Broken System

Calling for a moratorium on Muslim immigration “until our country’s representatives can figure out what the hell is going on,” Donald Trump this week ignited a firestorm of historic proportions. As all the old hate words - xenophobe, racist, bigot - have lost their electric charge from overuse, and Trump was being called a fascist demagogue and compared to Hitler and Mussolini. Why the hysteria? Comes the reply: Trump’s call for a temporary ban on Muslim immigration tramples all over “American values” and everything we stand for, including the Constitution. But is this really true? In fact, is this move a well thought out cunning plan?

Monetary policy 'rules' are no more accurate at determining interest rates than meteorologists are at forecasting the weather. The only difference between the two is that weathermen are precise on occasion, whereas the federal funds rate under the Taylor Rule is, at best, less wrong. Setting the price of money and credit in the name of unleashing the economy’s supposed potential output is the equivalent of enacting price controls on milk to unlock its full buying power. It’s a fallacy that cannot be achieved. The sooner the Fed pawns off its printing press, the sooner its market distortions will be lifted; and the sooner that each individual will be able to make rational decisions that make sense for not only himself or herself, but for the economy at large as well.

Earlier this week, the “independent” anti-doping commission WADA found that Russia engaged in state-sponsored doping and more importantly, recommended that Russia’s track and field athletes be suspended from Olympic competition in 2016. On Friday evening, that’s exactly what happened because as WSJ reports, “track and field’s world governing body provisionally suspended Russia’s athletes from international competition indefinitely."

"The secular reality of deflation & inequality is intensified by recession & rising unemployment, investors should expect a massive policy shift in 2016. Seven years after the west went “all-in” on QE & ZIRP, the US/Japan/Europe would shift toward fiscal stimulus via government spending on infrastructure or more aggressive income redistribution.  …buy TIPs, gold, commodities, Main Street not Wall Street."

"We believe that the path of least resistance would be to effectively ban capitalism and by-pass banking and capital markets altogether. We gave this policy change several names (such as “Cuba alternative”, “British Leyland”) but the essence of the new form of QE would be using central banks and public instrumentalities to directly inject “heroin into blood stream” rather than relying on system of incentives to drive investor behaviour."

If anyone wants to beat Trump in his own game, they will have to show and prove to the voters of America, that the existing system not only still works, but is worth saving in its current broken form. This is the biggest challenge to everyone - on the right, on the left and in the middle - even if nobody wants to admit it.

Normally, candidates that are not part of the “establishment” do not pose much of a threat. In order to win elections in this country, especially on a national level, you need name recognition and you need lots and lots of money. Donald Trump has both, and no matter what you may think of him you have to admit that he has star power. And he was never supposed to run for president. You see, the truth is that only members of “the club” are allowed to play. The elite very carefully groom their candidates, and they are usually able to maintain a very tight grip on both major political parties. This two-headed abomination that we call a “two party system” is in reality just a one party system.

Can markets be saved an eighth time, a ninth time, a tenth time this year? How about next year?

Goldman Sachs proposes that society should bend to the needs of the financial and monetary system rather than reform of that system. At any rate, the proposals put forward by them are unlikely to achieve any kind of long-term solution to the problem of massive unsustainable debt faced by the western world and Japan. 

The emperor has no clothes: there are markets (finance included) screaming out for disruption!

Today, we find precisely how and why Sarao was singled out: he not only ratted out the parasitic trading strategies of the real culprits behind the broken market, the massive HFT firms (such as Virtu which just went public just a day before the Sarao charges were filed) which gave the "regulators" no choice: one of them had to be put away for good, but found a way to capitalize on the algos' stupidity, and actually make money by beating them at their own game.  As such, regulators and exchanges such as the CFTC and CME had no choice but arrest him and prevent him from trading ever again!

• Banks Had Unfair Advantage From Commodity Units (Bloomberg)
• Report Notes Deals Between Goldman, Deutsche and Others Drove Up Aluminum Prices (WSJ)
• Goldman, Morgan Stanley Commodity Heyday Gone as Units Faulted (BBG) - because when you can no longer manipulate, you move on...
• Lenders Shift to Help Struggling Student Borrowers (WSJ)
• Immigrants face major hurdles in signing up to new Obama plan (Reuters)
• Distressed Debt in China? Ain’t Seen Nothing Yet, Buyers Say (BBG)
• Banking culture breeds dishonesty, scientific study finds (Reuters)
• Amazon Robots Get Ready for Christmas (WSJ)

In reality, there is nothing surprising in Matt Taibbi's latest piece since returning to Rolling Stone from the Intercept, as it tells a story everyone is by now is all too familiar with: a former bank employee (in this case Alayne Fleischmann) who was a worker in a bank's (in this case JPM) mortgage operations group, where she observed and engaged in what she describes as "massive criminal securities fraud" and who was fired after trying to bring the attention of those above her to said "criminal" activity. The story doesn't stop there, and as Carmen Segarra already showed, when she revealed that Goldman runs the NY Fed, once Alayne was let go and tried to "whistleblow" on the house of Jimon from the outside, she found the that US Department of Justice headed by Eric Holder is just as, if not more, corrupt, and in his desperate attempt to prevent discovery and bring JPM et al to justice, he would stretch the statue of limitations on frauds committed during the crisis long enough to where nobody had any legal recourse any more, up to and including the US taxpayer.

• How you know it is all a lie: Pelosi Presses Obama to Talk Up Stronger U.S. Economy (BBG)
• Secret Goldman Sachs Tapes Put Pressure on New York Fed (NYT), Uh, no they don't
• Clashes Break Out at Hong Kong Protest Site (WSJ)
• N.Y. Fed Lawyer Says AIG Got Billions Without Paperwork (BBG)
• Ebola’s Disease Detectives Race to Track Others Exposed (BBG)
• UPS, FedEx Want Retailers to Get Real on Holiday Shipping (WSJ)
• No more mailman at the door under U.S. Postal Service plan (Reuters)