What Central Planners Can Never Know

dailyreckoning.com / By Bill Bonner / August 9th, 2012

Dow up again – 51 points. But bond yields rising too… the ten-year now over 1.6%.

Perhaps we have seen the bottom of the great bear market in bond yields.

“You know, if you look at a chart of yield over the last 200 years,” says Rob Marstrand, our Family Office chief analyst, “you see something remarkable. Yields have been going down almost the entire time. There was a major spike up in the ’70s… and then down again. And now, they’re at their lowest point in two centuries.”

That trend may have now come to an end, just in the last few weeks…or not.

We don’t know. We won’t know for months…

What we do know is that our leaders’ efforts to lift the economy out of its funk have failed. They claim to have ‘whatever it takes’ to make people better off.

Which is what we’ve been talking about for the last few days. “Maybe they don’t”, was our point of departure. Today, promise, we reach our destination.

First, the world’s leading economies are all slowing down. Here’s the latest from the New York Times:

The Italian economy shrank again in the second quarter, official data showed Tuesday, and orders for German machinery declined sharply, a reminder that flagging growth continued to complicate European leaders’ quest to restore confidence in the euro zone.Italy’s gross domestic product declined 0.7 percent in the April-June period, compared with the first three months of the year, according to the country’s official statistical agency, Istat. The economy shrank 2.5 percent in the second quarter a year earlier.

The Italian economy has now contracted for four consecutive quarters, leaving it deep in recession. And with the entire euro area economy on shaky ground, analysts are pessimistic about the prospects for a near-term revival.

In Berlin, the German Economy Ministry said industrial orders fell 1.7 percent in June from May, far more than the economists surveyed by Reuters and Bloomberg News had anticipated. Factories had 7.8 percent fewer orders than a year earlier.

The Economy Ministry noted in a statement that domestic orders were weaker, “with the momentum coming from abroad.”

China, the US, Japan… are all slowing down too. The authorities think they know the way out of this mess. “Counter-cyclical stimulus” they call it. The idea is to give the market what it lacks – demand, by reducing the price and raising the availability of credit. In the simplest version, this means printing money…cash.

“That’s what’s nice about living in Argentina,” said Rob, a colleague. “Everything is so obvious. They don’t have these LTRO and the Twist programmes… They’re much more blatant… and in-your-face about it. It’s like a machine with the housing removed. You can see the gears turning. You can see how it really works.

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2012-08-10 02:22:11

Source: http://silveristhenew.com/2012/08/09/what-central-planners-can-never-know/