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Square Minus Zero
Square Minus Zero
I intentionally start writing this mere minutes away from Fed chair Jay Powell’s latest comments. Intentionally, because the importance ascribed to those comments only means we have gotten so far removed from what capitalism and free markets are supposed to be about, that it’s pathetic. The comments mean something for rich socialists, but nothing for the man in the street. Or, rather, they mean that the man in the street will get screwed worse for longer.
And it’s not just the Fed, all central banks have it and do it. They play around with rates and definitions and semantics until the cows can never come home again. And they have such levels of control over their respective societies and economies that the mere use of the word “markets” should result in loud and unending ridicule. There are no markets, because there is no price discovery, the Fed and ECB and BOJ got it all covered. Any downside risks, that is.
But it doesn’t, because the people who pretend they’re in those markets hang on central banks’ every word for their meal tickets. These are the same people we once knew as traders and investors, but who today function only as rich socialists sucking the Fed’s teats for ever more mother’s milk.
Our economic systems have been destroyed by our central bankers. Who pretend they’re saving them. And we all eat it up hook line and sinker. Because the rich bankers and their media have no reasons to counter Fed or ECB actions and word plays, and because anyone who’s not a rich banker or investor is kept by the media from understanding those reasons.
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The Fed IS the Ugly Truth
This Fed thing just keeps going on, and it needs to stop. There is nothing in the discussion about the Federal Reserve these days that has any value other than it provides even more proof that the Fed has killed off the most essential elements of what once made the US economy function. All markets, stocks, bonds, housing markets, all price discovery, all murdered. No heartbeat. Pining for the fjords.
And instead of addressing that, and I’m not even talking about addressing fixing what is wrong, all I see is neverending stuff about Jay Powell using, or not using, terms such as “patient” or “accommodative”. Like any of it means anything coming from him and his ilk. Other than for making ‘investors’ a quick buck. Like a quick buck could ever trump the survival of entire market systems.
People discussing whether Jay Powell is doing a good job all miss the point. Because Powell should not be doing that job in the first place. The Fed should not have the power to manipulate the US economy anywhere near as much as it does. Because that power is perverting America like nothing else, and the US economy will never recover as long as the Fed holds that power. Is that clear enough? Do we understand that at least?
Powell apparently changed his tune Friday in order to let the mirage that the stock market has become, live another day. Almost literally a day, since it will come crumbling down no matter what he does, just a day or so later. It’s all some message hidden in his use of “patience” or “accommodative”. Nothing he does will have any effect in the medium or longer term, and he knows it.
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Every Bubble Is In Search Of A Pin
Every Bubble Is In Search Of A Pin
Now that the world’s central banking cartel is taking a long-overdue pause from printing money and handing it to the wealthy elite, the collection of asset price bubbles nested within the Everything Bubble are starting to burst.
The cartel (especially the ECB and the Fed) is hoping it can gently deflate these bubbles it created, but that’s a fantasy. Bubbles always burst badly; it’s their nature to do so. Economic suffering and misery always accompany their termination.
It’s said that “every bubble is in search of a pin”. History certainly shows they always manage to find one.
History also shows that after the puncturing, pundits obsess over what precise pin triggered it, as if that matters. It doesn’t, because ’cause’ of a bubble’s bursting can be anything. It can be a wayward comment by a finance minister, otherwise innocuous at any other time, that spooks a critical European bond market at exactly the right (wrong?) moment, triggering a runaway cascade.
Or it might be the routine bankruptcy of a small company that unexpectedly exposes an under-hedged counterparty, thereby setting off a chain reaction across the corporate bond market before the contagion quickly spreads into other key elements of the financial system.
Or perhaps it will be the US Justice Department arresting a Chinese technology executive on murky, over-reaching charges to bully an ally into accepting that unilateral US sanctions are to be abided by everyone, regardless of sovereignty.
How was it that the famous Tulip Bulb bubble came to a crashing end back in the 1600’s? No one knows the exact moment or trigger. But we can easily imagine that in some Dutch pub on the fateful night on the Feb 3rd1637, a bidder on the most-coveted of all bulbs, the Semper Augustus, had an upset stomach and briefly grimaced when hit by a ripping gas pain:
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Central Banks ARE The Crisis
Walter Langley Never morning wore to evening but some heart did break 1894
It really should -but doesn’t- make us cringe uncontrollably to see Bank of England governor-for-hire Mark Carney announce -straightfaced- that:
“A decade after the start of the global financial crisis, G20 reforms are building a safer, simpler and fairer financial system. “We have fixed the issues that caused the last crisis. They were fundamental and deep-seated, which is why it was such a major job.”
Or, for that matter, to see Fed chief Janet Yellen declare that there won’t be another financial crisis in her lifetime, while she’s busy-bee busy building that next crisis as we speak. These people are now saying increasingly crazy things, and that should make us pause.
Central banks don’t serve people, or even societies, as that same myth claims. They serve banks. Even if central bankers themselves believe that this is one and the same thing, that doesn’t make it true. And if they don’t understand this, they should never be let anywhere near the positions they hold.
You can pin the moment central banks went awry at any point in time you like. The Bank of England’s foundation in 1694, the Federal Reserve’s in 1913, the ECB much more recently. What’s crucial in the timing is where and when the best interests of the banks split off from those of their societies. Because that is when central banks will stop serving those societies. We are at such a -turning?!- point right now. And it’s been coming for some time, ‘slowly’ working its way towards an inevitable abyss.
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Goldman Pays Fine For Causing 2008 Crisis As “The Rest of the World Faced Financial Armageddon”
Goldman Pays Fine For Causing 2008 Crisis As “The Rest of the World Faced Financial Armageddon”
Editor’s Comment: It’s funny how some criminals – whose actions affect perhaps a handful of people at the most – get the book thrown at them. In fact, so do speeders and code violators and other low level offenders.
But when the criminals loot the whole system, and effect everyone’s livelihood, it is somehow incomprehensible to deal out justice at all, no matter how swiftly. These bankers have all but announced that they are “too big to jail,” even as they work WITH the people running things and prepare to destroy the economy and all that rides with it. Hopefully there’s a special place in hell…
Government Sachs Gets Golden Wrist Slap For Global Financial Crisis
by James Corbett
Historians of the future will note Yellen’s smiling press conference in December of 2015 to announce the long-awaited rate hike as the beginning of the end for the dead cat bubble of the Global Financial Crisis. In some ways this has been a 20 year long Fed bubble that leads in a straight line from the “irrational exuberance” of the Dot Com bubble to the Dot Com bust and 9/11 to the Greenspan bubble and the subprime housing run-up to the Global Financial Crisis to QE1/2/3 and ZIRP to the rate hike to today.
And what do we have today?
- The worst start to the year in US equity markets in history.
- Downgrades of economic forecasts from every conceivable corner of the financialworld.
- Probability of US recession (even with the government’s cooked books) the highest it’s been in 5 years.
- The oil slump getting slumpier as Iranian oil comes online.
- Driver of world economic growth China hitting its weakest growth pace in 25 years.
- The Royal Bank of Scotland warning of “cataclysm” this year and advising investors to “sell everything.”
And on and on. You get the picture. But I bet you wish you didn’t.
…click on the above link to read the rest of the article…
Two Outs in the Bottom of the Ninth
Two Outs in the Bottom of the Ninth
The housing market peaked in 2005 and proceeded to crash over the next five years, with existing home sales falling 50%, new home sales falling 75%, and national home prices falling 30%. A funny thing happened after the peak. Wall Street banks accelerated the issuance of subprime mortgages to hyper-speed. The executives of these banks knew housing had peaked, but insatiable greed consumed them as they purposely doled out billions in no-doc liar loans as a necessary ingredient in their CDOs of mass destruction.
The millions in upfront fees, along with their lack of conscience in bribing Moody’s and S&P to get AAA ratings on toxic waste, while selling the derivatives to clients and shorting them at the same time, in order to enrich executives with multi-million dollar compensation packages, overrode any thoughts of risk management, consequences, or the impact on homeowners, investors, or taxpayers. The housing boom began as a natural reaction to the Federal Reserve suppressing interest rates to, at the time, ridiculously low levels from 2001 through 2004 (child’s play compared to the last six years).
Greenspan created the atmosphere for the greatest mal-investment in world history. As he raised rates from 2004 through 2006, the titans of finance on Wall Street should have scaled back their risk taking and prepared for the inevitable bursting of the bubble. Instead, they were blinded by unadulterated greed, as the legitimate home buyer pool dried up, and they purposely peddled “exotic” mortgages to dupes who weren’t capable of making the first payment. This is what happens at the end of Fed induced bubbles. Irrationality, insanity, recklessness, delusion, and willful disregard for reason, common sense, historical data and truth lead to tremendous pain, suffering, and financial losses.
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The Big Picture
The Big Picture
Towards the end of the 1990’s, Greenspan worked hard to insulate the markets from some of the more negative developments in global finance. These included the Asian Debt Crisis of 1997 and the Russian debt default of 1998. But the most telling policy move of the Greenspan Fed in the late 1990’s was its response to the rapid demise of hedge fund Long term Capital Management (LTCM), whose strategy of heavily leveraged arbitrage backfired spectacularly in 1998.
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The Futility of Our Global Monetary Experiment
The Futility of Our Global Monetary Experiment
Jeff Deist: The Fed recently announced just this past week that it would not use specific dates for targeting higher Fed funds rate this year and you almost get the sense that poor Janet Yellen is at the end of this Greenspan-Bernanke experiment and there’s not much left for her to do. I mean, what’s our sense of Yellen and her position?
David Stockman: Yeah, I agree with that. I think in some ways they’re petrified as to where they ended up or they should be. After all, we’re in an experiment of monumental proportions.
Let’s just assess where we are. If they don’t raise the interest rate in June — and I think all the signals now are pretty clear they’re going to find another reason to delay — that will mean seventy-eight straight months of zero rates in the money market. As I always say, the money-market price, that is the Federal Funds Rate or Overnight Money or a short term treasury bill, is the most important price in all of capitalism because that determines the cost of carry, the cost of speculation and gambling.
When you conduct a monetary policy that says to the speculators, to the gamblers, “come and get it,” you are guaranteed free money to carry your positions, whether you’re buying German Bonds or you’re buying the S&P 500 Stock Index or the whole array of yielding or price gaining assets that are available in the financial market. This monetary policy also sends the message that you can leverage and carry those positions for free and roll it day after day without worry because the central bank has pegged your cost and production, and in a sense has pledged on its solemn honor that it will not change without many months of warning. And that’s what this whole thing is about — changing the language and so forth. I think you have created a massive distortion in the very heart of capitalism in the financial system.
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The BOJ Jumps The Monetary Shark—–Now The Machines, Madmen And Morons Are Raging | David Stockman’s Contra Corner
This is just plain sick. Hardly a day after the greatest central bank fraudster of all time, Maestro Greenspan, confessed that QE has not helped the main street economy and jobs, the lunatics at the BOJ flat-out jumped the monetary shark. Even then, the madman Kuroda pulled off his incendiary maneuver by a bare 5-4 vote. Apparently the dissenters——Messrs. Morimoto, Ishida, Sato and Kiuchi—-are only semi-mad.
Never mind that the BOJ will now escalate its bond purchase rate to $750 billion per year—-a figure so astonishingly large that it would amount to nearly $3 trillion per year if applied to a US scale GDP. And that comes on top of a central bank balance sheet which had previously exploded to nearly 50% of Japan’s national income or more than double the already mind-boggling US ratio of 25%.
In fact, this was just the beginning of a Ponzi scheme so vast that in a matter of seconds its ignited the Japanese stock averages by 5%. And here’s the reason: Japan Inc. is fixing to inject a massive bid into the stock market based on a monumental emission of central bank credit created out of thin air. So doing, it has generated the greatest front-running frenzy ever recorded.
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