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By its actions, the Federal Reserve has selected a precious few winners and many, many losers. Sadly, you are highly likely to be one of the losers.

Sorry!

I’m one, too, if that helps soften the blow.

But we have a lot of company. Other losers include:

Savers
Anyone with money in a checking account
Anyone with money in a savings account
Anyone with money in a CD
Anyone depending on bond income
All pensions
Endowments
First time homebuyers
Renters
Those who invest based on fundamentals
Everybody alive in the future, when the bills come due

Anyone on this list has been intentionally pre-selected by the Fed for losing. The Fed has done this deliberately, with full pre-knowledge that it was going to diminish the prospects of the majority in favor of the benefit of an elite few. And to make matters worse, it has no plans to — and no clue how to — reverse the damage it has wrought.

Everyone on the list above has been dinged by the Federal Reserve — on purpose and by design, I will repeat — in order to transfer wealth and purchasing power to:

Big banks
The government
Entities with large stock (equity) holdings
The wealthiest 0.1%
Speculators
Borrowers (the heavier the better)
Well-connected insiders whom the Fed tipped off in advance

This has, of course, not been lost on the 99.9% relegated to the loser camp. They are angry and growing more pissed off by the day. We see this anger playing out politically, in street protests, and in growing tensions with the police. All of this is connected, of course.

Soon, more and more folks will figure out the source of the growing inequity causing this anger, and the hot new trend of the future will be Fed bashing. So you might as well get in on the ground floor…

…click on the above link to read the rest of the article…

Alan “Bubbles” Greenspan Returns to Gold

July 10, 2016

Alan “Bubbles” Greenspan Returns to Gold

Under a gold standard, the amount of credit that an economy can support is determined by the economy’s tangible assets, since every credit instrument is ultimately a claim on some tangible asset. […] The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit.

— Alan Greenspan, 1966

BALTIMORE – That old rascal!

Before joining the feds, former Fed chief Alan “Bubbles” Greenspan was a strong proponent of gold and the gold standard.

He wrote clearly and forcefully about how it was necessary to restrain the Deep State and protect individual freedom.

Then he went to Washington and faced a fork in the tongue.

In one direction, lay honesty and integrity. In the other, lay power and glory.

Faking It

Under the Bretton Woods monetary system, the U.S. promised foreign central banks that it would convert their dollars to gold at a fixed price of $35 an ounce.

This constrained the amount of dollars the U.S. could print to the amount of gold it had in its reserves.

A smart man, Greenspan quickly realized he could not advocate for this old, tried-and-true gold standard and run the Deep State’s new credit money system.

In 1987, he made his choice. He took over the top job at the Fed and faked it for the next 19 years.

Since 1978, we have had four different Fed chiefs. Some were smart. Some were honest. Only Paul Volcker was smart and honest.

Bernanke was honest… we believe. As near as we can tell, so is Janet Yellen. Both may mean well, but both are careful not to think out of the Deep State box.

…click on the above link to read the rest of the article…

Planet Debt

July 5, 2016

Planet Debt

Low Interest Rate Persons

She is a low-interest-rate person. She has always been a low-interest-rate person. And I must be honest. I am a low-interest-rate person. If we raise interest rates, and if the dollar starts getting too strong, we’re going to have some very major problems.

— Donald Trump

TrumpoYell Two low interest rate persons! The Trumpsumptive president (Donald the Tremendous) can be seen here indicating the approximate size of the interest rate that will still keep us out of “major problems”.

BALTIMORE – With startling clarity, the presumptive Republican presidential nominee described himself – and Fed chief Janet Yellen. But he could have just as easily been talking about his rival in this year’s presidential elections, Hillary Clinton.

Donald Trump had already gone broke – twice – by the time Bill Clinton took office. But then, the combination of lower interest rates and rising asset prices saved him.

And extraordinary abundance and prosperity of the Clinton years owes little to Mr. and Mrs. Clinton and much to the fact that Alan Greenspan had inaugurated his famous “Greenspan Put” in 1987.

1987 – the year of Greenspan’s original sin – click to enlarge.

Greenspan reassured investors that he had their backs with a rate cut whenever the stock market took a turn for the worse. This led to an “illusion of prosperity,” as stock prices rose, helping Bill get reelected… and gaining national prominence for Hillary as the aggrieved wife in the Monica Lewinsky affair.

Stock prices filled with hot air, until the bubble in the Nasdaq blew up in Clinton’s last year in office. Both of this year’s presumptive candidates are “low interest rate” people, all right. Their adult lives were marked by the credit cycle and their careers shaped by ballooning debt. And now, almost the entire world economy depends on low rates.

We live on Planet Debt.

…click on the above link to read the rest of the article…

Greenspan: “This Is The Worst Period I Recall; There’s Nothing Like It”

June 25, 2016

Greenspan: “This Is The Worst Period I Recall; There’s Nothing Like It”

During a CNBC inteview today, when discussing the historic Brexit vote outcome, Alan Greenspan unleashed a fiery sermon that could have been prepared just by reading a random selection of posts from this website, the former Fed chairman told his shocked hosts that the current period, far from the raging “Obama recovery” spun every day by adaministration propaganda appratchicks and one that prompted the Fed to unleash a ridiculous rate hike cycle in December just as the US is sliding into a recession, and is instead the “worst period” he has seen, surpassing even the infamous Black Monday in severity.

“This is the worst period, I recall since I’ve been in public service. There’s nothing like it, including the crisis — remember October 19th, 1987, when the Dow went down by a record amount 23 percent? That I thought was the bottom of all potential problems. This has a corrosive effect that will not go away. I’d love to find something positive to say.”

Of course, what he is referring to was a market shock which was the result of a massive capital account imbalance resulting from the aftermath of the Louvre Accord coupled with the then trendy Portfolio Insurance (in which everyone was on the same side of the boat, much like now) and not so much an all out economic malaise. Which, however, does beg the question when a Black Monday-like market crash is coming?

Rhetorical questions aside, Greenspan was referring to the unprecedented combination of economic stagnation, deteriorating demographics, insolvent entitlement programs, social inequity and wealth division, and of course, a historic debt overhang which could and should have been cleared out in the crash of 2008 but instead was preserved to avoid wiping out the same “equityholders” who also happen to be the Fed’s direct and indirect stakeowners.

…click on the above link to read the rest of the article…

No More Twofers——Why The Vaunted “Clinton Prosperity” Of The 1990s Is A Risible Myth

May 18, 2016

No More Twofers——Why The Vaunted “Clinton Prosperity” Of The 1990s Is A Risible Myth

That Hillary Clinton has—–unaccountably——stood by her man for 40 years is her particular foible. But now she wants 320 million Americans to stand by him, too, by electing her President so she can make Bill the nation’s economic czar:

During a speech in Kentucky Sunday she referred to “my husband, who I will put in charge of revitalizing the economy ’cause he knows what he’s doing.”

Actually, he doesn’t.

Herein follows a two-part essay on why Bill and Hillary Clinton had precious little to do with the vaunted prosperity of the 1990s, and why another twofer would be exceedingly bad for the nation.

In truth, it was the doing of Alan Greenspan, and not in a good way.

In fact, the roaring tech era prosperity was but an old fashioned crack-up boom. That is, a simulacrum of prosperity that was an artifact of monetary inflation and financial speculation. It was not merely unsustainable; it was guaranteed to boomerang against the future, and it has in spades.

In fact, the Greenspan Boom was the very fount of the financial toxins which have plagued this century. To wit, the housing and credit implosions after 2007, the stock market meltdown and the collapse of the Wall Street gambling houses in 2008-2009, the disabled, stall-speed main street economy since the crisis, the unspeakable windfalls to the 1% enabled by NIRP and QE and the desperation in the flyover zone of America that begat Donald Trump—-all had their roots in the 1990s monetary perfidies of Easy Al.

None of the Cool-Aid drinking “economists” of Wall Street or Washington are capable of exposing the Clinton Prosperity myth, even if they were politically inclined. That’s because they are linear-thinking paint-by-the-numbers practitioners of one or another form of the Keynesian gospel.

…click on the above link to read the rest of the article…

Former Fed Advisor Asks “Has The Fed Bankrupted The Nation”

April 14, 2016

Former Fed Advisor Asks “Has The Fed Bankrupted The Nation”

Volcker, Greenspan, Bernanke and Yellen.

Which one does not belong? Logic dictates that Volcker should have been odd man out. After all, there is no legendary “Volcker Put.”

The towering monetarist made no bones about never being bound by the financial markets. The same can certainly not be said of his three successors. And yet, history contrarily suggests it is to Volcker above all others that the financial markets will forever be beholden.

Many of you will be familiar with Michael Lewis’ memoir, Liar’s Poker. Yours truly first read the book in a Wall Street training program much like the one Lewis survived to describe in his autobiographical work. The take-away then, in late 1996, was that Gordon Gekko was right — greed was good.

Recently, a second reading of Liar’s Poker, following nearly a decade inside the Federal Reserve, delivered a much different message than did that first youthful reading and was nothing short of an epiphany: Paul Volcker, albeit certainly inadvertently, created the bond market.

On Saturday, October 6, 1979. Volcker held a press conference and announced that interest rates would no longer be fixed and that further the Fed would begin to target the money supply in order to curb inflation and “speculative excesses in financial, foreign exchange and commodity markets.”

Alas, this new regime was not meant to be. In trying to introduce an alternative to interest rate targeting, the Fed replaced one guessing game with another. Predicting the demand for reserves and then buying or selling securities based on that demand proved to be just as dicey as a similar exercise to target a given level of interest rates had been.

…click on the above link to read the rest of the article…

Bernanke’s Former Advisor: “People Would Be Stunned To Know The Extent To Which The Fed Is Privately Owned”

April 11, 2016

Bernanke’s Former Advisor: “People Would Be Stunned To Know The Extent To Which The Fed Is Privately Owned”

With every passing day, the Fed is slowly but surely losing the game.

Only it is not just former (and in some cases current) Fed presidents admitting central banks are increasingly powerless to boost the global economy, even if they still have sway over capital markets. What is far more insidious to the Fed’s waning credibility is when former economists affiliated with the Fed start repeating mantras that until recently were only a prominent feature in the so-called fringe media.

This is precisely what happened today when former central bank staffer and Dartmouth College economics professor Andrew Levin, special adviser to then Fed Chairman Ben Bernanke between 2010 to 2012, joined with an activist group to argue for overhauls at the central bank that they say would distance it from Wall Street and make its activities more transparent and accountable to the public.

Levin is pressing for the overhaul with Fed Up coalition activists. Many of the proposed changes target the 12 regional Federal Reserve Banks, which are quasi-private and technically owned by commercial banks in their respective districts.

All of that is not surprising. What he said to justify his new found cause, however, is.

“A lot of people would be stunned to know” the extent to which the Federal Reserve is privately owned, Mr. Levin said. The Fed “should be a fully public institution just like every other central bank” in the developed world, he said in a conference call announcing the plan. He described his proposals as “sensible, pragmatic and nonpartisan.”

…click on the above link to read the rest of the article…

Ben Bernanke: “Helicopter Money May Be The Best Available Alternative”

April 11, 2016

Ben Bernanke: “Helicopter Money May Be The Best Available Alternatives

Now that the prospect of helicopter money by the ECB has so infuriated Germany, the ECB had to reach out to Schauble to “mollify” the Germans who are dreading the second coming of monetary paradrops in one century, it was only a matter of time before Citadel’s most prominent employer opined. In a blog post earlier today, Brookings’ blogger and the central banker who together with Alan Greenspan has been most responsible for the world’s unprecedented debt pile and sad economic state, Ben Bernanke, took the podium to share his views on “helicopter money” head on.

In “What tools does the Fed have left? Part 3: Helicopter money” the former Fed head who first infamously hinted at helicopter money in his November 2002 speech “Deflation: Making Sure “It” Doesn’t Happen Here” when he quoted Milton Friedman, once again started off with a Friedman quote:

“Let us suppose now that one day a helicopter flies over this community and drops an additional $1,000 in bills from the sky, which is, of course, hastily collected by members of the community. Let us suppose further that everyone is convinced that this is a unique event which will never be repeated.” (Milton Friedman, “The Optimum Quantity of Money,” 1969)

He then pulls a quote from his own book “The Courage to Act”

“The deflation speech saddled me with the nickname ‘Helicopter Ben.’ In a discussion of hypothetical possibilities for combating deflation I mentioned an extreme tactic—a broad-based tax cut combined with money creation by the central bank to finance the cut. Milton Friedman had dubbed the approach a ‘helicopter drop’ of money. Dave Skidmore, the media relations officer…had advised me to delete the helicopter-drop metaphor…

…click on the above link to read the rest of the article…

Recipe for Collapse: Rising Military and Social Welfare Spending

March 23, 2016

Recipe for Collapse: Rising Military and Social Welfare Spending

Leaders faced with unrest, rising demands and dwindling coffers always debauch their currency as the politically expedient “solution.”

Whatever you think of former Fed chair Alan Greenspan, he is one of the few public voices identifying runaway entitlement costs as a structural threat to the economy and nation. We can summarize Greenspan’s comments very succinctly: there is no free lunch. The more money that is siphoned off for entitlements, the less there is for investment needed to maintain productivity gains that are the foundation of future income generation: Greenspan: Worried About Inflation, Says “Entitlements Crowding Out Investment, Productivity is Dead” (via Mish)

Many people look to the rising costs of the U.S. military as the structural problem, and they have a point: there is no upper limit on military spending, and the demands (by the civilian leadership of the nation) on the services and the Pentagon’s demands for new weaponry are constantly pushing budgets higher.

But the truth is entitlement spending now dwarfs military spending:entitlements are more than $1.75 trillion, half of all Federal spending, while the Pentagon, VA, etc. costs around $700 billion annually.

We have a model for what happens when military and social welfare spending exceed the state’s resources to pay the rising costs: the state/empire collapses. The Western Roman Empire offers an excellent example of this dynamic.

As pressures along the Empire’s borders rose, Rome did not have enough tax revenues to fully fund the army. Hired mercenaries had become a significant part of the Roman army, and if they weren’t paid, then the spoils of war became their default pay.

This erosion of steady pay also eroded the troops’ loyalty to Rome; their loyalties switched to their commanders, who often decided to take his loyal army to Italy and declare himself Emperor.

…click on the above link to read the rest of the article…

Will The Fed Follow The BoJ Down The NIRP Rabbit Hole?

March 17, 2016

Will The Fed Follow The BoJ Down The NIRP Rabbit Hole?

On Monday, in “JPM Looks At Draghi’s ‘Package,’ Finds It ‘Solid’ But Underwhelming,” we noted that according to Mislav Matejka, investors would do well to fade the ECB’s latest attempt to jumpstart inflation, growth, and of course asset prices with Draghi’s version of a Keynesian kitchen sink.

“Overall, we believe the latest package is far from a game changer,” Matejka opined.

What was especially interesting about that particular note was the following graph and set of tables which show just how “effective” NIRP has been for the five central banks that have tried it so far.

As you can see, once you go NIRP, it’s pretty much all downhill from there whether you’re talking inflation, the economy, or even equities.

Given that, and given that the entire idea is absurd on its face for a whole laundry list of reasons, one wonders why any central banker would chase down this rabbit hole only to find themselves the protagonist in the latest retelling of “Krugman in Wonderland”.

In any event, for those wondering whether the Fed will join the ECB, the BoJ, the Riksbank, the SNB, and the NationalBank in this increasingly insane monetary experiment, below, courtesy of Bloomberg, find a chronological history of Fed and analyst commentary on NIRP in America.

FED COMMENTARY

March 16: Yellen said during post-FOMC press conference Fed isn’t actively considering negative rates, studying effects in other nations
March 2: San Francisco President Williams said “we’re not doing negative interest rates”; Williams Feb. 25 said negative rates are “potentially in the toolbox” but may have “unintended consequences”
March 1: Former Fed Chairman Alan Greenspan said on Bloomberg Radio and TV negative interest rates, if pursued for an extended period of time, will eventually distort saving and investment…click on the above link to read the rest of the article…

Greenspan Explains The Fed’s Miserable Track Record: “We Didn’t Forecast Better Because We Can’t”

March 12, 2016

Greenspan Explains The Fed’s Miserable Track Record: “We Didn’t Forecast Better Because We Can’t”

On March 11, the National Archives announced its first opening of Financial Crisis Inquiry Commission (FCIC) records, along with a detailed 1,400-page online finding aid (yes, just the index is 1,400 pages). The records which are available via DropBox, seek to identify the causes of the 2008 financial crisis.

Among the numerous materials are interviews with key players in Washington and on Wall Street, from Warren Buffett to Alan Greenspan. The documents also include minutes of commission meetings and internal deliberations concerning the causes of the financial crisis.

While we admit we have yet to read the several hundred thousand pages released yesterday, here is what has so far emerged as of the better punchlines within the data dump, and it comes courtesy of the man who many believe is responsible not only for the second global great depression (which needs trillions in central bank liquidity to be swept under the rug every day), but for the “bubble-bust-bigger bubble” cycle that was unleashed with Greenspan’s Great Moderation.

Here is Allan Greenspan meeting with Dixie Noonan et al on March 31, 2010:

This is a reason why the Board is getting an unfair rap on this stuff. We didn’t forecast better than anyone else; we regulated banks that got in trouble like anyone else. Could we have done better? Yes, if we could forecast better. But we can’t. This is why I’m very uncomfortable with the idea of a systemic regulator, because they can’t forecast better.

This comes from the person in charge of the most powerful central bank in the world; a world which now is reliant exclusively on central bankers for its day to day pretend existence.

Good luck to all.

Secret Monetary Group Warns a Catastrophe Is Coming

March 10, 2016

Secret Monetary Group Warns a Catastrophe Is Coming

This is just the tip of the iceberg.

The Bank for International Settlements is nothing if not obscure. As the central bankers’ bank, it seems little-more than a back-door, private club for monetary elites to rub shoulders. And it’s located in Switzerland which has always carried a reputation for financial secrecy.

Then it has this going for it – John Keynes of “Keynesian economic theory” opposed its dissolution back in the 1940s. His was the kind of thinking that has largely influenced central banks to hijack our economies with manipulative monetary policies! So you’d probably think I hate these guys.

But you’ve got to give credit where credit is due. The Bank for International Settlements is one of the few financial institutions that warned of dangers to the global financial system as early as 2003.

So by time the financial crisis struck, they’d been warning about it for years. Its former chief economist, William White, even dared to challenge former Fed Chair Alan Greenspan about cheap money policies that helped start the crisis!

Once again, this group is on the right side of history.

It just warned about a “gathering storm” in the global economy as central banks seem to be running out of options. They’ve seen right through this “recovery” and warned that unprecedented debt levels would put the world economy in worse shape than before the 2008 crash.

Because like with any addiction, there is a point where increased stimulus just doesn’t work anymore.

Just this week, China reported a 25.4% year-over-year decline in exports, despite continued strong economic stimulus from the government. Now, they simply pledge more stimulus like every central bank in the world.

Then there’s Japan, whose economy remains in a coma after the most aggressive QE of all developed nations. Four of the last seven quarters have been negative, including the fourth quarter of 2015.

…click on the above link to read the rest of the article…

Eugen Bohm Von Bawerk: Greenspan, The Sheepherder

March 9, 2016

EUGEN BÖHM VON BAWERK: GREENSPAN, THE SHEEPHERDER

It is common knowledge by now that Federal Reserve Chairman Alan Greenspan oversaw, enabled and approved of, a major transition in the US economy. His infamous “Greenspan-put” in which his actions at the central bank would be driven, if not dictated, by the whims of financial markets, clearly led to higher asset prices. Investors obviously picked up on the strong bias in the Greenspan-Fed’s conduct of monetary policy as they slashed rates at the tiniest hiccup in financial markets, and kept them at low levels for much longer than what would be considered prudent by former administrations. Following markets on the escalator up and taking the elevator down together set a precedent that created a Frankenstein monster, which socialised losses through the printing press while privatizing profits. Such a system was and still is unsustainable as it more or less ensures valuations decouple from underlying fundamentals.

The monetary system in place since the gold-exchange standard that emerged from the rubbles of WWI clearly favours inflation over deflation, so we should expect values expressed in money to have an upward trend imbedded in them. However, a stable system would see nominal valuations rise more or less in tandem. In other words, we would expect a balanced sustainable system to see the price of apples, S&P500, cars, commodities and GDP grow more or less at the same pace.

Note, we are not saying certain markets will never experience idiosyncratic price movements due to their own peculiarities as driven by shifts in supply or demand. On the contrary, shifts inrelative prices are the one thing that make a capitalistic system stable over the long run.

…click on the above link to read the rest of the article…

Alan Greenspan’s Pickled Economy

March 6, 2016

Alan Greenspan’s Pickled Economy

Winter of Discontent

Former Federal Reserve Chairman Alan Greenspan resurfaced this week. We couldn’t recall the last time we’d heard from him. But, alas, the old fellow’s in desolate despair.

Alan-Greenspan Unexpectedly rising from the crypt: Alan Greenspan Photo credit: AP

On Tuesday, for instance, he told Bloomberg he hasn’t been optimistic for “quite a while.” Obviously, this is in contrast to the perennial Goldilocks attitude he had during the 1990s. So what is it that has the Maestro playing a low dirge?

China, the dollar, Dodd-Frank, and associated unknowns are all part of his negative outlook. But the long winter of his discontent is something else. Greenspan said he “won’t be [optimistic] until we can resolve entitlement programs.”

“Nobody wants to touch [entitlements]. But it is gradually crowding out capital investment and that is crowding out productivity and that is crowding out the standards of living,” said Greenspan.

Indeed, funding entitlement programs is becoming more burdensome by the year. As a greater percentage of the economy’s GDP goes toward entitlement programs, a lesser percentage goes towards capital investment. The effect of this negative feedback loop, as Greenspan infers, is quite simple.

ramirez-entitlement-cartoon An enticing lure…. Cartoon by Michael Ramirez

Less capital investment leads to lower productivity. Lower productivity leads to slower GDP growth. Slower GDP growth leads to an economy that can’t keep pace with entitlement programs. Thus, an even smaller percentage of GDP is, in turn, available for capital investment…to propel future growth. And so on, and so forth.

A 2012 forecast of entitlement spending by the Heritage Foundation. This seems not exactly sustainable – click to enlarge.

What Drives Economic Growth?

Certainly, this is a basic insight. But perhaps Greenspan is on to something much larger than just the issue of entitlement programs. From what we can tell he’s getting at the question of economic growth. Namely, what drives it?

…click on the above link to read the rest of the article…

Striking Admission By Former Bank Of England Head: The European Depression Was A “Deliberate” Act

March 2, 2016

Striking Admission By Former Bank Of England Head: The European Depression Was A “Deliberate” Act

Once again we find that it is only after they leave their official posts that central bankers finally tell the truth.

Last night, it was Alan Greenspan who blasted the state of the economy, saying that “we’re in trouble basically because productivity is dead in the water” and when asked if he is optimistic going forward, Greenspan replied “no, I haven’t been for quite a while.”

Then on Sunday, the former head of the BOE, Mervyn King, warned that another aspect of the global economy, namely the financial system whose structural problems remain untouched since the financial crisis have been untouched, is “certain to have another crisis.

“To be sure, warnings by former central bankers who are more responsible about the current global mess sound as nothing but revisionist bullshit. And yet, it was what King said today at the launch of his new book that left us surprised.

As the Telegraph reports today, according to the former head of the Bank of England Europe’s economic depression “is the result of “deliberate” policy choices made by EU elites. Mervyn King continued his scathing assault on Europe’s economic and monetary union, having predicted the beleaguered currency zone will need to be dismantled to free its weakest members from unremitting austerity and record levels of unemployment.

King also said he could never have envisaged an economic collapse of the depths of the 1930s returning to Europe’s shores in the modern age. But, he added, the fate of Greece since 2009 – which has suffered a contraction eclipsing the US depression in the inter-war years – was an “appalling” example of economic policy failure, he told an audience at the London School of Economics.

“I never imagined that we would ever again in an industrialised country have a depression deeper than the United States experienced in the 1930s and that’s what’s happened in Greece.

…click on the above link to read the rest of the article…

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