ECB's Praet Says Stimulus Losing Effectiveness

It has never been a question of whether or not the stimulus from the ECB has ever been effective, because it hasn't been.

ECB Executive Board member Peter Praet confirms this over the long term, as he said the longer the European Central Bank attempts to stimulate by throwing money at banks, and keeps interest rates at below-market levels, the less effective the measures become.

The longer we carry on with a highly accommodative monetary policy, characterized by extremely low interest rates and excess liquidity in the banking system, the more we will see a phenomenon manifesting itself with greater and greater evidence.

I am referring to what used to be known as 'instrument instability' in policymaking: the need to apply larger and larger doses of the same policy interventions only to see their macroeconomic influence becoming more and more tenuous.

Praet added the low interest rates also removes the incentive of governments to lower their deficits.

It's interesting to see Praet take on the role of the minutes read from the latest Federal Reserve meeting, where the markets were rocked after it was revealed that some of those in attendance questioned the stimulus policy of the Federal Reserve, just as Praet appears to be in Europe.

That was undoubtedly orchestrated, as are these statements by Praet. What appears to be happening is the central banks of the U.S. and Europe are using the media to manage the movement of various markets in response to the unrestricted quantitative easing.

More than likely it's an attempt to keep commodity prices in line, and inflation down. This is why the illusion of economic recovery and reporting continues to be asserted, even though there is almost nothing to reinforce the wishful thinking of those trying to blur the terrible global economy we still face.

IMF: Global Economy At Risk - Contradicts Bernanke

Although his name wasn't mentioned, Ben Bernanke essentially received a rebuke from one official from the IMF, who said risks to the global economy have 'risen significantly.'

While it could be a coincidence, it's doubtful when taking into account it came a day after Bernanke's irresponsible comments that the U.S. economy is doing okay, although it'll take some time to recover strongly.

IMF deputy managing director, Naoyuki Shinohara, said this, “After nearly two years of global economic and financial upheaval, shockwaves are still being felt, as we have seen with recent developments in Europe and the resulting financial market volatility. The global outlook remains unusually uncertain and downside risks have risen significantly.”

So to say America is puttering along at a decent pace in light of this is ludicrous, and ultimately dishonest of Bernanke, who knows better, and is still trying to salvage his legacy, which is sure to be horrid for what he's done to the economy and debt load of the United States through his policies at the Federal Reserve.

Oil, Unemployment and Economic Recovery

Excuses being prepared for why an economic recovery was reported as being real

Everywhere I read, I continually hear what sounds like excuses for why the so-called recovery won't be continuing on. Now I have no doubt there is no economic recovery, and the most recent excuse for that, from the mainstream media perspective, is the increasing price of oil.

Before we get into that, think for a moment if you're a consistent reader of economic news, on how many times over the last several months you've heard the term "unexpected" used when referring to economic data.

The latest "unexpected" referred to the number of new unemployment claims which were of course, "unexpected.

Why is it this way? That's easy. Reporters for mainstream media, and some of the sycophants of the Obama administration simply can't think in terms of there being no recovery after the trillions being spent to make sure there is one.

That would mean the government has failed, and they should have listened to those who told them and other that we should allow the market to take care of the problem and to leave their hands off of it.

Now for oil, it is rising in anticipation of what the industry is hoping is a robust summer vacation time for travelers, but I'm highly suspicious of that being what emerges. I think people will stay closer to home and continue to do more local and inexpensive activities.

So the assumption that oil will continue to rise in price can't be a certainty because of the continuing weak economy around the world, and especially in America.

what is happening, in my estimation, is mainstream media around the world are preparing to explain their failure in identifying the outrageous spending by governments and central banks and how it has been a disaster which future generations will have to pay for with almost no results. Of course they did identify it, but it'll be spun as something they didn't see, and are raising a bunch of bogeyman like oil and other "unexpected" events which brought their faulty conclusions into the light.

Of course the Keynesian economists are already preparing the same strategy, as they're made to look like the complete idiots they are, as they as a group supported the outrageous government spending which Keynesian economics is founded upon, and of course will be exposed as the complete failure it has always been; it just takes years for it to be exposed as debt is piled on, taxes are raised and money printed which can no longer cover up the hoax that it is.

Now other commodities are also being added to the mix as to why there may be economic problems ahead of us, but that misses the point. A number of economists and others have pointed out that printing money will result in inflation. Now that inflation is coming, the analysis is higher prices could keep the economic recovery from happening.

Another factor is demand, which always pushes prices higher if the demand is strong and supply weak, and that has been predictable for a long time.

All of this is saying the hoopla and stupidity of mainstream media in promoting the lie that we're in a recovery when in fact we haven't even began a recovery, has them scrambling to explain why that isn't so after reporting so faithfully on behalf of the Obama administration.

In other words: damage control. All the excessive government spending was for one reason, and that was an attempt to buy time in hopes there would be a legitimate recovery which would cover up the outrageous behavior of politicians, who for populist reasons allowed the outrage to continue, with little chance of it having a chance to succeed, although the politicians didn't know that, but there advisers and those in economic positions as well.

Now the mainstream media is positioning themselves in an attempt to keep from looking like complete buffoons in the matter, but it is far too late for that, as they committed to quickly, too long and too deeply to what was coming out of the White House concerning the alleged recovery, and now they'll have to again pay the price for becoming increasingly irrelevant concerning being legitimate sources of news, and more the parrots they've sadly become.

Citigroup (NYSE:C) Right on China Debt

Citigroup on China Debt and Risk

Citigroup (NYSE:C) was right when it warned China could have some major problems based on local government debt issues in the country. Seeming to confirm that, China Premier Wen Jiabao said China faces some challenges in that regard of its own, but the global economy also faces major problems going forward, with double dip recession very possible.

Of particular concern to Wen was the export market, which remains down, as consumers (especially Americans), hold back on spending, causing demand for products to continue to falter.

Other things that could dramatically impact the markets could be ongoing instability in the exchange rates, along with continuing sovereign debt problems in Europe, which while temporarily relaxed because of commitment by the European Union to back Greece if its efforts don't pan out, still are there with more important countries like Portugal, Ireland, Italy and Spain, which if any were to fall would be much more damaging than the fall of Greece; as far as the EU being able to save them goes.

For China, there are also issues of the extraordinary debt they now have as the consequences of their stimulus program, which Citigroup estimates could result in up to $350 billion in bad loans in the years ahead.

Commodities: Global Economic Summit

Ron Paul on the Troubling Global Economic Summit

Talking about the upcoming Global Economic Summit which probably will do nothing but cause more problems in the global economy, Ron Paul reveals his concerns and the folly what will eventually emerge from the countries involved.

Rather than take the opportunity to lead and make a real change for the better by promoting balanced budgets, sound money and less spending, America will probably go along and encourage some type of version of an international central bank, which in Paul's words would be "a horror."

What that will result in is more regulation and controls. It will do nothing to fix the real problems, but perpetuate the old ones.

Here's the video:




The Global Economic Summit will do nothing to help commodities, in the end, as usual, it'll just prolong the temporary lull in commodities being moved forward by the market.

Some Say Wait on Commodities Till Things Settle Down

The volatility in the economy, especially in relationship to base metals, gold and oil, have some experts saying investors should wait for a few days until things unwind and there's more clarity in the overall picture. I also think that's the best thing to do in current circumstances.

There are too many variables not usually connected to the market that make things at this time more unpredictable than usual.

With fear being a main driver at this time, we have to be cautious in what we do, as the rejection of the bailout package in America suggests.

Fear is being used as a tool by some now to get things done in the way they want them done. With this in mind, it makes it impossible to know with any reasonable accuracy in the short term which way things will go.

Even many analysts, normally glad to be in the spotlight, were quiet on Monday, as anything they say could go the opposite direction with ease.

I would wait a few days to allow things to settle down.

Bank of New York Mellon Corporation Says Commodity Investors Need to be Highly Selective Until Global Economy Recovers

Sept 25, 2008 /PRNewswire-FirstCall via COMTEX/ -- Investors will need to be highly selective in their allocations to commodities until the global economy recovers, which is expected to occur by 2010, according to a forthcoming white paper from The Boston Company Asset Management (TBCAM), an investment boutique within BNY Mellon Asset Management.

"We would maintain a modest allocation to commodities at this time, and then aggressively increase our positions at the first sign of a recovery," said Robin Wehbe, an equity research analyst at TBCAM. "We believe commodities are poised to hit new highs once a recovery begins to gather momentum."

Until the recovery, TBCAM would look closely at select commodities that require particularly long lead times to add capacity or face challenging geological hurdles. As examples, the TBCAM white paper noted that iron ore used in the production of steel and potash, a fertilizer nutrient, require tremendous investments to make extraction economical. Ramping up production for these two commodities can take seven years or longer.

"Focusing investments on commodities with tight fundamentals and producers with low-cost positions is the right approach for these markets," said Wehbe. "Companies with low-cost positions will enjoy an extended period of above-normal profitability and cash flow."

The Boston Company Asset Management, a BNY Mellon Asset Management investment boutique, provides investment management services for corporate, public, mutual funds and Taft-Hartley retirement plans, endowments and foundations.

The Bank of New York Mellon Corporation is a global financial services company focused on helping clients manage and service their financial assets, operating in 34 countries and serving more than 100 markets. The company is a leading provider of financial services for institutions, corporations and high-net-worth individuals, providing superior asset management and wealth management, asset servicing, issuer services, clearing services and treasury services through a worldwide client-focused team. It has more than $23 trillion in assets under custody and administration, more than $1.1 trillion in assets under management and services $12 trillion in outstanding debt. Additional information is available at bnymellon.com.
SOURCE The Bank of New York Mellon Corporation

BNY Mellon

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