Last week saw a full court press in defense of the current money printing exercise. As we have frequently pointed out, modern-day economic policy is evidently in the hands of utter quacks. It matters little to them that their prescriptions have failed time and again for hundreds of years – they do the same thing over and over again, as though they were escapees from an insane asylum.
In late 2010, in a superficially stunning move, Bank of America was sued by, among many others, the New York Fed over the biggest bogeyman for the bank's balance sheet - its legacy portfolio of super toxic Countrywide mortgages it inherited in the worst M&A deal of all time (its purchase of CFC) and the inheritance of woefully inadequate mortgage issuance standards which ever since then (recall our prediction on this issue) has cost the bank billions in litigiation payments and reserves. Obviously, the Fed had no concerns about collecting the money it itself creates, and it certainly doesn't care about legality and criminal financial impropriety, so why was it among the list of plaintiffs? Simple: as we suggested back then, and as has since been proven correct, it was simply so that Bill Dudley's henchmen have a first row view of everything going on in the putback litigation that has been the primary concern for BofA, but with a few of keeping the damage to a minimum. Sure enough, Ever since then the Fed has done everything in its power to mitigate potential losses to BofA as a result of Agent Orange selling hundreds of billions in biohazardous mortgages to anyone and anything with a pulse. It has gotten so bad that the Fed was last week caught lying under testimony, forcing the Fed to take back testimony in a parallel lawsuit between AIG and BofA, which has also involved the New York Fed, as a indirect guardian of BAC's cash hoard.
Typically, when the ISM-leading Chicago PMI has a horrible print as it did last week, the subsequent ISM response in a "baffle with BS" centrally planned regime is one of a stunning beat just to make sure all vacuum tubes are kept on their binary toes, and the bad news is good news, good news is better news meme continues propagating. Not this time: moments ago, the March ISM printed at 51.3, the biggest miss to expectations (of 54.0) in 13 months, in fact below the lowest estimate, driven by a collapse in New Orders which tumbled from 57.8 to 51.4, as the rapid deceleration in the US economy is confirmed in virtually every recent metric. The good news, and what will be used to spin the market back into green following its epic 0.2% selloff on the news, is that the Employment Index rose from 52.6 to 54.2, the highest since June 2012. Elsewhere, the 1.2% increase in construction spending came in better than estimated... on a seasonally adjusted basis. Unadjusted it had its biggest drop since July 2011 but who cares: we all live in a seasonally-adjusted "reality" in which only the daily record S&P prints matter. And now, with yet another economic miss in tow, we resume your regularly scheduled no-volume Federal Reserve mandated "stock market" levitation.
Our April Fool's wish: someone in the inner circle of power would finally tell the truth. In an unprecedented abandonment of his carefully scripted responses to Congressional questions, Federal Reserve Chairman Ben Bernanke unleashed what appeared to be a heart-felt and spontaneous disavowal of the financial and political systems of the United States.
Everything the Fed does ultimately leads to less economic activity, less savings and more debt resulting in poverty for Americans, not prosperity. Debt is not prosperity. Debt is poverty and economic slavery. As long as the money printing continues things will continue to get worse, not better. Americans are now economically worse off than they were in 2008. This leads us to one curious question: if the Fed knows reality is deteriorating and it’s monetary policies are causing this deterioration to accelerate, what is the endgame the government and the Fed have in store for Americans?
This system distorts the market and turns appropriate risk-taking into recklessness. The result is a more concentrated and powerful financial sector — and a more fragile economy. The way to return the financial services industry to the free market is by separating trading from commercial banks and by reforming the so-called shadow banking sector. Government guarantees should be limited primarily to those commercial banking activities that need it to function: the payments system and the intermediation process between short-term lenders and long-term borrowers.... It is time to return our financial system to one in which success is no longer achieved through government protections but, rather, through innovation and competition. While trading and investment activities are vital parts of the financial services industry, there is no economic or social rationale for protecting and subsidizing them. Financial services firms are in the business of taking risks. Our country shouldn’t attempt to take the risk out of the system. But we should absolutely stop subsidizing it.
Bernankeism must be obliterated.
There are two types of people in this world; those who worship the ideal of centralized command authority, and those who do not. Those who value freedom regardless of risk or pain, and those who value slavery in a desperate bid to avoid risk and pain. When I consider the ultimate folly of man, in the end I look to the meek and unquestioning masses who strive to avoid risk, because it is they who always end up feeding the machines of war, despair, and tyranny. The power thirsty halls of elitism surely instigate and manipulate the tides of this wretched ocean of quivering souls, but ultimately, the weak-hearted and weak minded make all terrible conquests possible. They live by the rule of fear, and their fear drives them to seek control; control of their environment, control of others, and by extension they believe, control of the future. They attempt to mitigate their overwhelming fear by containing the world and sterilizing it of everything wild, untamed, and unknown. They dream of a society of pure predictability, and zero responsibility. They are willing to sacrifice almost anything to attain this position of artificial comfort. The concept of “big government” appeals to such people for many reasons...
No, it wasn't Ben Bernanke or Alan Greenspan, it wasn't Jean-Claude Trichet or his successor Mario Draghi, nor was it Mervyn King, Carney, Shirakawa, or Hildebrand. The answer, as shocking as it may sound, was...
The “Cyprus deal” as it has been widely referred to in the media may mark the next to last act in the the slow motion collapse of fractional-reserve banking that began with the implosion of the savings-and-loan industry in the U.S. in the late 1980s. The happy result will be that depositors, both insured and uninsured, in Europe and throughout the world will become much more cautious or even suspicious in dealing with fractional-reserve banks. They will be poised to grab their money and run at the slightest sign or rumor of instability. This will induce banks to radically alter the sources of the funds they raise to finance loans and investments, moving away from deposit and toward equity and bond financing.
Reclaiming the Founding Fathers' Vision of Prosperity
If we shed our fixation with the Fed and look at global supply and demand, we get a clearer understanding of the tailwinds driving the U.S. dollar higher. I know this is as welcome in many circles as a flashbang tossed on the table in a swank dinner party, but the U.S. dollar is going a lot higher over the next few years. In a very real sense, every currency is a claim not on the issuing central bank's balance sheet but on the entire economy of the issuing nation. All this leads to two powerful tailwinds to the value of the dollar. One is simply supply and demand: as the global economy slides into recession, trade volumes decline, and the U.S. deficit shrinks. (It's already $250 billion less than was "exported" in 2006.) That will leave fewer dollars available on the global market. The second tailwind is the demand for dollars from those exiting the euro and yen. The abandonment of the euro is already visible in these charts.
- What bread... What circuses... JPMorgan Chase Faces Full-Court Press of Federal Investigations (NYT)
- European Regulators to Charge Banks Over Derivatives (WSJ) ... but forgive us if we don't hold our breath
- Cyprus readies capital controls to avert bank run (Reuters)
- Damage ripples through Cypriot economy (FT)
- G4S readies guards as Cypriot banks prepare to open (Reuters)
- Global pool of triple A status shrinks 60% (FT)
- Customers Flee Wal-Mart Empty Shelves for Target, Costco (BBG)
- BOE Says U.K. Banks Have Capital Shortfall of $38 Billion (BBG)
- U.K. Banks Facing Capital Shortfall (WSJ)
- Cyprus Details Bank Revamp (WSJ)
- Kazumasa Iwata Joins Kuroda Naysayers as BOJ to Meet (BBG)
- BRICS Nations Need More Time for New Bank, Russia Says (BBG)
We’ve all seen these statistics before in one form or another, but David Cay Johnston does an excellent job going into more detail for us in an article he published late last month. As he correctly notes, when things get extreme like this you ultimately end up with extreme social unrest. Furthermore, as we have pointed out for years and years, this kind of disparity does not happen under free markets with rules and regulations applied equally to all. It happens under totalitarian societies, whether fascism, communism or crony capitalist corporatism (which is the model in the USA). It only happens when a very small oligarch class takes over the political process of a nation and then uses it to game the system.
It is clear now that we must have been wrong about the economy. No more proof is needed than the fact the Dow has gone up 1,500 points. Everyone knows the stock market reflects the true health of the nation – multi-millionaire Jim Cramer and his millionaire CNBC talking head cohorts tell us so. Ignore the fact that the bottom 80% only own 5% of the financial assets in this country and are not benefitted by the stock market in any way. It is time to open your eyes and arise from your stupor. Observe what is happening around you. Look closely. Does the storyline match what you see in your ever day reality? It is them versus us. Whether you call them the invisible government, ruling class, financial overlords, oligarchs, the powers that be, ruling elite, or owners; there are powerful wealthy men who call the shots in this global criminal enterprise. No amount of propaganda can cover up the physical, economic, social, and psychological descent afflicting our world. There’s a bad moon rising and trouble is on the way.