"I’ve never felt so ... resigned ... to the fact we are ALL well and truly stuck. The Fed is stuck. The ECB and the BOJ are stuck. The banks are stuck. Corporations are stuck. Asset managers are stuck. Financial advisors are stuck. Investors are stuck. Republicans are stuck. Democrats are stuck. We are all stuck in a very powerful political equilibrium where the costs of changing our current bleak course of ineffective monetary policy and counter-productive regulatory policy are so astronomical that The Powers That Be have no alternative but to continue with what they know full well isn’t working."
There is definitely considerable negativity about central banking in the mainstream media these days. This is surprising, on the one hand, because central banking provides the foundation of the current economic system, worldwide. On the other hand, such negativity may be signaling far worse.
Just last week the European Central Bank (ECB) unveiled a self-produced exposé on its now openly celebrated trading operation. Only an Ivory Tower’d academic or Ph.D economist who’s never spent a day in the real world of business and/or market place could envision this as helping to bolster an image of surety or confidence.
One of the oddest things in this increasingly odd world is the spread of negative interest rates everywhere but in the US. One answer is that the Bank of Japan and the European Central Bank are buying up all the high-quality (and increasing amounts of low-quality) debt in their territories, thus forcing down rates, while the US Fed has stopped its own bond buying program. The other answer is that this is just one of those periodic anomalies that persist for a while and then get arbitraged away. And Brexit might be the catalyst for that phase change.
So here we are. After decades of what essentially could be called a new “Industrial Revolution” with the advent of computers and the internet, the US government has managed through its monetary authorities and through its other policies to decimate savings and leave millions of Americans financially vulnerable. It has been no accident.
Millions of Americans and Canadians who are counting on pension benefits to fund their retirements risk being severely disappointed. Ironically, as experts worry about stock, bond and real estate market excesses; the biggest challenge facing government bureaucrats and private fund administrators has nothing to do with paying back pensioners. They have known for some time that would not be possible. Their key challenge, will be to ensure that shortfalls occur on someone else’s watch.
Experts worry about stock, bond and real estate market excesses. But a bubble is forming that dwarfs them all: in pension plans. Millions of Americans and Canadians who are counting on pension benefits to fund their retirements risk being severely disappointed.
Carve-up, n. “An act or instance of dishonestly prearranging the result of a competition.” Just two hours before it was barred from issuing any more fatuous propaganda about Brexit, the UK Treasury last week managed to surpass themselves...
The errors of Keynes have empowered sociopathic political classes all over the world and deprived the world of the economic progress we would otherwise have enjoyed. No amount of stimulus ever seems to be quite enough. And when the stimulus fails, the blinkered Keynesian establishment can only think to double down, never to question the policy itself. The Keynesians are pretending they have everything under control, but we know that’s a fantasy. Simply put, "Keynes must die so the economy may live."
“When the facts change, I change; What then do you do, Sir?” The facts are changing in the world of crude oil; demand is still rather strong and supplies seem to be rising but only modestly. Further, the term structures are shifting. We had been, on balance and really quite openly, bearish of crude for the past several years, erring always to sell crude’s rallies rather than to buy crude’s weakness. That has been wrong for the past two months and it is time to acknowledge that “wrongness.” If the facts are indeed changing… and certainly they seem to be… then we too must change.
There must be some dark corner of Hell warming up for modern, mainstream economists. They helped bring on the worst bubble ever... with their theories of efficient markets and modern portfolio management. They failed to see it for what it was. Then, when trouble came, they made it worse. But instead of atoning in a dank cell, these same economists strut onto the stage to congratulate themselves.
The “bullish case” is currently built primarily on “hope.”Hope the economy will improve in the second half of the year; Hope that earnings will improve in the second half of the year; Hope that oil prices will trade higher even as supply remains elevated; Hope the Fed will not raise interest rates this year; Hope that global Central Banks will “keep on keepin’ on.” Hope that the US Dollar doesn’t rise; Hope that interest rates remain low; Hope that high-yield credit markets remain stable.
Pestilence. War. Famine. Death. One could give these Four Horsemen any cute nicknames that they desire. But what the four Fed-heads all have in common is that they are destroyers. Just like all of the West’s other central bankers.