Maynard Keynes

When it comes to building wealth, muddying the difference between perception and reality is the key manipulation tool that banksters use to goad people into wrong choices.

In a recent BBC News article, philosopher John Gray asks the quaint but otherwise vain question of what would John Maynard Keynes do in today’s economic slump.  We call the question vain because practically every Western government has followed Keynes’ prescribed remedy for the so-called Great Recession.  Following the financial crisis of 2008, governments around the world engaged in deficit spending while central banks pushed interest rates to unprecedented lows.  Nearly four years later, unemployment remains stubbornly high in most major countries. Even now in the face of the come-down that inevitably follows any stimulus-induced feelings of euphoria, certain central banks have taken to further monetary easing. The question of interest shouldn’t be “what would Keynes do” but rather “why even listen to someone so pompous and nihilistic to begin with?”  Just as Keynes missed the Great Depression, modern day Keynesians missed the housing bubble and financial crash.  From his contempt for moral principles to his enthusiastic support for eugenics, Keynes saw the world as something separate from the bubble of his fellow elitists. Outside of that we guess he was a great guy!

The New York Fed has a few words to say about gold: "A PHENOMENAL ASSET. For centuries, gold had a profound impact on history, as a symbol and a storehouse of wealth accepted universally around the world. Gold functions as a medium of exchange, particularly in areas where currencies are distrusted. Yet gold has not been without controversy. The influential economist, John Maynard Keynes, referred to gold as a “barbarous relic.” Later in the 20th century, former Chairman of the Federal Reserve’s Board of Governors, William McChesney Martin, praised gold as "a beautiful and noble metal. What is barbarous," Martin said, "is man’s enslavement to gold for monetary purposes." Clearly, this precious metal has aroused great passion. It undoubtedly will continue to do so long into the future."

Meet the Old Scary Clown, same as the same Old Scary Clown.

Reflecting on yesterday's monetary-policy-hope-driven rally, UBS' Art Cashin prefers to focus on Richard Fisher's very frank (and succinct) speech on the limits of monetary policy and the importance of fiscal policy.  Urging everyone to read it, and send it to your Congressman and Senators, he reminds us that Fisher is the only Fed policymaker to have been a banker and a money manager, and in the words of Richard Fisher, he worries that: "there is a growing sense that we are unwittingly, or worse, deliberately, monetizing the wayward ways of Congress."

While eugenicists and Keynesians make correct descriptive observations — like the fact that certain qualities and traits are inheritable, or more simply that children are like their parents — their attempts to use the state as a mechanism to control these natural systems often turns out to be drastically worse than the natural systems that they seek to replace. As Keynes seems to admit when — in the German language edition of his General Theory — he noted that the conditions of a totalitarian state may be more amenable to his economic theory, the desire for control may be the real story here. Keynesianism brings more of the economy under the control of the state. It is a slow and creeping descent into dependency on the state. As we are seeing in Europe today, cuts in state spending in a state-dependent economy can cause deep economic contraction, providing the Keynesian more confirmation for his idea that the state should tax more, and spend more. That is, until nature intervenes. Just as a state-controlled eugenics program might well spawn an inbred elite suffering hereditary illnesses as a result of a lack of genetic diversity, so a state-controlled economy may well grind itself into the dirt as it runs out of innovation as a result of a lack of economic diversity. Such a situation is unsustainable — no planner is smarter than nature.

The standard Keynesian narrative that "Households and countries are not spending because they can’t borrow the funds to do so, and the best way to revive growth, the argument goes, is to find ways to get the money flowing again." is not working. In fact, former IMF Director Raghuram Rajan points out, today’s economic troubles are not simply the result of inadequate demand but the result, equally, of a distorted supply side as technology and foreign competition means that "advanced economies were losing their ability to grow by making useful things." Detailing his view of the mistakes of the Keynesian dream, Rajan notes "The growth that these countries engineered, with its dependence on borrowing, proved unsustainable.", and critically his conclusion that the industrial countries have a choice. They can act as if all is well except that their consumers are in a funk and so what John Maynard Keynes called “animal spirits” must be revived through stimulus measures. Or they can treat the crisis as a wake-up call and move to fix all that has been papered over in the last few decades and thus put themselves in a better position to take advantage of coming opportunities.

“Public debt is an enemy for the country”

John Maynard Keynes, Charlie Munger and Warren Buffett all said or implied that gold was a barbarous relic. But what’s the barbarous relic? The precious metal that shows prices without a veneer of manipulation, or the paper currency that smudges the true state of supply and demand through money printing, thus misleading markets and society? Charlie Munger says gold is not for civilised people, but in reality gold may be the most civilised currency of all — because it allows civilised people to purchase insurance against the risk of civilisation failing.

12-year old Victoria Grant drops knowledge on adults that can't put two and two together and figure out that our immoral, morally reprehensible fractional reserve banking system is responsible for the  majority of misery and suffering in the world today.

When inflation isn’t particularly hot, it’s praised as something desirable....

Four time Fed Chairman Marriner Eccles: "As long as the Federal Reserve is required to buy government securities at the will of the market for the purpose of defending a fixed pattern of interest rates established by the Treasury, it must stand ready to create new bank reserves in unlimited amount. This policy makes the entire banking system, through the action of the Federal Reserve System, an engine of inflation. (U.S. Congress 1951, p. 158)... [We are making] it possible for the public to convert Government securities into money to expand the money supply....We are almost solely responsible for this inflation. It is not deficit financing that is responsible because there has been surplus in the Treasury right along; the whole question of having rationing and price controls is due to the fact that we have this monetary inflation, and this committee is the only agency in existence that can curb and stop the growth of money.. . . [W]e should tell the Treasury, the President, and the Congress these facts, and do something about it....We have not only the power but the responsibility....If Congress does not like what we are doing, then they can change the rules. (FOMC Minutes, 2/6/51, pp. 50–51)"

“God bless Bankstas, each and every one of em!” --Tiny Timmah

This misconception that the paradox of thrift applies in normal markets has done immense harm to the economy and eroded the savings of the middle-class and retirees. For three generations, central bankers attacked savers by artificially reducing interest rates — in the belief that lower savings would boost demand and stimulate the economy. Low interest rates simply forced savers to assume more risk, in order to earn a return on their investment, and encouraged speculation. The traditional work hard and save ethic that is the backbone of the capitalist system has been supplanted by the consume, borrow and speculate profligacy that got us into such a mess. High levels of public and private debt, inflation, volatile investment returns and rising income inequality are all consequences of the low-interest policy pursued by the Fed. Today’s giant casino is a far cry from the cautious, prudent investment outlook of our grandparents’ generation.

Hark - either the end is nigh, or we are about to see one of the biggest market melt-ups in history: the man who conceived, developed, and distributed the Birinyi Ruler to a Comcast financial comedy cable channel near you, and to late night comedy in financial circles everywhere, is no longer a Bull. He is merely a bull, which is the also the first word one may apply to another very appropriate word to describe his predictions from early on in the year. For those who have their ultrasound babel fish on, here it is: "The S&P 500 has been perilously close to a 20 per cent decline in recent weeks which would, by definition, terminate the bull market which began in March 2009. Given the economic circumstances and the continuing political turmoil on both sides of the Atlantic, most commentators believe it is only a matter of time before such a landmark is reached. Having been bullish, I am – as expected – disappointed but not undaunted. I remain bullish if only now with a lower case “b”. Some months ago I conceded that making market forecasts was increasingly difficult as they entailed an understanding of American politics, Chinese monetary and financial policy, Greek and Italian attitudes, German elections in addition to the usual economics, corporate developments and actions and comments by the Federal Reserve Board." Obviously, all these are superfluous 'things' that a man of Birinyi's intellect should not need to be concerned by. After all, what is good is the 'ruler' for if not to predict the future? But before you go ahead and pledge a 4th lien on your 3rd born to go all in stocks, here is the Notorious BIGGS, who bottom ticked the market a few weeks back with laser-like precision : "Barton Biggs Increases Bullish Bets in Traxis Macro Fund to 65%." Needless to say, every time Biggs has done something, the market has done the opposite. So for all those confused what they should do when two of the market's most hilarious permabulls say the opposite things, fear not - i) you are not alone, and ii) just buy a collocated vacuum tube-based algo, and watch as the High Frontrunning Trading algo makes you rich beyond your wildest dreams.