- By Bill Bonner
We've seen at least three articles explaining why the Fed failed to increase interest rates last Thursday.
One says Goldman Sachs is calling the shots now.
Another says China has the Fed under its thumb.
Still another claims the Fed is a victim of its own policies and is now stuck in a "doom loop."
All of them are right. All of the powers-that-be, including the Fed itself, want the party to continue. And all know that if the Fed starts going around and turning off the lights and unplugging the music, it's over.
As we tried to understand in our book, "Hormegeddon," public policies create their own support. When they're big enough, and go on for long enough, they become unstoppable.
Yesterday, US stocks rose 96 points on the Dow scale, recovering about a third of what they lost on Friday. But the bigger picture shows an equity market that is cut off from reality, pretending to ‘party on,' while desperately trying to ignore the fact that the rest of the revelers have gone home.
The Financial Times reports a conversation with John Burbank, of the Passport Fund:
"The world economy is locked on a course towards an emerging markets crisis and a renewed slowdown in the US, despite the federal Reserve's decision last week to hold off on a rise in rates..."
China, the world's number 2 economy, has already seen its stock market lose more than 40% of its value.
Japan, the world's number 3 economy, was supposed to be doing the funky chicken by now, led by Abe and a whole line of economists, including US advisor Paul Krugman. Japan has done "whatever it takes" to get its economy moving ahead. But whatever it did was not whatever it needed. Instead of racing ahead, Japans seems to be in its own permanent ‘doom loop.'
And Europe? Put together, European nations have a larger economy than the US. But right now, Europe, too, seems to be in a slump. At least that is what we gathered from listening in a conversation over dinner last night. Listening to your neighbors in a middle-class eatery is not one of the approved methods of economic research, but sometimes it reveals things the statistics don't tell you.
Autumn began yesterday. The plane trees along the river are beginning to lose their leaves. The first brown and curling leaves in Paris are like the first gray hairs on a beautiful woman; they make her more attractive than ever. It is raining today. The odor of fall is in our nostrils. The City of Light can be dark and gloomy in the autumn. But it only makes the warmth inside even more fetching.
"Oh, you know, Anne went to Polytechnic (one of France's top schools)," began the woman at the next table, while we were eating our filet mignon de porc. The restaurant is one of our favorites, the Beaujolais in the 16th. It is not for the food that we like it, but the style. It is old fashioned, like a bistro from 50 years ago, with rich woodwork, chandeliers, and brass railings that reflect the yellow light. It was Monday night. Few diners were there. It was easy to eavesdrop.
"Poor Anne; she so unhappy. And when she is unhappy she tends to eat too much and gain weight. We thought she would get a good job here in Paris. For months and months, she lived with us at home...going to interviews. She was getting very depressed. And partly, she was depressed because she didn't have a boyfriend. But I told her, ‘if you keep eating like that, what do you expect?'
"Finally, after about 6 months, she answered an ad on the internet for someone to work in San Francisco. Well, you know there...if you can just walk and talk at the same time...if you present yourself well, you know, if you dress properly and have a good education, apparently, you don't have any trouble getting a good job. Her employer is one of these internet things. I'm not sure what they are doing. But they are worth billions. Three young guys started the business. And they're very happy with Anne. And you know, even though she is a little ‘heavy,' she's actually pretty normal for there. She didn't admit it, but I think she has a boyfriend already. And she's only been there a month. I think he's Chinese or something."
"When she first started looking for work overseas, she thought she'd get a job in Brazil or maybe even China. But they are both doing worse than France. Apparently, it is only the US that is hiring people. And they like hiring foreigners."
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Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.