blossomed like never before.

Another reason the Fed has not wanted to hand out money directly to consumers is that the resultant price inflation would have been severe and probably almost immediate. But here is the irony: Price inflation is going to take place anyway.

Is this the reason US officials seem to be preparing for an insurrection? When price inflation takes off – and there is already plenty of it despite what government figures indicate – then two things will happen. Consumers will see for themselves the nature of this faux recovery. And the US government will be whip-sawed by debt and interest rates.

The debt burden carried by Fedgov is already too big and high rates will make it insupportable. If the Fed cannot remove money from the economy in a timely and scientific manner, then the "recovery" may well blow sky high.

After Thoughts

This is the bet that the good, gray men of the Fed have made. Do you think they will win it?

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