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'Janus' Yellen And The Great Transition From Risk-On To Risk-Off
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
In ancient Roman religion and myth, Janus is the god of transitions--beginnings and endings of conflict, war and peace, journeys, trades and eras. Janus has two faces, as befits a god that looks both to the future and to the past.
In our era of omnipotent central banks worshipped by the Status Quo, we have a goddess of financial transitions--Janus Yellen, the two-faced chair/deity of the Federal Reserve--to usher in the Great Transition from risk-on to risk-off.
What is risk-on? Speculative bets directly enabled by central bank issued free money for financiers--also known by the bland technocrat perception management labels stimulus and quantitative easing (QE).
The primary risk-on policies are:
1. ZIRP--zero interest rate policy. This enables financiers (but not J.Q. Citizen) to borrow money for next to nothing and then use this free money to buy assets that pay dividends or interest.
This is effectively a gift to banks and financiers. The goal is straightforward: transfer great wealth from the peasants who once earned interest on their savings to the banks, who have rebuilt their bad-bet-shattered balance sheets on the backs of tax donkeys and savers.
2. Asset purchases. The Fed has bought almost $4 trillion of Treasury bonds and mortgages from primary dealers (banks) and other financial institutions. This is effectively a transfer of cash directly into the financial system.
Those closest to the Fed money-spigot benefit directly from asset purchases (a.k.a. quantitative easing). Those far from the spigot (the 99.9%) get nothing but slightly lower interest on their crushing debt.
Those with low/no debt have lost hundreds of billions in interest that has been transferred to the banks by ZIRP and QE, which actively suppresses interest rates.
3. Liquidity. This simply means the Fed will create as much money as is needed to meet the borrowing needs of the financial system. This unlimited liquidity is offered not just to U.S. banks, but to the entire global banking system. The Fed doesn't just bail out U.S. speculators--it bails out speculators worldwide.
In other words, the Fed deities are lavishly generous to financiers everywhere.
But all these risk-on policies have created extremes of speculative bets, which have generated corresponding extremes in systemic risk. Those who have skimmed profits from risk-on speculation with borrowed money and leveraged bets need to unwind/exit their bets to book their gains.
This unwinding of speculative excesses is risk-off.
It falls to Janus Yellen to oversee this transition from roughly 20 years of risk-on to risk-off. The trick will be to unwind all the debt and leverage without collapsing the global speculative house of cards.
Janus Yellen's job is to manage the transition such that banking sector profits are maintained.One way to do this is to raise interest rates incrementally.
Ilargi at theautomaticearth.com makes a compelling case for the Fed raising interest rates sooner than most believe possible as the only means left to maintain banking-sector profits: The Fed Has A Big Surprise Waiting For You.
Though we can be confident that Janus Yellen's face looking back in time sees the Fed's unprecedented efforts to prop up a failed, broken financial system as a success, to the rest of us, the past is easily visible: central banks did not fix what is broken in the financial system; they simply papered over the sources of speculative instability with multiple layers of additional bureaucracy, ZIRP, QE and unlimited liquidity. As a result, the threat of speculative instability was only deferred, not eliminated.
The future is much less clear. As Janus Yellen looks ahead, she finds no real historic parallels for the extremes of risk-on debt, leverage and speculation that unprecedented central bank intervention have conjured up.
She also finds no recent precedent for the gargantuan expansion of financial claims on real wealth that dwarf the actual expansion of real wealth since the 2008-09 Global Financial Meltdown: energy extracted, soybeans harvested, industrial equipment manufactured, etc.
Multiplying the financial claims on real wealth by creating money and selling Treasury bonds that are claims on future wealth does not expand real wealth. This is the foundational falsity of risk-on monetary easing and the speculation it fuels: expanding claims on real wealth does not increase real wealth.
The idea that expanding financial claims on wealth is wealth is entirely illusory, and this is why risk-on is a self-liquidating dynamic: as everyone holding a claim tries to cash in their illusory gains, the risk-on trade implodes.
Janus Yellen is trying to engineer an impossible "solution" to this destabilizing dynamic: gently transition risk-on to risk-off so imperceptibly that the market for phantom assets will magically absorb all the selling.
But this assumes there will be buyers ready to bid up the market value of these phantom assets as the smart money distributes/sells. And that is of course the dynamic of bubbles throughout human history: there are ready buyers right up to the point that prices start dropping sharply. Then the bid vanishes as the pool of greater fools has been drained and there are no buyers, only sellers.
Perhaps what Janus Yellen's future-facing eyes see is a future in which central banks are forced to become the buyers of last resort not just of trillions of dollars in home mortgages and sovereign bonds, but every other asset as well: real estate, corporate junk bonds, swampland, the debt of bankrupt cities--everything.
This is nothing but another expansion of financial claims, masked by the apparition of phantom assets on the central bank balance sheets. Buying up phantom assets does not transform them into real wealth. Regardless of how Janus Yellen tries to sell the idea as the miraculous "fix" to the systemic bubble in claims the central banks have inflated, it will fail just as predictably as her plan to defuse the risk-on trade while maintaining the inflated value of the phantom assets the speculative frenzy has created out of nothing.
The end of risk-on cannot be prettily managed. If Janus Yellen had looked far enough back in history, she would already know that.
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Dude looks like a lady.
I haven't seen any proof of a "transition". Interest rates need to go to 9%, then I start to believe it. Until then, it's a ponzi as 95% of policy decisions and actions are done in a backroom via algos, gaming, and espionage. I guess they call that "capitalism"..... lol.
Let's keep the discussion sane. in the absence of significant inflation, the interest rate has to be aligned with growth rates. The realistic growth rate is between 0 and 2% (without counting the -10%+ hit to GDP we will get when the crash comes!) and inflation is below 2%.
Put interest rates anywhere near 4-5% and everything risk. Unless you think the dividend yield of stocks, currently below 2%, can go to 5%. It can't, there is no money for that.
Companies that grow sales at 2% a year can't pay 5%!
Countries that grow GDP at 2% can't pay 5% (for long)!
The interest rate is not what savers want it to be, it is what the paying capacity of borrowers can withstand.
Companies are growing at 2% because ZIRP is a capital killing policy, which is why growth is so low. ZIRP removes capital from the market and does not stimulate investment. It makes no difference where rates are at for someone ready to invest. If I told you that you would have a guaranteed return of 50% in one year on an instrument, you'd have no problem borrowing at 10% to do it. Martin Armstrong has proven this to be true in his research.
ZIRP is in play to keep .gov afloat. The insolvent banks, along with the Fed, will go bankrupt if rates ever rise. ZIRP is a Fed dictated suffocation policy only because any semblance of a real rate would cripple deficit financing.
The West is broke, and the economy severely broken. ZIRP is clearly a mechanism to keep a dead economy on life support, along with intentionally low balling true inflation figures.
ZIRP is here to keep the system from falling into the abyss, not to stimulate investment. You've been sold a fake promise.
Any academic can prove anything with their "research"...
You've got it backwards. Growth is low because of debt, not because of what central banks define on short term interest rates...if it were only that easy we wouldn't have these problems in Europe and growth is non-existent pretty much everywhere. You are aware that liabilities in this country exceed $53 trillion, right?
Anyway, not trying to convince you - you believe what you want to believe.
I disagree. Short term rates are low to keep .gov afloat and are fictitiously set by the Fed to allow them to pump liquidity into the insolvent Western banks. Wihtout liquidity, the banks are dead and without rates being low, said liquidity puts the Fed in death spiral.
In doing so, the Fed through ZIRP has announced the value of money, because rates are the price of money. Today, with rates around 0%, money is valueless. No one wants to borrow or lend which is why growth is stagnating. ZIRP suffocates capital, not stimulates it. You've got it backwards, otherwise the economy would be booming right now after 6 years of this experiment.
We will not see an economic turn around until the Fed stops manipulating rates to keep the insolvent cabal from facing reality.
On a full moon all the bats fly out of her cunt.....
Janus Yellen. New heights of hilarity. What a ducking riot.
"in the absence of significant inflation," - LMFAO!!!!
Right, because the cost of living, healthcare, education, and energy (to name a few) are so low right now....
Fucking idiot, name one society/currency that collapsed/died because thier purchasing power was too strong.
Companies that can't deliver a product of real value should go fucking bankrupt and prices should fall. That is a functioning fucking market!!!!!!
Let me be clear asshat, there is not, nor will there ever be a political, economic, or monetary solution to resource scarcity.
hedge accordingly.
Oh you are one classy gent! Must suck to be you.
gosh, what an intelligent and insightful response... ...NOT.
In the meantime capital and talent continue to go where they are respected. Same as it ever was...
raising interest rates will be a moot point soon enough.
They have to end QE first. 2015 likely first opportunity to raise ... and we'll be in a recession by then (current "recovery" now into its 63rd month ... getting long in the tooth)
The interest rate is not what savers want it to be, it is what the paying capacity of borrowers can withstand.
I'd suggest the (long forgotten) idea that the interest rate reflects the value of the capital being lent (eg what could the lender do with the money if he wasn't lending it to the borrower) and also the CONFIDENCE OF THE LENDER that he'll get his principal back at maturity. This second point in particular seems to be completely forgotten by the math whizzes managing bond portfolios - I'd suggest it's analagous to say an ship designer who's become so caught up in the minutiae of maybe the fuel system or wiring or seating arrangement that he's forgotten about the fundamental first requirement - ship must be capable of floating.
At some unknown future point, this elaborate ship that is the bond market is going to hit a real storm, and sink with stunning speed due to this oversight, and then AFTER the fact the pundits will be saying 'well yeah, it was obvious that the US government was broke and insolvent - why the hell were people continuing to loan them money at < 2%? What an idiotic thing to do.' But of course right now it's all about yield and duration and how many fucking angels can dance on the head of a pin...
^^^^this, and yes, capital and talent always go where they are respected. Always have and always will.
If equity prices drop significantly in a short time period, you can see dividend yields on equities go up but both cannot stay high in this economy, something must give
Janet Yellen had better toe the line. There are plenty of tall buildings around with balconies. I doubt she has a nail gun.
http://www.nydailynews.com/news/world/bitcoin-ceo-researched-suicide-lif...
1.1941010
A U.S.-born Bitcoin currency executive committed suicide in Singapore this year because she was stressed and depressed about work and personal issues, a coroner has ruled.
Singapore Coroner's Court found that Autumn Radtke had been "determined to end her life and made concerted efforts toward facilitating this outcome."
She had also researched suicide methods online, a report released by the court on Monday revealed.
The 28-year-old sustained multiple injuries on Feb. 26 after falling to her death from the 16th floor of an apartment block.
"The magnitude of the issues on the work and personal front had taken a toll on her," the report added.
The coroner ruled out foul play, according to Channel NewsAsia.
The death of the startup company First Meta's CEO — which lets virtual currency users trade and cash out their investments — came after the collapse of the Mt. Gox bitcoin exchange in Tokyo.
Stanley Fisher will tell her what to do.......
.
Soon enough we shall see if Yellen has only one bullet left in the Fed's gun.
the world (and Fed) is still dancing on the head of that pin...
For the U.S., has some of that debt been forgiven or has our "representation" finally figured out how to fund all those liabilities?
tick tock...
In the meantime capital and talent continue to go where they are respected.
haha representation...what a quaint notion...
..yes, hence the quotations....
But please, don't discount the guillotine as such "let them eat cake" monetary policies have been tried before.
Anus Yellen
Theres a vintage specialist dutch porn mag called Janus, with a fair share of Yellen in it
http://www.tilleysvintagemagazines.com/source/adult_product_data.php?pro...
.
Unfortunately, there is no way to avoid risk in the real world. The best "markets" will reflect that risk and value (price discovery).
Go ahead, raise rates already bitch.
In the meantime, capital and talent will go where they are respected.
A year or two from now, Janet Yellen thinks "gee, this is like... not going as planned. Back down to ZIRP and lets launch QE5."
Yellen. Is that Scottish?
Yellen's goin up everybody's FAFSA. Run.
yellen does not want to be blamed for a market crash so it will be this:
Perhaps what Janus Yellen's future-facing eyes see is a future in which central banks are forced to become the buyers of last resort not just of trillions of dollars in home mortgages and sovereign bonds, but every other asset as well: real estate, corporate junk bonds, swampland, the debt of bankrupt cities--everything...
They will own it all eventually. I found Ilargi's: The Fed Has A Big Surprise Waiting For You.
to be illogical and naive drivel. i can't believe she posted it. take off the deflation colored glasses and have an unbiased look around girlfriend.
Yellen and the FedRes will sell the world out and see it go to extreme poverty before they give up the most powerful tool in the world - the keys to the printing press. They will continue to lie like sociopaths through their insipid spokeswoman pictured above, to maintain their illusion of importance, and to mask their inability to deal with reality
Surely the US government can afford rising interest rates right?
Oh, and all that new debt that has to be issued to cover the stealing of the SS funds too.
So rates rise, budget gets balanced, debt production slows (QE stops), and the US dollar gets left behind in the competitive devaluation race.
Lulz, not gonna happen. Eva.
pods
Yeah, apparently the cost of servicing the debt is not an issue. All we're talking about here is 'whether the fake economy is strong enough to raise rates'. The thing is, the more I think about it, the more convinced I am that the Fed will (either because they're clueless or because they have another agenda) stick with their idiotic story and raise rates.
I agree that they will allow rates to rise, for
1) they are running out of bonds to buy for rate suppression; new issuance of bonds cannot keep pace with amount needed to support Ponzi scheme.
2) they are of the banks, by the banks, and will think of banks above all else.
They are not stupid.
Once again, the fed is not going to raise rates in any meaningful fashion. We have about 200 trillion moar in derivatives since the last collapse. If the fed does raise rates it will be a cursory raise in order to maintain the illusion of economic health. But mark my words, the fed funds will never be above 1% again.
Concur.
(but never use the word never)
Yup, the FF will most likely exceed previous 80's numbers before this is over. And it still won't be enough to save the buck or the Fed.
But that might be a ways out from here. We still have the Neo New Deal to go through.
Correct doc and TPTB are chomping at the bit for an excuse to invoke a "force majeure" and marshal law. For our own good of course. What happened to Russia, will happen to the U.S., the math is what it is.
Early press photo of Mr. Yellen, before the Fed. announcement tomorrow.
Looks more like "Moe-Bama" to me.
Didn't we adopt Janus, and modify him? Doesn't one of Janus's faces express the same faraway entranced otherwordly divine piety as the faces of the Spanish conquistadors in those old paintings that show them on their war horses, piously driving their lances through the stomachs of South Americans? And isn't Janus, with his other face, smirking like Dubya bemusedly contemplating how everything was so easy? Not to insult Janus, of course. Just what they did to him. As the lady said to Houdini, "after we have killed you, we will make you say whatever we want".
Q: Doesn't one of Janus's faces express the same faraway entranced otherwordly divine piety as the faces of the Spanish conquistadors in those old paintings that show them on their war horses, piously driving their lances through the stomachs of South Americans? And isn't Janus, with his other face, smirking like Dubya bemusedly contemplating how everything was so easy?
A: something like that.
"Not to insult Janus, of course."
none taken.
Just what they did to him. As the lady said to Houdini, "after we have killed you, we will make you say whatever we want".
well, whatever contortions come after my passing are none of my concern. no one has done anything to janus, nor has he made any arrangements with any... i serve, and will go on serving, the same master: God Almighty. perhaps many of the things i write do not comport with others' expectations as regards The Everlasting; and this is a consequence of our age's limited, specious and stunted understanding of God. all the same, i'm no holy man; just an artist. if i were to hazard a guess as to why my words and whatnot confound so many, it is because most -- if not all -- confuse & conflate the ways & thoughts of God & man.
here's what Jehovah has to say for Himself in the book of Isaiah, chapter 55, "Let the wicked forsake his way And the unrighteous man his thoughts; And let him return to the LORD, And He will have compassion on him, And to our God, For He will abundantly pardon. 8"For My thoughts are not your thoughts, Nor are your ways My ways," declares the LORD. 9"For as the heavens are higher than the earth, So are My ways higher than your ways And My thoughts than your thoughts."
finally, and with respect to certain 'inconsistencies' some may detect in whatever philosophy they have to me imputed, i can only say that i don't join teams. i am a free moral agent; and will ever remain so. i consider myself an instrument of change; and, furthermore, i espouse a very radical and transformative variant of change. i endorse a return to something i like to call "The Natural Order" -- only, one that is suitably adapted to our modern age (and all its trappings).
to elaborate on this final point, i'll for one moment speak opaquely and somewhat allegorically. let's say that we're entering a phase of The Great Game that is both radical and transformative. and for the purposes of allegory, let's say that The Great Game can be likened to a symphony. for a symphony to be a masterpiece, and for its opus to be rated among the magnums, every single note must perfectly accord to all that's come before and everything that follows; all notes must harmonize in terms of duration, tone and emphasis; and, most importantly, each and every note must be struck at precisely the right time -- janus does not traffic in cliches, but, verily, 'timing is everything.' and so, let's say that any given opinion (note) or idea (harmony) is neither right nor wrong; they are exclusively so, and their value can be esteemed as such, only within the context of their position within the grand symphony. which is to say, a note can be right and perfect in the abstract of tonal harmonics, but if it is sounded at the wrong time it is an evil to itself and all the notes that surround it within the flow of the symphony.
http://www.youtube.com/watch?v=rHuGktVssdc
nevermore,
janus
Risk on to risk off?
Nah, more like risk on to RISK ON!
"promote full employment"....not guarantee it
"promote stable prices"..not root for 2% inflation (as they measure it)
"maintain moderate interest rates"....ZERO is not moderate by any definition
THe Fed is off their mandate and mission statement..... but those in the know are LONG
and Janet says she will do nothing that will harm the recovery
THerefore...she CANT raise rates by her own definition and conditions
LOP:
Precisely.....No Society Has Collapsed from Buying Power being Too Strong.....
The Federal Reserve has Neither The Power Nor the Inclination to Destroy Itself, Much Less The Dollar, it's Greatest Ally......
Failure to Grasp this Renders All Reasoning Flowing Therefrom, Flawed.
That is Exactly Why it is Deflation in the End.......Across the Board....
What We Have on All Levels is Ignorance, Arrogance and Extraordinary Popular Delusions......
http://www.talentseekscapital.com/uploads/3/2/6/9/3269986/extraordinary_popular_delusions_c._2014__pv3.pdf
The "New Normal" = "Permanently High Plateau".........
One of the Most Popular Delusions is That America Revolves Around Markets.......
"Markets" including The Federal Reserve and ALL Central Banks, et al......
Markets Revolve Around America.....
In Due Course this Will Be Crystal Clear......
Anyone Who Wants to Bet Against America, Please Do....
http://www.talentseekscapital.com/uploads/3/2/6/9/3269986/america.pdf
I'm Quite Happy to Take Your Money.......
Short or in US Bills, The Winning Position(s) to the Bottom.......
Jesse, you're whistling past the grave yard. Continuously shooting yourself in the foot is not winning.
Horrorschach, what's that thing in the middle, looking like it's gonna make some noise...