Thursday, January 26, 2012

Welcome to the Age of Financial Repression; Markets Fall, Metals Gain

This was truly a strange day in US equity markets. On the heels of Wednesday's Fed announcement that the federal funds rate would stay at 0-0.25% until the latter part of 2014 (read: as long as we need ZIRP to keep the economy from collapse) and blow-out earnings from Caterpillar (CAT), stocks opened sharply higher, but then nose-dived right at 10:00 am, after the Commerce Dept. reported that new home sales in December fell by 2.2%, to an annualized rate of 307,000. Additionally, the median price of a new house purchased last month declined 12.8% from a year ago. 2010 now stands complete as the worst year for new home sales since records began being kept in 1963.

On top of the earlier-reported initial unemployment claims spiking back up to 377,000 from an upwardly-revised 356,000 last week, not even the hope of endless largesse from the Federal Reserve could keep stocks in positive territory. All major indices ended in the red. By contrast, gold and silver posted solid gains.

A term one won't be hearing much on mainstream media is "financial repression," and if it sounds harsh, it's because it is, and it is the reality of much of today's economic world.

Here's a definition of Financial Repression from Investopedia:
A term that describes measures by which governments channel funds to themselves as a form of debt reduction. This concept was introduced in 1973 by Stanford economists Edward S. Shaw and Ronald I. McKinnon. Financial repression can include such measures as directed lending to the government, caps on interest rates, regulation of capital movement between countries and a tighter association between government and banks. The term was initially used in response to the emerging market financial systems during the 1960s, '70s and '80s.

Bingo. Another term for the collusion of business and government is fascism.

Welcome to the new world order. For a glimpse of who and what are destroying the value of capital and thus, your money, just take some time to view the goings-on at the World Economic Forum in Davos, Switzerland. Surely, George Soros, Mark Zuckerman, Jamie Dimon and a gaggle of billionaires have the worming men and women of the world's best interests at heart.

Dow 12,734.63, -22.33 (0.18%)
NASDAQ 2,805.28, -13.03 (0.46%)
S&P 500 1,318.43, -7.62 (0.57%)
NYSE Composite 7,883.90, -30.91 (0.39%)
NASDAQ Volume 2,061,939,750
NYSE Volume 4,521,722,000
Combined NYSE & NASDAQ Advance - Decline: 2651-2944
Combined NYSE & NASDAQ New highs - New lows: 332-21 (very extreme)
WTI crude oil: 99.70, +0.30
Gold: 1,726.70, +26.60
Silver: 33.74, +0.62

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