Monday, September 16, 2013

Financial Sarcasm Roundup for 09/16/13

I'll lead off this particular roundup with a bizarre twist in the Fed-head replacement saga.  Larry Summers has withdrawn from consideration as the next Fed chairperson.  That means Janet Yellen is once again the heir apparent to Helicopter Ben.  I have two theories about this sudden pullout.  My first theory is that Summers' media game was a lot stronger than his real candidacy.  Old Washington hands are skilled at spinning the media even if they advocate a weak case.  If this theory is correct, Summers never had much of a chance and Yellen was always the front-runner, as I've long suspected.  Nothing negative in her background ever emerged in the media.  My second theory (which does not conflict with the first theory) is that Summers' public commentary on the limited effectiveness of QE was the dealbreaker.  Yellen's dovishness on inflation indicates she will continue QE-infinity, and that's ultimately what politicians want from the Fed now.  Bernanke likes Yellen because she'll continue his policies and thus take the fall for their eventual failure.  He's off the hook with the old "I'll be gone, you'll be gone" banking adage..

The reality of economic annihilation is filtering into the daily awareness of more Americans.  A record number of Americans self-identify as "lower class."  People receiving EBT cards and HAMP modifications have no illusions about their station in life.  That's why those programs aren't alleviating poverty.  Many of the working poor will simply give up on upward mobility if this class consciousness becomes permanently ingrained and they settle for a lifetime of collecting public benefits.  That may very well be what the plutocratic class wants the poor to do.  The country club's parking lot only has so many spaces and nobody wants to see a cheap compact car next to a Rolls Royce.

Emerging markets are on a debt binge.  This will end badly for markets that aren't export-driven.  It may be a blessing for markets that export hard assets and borrow in US dollars.  Hyperinflation will eventually destroy the dollar's value and leave hard asset owners feeling fine.  The Fed's hints of tapering QE have pounded emerging market equities lately.  Those hints will end once Yellen is running the Fed.  It's a great time to be a BRIC exporter.