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Intervention

October 23, 2019

Intervention

The Fed has gone into full intervention mode. Not only into full intervention mode, but accelerated intervention mode. Not just a little “mid cycle adjustment” but full bore daily interventions to the tune of dozens of billions of dollars every single day. What’s the crisis? After all we live in the age of trillion dollar market cap companies, unemployment at 50 year lows and yet the Fed is acting like the doomsday clock has melted as a result of a nuclear attack.

Think I’m in hyperbole mode here? Far from it.

Unless you think the biggest repo efforts ever by far surpassing the 2008 financial crisis actions are hyperbole:

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What is the Fed not telling us?
I’m asking for a friend.

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What indeed is the Fed not telling us?

Something’s off here. See it all started as a temporary fix in September when suddenly the overnight target rate jumped sky high and the Fed had to intervene to keep the wheels from coming off. Short term liquidity issues they said. Well those look to have become rather permanent:

And these liquidity injections are absolutely massive. Just yesterday the Fed injected $99.9 billion in temporary liquidity into the financial system and $7.5 billion in permanent reserves as part of its $60 billion per month in treasury bills buying program. The $99.9 billion coming from $64.90 billion in overnight repurchase agreements and $35 billion in repo operations.

All this action is surprising frankly. What stable financial system requires nearly $100B in overnight liquidity injections. The Fed did not see the need for these actions coming. They are reacting to a market that suddenly requires it. Funding issues Jay Powell called it in October. The Fed was totally caught off guard when the overnight financing rate suddenly jumped to over 5% and they’ve been reacting ever since which pretty much describes the Fed in all of 2019.

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

How to Cope with Inevitable Chaos

October 18, 2017

How to Cope with Inevitable Chaos

And that’s okay. You don’t need to. And neither does governments.

Is it me or does it seem like current times are more chaotic than ever?

The world seems to be constantly threatened by mass shootings, terrorism, war in the Middle East, nuclear proliferation, and lack of international diplomacy. Turn on the news and you’re bound to find a new threat that purports to destabilize the order of the world.

Right here at home, the national debt continues to soar to new heights, and the student-debt bubble seems more concerning as each day passes. Congress is failing to repeal and replace Obamacare, even with a Republican majority. News circulates about Trump’s administration constantly changing, while he still has over 1,000 top-level positions to fill. It seems like the people in charge of our domestic order can’t even seem to accomplish the very thing we elected them to do.

It makes one question just what is going on in our modern society? Are we seeing the social fabric unravel before our eyes? Why have things gotten so disorderly?

The Struggle Against Chaos

These are the questions posed, but something is missing. A certain historical context is left out. The real question we should be asking is, are current times truly more chaotic than ever before, or have things always been this way?

The history of humanity has been a struggle between order and disorder. Mankind has always been walking that fine line, struggling to find a balance.

This story goes all the way back to the Garden of Eden. A land of harmony and order, but man descends into chaos when a snake is let in and convinces Eve to eat the apple. Ever since, mankind has been subject to a world of disorder, struggling to keep a grasp on a life that seems random, and chaotic.

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

Upon The Next Crisis, The Rules Will Suddenly Change

September 29, 2017

Upon The Next Crisis, The Rules Will Suddenly Change

For the benefit of the elites; not the rest of us

We can add a third certainty to the two standard ones (death and taxes): The rules will suddenly change when a financial crisis strikes.

Why is this a certainty? The answer is complex, as it draws on human nature, politics and the structure of societies/economies ruled by centralized states (governments).

The Core Imperative of the State: Expand Control

As I explain in my book, Resistance, Revolution, Liberation, the core (i.e. ontological) imperative of every central state is to expand its reach and control.  This isn’t just the result of individuals within the state seeking more power; every centralized state views whatever is outside its control as a threat.  The way to reduce or neutralize a threat is to take control of the mechanisms that generated it.

Once the state has gained control of these mechanisms, it is loath to relinquish them; to relinquish control is to invite chaos.

There is of course an intensely self-serving dynamic to extending state control: those being paid to enforce this state control have an immense vested interest in the state retaining (or even extending) this control, as their livelihoods now depend on the state doing so.

The higher-ups in the state also have a vested interest in retaining these new controls, as more control means more wealth and power accrue to those at the top of the centralized power pyramid: this extension of state control means private enterprise must now lobby the state for favors, and it gives the higher-ups more perquisites and favors to dispense—for a price, of course.

This vested interest arises throughout the power pyramid, from the bottom functionary with newfound power over common citizens to the managers of the departmental bureaucracy tasked with enforcing the new control to the apex of state authority.

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

Where There’s Smoke…

April 22, 2017

Where There’s Smoke…

…There’s central bank manipulation

Central banks around the world have colluded, if not conspired, to elevate and prop up financial asset prices.  Here we’ll present the data and evidence that they’ve not only done so, but gone too far.

When wee discuss elevated financial asset prices we really are talking about everything.

we’re talking not just about the sky-high prices of stocks and bonds, but also of the trillions of dollars’ worth of derivatives that are linked to them, as well as real estate in dozens of countries and locations.  All are intricately linked together. For instance, stocks are elevated, in part, because bond yields are so low.  Sam for real estate.

Here are three questions most alert investors are asking:

  • Question #1: When will financial assets ever ‘correct’ and fall in price?
  • Question #2: How much does overt propping by the central banks have to do with today’s elevated prices?
  • Question #3: How much does covert propping by central banks play a role in these inflated markets?

These are important questions to consider because if central banks have been too involved and gotten themselves mixed up in trying to ‘wag the dog’ by using elevated financial asset prices as a means to drive economic expansion — then the risk is a big implosion in financial asset prices if their efforts fail.

The difficulty, as always, is that you can’t print your way to prosperity.  It’s never worked in history and it won’t work this time either.  You can, however, print (or borrow) to delay a correction, after which a boost in real economic growth (or additional income) had better materialize to save your bacon.   But if enough growth does not emerge to both pay back all the old outstanding loans plus all the newly created debt and currency, then you’re going to experience a worse correction than if you had not tried to print/borrow your way to prosperity.

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

The Fallacy of ‘Humanitarian’ War

March 21, 2016

The Fallacy of ‘Humanitarian’ War

The new excuse for U.S. imperial wars is “humanitarian” or “liberal” interventionism with Hillary Clinton and other proponents citing noble motives for destroying foreign societies, as ex-CIA official Graham E. Fuller discusses.

Rajan Menon’s new book, The Conceit of Humanitarian Intervention, launches a timely argument against a dominant argument lying behind so much of modern American foreign policy — “humanitarian intervention” or “liberal interventionism.”

We are, of course, well familiar with Republican and neocon readiness to go to war, but the reality is that many Democrat Party leaders have been no less seduced into a series of optional foreign military interventions, with increasingly disastrous consequences. Former Secretary of State Hillary Clinton is today one of the leading exponents of the idea, but so are many of the advisors around President Barack Obama.

President Barack Obama talks with Ambassador to the United Nations Samantha Power, a major proponent of "humanitarian" wars, following a Cabinet meeting in the Cabinet Room of the White House, Sept. 12, 2013. (Official White House Photo by Pete Souza)

President Barack Obama talks with U.S. Ambassador to the United Nations Samantha Power, a major proponent of “humanitarian” wars, following a Cabinet meeting in the Cabinet Room of the White House, Sept. 12, 2013. (Official White House Photo by Pete Souza)

Menon offers powerful argumentation skewering the concept of “humanitarian intervention,” demonstrating how it operates often as little more than a subtler form of an imperial agenda. Naked imperial ambitions tend to be recognizable for what they are. But when those global ambitions are cloaked in the liberal language of our “right to protect” oppressed peoples, prevent humanitarian outrages, stop genocide, and to topple noxious dictators, then the true motives behind such operations become harder to recognize.

What humanitarian could object to such lofty goals? Yet the seductive character of these “liberal interventionist” policies end up serving — indeed camouflaging — a broad range of military objectives that rarely help and often harm the ostensible objects of our intervention.

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

The Political Consequences of Financial Crises

December 23, 2015

The Political Consequences of Financial Crises

LONDON – I may not be the only finance professor who, when setting essay topics for his or her students, has resorted to a question along the following lines: “In your view, was the global financial crisis caused primarily by too much government intervention in financial markets, or by too little?” When confronted with this either/or question, my most recent class split three ways.

Roughly a third, mesmerized by the meretricious appeal of the Efficient Market Hypothesis, argued that governments were the original sinners. Their ill-conceived interventions – notably the US-backed mortgage underwriters Fannie Mae and Freddie Mac, as well as the Community Reinvestment Act – distorted market incentives. Some even embraced the argument of the US libertarian Ron Paul, blaming the very existence of the Federal Reserve as a lender of last resort.

Another third, at the opposite end of the political spectrum, saw former Fed Chairman Alan Greenspan as the villain. It was Greenspan’s notorious reluctance to intervene in financial markets, even when leverage was growing dramatically and asset prices seemed to have lost touch with reality, that created the problem. More broadly, Western governments, with their light-touch approach to regulation, allowed markets to career out of control in the early years of this century.

The remaining third tried to have it both ways, arguing that governments intervened too much in some areas, and too little in others. Avoiding the question as put is not a sound test-taking strategy; but the students may have been onto something.

Now that the crisis is seven years behind us, how have governments and voters in Europe and North America answered this important question? Have they shown, by their actions, that they think financial markets need tighter controls or that, on the contrary, the state should repudiate bailouts and leave financial firms to face the full consequences of their own mistakes?

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

Garbage In Garbage Out Economics

November 3, 2015

Garbage In Garbage Out Economics

“On two occasions I have been asked, “Pray, Mr. Babbage, if you put into the machine the wrong figures, will the right answers come out? …I am not able rightly to apprehend the kind of confusion of ideas that could provoke such a question.” – Charles Babbage, Passages from the Life of a Philosopher.”

Charles_Babbage_1860The late Mr. Charles Babbage (1791-1871), an English polymath credited with inventing the first mechanical computer
Image via The Illustrated London News

 Crunching Data to Fix Prices

The fundamental problem facing today’s economy is the flagrant contempt by governments the world over for the free exchange of goods and services and private stewardship of property.  Perhaps it is power and control governments are after.  Maybe they believe they are improving the economy and making the world a better place for all.

No one really knows for sure.  But what is lucidly clear is the muddled disorder modern day economic policies have wrought upon us.  You can hardly enter into a transaction without a cluster of intervention mucking with the price of payment.

Taxes, tariffs, wage laws, and subsidies.  These all impact prices.  But the main culprit affecting prices and trade are central bank interventions into money and credit markets.  Relentless actions to control the economy by manipulating money and credit stand the price of everything else on end.

Certainly, government intervention into the U.S. economy is much looser than a Soviet style command and control system.  But it does share a common refrain.  Price fixing is central to its operation.

The Soviets, armed with their Five-Year Plans and the Theory of Productive Forces, deliberately directed how much wheat should be planted and how much a potato should cost.  Conversely, the U.S. approach is mostly hidden from the short sighted view of the average lay person.  The Federal Reserve allows the government to bypass the nuisance of tinkering with individual prices…though they still do it through subsidies and appropriations.

 

5 year plan

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