Austrian "Freedom" Party Demands Bailout For Swiss Franc Speculators (From "Monstrous Monetary Policy")Submitted by Tyler Durden on 01/26/2015 22:10 -0500
The phrases "it's just not fair" and "waa waa waa" were not seen in Austria's Freedom Party's statement demanding a bailout for Swiss-Franc-denominated borrowers (i.e. people who were willing to speculate on FX rates with their house as collateral in order to get a lower interest rate in order to afford a bigger home that they really couldn't afford in real risk-adjusted terms). What Austria needs, general secretary Franz Kickl exclaimed is "a general regulation and an offer to all Franc borrowers," adding that "it cannot be that Austrian borrowers are the only ones who keep their losses even they are indemnified in Hungary, Croatia and perhaps even in Poland, the Czech Republic and Slovakia." Which does sound oddly like 'waa waa waa'?
Today what we’ve come to know as “mainstream financial media” has provided nothing more than a vehicle for the exponential rise of group-think. All at the suffering of critical thought. In what seems like the blink of an eye most anything to do with financial insight whether it be the reporting of, as well as investigative analysis; has morphed into some version of a stylized regurgitation of Central banking dogma. (this also includes many of the so-called “experts” brought on to fortify the sermons).
In a fundamentals-driven market you need to look at fund flows; in a Narrative-driven market you need to look at Narrative flows. With Draghi’s announcement last Thursday, there is no longer a marginal provider of market-supportive monetary policy Narrative. Or to put this in game theoretic terms, the 2nd derivative of the Narrative of Central Bank Omnipotence just flipped negative. We’ve shifted from an accelerating Narrative flow to a decelerating Narrative flow, and that inflection point in profoundly important in game-playing. The long grey slide of the Entropic Ending begins.
The Japanese fire at the Europeans. The Europeans fire at the Japanese & Chinese. The Chinese fire scattershot at everybody else in Asia. England & America prep to teach those they consider muppets not to play with guns. It's World War Money, if you know what I mean...
With the Ruble having plunged 3 handles today alone, it appears perhaps more than a few could see this coming...
- RUSSIAN FEDERATION RATINGS CUT TO JUNK BY S&P
- RUSSIAN FEDERATION CUT TO BB+ FROM BBB- BY S&P; OUTLOOK NEG
Putting it below investment grade for the first time in a decade. Of course, this happens just 6 days after the news first leaked that S&P would pay a $1.5 billion settlement to the US DoJ over downgrading America: one wonders just what else was in the small print?
The problem with all Keynesian styled philosophy is, it works well, and seems utterly brilliant on paper and in the classrooms of academia - when trouble arises its "To the text books!" for answers and BAM! – crisis solved. However in the real world it doesn't work that way. Just like war, when the battle starts, all earlier plans get thrown in the dust heap. And make no mistake, this was all started via armchair generals who believed monetary policy could be managed from within the Ivory Towers of academia and the consequences of these policies are multiplying by the day. As Mike Tyson once said so eloquently: (I’m paraphrasing) "Everybody's got a plan – till someone punches them in the face." The SNB has just landed the first blow. Now what?
"The Ruble has fallen by 50% in a year. The price of oil has halved, the price of copper, iron ore and many other commodities has tumbled. The Swiss franc has been de-floored and the uproar was huge. All random events, all part of a pattern. Financial markets are feeling the effects of a pick-up in volatility that has followed the end of Fed QE. While zero rates were augmented with Fed bond-buying, investors went around the world in search of higher yields, in all sorts or assets and currencies. Traders and investors of one kind or another resorted to leverage to reach the yield targets they needed to match their required investment returns. All of which was fine while the party went on forever, but now that it’s ending, the outcome is anything but fine."
The fallout from the monetary policy machinations in Europe over the last two weeks are far from over. After notable weakness last week, the Swiss Franc collapsed 2.7% today against the USD - its largest single-day drop since Sept 6th 2011. Whether this is SNB re-intervention, natural kneejerk reactions to the massive move on SNB day, covering of positions as FX brokers try to unwind positions, or Swiss recession fears is unclear; but one thing is obvious, higher-er margins and lower-er leverage is on the way as these moves are colossal on a historical volatility basis...
Even if you think you know how competitive devaluation works, this primer is worth it because parts 2-4 of this series will blow your socks off leaving you wondering, "Damn, why didn't I tink of that?"
This is what Goldman has to say in order to assure that clients flood Goldman's prop pardon flow traders with "Buy USD" orders: orders which Goldman, being on the other side, will be delighted to fill.
Non-bombastic, non-insulting simply straight-forward look at next week's key events and data. If you are so inclined...
With Fed mouthpiece Jon Hilsenrath warning - in no lesser status-quo narrative-deliverer than The Wall Street Journal - that The ECB's actions (and pre-emptive collapse in the EUR) means the U.S. economy must deal with a rapidly strengthening dollar that will make American goods more expensive abroad, potentially slowing both U.S. growth and inflation; and Treasury Secretary Lew coming out his crypt to mention "unfair FX moves," it appears The Fed (and powers that be) are worrying about King Dollar. This suggests, as Mises Canada's Patrick Barron predicts, the Fed will start charging negative interest rates on bank reserve accounts as the final tool in the war on savings and wealth in order to spur the Keynesian goal of increasing “aggregate demand”. If savers won’t spend their money, the government will take it from them.
In 55BC, Cicero stood before the Senate of Rome (warning of its looming demise), spoke of the “arrogance of officialdom” and the more one studies going ons throughout history, the clearer it becomes – the story remains the same, only the actors change - history repeats because the passions of man never change. Those who may grudgingly support the ECB stimulus in the hope that it will buy time for governments to enact structural overhauls, keep praying that politicians will push aside their own personal self-interests for once and focus of the interests of the people. Such wishful thinking is foolish since history demonstrates that only takes place when the system collapses. People who do hold to this view are also worried that looser monetary policy may work against structural measures. The European Central Bank’s stimulus diminishes any incentive for governments to reform. The policy makers and specialists at Davos were divided over the effect of even that program; but where do these people get off assuming they have the ability and right to manipulate the world?
Over the past 48 hours, the world has been bombarded with a relentless array of soundbites, originating either at the ECB, or - inexplicably - out of Greece, the one place which has been explicitly isolated by Frankfurt, that the European Central Bank's QE will benefit everyone. Setting the record straight: it won't, and not just in our own words but those of JPM's Nikolaos Panigirtzoglou, who just said what has been painfully clear to all but the 99% ever since the start of QE, namely this: "The wealth effects that come with QE are not evenly distributing. The boost in equity and housing wealth is mostly benefiting their major owners, i.e. the wealthy." Thank you JPM. Now if only the central banks will also admit what we have been saying for 6 years, then there will be one less reason for us to continue existing.
There is no reason to assume that this time will be different. These boom-bust sequences will continue until the economy is structurally undermined to such an extent that monetary intervention cannot even create the illusory prosperity of a capital-consuming boom anymore. The bankers applauding Draghi’s actions today will come to rue them tomorrow.