The stock market is still viewed as if it were a discounting mechanism, a system where information is processed and priced to deliver insight about the fundamental state of liquidity, markets, and the economy. That view has always been debatable, but never more so than the whole of this century so far. What were share prices suggesting, fundamentally, in March 2000? Or October 2007?
Bernanke's Former Advisor: "People Would Be Stunned To Know The Extent To Which The Fed Is Privately Owned"Submitted by Tyler Durden on 04/12/2016 18:23 -0400
Earlier today, former central bank staffer and Dartmouth College economics professor Andrew Levin, special adviser to then Fed Chairman Ben Bernanke between 2010 to 2012, said something shocking. "A lot of people would be stunned to know” the extent to which the Federal Reserve is privately owned." Is the truth finally starting to come out?
Japan is heading for a full-blown solvency crisis as the country runs out of local investors and may ultimately be forced to inflate away its debt in a desperate end-game, one of the world’s most influential economists has warned. "One day the BoJ may well get a call from the finance ministry saying please think about us – it is a life or death question - and keep rates at zero for a bit longer."
"Money-financed fiscal programs (MFFPs), known colloquially as helicopter drops, are very unlikely to be needed in the United States in the foreseeable future. They also present a number of practical challenges of implementation, including integrating them into operational monetary frameworks and assuring appropriate governance and coordination between the legislature and the central bank. However, under certain extreme circumstances—sharply deficient aggregate demand, exhausted monetary policy, and unwillingness of the legislature to use debt-financed fiscal policies—such programs may be the best available alternative."
Over time, Bubble Economies become increasingly vulnerable to economic stagnation, Credit degradation and asset price busts. Bubbles are fueled by Credit excesses that distort risk perceptions and resource allocation. Credit and asset price inflation will incentivize speculation, another key dynamic ensuring misallocation and malinvestment. In the end, Bubbles redistribute and destroy wealth. Major Bubbles will tear at the threads of society.
Here’s my metaphor for investors and central bankers today — the brilliant Cars.com commercial where a woman is stuck on a date with an incredibly creepy guy who declares that “my passion is puppetry” and proceeds to make out with a replica of the woman.
Will the Fed be able to keep the game going? In a word, no. We’ve already seen that even the tiniest of interest rate hikes has gone hand in hand with a huge drop in the markets. Furthermore, the Fed’s subsidies to the banks are now on the order of $11 billion annually, but if they want to raise the fed funds rate to, say, 2 percent, then the annual payment would swell to more than $40 billion.
So far this year, Janet Yellen has not taken a single step in the direction of a “normal” monetary policy; our guess is that she never will. Why not? Is it because she is a witless tool of Deep State cronies? Is it because her economic theory is silly, superficial, and simpleminded? Or is it because she and her predecessor, Ben Bernanke, have done so much damage to the normal world that there is nothing to go back to?
Key economic releases for the coming week include the ISM non-manufacturing report on Wednesday. There are several scheduled speeches from Fed officials this week. Fed Chair Yellen will take part in a discussion with former Fed Chairs on Thursday.
With volume declining on the rally as short-covering fades, the thrust of Central Bank actions now behind us, the focus will once again turn to the economic and fundamental data. From that standpoint, the “bears” remain firm in the commitments. With profit margins and earnings on the decline, economic data weak and interest rates hovering near lows, there is little support for an ongoing bull rally.
The credit markets are signaling that the debt fueled expansion that began in 2010 is turning to bust. This is the most precarious moment in financial market history because as the world slides into recession global central banks have no ability to soften the oncoming recession with debt creation. The world economy is on the precipice of another Great Depression.
Japan Goes Full Krugman: Plans Un-Depositable, Non-Cash "Gift-Certificate" Money Drop To Young PeopleSubmitted by Tyler Durden on 03/23/2016 20:06 -0400
The Swiss, the Finns, and the Ontarians may get their 'Universal Basic Income' but the Japanese are about to turn the Spinal Tap amplifier of extreme monetary experimentation to 11. Sankei reports, with no sourcing, that the Japanese government plans to unleash "vouchers" or "gift certificates" to low-income young people to stimulate the "conspicuous decline" in consumption among young people. The handouts may not be deposited, thus combining helicopter money (inflationary) and fully electronic currency (implicit capital controls and tracking of spending).
Munich Re planning to store tens of millions of euros in bank notes in its vaults might be the start for a very slow bank run...
After the February jobs report, President Obama said “America’s pretty darn great right now.” He then went on to disparage the “doomsday rhetoric” of the Republicans, which he said was pure “fantasy. I think that there is a good chance that this will enter the Hall of Fame of miss-timed statements, right up there with this jewel from Ben Bernanke in March 2007: “At this juncture, however, the impact on the broader economy and financial markets of the problems in the sub-prime market seems likely to be contained.”
At this point, one wonders why any central banker would chase down the NIRP rabbit hole only to find themselves the protagonist in the latest retelling of "Krugman in Wonderland," but alas, the experiment continues. The only question now is this: will the FOMC take the plunge? Here's a chronological list of Fed NIRP commentary.