Inside Janet Yellen’s Brain at 4 a.m.…

By BILL BONNER
GUALFIN, Argentina – Poor Janet Yellen.
Usually, we reserve our pity for the poor, the downtrodden, and the hopeless. But today, we spare a thought for the clueless… and feel Yellen’s pain.
Markets are tense. Investors seem to be holding their breath.
Everyone is waiting to see what the Fed will do.
There must be hundreds of thousands – if not millions – of well-educated adults sitting on the edges of their seats… eager to hear what this rather ordinary functionary will say.

No Return to Sanity

Will Janet Yellen proudly put the Fed on the side of the angels, announcing that she and her crew have decided to move the Fed’s key interest rate to a more normal level… regardless of how much it costs the cronies?
Will she admit that the Fed’s ZIRP and its three QE programs have been failures? Or that they have shifted trillions of dollars toward the rich while leaving Main Street poorer?
Will she beg forgiveness for such errant policy decisions over such a long time and vow publicly never to interfere with the market again?
No, she won’t.
She will say the outlook is favorable – generally, clearing skies and fair weather is in the forecast. But there are some clouds forming out to the east that could lead to stormy weather.
So she will urge a cautious return to normalcy. She may be feeling confident and allow for a small rate increase… or she may be feeling fearful and decide to hold off for a while.
We don’t know. And it probably doesn’t matter much.

Permanent Emergency

Once you begin manipulating markets, it’s a hard habit to break.
First, investors come to look forward to it. Then businesses become hooked on it. And then you can’t stop even if you wanted to.
After nearly seven years of emergency financial policies, we are now in a permanent emergency.
But it is a phony emergency. Markets are supposed to go down as well as up. They’resupposed to correct their mistakes. They’resupposed to destroy malinvestment to make way for new capital formation.
It’s never been a real emergency; it was capitalism at work.
Poor Janet Yellen must not know what to think.
On the one hand, she is lauded as the most powerful woman in all history. Helen of Troy was a bit player by comparison. Cleopatra was merely the love interest in the battle between Julius Caesar and Mark Antony.
Susan B. Anthony? No one knows what she did… if anything.
But Janet – she has the entire world economy in her hand. She can squeeze it. She can bounce it on the floor. She can do what she wants with it.
On the other hand, there are the dark nights… when she must realize she is in way too deep.
She is supposed to do what no mortal can do. She is in charge of fixing – at least to the extent she is able – the most important price in a market economy: the price of credit.
It must have occurred to her that she shouldn’t be fixing it at all. Only the gods know what the price of credit should be. She is just human. If she sets the price of credit, she is bound to err.
What’s going on? Has she been set up to take the fall for Greenspan and Bernanke?
But wait… in a fiat money system banks don’t lend out deposits… or even a fraction of deposits. Instead, with a few keystrokes, banks create money ex nihilo (out of nothing) when they lend.
Surely, the head of the central bank can decide at what price banks can rent out capital, no?

Janet Yellen’s Brain at 4 a.m.

If I raise the rate, just a little, I’ll probably be hailed as a sober, responsible economist. After all, it is unnatural for the federal funds rate to be so low for so long.
And those charts and graphs on my “dashboard”… they seem to be saying that things really are returning to normal. People have jobs. The economy is growing. Why worry?
Of course, I know perfectly well those charts are mostly garbage. All the data is so jigged and jived by the back-office boys, who knows what is really going on?
And here I’ve got Bill Dudley at the New York Fed, Goldman Sachs, and Larry Summers all telling me that natural market forces are already tightening credit conditions… without waiting for the Fed. And that if we raise rates now, we’ll just be making a bad situation worse.
Maybe they’re right. But those zero-bound rates must be causing distortions that we don’t know about. The junk bond market, for one. And the corporate bond market, in general. How were we to know those rascal corporate execs would borrow money at our low rates just to goose up their shares, via buybacks, so they could earn even fatter bonuses?
And now, stock prices depend on our ultra-low rates. That’s crazy. They must know we’ll raise rates sooner or later. Then the people who bought stocks at some of the highest valuations in history… like those gamblers at Goldman… they must realize that they’ll lose money.
I guess it’s almost our duty to teach them a lesson…
But what if all these dumb-heads who’ve been gaming the Fed… betting that we’ll keep ZIRPing along for far longer than we probably should have… what if they panic?
What if we get a couple days of 1,000-point drops on the Dow? Won’t they all start pointing their fingers at me… claiming I caused the panic?
Of course, I did nothing of the sort. It’s not my fault they bought stocks at such high valuations. We were just trying to boost asset prices so the “wealth effect” would make Americans rush out and spend.
We have to raise the interest rate at some time, or the entire system will become unmoored… drifting to who knows where… and washing up on who-knows-what rocks.
But what if Larry is right? What if a rate increase makes credit conditions too tight? What if that provokes a sell-off in stocks… and sets in motion a chain of events such as those that led to the Great Depression?
Then stock markets plunge. The “wealth effect” turns negative. World trade collapses even further. Unemployment rises. And we end up in a new depression that lasts 10 years…
What if they say it’s my fault? What if they call it the Yellen Depression?
Oh, no… It’s not fair… It’s not fair… Boo-hoo… sob… sob… I should have stayed at Harvard. I’d have tenure. I’d have a nice pension. George and I could go the Martha’s Vineyard in the summer. It would be such a nice life.
Regards,
Bill

Standard & Poor's downgrades Japan from AA- to A+

Chris McGrath | Getty Images

U.S. ratings agency Standard & Poor's downgraded Wednesday its credit rating for Japan from AA- to A+, but has revised its outlook for the world's third-largest economy from negative to stable.
In a statement accompanying the re-rating, S&P added that economic support for Japan's sovereign creditworthiness has continued to weaken over the past three to four years and that the government's strategy to revive economic growth and end deflation appeared unlikely to reverse deterioration in next two to three years.
Recent cabinet office data released last week showed that the Japanese economy shrank an annualized 1.2 percent in April-June, less than the initial estimate of a 1.6 percent contraction. The median market forecast was a revision to a 1.8 percent contraction.
Read MoreJapan's Q2 GDP revised up but pressure on Abe, BoJ remains

Nonetheless, the data is expected to keep policymakers under pressure to do more to energize the fragile recovery.
Marcel Thieliant, Japan Economist at Capital Economics, called last week's data "hardly reassuring."

"The upshot is that price pressures are unlikely to strengthen as quickly as policymakers hope, so the chances of hitting the 2 percent inflation by next summer remain slim. We stick to our view that the BoJ will step up the pace of easing at its end-October meeting."

Donald Trump is right: America’s real unemployment rate is 40%

(Chris Matthews)  As depressing as the statistic sounds, the jobless rate was a lot higher in the 1970s.
Donald Trump’s presidential campaign is not predicated on the candidate’s mastery of or allegiance to facts.
His views on things like immigration or international tradeare just not supported by any relevant statistics. So whenThe Donald called into CBS’ Face the Nation on Sunday and claimed that Americans are living in a “false economy,” where the unemployment rate is actually 40% rather than the 5.1% as reported by the Labor Department, you’d be forgiven for believing this was just another Trumpian whopper.
But actually, this view can be supported by actual statistics. If you use the broadest definition of unemployment, the ratio of people over the age of 16 with jobs to the overall 16-and-over population, the Labor Department says that 40.6% of the population is unemployed.

Unfortunately, the veracity of Trump’s analysis ends there. As you can see from the above chart, 40% of the 16-and-over population not having a job is nothing new in America. Trump’s campaign slogan, Make America Great Again, presumably refers to his hope of returning America to it’s post-war glory, when the U.S. economy accounted for a much larger share of global GDP than it does today. But that was a time when a lower percentage of Americans of working age had a job.
When you study the statistics carefully, you find that the employment-population ratio has much more to do with social factors than the strength of the economy. As it became socially acceptable (and for middle class families economically necesssary) for women to enter the workforce in large numbers, the ratio rose. As the country aged and a greater share of workers entered retirement years, the ratio fell.
It’s also true that the Great Recession has affected the labor market in ways that are still being felt. Long-term unemployment skyrocketed and has yet to fall back to pre-crisis levels, and that fact shows up in the employment-population ratio. But to claim that the unemployment rate is a statistic that, as Trump said, “was made up by the politicians for the politicians . . . so they could look good,” has no basis in fact.
The Labor Department compiles and publishes many different measures of the health of the labor market, with the “official” rate, also known as U3, just being one of many. As I have written before, these numbers cannot be understood in a vacuum:

Sure, Wall Street and the White House might have an incentive to convince people that the economy is better than it actually is. (The media, on the other hand, is encouraged to play up bad news, which gets more attention.) But it’s an insult to the public’s intelligence to suggest that it could be tricked into thinking the economy is good just because the Labor Department says so.

The economy and the labor market are certainly not back to full strength, which is why the Federal Reserve, for instance, hasn’t yet begun raising rates even with the “official” unemployment rate lower today than the post-war average. But that doesn’t mean this particular statistic is a lie, or without its uses. It’s simply one of many statistics we must use to understand the health of the economy.

A $2 trillion bet against Fed raising rates this week

Casino economy vs. physical economy, hazard wins every time. Do not wonder the common sense got lost in the process and the madmen rule.

With investors fixated on Thursday’s key Federal Reserve FOMC meeting announcement and the prospect of the first interest-rate hike since the Great Recession, the message from a group of CFOs representing more than $2 trillion in market cap is in line with much of the market: Don’t hold your breath.
The majority CFO view has moved from betting on a September rate hike when last polled in May to a majority view in the August poll that the first rate hike gets backed up to 2016. Less than a quarter of CNBC Global CFO Council members polled believe the Fed will raise interest rates after its meeting on Thursday (compared to 47 percent in May’s poll). In the previous CFO poll, only 16 percent of CFOs were betting on the Fed delaying action until 2016.
Wall Street doesn’t think the Fed will announce a rate hike this week, either. The CME FedWatch shows that traders put the probability at only 25 percent, down from 40 percent last month.
http://www.cnbc.com/2015/09/15/a-2-trillion-bet-against-fed-rate-hike.html

Big Banks Cutting Tens Of Thousands Of Jobs; Huge Implications; Significant Fed Tightening Looks Like A Hard Sell. The Opposite Is Much More Likely.

by John Rubino
Some major banks — which over the past few decades have grown into the biggest financial entities the world has ever seen — appear to have hit a wall, and are now shedding tens of thousands of workers. Some recent examples:

Barclays plans to cut more than 30,000 jobs

(CNBC) – Barclays plans to cut more than 30,000 jobs within two years after firing Chief Executive Antony Jenkins this month, The Times reported on Sunday.
This redundancy program, which could reduce the bank’s global workforce below 100,000 by 2017 end, is considered as the only way to address the bank’s chronic underperformance and double its share price, the newspaper said, citing senior sources.
These job cuts are likely to affect staff at middle and back office operations, where largest savings are achieved, the Times said.
The paper said that a potential candidate, who would replace Jenkins, is expected to ax jobs much faster and more deeply than the ousted boss.
————————

Deutsche Bank to cut workforce by a quarter

(Reuters) – Deutsche Bank aims to cut roughly 23,000 jobs, or about one quarter of total staff, through layoffs mainly in technology activities and by spinning off its PostBank division, financial sources said on Monday.That would bring the group’s workforce down to around 75,000 full-time positions under a reorganization being finalised by new Chief Executive John Cryan, who took control of Germany’s biggest bank in July with the promise to cut costs.
Deutsche’s share price has suffered badly under stalled reforms and rising costs on top of fines and settlements that have pushed the bank down to the bottom of the valuation rankings of global investment banks. It has a price-book ratio of around 0.5, according to ThomsonReuters data.
Deutsche is mainly reviewing cuts to the parts of its technology and back office operations that process transactions and work orders for staff who deal with clients.
A significant number of the roughly 20,000 positions in that area will be reviewed for possible cuts, a financial source said. Back-office jobs in the group’s large investment banking division will be concentrated in London, New York and Frankfurt, the source said.
PostBank has about 15,000 positions, pointing to roughly 8,000 layoffs at Deutsche once the unit’s spinoff is completed as planned in 2016.
————————

UniCredit plans to cut around 10,000 jobs

(Reuters) – UniCredit (CRDI.MI), Italy’s biggest bank by assets, is planning to cut around 10,000 jobs, or 7 percent of its workforce, as it seeks to slash costs and boost profits, a source at the bank told Reuters on Monday.The planned cuts will be concentrated in Italy, Germany and Austria, several sources said, adding that they include 2,700 layoffs in Italy that have already been announced.
A UniCredit spokesman declined comment beyond noting that the bank’s CEO Federico Ghizzoni had on Sept. 3 said there were no concrete numbers on potential lay-offs, after a report said it was considering eliminating 10,000 positions in coming years.
UniCredit, which has 146,600 employees across 17 countries, is under pressure to boost its profits as low interest rates are expected to keep hurting its earnings in coming years.

Such a sudden, widespread retrenchment can mean several things:
1) Technology is making a lot of back office staff redundant. That’s reasonable and to be expected. Automation of knowledge work will be one of the big stories of the coming decade and finance is a prime target. A quick look at the growth of crowdfunding (from zero in 2009 to an estimated $50 billion in peer-to-peer loans in 2016) tells you all you need to know about the future of conventional bank lending.
2) The profitability of core banking operations is going to crater in the coming year and these guys are trying to get out in front of it — while hoping to hide the deterioration within massive workforce reduction write-offs.
3) The availability of good jobs for European college graduates — already too low — is going to shrink further. It’s virtually impossible for a finance-dependent system to grow while major banks are shrinking, so Europe will remain stuck in neutral while its governments pile up ever-greater debts and more peripheral countries join Greece on the public dole. And the euro will, at some point, be devalued suddenly and drastically.
5) The other big banks can’t be in much better shape, since they’re all operating in the same zero-interest rate, low-growth world. In the US, where auto loans have been a singular bright spot, what happens when cars stop selling? We may be about to find out. See U.S. factory output declines on sharp drop in auto production.
6) The global recovery is a mirage. Six years in, with stock and bond prices near record levels, demand for support staff in deal-driven entities like banks should be rising. Layoffs on this scale are bottom-of-a-recession events.
Add it all up, and significant Fed tightening looks like a hard sell. The opposite is much more likely.
==========================================================================

World Bank Warns Of Financial Turbulence If US Fed Raises Rates… Deutsche Bank: Interest-rate Hike Could Tank Stocks by 40%

The World Bank published a report today warning of possible financial turbulence in developing countries if the Federal Reserve raises interest rates this Thursday.
The BBC summarizes:

The World Bank has warned developing countries to brace themselves for possible financial turbulence when the US Federal Reserve starts to raise interest rates.
It could come as early as Thursday when the Fed concludes a policy meeting.
A new report from the World Bank says there will probably be a modest impact on developing countries.
But it also warns there is some risk that it could be worse.
The Bank says it is possible that there would be sufficient disruption to capital flows into developing countries to harm economic growth and financial stability.
‘Perfect storm’
US interest rates have been practically zero for more than six years and as the economy continues to recover, the Fed is sure to raise interest rates at some stage. The prospect has been a major concern for financial markets all year.
Developing countries are bound to be affected when it happens and the first step might be imminent.

http://www.activistpost.com/2015/09/world-bank-warning-for-financial-turbulence-if-federal-reserve-raises-rates.html
Interest-rate hike could tank stocks by 40%
NEW YORK – Bankers worldwide are warning a decision by the Federal Reserve to increase interest rates could precipitate a stock-market collapse.
Deutsche Bank, the European Union’s biggest bank, has grabbed attention by issuing a warning to the Federal Reserve that a rise in U.S. interest rates now would constitute nothing less than a “premeditated controlled demolition” that could cause global stock markets to collapse a dramatic 40 percent.
http://www.wnd.com/2015/09/interest-rate-hike-could-tank-stocks-by-40/#IRE5fZsiAFgFRS2m.99

JP MORGAN COMEX GOLD is about to RUN OUT! 252 to 1 paper/real gold ratio!

Comexodus: JPMorgan’s Vault Is One Withdrawal Away From Running Out Of Deliverable Gold
One week ago, when we reported the record plunge in registered gold held by the various Comex gold warehouses in general, and JPMorgan in particular, which saw the “gold coverage” ratio, or the number of paper claims through open futures interest for every ounce of deliverable gold, soar to what we then thought was a record, and unsustainable 207x, we thought this situation would be promptly rectified as a few hundred thousand ounces of eligible gold would be “adjusted” back into the “registered” category.

Not only has this not happened, but with every passing day the situation is getting progressively worse.
…there was a record 252 ounces of gold paper claims to every gold physical ounce of currently available and deliverable gold..
IF YOU DON`T WANT TO READ TOO MUCH, READ HERE:

To summarize: last week we were confident that JPM would promptly adjust a few hundred thousands ounces of Eligible gold back into Registered status to silence growing concerns about Comex distress. A week later we are not as concerned by the relentless surge in paper gold dilution, as we are that JPM still has not even bothered to do this. Especially since with just 335 kilograms of gold, or less than 27 bricks, JPMorgan is now just one withdrawal request away from running out of deliverable physical gold.

http://www.zerohedge.com/news/2015-09-15/comexodus-jpmorgans-vault-one-withdrawal-away-running-out-deliverable-gold
And apparently the gold in London is gone too.
http://www.silverdoctors.com/its-virtually-impossible-to-get-physical-gold-in-london/
UPDATE 2: IS THE US ALREADY BROKE AND NOBODY IS LENDING US GOV money from months?!?!? : go here and answer here:
IT`S REAL. US GOVERNMENT IS BANKRUPT AND NOBODY IS LENDING TO THE US GOVERNMENT FOR MONTHS! THEY AR BROKE!?!??!?!
150 Days: Treasury Says Debt Has Been Frozen at $18,112,975,000,000


(CNSNews.com) – The portion of the federal debt that is subject to a legal limit set by Congress closed Monday, August 10, at $18,112,975,000,000, according to the latest Daily Treasury Statement, which was published at 4:00 p.m. on Tuesday.
That, according to the Treasury’s statements, makes 150 straight days the debt subject to the limit has been frozen at $18,112,975,000,000.
$18,112,975,000,000 is about $25 million below the current legal debt limit of $18,113,000,080,959.35.
http://www.cnsnews.com/news/article/terence-p-jeffrey/150-days-treasury-says-debt-has-been-frozen-18112975000000

SS