Federal Reserve

Frontrunning: April 30

  • Marchers protest police violence in Baltimore, New York (Reuters)
  • Majority of Financial Pros Now Say Greece Is Headed for Euro Exit (BBG)
  • Greece signals concessions in crunch talks with lenders (Reuters)
  • Greece, Euro-Area Partners Target Deal by Sunday (BBG)
  • Iglesias Says EU Risking Right-Wing Backlash With Greek Pressure (BBG)
  • Student-Loan Surge Undercuts Millennials’ Place in U.S. Economy (BBG)
  • Majors’ Quandary: Why Drill for Oil When They Can Buy Somebody Else’s? (WSJ)

The Third And Final Transformation Of Monetary Policy

The law of unintended consequences is becoming ever more prominent in the economic sphere, as the world becomes exponentially more complex with every passing year. Just as a network grows in complexity and value as the number of connections in that network grows, the global economy becomes more complex, interesting, and hard to manage as the number of individuals, businesses, governmental bodies, and other institutions swells, all of them interconnected by contracts and security instruments, as well as by financial and information flows. It is hubris to presume, as current economic thinking does, that the entire economic world can be managed by manipulating one (albeit major) subset of that network without incurring unintended consequences for the other parts of the network.

The Real Financial Crisis That Is Looming

There is a financial crisis on the horizon. It is a crisis that all the Central Bank interventions in the world cannot cure. It is a financial crisis that will continue to change the economic landscape of America for decades to come. No, we are not talking about the next Lehman event or the next financial market meltdown. Although something akin to both will happen in the not-so-distant future. It is the lack of financial stability of the current, and next, generation that will shape the American landscape in the future.

'Hawkish' Hilsenrath Confirms Fed Not Worried About Q1 Growth, Rate Hikes Coming

At a stunning pace of 608 words in just 4 minutes, The Wall Street Journal's Fed-Whisperer, Jon Hilsenrath, has proclaimed his "common knowledge" meme for today's FOMC statement. Confirming that officials "aren’t at this point alarmed about the first quarter slowdown," and in fact stating they are confident of spending picking up due to consumer sentiment (which just fell)... which leaves them signalling no shift in policy stance - i.e. rate hikes are coming whether the economy can handle it or not...

The First Rule Of Holes

“Promoted by the intellectual glitterati of the central banks, our economic system has become addicted to all forms of debt, much of which has been unproductive." The seemingly universal agreement that the prerequisite for a healthy economy is the growth of debt at all costs highlights both a lack of discipline and an aversion to consider different ideas on the part of economic policy-makers.

Why Markets Are Manic - The Fed Is Addicted To The "Easy Button"

Honest price discovery is essential to capitalist prosperity since it is the miraculous mechanism by which capital is raised from savers and investors and efficiently allocated among producers, entrepreneurs and genuine market-rate borrowers. What the central banks have generated, instead, is a casino that is blindly impelled to churn the secondary capital markets and inflate the price of existing assets to higher and higher levels - until they ultimately roll-over under their own weight. The Easy Button addiction of our central bankers is thus not just another large public policy problem. It is the very economic and social scourge of our times.

How BofA's Depositors Funded The Bank's "Fugazi P&L"

When we first exposed in February how yet another bank - Bank of America - has been quietly preserving the post Glass-Steagall world in which cash depositing taxpayers are on the hook for a bank's stupidity, some shrugged it off and looked to stress test to solve all the problems. However, it appears - for once - the SEC is not willing to just ignore the bank's actions. Just as JPMorgan's CIO Office, aka the London Whale, took advantage of fungible, taxpayer-insured funding in the form of excess US deposits over loans, to corner the US credit market (in what was clearly a directional prop trade); so, as WSJ reports, The SEC is investigating whether BofA broke rules designed to safeguard client accounts, potentially putting retail-brokerage funds at risk in order to generate more profits using large complex trades.

Ron Paul Exposes The Real War On The Middle Class

One of the great ironies of American politics is that most politicians who talk about helping the middle class support policies that, by expanding the welfare-warfare state, are harmful to middle-class Americans. Eliminating the welfare-warfare state would benefit middle-class Americans by freeing them from exorbitant federal taxes, including the Federal Reserve’s inflation tax.