This morning's key headlines from GenerationalDynamics.com

• Indian Mujahideen suspected in bombing in Hyderabad
• Indian Mujahideen linked to Pakistan's Lashkar-e-Toiba
• Stock market has 'mini-panic' over Fed QE signal
• The Fed's falling inflation expectations
• Mainstream economists' failing recovery forecasts

Indian Mujahideen suspected in bombing in Hyderabad

Bomb site in Hyderabad (AP)

Two terrorist bombings killed 13 people and injured dozens others in a crowded marketplace in Hyderabad in India. No one has yet claimed responsibility, but terrorist group Indian Mujahideen (IM) is suspected. India's security establishment is coming under criticism for ignoring the interrogation of an IM operative in Delhi in October. The interrogation revealed three planned sites for terror attacks, one of which was Thursday's Hyderabad site.

DNA India and Times of India

Indian Mujahideen linked to Pakistan's Lashkar-e-Toiba

The Indian Mujahideen (IM) was founded by Abdul Subhan Usman Qureshi, who had come from an economically privileged background. and was educated at a school run by a Christian missionary in Mumbai. Anger at the mainstream media is cited by IM cadres as a motivator. It is argued that the mainstream media turns a blind eye to Hindu fundamentalist groups while mostly linking the fundamental nature of Islam to terrorism. IM is closely linked to Pakistan's Lashkar-e-Toiba (LeT), which supplies weapons and direction to IM. An objective of IM is to tie up India's security forces in India, giving LeT a free hand. Institute for Defence Studies and Analyses (IDSA)

Stock market has 'mini-panic' over Fed QE signal

The minutes from the Federal Reserve's January 29-30 meeting were released on Wednesday, and they "hinted" that some people at the Fed were getting concerned about the massive amount of money that the Fed is "printing" each month. There was a time, before 2008, when $60 billion dollars of one-time fiscal or monetary stimulus would have been considered an astronomical amount, and would have triggered national debate. But those days are long gone. For the last year or so, the Fed has been using quantitative easing to inject $85 billion dollars of monetary stimulus EVERY MONTH. The result was a kind of two-day "mini-panic" in the stock market.

I listen to the financial people on CNBC and Bloomberg TV -- as much as I can stand them -- and there's really no longer any pretense that the stock market represents anything real anymore. Everyone knows that the $85 billion in monthly stimulus hasn't help any ordinary people or small businesses. Instead, it goes to the investment banks and into the stock markets, so that the bankers can continue to pay themselves multi-million dollar bonuses and kick the money back into Obama campaign contributions. So when the Fed hinted that the $85 billion might be cut back, the stock market mini-panic began. Bloomberg

The Fed's falling inflation expectations

If the Fed had "printed" $85 billion per month of new money in the 70s, 80s or 90s, then inflation would have skyrocketed. But those days are past. As Alan Greenspan has pointed out, every single standard macroeconomic model has been completely wrong since 2007. The reason they've been wrong is that they're based on data from the 70s, 80s and 90s, when the Silent Generation was in charge. Today, the Gen-Xers and the Boomers are in charge, and the culture is now one of fraud, extortion, and screwing people. Today's culture is like the 1930s, and the only macroeconomic models that will work should be base on 1930s data.

The Fed puts out a regular report on "inflation expections" -- how much they expect inflation to rise in the current year, in the following year, and in each year for the next ten years. Unfortunately, the Fed's inflation forecasts have been abysmally wrong, year after year. Here's a chart of the Fed's inflation expectations as of February in each of the three past years:

Fed 'Inflation Expectations' in Feb '11, Feb '12, and Feb '13 (Marcus Nunes)

There are two interesting things about the above chart. One is that the Fed's inflation expectations have been falling each year, reflecting the fact that inflation itself has been falling.

The second interesting thing is that the Fed's models have been wrong every year in exactly the same way. Each year they predict a brief period of falling inflation, then a period of rising inflation. Instead, inflation keeps falling, and expectations keep falling.

Since 2003, I have been writing that, in this generational Crisis era, our economy is in a deflationary spiral. Since 2003, mainstream economists have been predicting that there would be inflation or hyperinflation the following year. They've been wrong every, and I've been right. Marcus Nunes

Mainstream economists' failing recovery forecasts

Mainstream economists are always predicting that prosperity is just around the corner, so that people will buy their stocks or bonds or whatever. Each month, the Congressional Budget Office (CBO) forecasts when there will be a full economic recovery. The Economic Policy Institute has done a study of the CBO forecasts for the last four years, and found that they have failed in exactly the same sort of way that the Fed's inflation forecasts had failed. Here's a chart of the CBO recovery predictions for January of each of the last few years: v

CBO forecasts of full economic recovery, Jan '08, Jan '09, Jan '10, Jan '11, Jan '12, and Feb '13. (Economic Policy Institute)

So, in Jan 2008, the were project full recovery by 2011. By Jan 2011, it would be 2016. And the latest projection, from February of this year, puts the forecast of full economic recovery at 2018.

As I've written many, many times, mainstream economists have no clue about what's going on. They didn't predict, and can't explain, the tech bubble of the 1990s, the real estate bubble, the credit bubble, the credit crunch of 2007, the collapse of 2008, they had no idea what was going to happen in 2012, and they don't have the vaguest clue what's going to happen in the next year. Unfortunately, with the Gen-Xers increasingly in charge, the worst is yet to come. Washington Post and Economic Policy Institute

Permanent web link to this article
Receive daily World View columns by e-mail