Here come the revisionists with new malarkey about the 2008 financial crisis. No less august a forum than the New York Times today carries a front page piece by journeyman financial reporter James Stewart suggesting that Lehman Brothers was solvent; could and should have been bailed out; and that the entire trauma of the financial crisis and Great Recession might have been avoided or substantially mitigated. That is not just meretricious nonsense; its a measure of how thoroughly corrupted public discourse about the fundamental financial and economic realities of the present era has become owing to the cult of central banking. The great error of September 2008 was not in failing to bailout Lehman. It was in providing a $100 billion liquidity hose to Morgan Stanley and an even larger one to Goldman. They too were insolvent. That was the essence of their business model. Fed policies inherently generate runs, and then it stands ready with limitless free money to rescue the gamblers. You can call that pragmatism, if you like. But don’t call it capitalism.
There is nothing like the release of secret tape recordings to clarify an inconclusive debate. Actually, what the tapes really show is that the Fed’s latest policy contraption - macro-prudential regulation through a financial stability committee - is just a useless exercise in CYA. Macro-pru is an impossible delusion that should not be taken seriously be sensible adults. It is not, as Janet Yellen insists, a supplementary tool to contain and remediate the unintended consequence - that is, excessive financial speculation - of the Fed’s primary drive to achieve full employment and fill the GDP bathtub to the very brim of its potential. Instead, rampant speculation, excessive leverage, phony liquidity and massive financial instability are the only real result of current Fed policy.
When is the U.S. banking system going to crash? We can sum it up in three words. Watch the derivatives. It used to be only four, but now there are five "too big to fail" banks in the United States that each have more than 40 trillion dollars in exposure to derivatives.
The US economy and financial system are in worse condition than the Fed and Treasury claim and the financial media reports. Gold serves as a warning for aware people that financial and economic trouble are brewing. In the 21st century, US debt and money creation has not been matched by an increase in real goods and services. The implication of this mismatch is inflation. Without the price-rigging by the bullion banks, gold and silver would be reflecting these inflation expectations.
History may not repeat exactly because technology, resource discoveries, and political dynamics change the nature of society, but it does rhyme because the human foibles of greed, lust for power, arrogance, and desire for conquest do not vary across the ages. The corruption, arrogance, hubris, currency debasement, materialism, imperialism, and civic decay that led to the ultimate downfall of the Roman Empire is being repeated on an even far greater scale today as the American Empire flames out after only two centuries. The pillars of western society are crumbling under the sustained pressure of an immense mountain of debt, created by crooked bankers and utilized by corrupt politicians to sustain and expand their welfare/warfare state. Recklessness, myopia, greed, willful ignorance, and selfish disregard for unborn generations are the earmarks of decline in this modern day empire of debt, delusion and decay.
While Janet Yellen and her band of money printers work themselves into a tizzy over whether two buzz words - “considerable time” - should be dropped from their post-meeting word cloud, they might be better advised to just read the newspapers. This morning’s WSJ brings word that the lending boom which our monetary central planners are eager to stimulate is apparently off-to-the-races. Well, sort of. The item in question is a $122 billion globally syndicated loan to facilitate an M&A deal between the world’s two largest beer companies - AB InBev with a 20% global market share and SABMiller with 10%.
Today the entry-level position has morphed into something far different when you talk to anyone who's never owned or run a business. It's no longer thought of as "entry-level," as - faced with a government-mandated 50% minimum wage pay rise in some cases - businesses may decide their choice is to either leave – or eliminate the need for - those positions all together? And the technology, along with the acceptance of it, might be farther along the development curve than many believe to foster such dramatic changes.
The financial market stimulus chorus is now universal - virtually identical from Hong Kong to London to New York, despite ostensibly deep differences in policy regimes. At the end of the day, however, there is not really a dimes worth of difference between the Bush/Obama/Bernanke model and the economic model employed by the politburo overlords in Beijing. Its all about insensible, contagious, addictive credit expansion, and the phony wealth and temporary prosperity which it breeds. All it takes is just another shot of “stimulus”.
That was quick! Last November Snapchat was valued at $2 billion in the private VC market; by Q1 that had risen to $7 billion; and yesterday it soared to $10 billion. Gaining $8 billion in market value in just nine months is quite a feat under any circumstance - but that’s especially notable if you’re are a company with no profits, no revenues and no business model. How much does it cost to manipulate an entire market? Apparently not much. And it’s getting cheaper!
Given that this is 'officially' the worst-recovery-ever, one wonders why does the abysmally failed and dangerous monetary experimentation continue unabated — as Yellen will undoubtedly confirm at Jackson Hole? Self-evidently, it is irresistibly convenient to both Wall Street and Washington. Yet these screaming juxtapositions are lost in the recency bias of the mainstream narrative. Invariably, the “in-coming” data is tortured and rationalized to prove that just a few more doses of money and debt will do the trick. Consequently, the pattern and signal is obscured amidst the immediate noise. It is therefore perhaps useful to consider a more advanced case of this Keynesian debauch from elsewhere in the world. Consider Italy.
- FTW: Europe Stocks Rise as Data Signals Need for Stimulus (BBG)
- More de-escalation: Dozens die in Ukraine in street battles, Donetsk shelling (Reuters)
- Calm largely holds in Missouri after grand jury opens shooting investigation (Reuters)
- Attorney General Eric Holder Vows Thorough Probe of Ferguson Shooting (WSJ)
- World’s Biggest Wealth Fund Slows Emerging Market Investment (BBG)
- Market Chilly to Argentine Debt Proposal (WSJ)
- Israeli air strike kills three Hamas commanders in Gaza (Reuters)
- Retooled Hamas Bloodies Israel With Help From Hezbollah (BBG)
- Investors Pour Into Vanguard, Eschewing Stock Pickers (WSJ)
- Fed Debates Early Rate Increases (WSJ)
Absolute Bubble Insanity: For Nearly Half A Billion Dollars, Here Is The World's Most Expensive PenthouseSubmitted by Tyler Durden on 08/19/2014 13:02 -0400
Forget Hong Kong, London and New York: when it comes to the pinnacle in absolute real estate insanity - perhaps in all of history - look no further than James Bond's favorite gambling mecca, Monaco. It is in this tiny Riviera principality where we find the Tour Odeon, a double-skyscraper being built by Groupe Marzocco SAM near Monaco’s Mediterranean seafront, which will contain a 3,300 square-meter (35,500 square-foot) penthouse with a water slide connecting a dance floor to a circular open-air swimming pool. The description is nice, but it is the bottom line that is mindblowing: Bloomberg reports that the apartment may sell for more than 300 million euros ($400 million) when it goes on the market next year, French magazine Challenges reported. That would make it the world’s most expensive penthouse, according to broker Knight Frank LLP.
There is no reason rooted in the real world for today’s frothy stock market rally. In every single region of the planet, the post-crisis, central bank fueled expansion cycle - tepid as it was in the global aggregate - is faltering badly. So with the global expansion cycle faltering, profit ratios at all-time highs and PE multiples in the nose-bleed section of history - nearly 20X reported earnings for the S&P 500 - there is only one thing left for the Wall Street robots to do. Namely, vigorously buy the latest dip because the Fed has yet another new sheriff heading for Jackson Hole purportedly bearing dovish tidings. To wit, after 6 years of pinning money market rates to the economic floorboard at zero, Janet Yellen espies an economy still encumbered by “slack”, and will therefore be inclined to keep Wall Street gamblers in free money for a while longer.
This is especially the case in Ukraine where the currency has lost more than half of its value versus gold (see chart above and below). Gold in Ukraine Hrvynia is up 70% since the start of 2014. People who own gold in Ukraine would laugh at you, if you said that gold is not a safe haven. As would people in many countries in South America, the Middle East and Africa.
Anyone desperate to find clues to the "great American recovery" is strongly urged to stay away from Atlantic City, where shortly after the Revel hotel and casino filed for its second bankruptcy in 16 months, the struggling property announced it would shutter its doors for one final time in September, when not a single qualified buyer emerged during the bankruptcy auction. The good news: there will not be a Chapter 33 for the doomed from the beginning property. The bad news: the DOL will have to find a major seasonal adjustment to absorb the 3,100 jobs that were just lost. It also means that Atlantic City is set to close the year with 25% fewer casinos than it started with, following the shuttering of three other properties including the Showboat and Trump Plaza.