{"id":66389,"date":"2023-12-20T08:24:56","date_gmt":"2023-12-20T13:24:56","guid":{"rendered":"https:\/\/olduvai.ca\/?p=66389"},"modified":"2023-12-20T08:24:56","modified_gmt":"2023-12-20T13:24:56","slug":"the-feds-empire-of-speculation-and-the-echoes-of-1929","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=66389","title":{"rendered":"The Fed’s Empire of Speculation and the Echoes of 1929"},"content":{"rendered":"

The Fed’s Empire of Speculation and the Echoes of 1929<\/a><\/h3>\n
\n

Speculation has its own expiration dynamics, and they don’t depend on us recognizing speculative excess for what it is. They will unravel the excesses regardless of what we think, hope or deny.<\/i><\/p>\n

The Federal Reserve has so completely normalized speculative excess that these extremes are no longer even recognized as extremes.<\/b>\u00a0Rather, they are simply “the way the world works.” This\u00a0Empire of Speculation<\/i>\u00a0is complex and plays out on multiple levels.<\/p>\n

The primary mechanism is obvious to all:<\/b>\u00a0whenever the equity market falters, the Fed unleashes a flood tide of liquidity, i.e. fresh currency, that rushes into the market at the top–corporations, banks and financiers–because the Fed distributes the fresh liquidity solely into the top tier of market players.<\/p>\n

The Fed’s ability to conjure up liquidity in a variety of ways appears limitless:<\/b>\u00a0expand its balance sheet (QE), use the reverse repo market and bank reserves, launch new lending mechanisms, and so on.<\/p>\n

The Fed has long relied on useful fictions to mask its agenda.<\/b>\u00a0One useful fiction is that the Fed is independent and apolitical. Despite being risibly shopworn, this mirth-inducing fiction is still dutifully trotted out by every Fed chairperson.<\/p>\n

Another useful fiction is that the Fed’s mandate focuses on promoting stable expansion of the economy, not the equity market.<\/b>\u00a0This masks the reality everyone knows and acts on, which is\u00a0the market isn’t a reflection of the economy, it is the economy.<\/i><\/p>\n

This is why the Fed will pursue ever greater policy extremes to rescue the market from any decline and keep equity markets lofting higher: should the market falter, the economy will quickly follow, as the\u00a0animal spirits<\/i>\u00a0of the market are now the primary engine of expansion.<\/p>\n

\u2026click on the above link to read the rest\u2026<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

The Fed’s Empire of Speculation and the Echoes of 1929 Speculation has its own expiration dynamics, and they don’t depend on us recognizing speculative excess for what it is. They will unravel the excesses regardless of what we think, hope or deny. The Federal Reserve has so completely normalized speculative excess that these extremes are […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[24078,1450,303,487,4806,3650],"class_list":["post-66389","post","type-post","status-publish","format-standard","hentry","category-economics","tag-charles-hugh-smith-2","tag-equity-markets","tag-fed","tag-liquidity","tag-speculation","tag-us-federal-reserve"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/66389","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=66389"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/66389\/revisions"}],"predecessor-version":[{"id":66390,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/66389\/revisions\/66390"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=66389"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=66389"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=66389"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}