Main Street

One of the most deplorable aspects of Greenspan’s monetary central planning was the lame proposition that financial bubbles can’t be detected, and that the job of central banks is to wait until they crash and then flood the market with liquidity to contain the damage. In short, China didn’t “save ” America into a housing crisis; the Greenspan Fed printed America into a cheap debt binge that ended up impairing the residential housing market for years to come. In any event, for those Millennials who do manage to accumulate a down payment by the time they are in their early 30s there is precious little starter home inventory available.  The Greenspan mortgage debt serfs from the previous generation are blocking the way. Monetary central banking is an economy wrecker.  Here is just one more smoking gun of proof.

During the bubblicious years from 2000 through 2014, while Wall Street used control fraud and virtually free money provided by the Fed to siphon off hundreds of billions of ill-gotten profits from the economy, the average middle class family saw their income drop and their debt load soar. This is crony capitalism success at its finest. The oligarchs count on the fact math challenged, iGadget distracted, Facebook focused, public school educated morons will never understand the impact of inflation on their daily lives. The pliant co-conspirators in the dying legacy media regurgitate nominal government reported income figures which show median household income growing by 30% over the last fourteen years. In reality, the real median household income has FALLEN by 7% since 2000 and 7.5% since its 2008 peak. Again, using a true inflation figure would yield declines exceeding 15%.

Having unsuccessfully lobbied its slave-driving masters with one-day strikes and angry tongue-lashings, Thursday sees the fast food workers’ movement wants to broaden its reach as it pushes for a $15-an-hour wage (that restaurant companies say is unrealistic). In addition to 150 strikes across the US, NY Times reports, support protests will take place in 80 cities in more than 30 countries, from Dublin to Venice to Casablanca to Seoul to Panama City. "Fast food workers in many other parts of the world face the same corporate policies — low pay, no guaranteed hours and no benefits," warned one union leader but judging by the response from the restaurants association, "These are made-for-TV media moments - that’s pretty much it." Workers generally have the same message - "I don’t make enough money to take care of my kids," but as we have noted before (and as Motoman Robot below indicates) raising the minimum wage will have unintended consequences few strikers consider, "it would have consequences on hiring patterns for Main Street businesses across the country."

While many dismiss the impact of the "baby boomer" generation moving into retirement, the reality is likely to be far different. If the current survey is representative of that particular group, the drag on the financial markets and economy over the next decade could be quite substantial.

More Reasons QE Is a Dud

“I am often asked why I do not support a more rapid deceleration of our purchases, given my agnosticism about their effectiveness and my concern that they might well be leading to froth in certain segments of the financial markets. The answer is an admission of reality: We juiced the trading and risk markets so extensively that they became somewhat addicted to our accommodation of their needs… you can’t go from Wild Turkey to cold turkey overnight."

- Fed Governor Richard Fisher

As another week passes by the markets have made no real movement in months. News flow, outside of Yellen's testimony, was also rather slow as first quarter's earnings season begins to come to a close. However, there were a few articles that we read this week that we thought you might find interesting as well... from the dangers of hidden leverage (in the re-burgeoning CDO markets) to the history if bubbles (and their lack of logic) and the demise of the US small business.

• Omnicom, Publicis call off proposed $35 billion merger (Reuters)
• Apple in talks for $3.2bn Beats deal (FT)
• Alibaba IPO Grew Out of ’80s Chaos and Guy From Goldman (BBG)
• Nigeria's president at WEF pledges to free kidnapped girls (Reuters)
• JPMorgan Joins Wells Fargo in Rolling Out Jumbo Offerings (BBG)
• It's 1999 all over again: Young Bankers Fed Up With 90-Hour Weeks Move to Startups (BBG)
• ECB stimulus talk knocks euro, peripheral yields (Reuters)
• Deutsche Bank Currency Crown Lost to Citigroup on Volatility (BBG)
• London Taxis Plan 10,000-Car Protest Against Uber App Use (BBG)
• Pfizer Holders Could Face Tax Hit in a Deal for AstraZeneca (WSJ)

Some people are either born or nurtured into a time warp and never seem to escape. That’s Janet Yellen’s apparent problem with the “bathtub economics” of the 1960s neo-Keynesians. As has now been apparent for decades, the Great Inflation of the 1970s was a live fire drill that proved Keynesian activism doesn’t work. That particular historic trauma showed that “full employment” and “potential GDP” were imaginary figments from scribblers in Ivy League economics departments—not something that is targetable by the fiscal and monetary authorities or even measureable in a free market economy. Even more crucially, the double digit inflation, faltering growth and repetitive boom and bust macro-cycles of the 1970s and early 1980s proved in spades that interventionist manipulations designed to achieve so-called “full-employment” actually did the opposite—that is, they only amplified economic instability and underperformance as the decade wore on.

6 Years After the Financial Crisis Hit, The Big Banks Are Still Committing Massive Crimes

Bad Government and Central Bank Policy Are the MAIN CAUSE of Runaway Inequality

This eruption of late cycle bubble finance hardly needs comment. Below are highlights from a Bloomberg Story detailing the recent surge of leveraged recaps by the big LBO operators. These maneuvers amount to piling more debt on already heavily leveraged companies, but not to fund Capex or new products, technology or process improvements that might give these debt mules an outside chance of survival over time. No, the freshly borrowed cash from a leveraged recap often does not even leave the closing conference room - it just gets recycled out as a dividend to the LBO sponsors who otherwise hold a tiny sliver of equity at the bottom of the capital structure. This is financial strip-mining pure and simple - and is a by-product of the Fed’s insane repression of interest rates.

If there’s one thing we all know about banks and bankers: they love to tell tales in public of how much they value their customers. However, what you’ll never hear them profess in private: is how much they trust them. Although one may think that’s unseemly, believe it or not there is another entity banks hold at an even lower tier. Other banks.  One of the known facts people remember about the melt down in 2008 (as opposed to general public) was when the banks no longer trusted each other, and what they earlier claimed was “collateral” wasn’t actually worth what it was stated to be. As we recently explained in How China’s Commodity-Financing Bubble Becomes Globally Contagious, the implications of this development and the consequences it portends just might make it the proverbial “canary in a coal mine.” The underlying issue that makes this far more dangerous or different from times past is three-fold...

A ‘Perfect Storm’ of demography and debt will economically and financially doom almost every country on earth. It will be TEOTWAWKI – ‘The End Of The World As We Know It’. No, it’s not the end of life or even the end of civilization. However, when it’s all over, nothing will ever be the same and that includes the disappearance of much of the middle class.  The good news - The storm won’t last forever. The bad news is there will be much more pain before it ends unless you make an effort to understand what’s happening and why.

Military Keynesians Are Full of Sh ... (Cough) ... Shallow Myths