Too Big To Fail
The notion of free markets, mechanisms where buyers and sellers can meet to exchange securities or various kinds of goods, in which each participant has access to the same information, is a fallacy. Transparency in trading across global financial markets is a fallacy. Not only are markets rigged by, and for, the biggest players, so is the entire political-financial system.
"The Populist Upsurge is Real" When A Liberal College Professor Finds Common Ground With The Tea PartySubmitted by Tyler Durden on 11/11/2015 18:00 -0500
People are going to be pissed off no matter who wins this election and that is a very important social dynamic that is vastly under appreciated by the majority of mainstream pundits and analysts out there. The truth is, the American public is tricked into thinking they disagree with each other on the big issues, when in reality there’s enormous overlap. Until we stop being tricked, the status quo will continue to suck the economy dry through their religious-like embrace of corruption and crony capitalism. Unfortunately, the people who could benefit the most from reading this post, will never see it.
Bring On 'Operation Switch' - Bill Gross Calls For A Reverse 'Operation Twist' To "Benefit Savers And The Economy"Submitted by Tyler Durden on 11/03/2015 08:49 -0500
"But they won’t, you know. Yellen and Draghi believe in the Taylor model and the Phillips curve. Gresham’s law will be found in the history books, but his corollary has little chance of making it into future economic textbooks. The result will likely be a continued imbalance between savings and investment, a yield curve too flat to support historic business models, and an anemic 1-2% rate of real economic growth in even the most robust developed countries."
China's Manufacturing Misses; Nonmanufacturing Worst Since 2008 Despite Unprecedented $1 Trillion "Debt Injection"Submitted by Tyler Durden on 11/01/2015 08:38 -0500
The most anticipated economic release over the weekend was the early glimpse into China's manufacturing and non-manufacturing sectors via the two key PMI surveys released by China's National Bureau of Statistics, to get a sense if the slowdown across China is stabilizing or, as some have suggested, rebounding. It did not: overnight the NBS reported that the manufacturing PMI remained unchanged in October at 49.8 missing consensus estimates of a modest rebound to 50.0, its third consecutive month in contraction territory.
China as the global Bubble’s focal point – the weak link yet, at the same time, the key marginal source of Bubble finance. China’s policy course appears to focus on two facets: to stabilize the yuan versus the dollar and to resuscitate Credit expansion. For better than two decades, similar policy courses were followed by myriad EM policymakers in hopes of sustaining financial and economic booms. Many cases ended in abject failure – often spectacularly. Why? Because when officials resort to such measures to sustain faltering Bubbles it generally works to only exacerbate systemic fragilities. For one, late-stage reflationary measures compound Credit system vulnerability while compounding structural impairment to the real economy. Secondly, central bank and banking system Credit-bolstering measures create liquidity that invariably feeds destabilizing “capital” and “hot money” outflows.
Impunity has been the norm. The reason there have been no efforts made to criminally investigate is obvious. Former banking regulator and current securities Professor Bill Black told Bill Moyers that "Timothy Geithner, then Secretary of the Treasury, and others in the administration, with the banks, are engaged in a cover up to keep us from knowing what went wrong."
Have you noticed that things have gotten eerily quiet in the month of October? For those that don’t want to believe that hard times are on the way, they can take comfort in the eerie period of calm that we are experiencing right now. What they don’t realize is that this truly is “the calm before the storm”, and the global economic crisis that is ahead of us is going to be far beyond what most people ever dared to imagine was possible.
In this symposium I literally challenge the audience (of mostly bankers) to tell me what use would the world have for banks in a Blockchain connected world. The response?...............
In its efforts to prop up the Too Big To Fail banks, the Fed has made keeping your money in a bank a low value proposition.
The entire global financial system is leveraged to the 'Modern Portfolio Theory' concept that stocks and bonds are always anti-correlated. It is impossible to estimate how many trillions of dollars are managed according to the simple 60/40 mantras but let us just assume something north of $1.4 trillion and something south of "more money than God." However, the truth about the long-term (132-year) historical relationship between stocks and bonds is scary. The last three decades of extraordinary anti-correlation has been an era of falling rates, globalization, accommodative monetary policy, and very low volatility of CPI. With the global economy now at the zero bound, those days are over.
We would argue the main reason for Blackrock’s attempt to persuade the exchanges to adopt its recommendations on trading halts is that Blackrock itself is inconvenienced by downside volatility. Presumably the company is no stranger to leverage (how else can it squeeze out large returns with a portfolio this large in a ZIRP world?) and is therefore forced to exercise stop loss orders itself when the market declines fast. Such attempts to “regulate” everything, even the price swings markets are allowed to make, are attempts to stem oneself against nature.
The Fed needs to extricate itself from manipulating the financial markets. It needs to end backstopping market liquidity. It must never again print Trillions of new “money” out of thin air. Because so long as the marketplace perceives that the markets are "too big to fail", there will be speculative excess, major securities markets mispricings and Bubble fragilities. No one – average investor or sophisticated financial operator – has a clue as to the degree Fed policies have distorted asset prices.
Never have markets carried so much risk. And never have markets been as vulnerable to an abrupt change in perceptions with regard to central banker competence, effectiveness and capabilities. At the minimum, global markets will function poorly, but risk is now high for a disorderly – Party Crashing - "run" on financial markets, as faith in central banking begins to wane.
Gold in Q3: USD -4.5%, EUR -2.4%, GBP +1.5%, CHF +2.4%, CAD +4.6%. Global stocks fall 5% to 13% - Stocks face worst quarter since 2011 over fears for global economy