One of the most terrible aftermaths of the Global Financial Crisis (GFC) is that financial services companies have had to make serious dents into staff numbers to cut costs. Now for all of the ‘bankster’ arguments that have been made, the GFC has also meant decently paid but intelligent workers have been replaced with green graduates with no history or understanding of cycles. So as a result we are getting more misunderstandings.

These intern-esque kind of knowledge bank stood out because markets became happy that Ms Yellen is unlikely to raise rates because the US economy is sicker than people thought. You don’t say? See PMI and US non farm payrolls.

I might cynically say that the rate rise in December to 0.37% by the Fed was a headfake. It was trying to bluff markets into believing that the underlying economy was stronger than it really was. Isn’t it striking that employment has fallen off a cliff and PMI is a deflated balloon since. So for such a measly rise in rates to make out ‘inflation was coming down the pipe’ you might ask yourself is the economy so sensitive to punt change?

This is the argument I continue to make. Central banks have lost not only the battle but the war on monetary policy. They have spent all their ammo. For markets to cheer today at Yellen not raising rates from ‘stuff all’ to ‘peanuts’ should be a massive red flag. It is a perfect example of how dumbed down market participants have become. This is called believing one’s own bullshit.  Had Yellen raised rates markets should have cheered because of what that would have said something more concrete about real underlying strength.if she cut rates that would have spooked markets more. Standing pat was the only option.

Look at the ECB. Markit showed Eurozone manufacturing activity hit a 3-mth low. The Chief Economist of Markit wrote, “New orders grew at the slowest rate for over a year as demand showed signs of waning both within the euro area and further afield. Not surprisingly, companies remain reluctant to build capacity and take on extra workers, lacking signs of any imminent upturn in demand…France and Greece remain the key areas of concern, both seeing manufacturing contracting again in May. Worryingly, however, growth has also slowed sharply in previously fast-growing countries such as Spain, Italy and Ireland, meaning there are now no signs of robust manufacturing growth evident across the region…The overall slowing of manufacturing activity confounds expectations that recoveries will accelerate on the back of the ECB stimulus announced earlier in the year.Hopes remain pinned on forthcoming corporate bond purchases and new tranches of ultra-cheap bank loans from the ECB providing an extra boost in coming months.” Ireland hit a 34 month low followed by Spain at a 7-mth low.

So market participants need to wake up to realities here. Yellen’s remarks to me are yet more confirmation to remain very bearish. To mask it in words like the “Fed is in no rush” is not so much to do with fine tuned Fed planning but sheer fear. If you look closely you should be able to see the whites of their eyes. This is the prelude to panic stations. Don’t forget money velocity continues to slow!

So that is why under-performing assets like Gold are really the more sensible safe haven!

Before I forget Europe is even worse…on velocity…almost 5 euro needed to create 1 euro of GDP.