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Central Banks Are Now Uncorking The Delirium Phase
Submitted by David Stockman via Contra Corner blog,
Virtually every day there is an eruption of lunacy from one central bank or another somewhere in the world. Today it was the Swiss central bank’s turn, and it didn’t pull any punches with regard to Russian billionaires seeking a safe haven from the ruble-rubble in Moscow or investors from all around its borders fleeing Mario Draghi’s impending euro-trashing campaign. The essence of its action was that your money is not welcome in Switzerland; and if you do bring it, we will extract a rental payment from your deposits.
For the time being, that levy amounts to a negative 25 bps on deposits with the Swiss Central bank—-a maneuver that is designed to drive Swiss Libor into the realm of negative interest rates as well. But the more significant implication is that the Swiss are prepared to print endless amounts of their own currency to enforce this utterly unnatural edict on savers and depositors within its borders.
Yes, the once and former pillar of monetary rectitude, the SNB, has gone all-in for money printing. Indeed, it now aims to become the BOJ on steroids—-a monetary Godzilla.
So its current plunge into the netherworld of negative interest rates is nothing new. It’s just the next step in its long-standing campaign to put a floor under the Swiss Franc at 120. That means effectively that it stands ready to print enough francs to purchase any and all euros (and other currencies) on offer without limit.
And print it has. During the last 80 months, the SNB’s balance sheet has soared from 100B CHF to 530B CHF——a 5X explosion that would make even Bernanke envious. Better still, a balance sheet which stood at 20% of Swiss GDP in early 2008—-now towers at a world record 80% of the alpine nation’s total output. Kuroda-san, with a balance sheet at 50% of Japan’s GDP, can only pine for the efficiency of the SNB’s printing presses.
As per the usual Keynesian folly, this is all being done in the name of protecting Switzerland’s fabled export industries.
Let’s see. During the most recent year, Switzerland did export $265 billion of goods, representing an impressive 41% of GDP. But then again, it also imported $250 billion of stuff. Accordingly, for every dollar of watches, ball point pens, (Logitech) mouses, top-end pharmaceuticals and state of the art high speed elevators it exported, it imported 95 cents worth of petroleum, raw and intermediate materials, semi-finished components and expensive German cars.
Accordingly, allowing the market to drive its FX rate below the magic 120 floor (i.e. appreciating the CHF) would not bring on Armageddon —just a reduction in its giant import bill to offset any loss of earnings from its export trades. Instead, however, the mad money printers at the SNB are pursuing an altogether different financial proposition. Namely, they are going massively and incorrigibly “long” the Euro, and, in fact, have already stuffed their bulging one-half trillion dollar balance sheet with vast emissions of the ECB’s unwanted euros.
Now why in the world would any rational investor want to get massively long the squabbling, dissembling monetary crackpots who run the ECB and the even worse gang of self-serving parasites who urge them on from Brussels? Needless to say, that question doesn’t require much contemplation. The fact is, the SNB’s crazy money printing scheme to throttle CHF appreciation is just plain irrational.
Yet this very irrationality is part and parcel of the central bank race to the currency bottom that is driving the global financial system toward a monumental implosion. Prior to Mario Draghi’s accidental discovery in mid-2012 that by the mere emission of words (“whatever it takes”), he could temporarily park a $1.3 trillion chunk of his balance sheet with the fast money traders of London and New York (i.e. they and the various national banks front-ran the promised QE), the ECB’s balance sheet had expanded at a blistering pace, as well.
In fact, between 2007 and early 2012, the ECB printing presses had been working overtime, tripling their footings in a relative heart-beat of historical time.
Facing this tsunami of euro, the SNB simply responded in kind. After only a modest rise in the CHF exchange rate, it has launched a veritable monetary rampage. Consequently, it has now committed what amounts to one-year’s output by the Swiss people to the dubious proposition that something will not go bump in the night among the German, French, Italian, Spanish, Greek, Dutch etc. patriots—–financially illiterate as they may be—who malinger in Frankfurt.
So add Thomas J. Jordan, Chairman of the SNB and PhD economist, to the rogue’s gallery of financial arsonists who are setting up the global financial system for a fiery conflagration. To nearly every last man and woman, these central bankers are now daily espousing pure monetary rubbish, making up theories as they go along to justify an out of control spiral of debt monetization and extreme interest rate repression.
To reprise, there is no “deflation” threat whatsoever in the Eurozone. It’s just made-up chatter among the financial apparatchiks based on the fact that the long-suffering citizens of these countries are finally enjoying a moment of price stability compared to the official 2% inflation “target” . Yet there is not a shred of proof that cutting the purchasing power of savings in half every working generation—–that’s what 2% compounds to over 30 years—-results in more growth and wealth.
Stated differently, the ECB is fixing to unleash a new round of QE based on mere ritual incantation. Buying the junk bonds of Italy, Spain, Portugal and Greece cannot possibly generate more productivity, enterprise or investment in the euro-zone. Interest rates are already at the zero-bound and households, business and banks are already saturated with “peak debt” and have been so since 2008.
What QE in the Eurozone will do is enable fiscal fraud in the peripheral countries and a further inflation of already lunatic valuations of sovereign debt. It is now an established fact that the Italian government, for example, cannot get out of its own way, and that its public debt is in a death spiral. Yet today the Italian 10-year is trading at a 1.9% yield because the fast money traders are happy to hold it on zero cost repo—- until the ECB takes it off their hands at an enormous windfall gain a few months down the road.
The above pictures are no more anomalous than today’s 35 bps yield on 10-year JGBs——the debt of a government which is hopelessly bankrupt and for which there is virtually not a single bid anywhere outside of the open market desk of the BOJ. Nor does it make any more sense than today’s heated rip on Wall Street based on the word “patient” at a point in the cycle where 71 months of free carry trade money has already inflated financial asset values to the nose-bleed section of history.
In short, the central banks of the world are embroiled in a group-think mania so extreme and irrational that it puts one in mind of the spasm of witchcraft trials that erupted in the Massachusetts Bay Colony nearly four centuries ago. As a practical matter, this mania amounts to a race to the currency bottom and the final extinguishment of the price discovery mechanism in every financial market on the planet.
Flying blind, the financial markets are thus bubbling - in the delirium phase - like never before. That is, until they don’t.
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reminds me of 2007 before 2008
Delirium isnt noticeable when GREED is present....especially in times when making money is so easy, like right now.
But when things suddenly turn sour....delirium becomes all-out PANIC
You'd have to be absolutely CRAZY to try investing in this crap.
Yea, I sure would hate to be a nobody tomorrow.
Why?
What would change?
Now that's funny!
GREED Derived DT's
A new low
Whatever is the plan staged will prevail. Not like before. The disinformation is so much worse. 365 days of Aprils fools.
It's a sprint to the enevitable worthlessness of fiat paper currency.
BUY & MINE BITCOIN NOW!
Where's the $700-800/Oz gold??? People on ZH have been promising me a big discount on real money for years now. I've been paying $1200/Oz forever. Where's my $800 gold. I want my $800 gold now! Time is growing very short to replace the funny monies (paper and digital) with the real stuff before the endgame begins!
Folks sitting around doing nothing are in the delirium phase. the bankers are in the stupid phase. Stupid like a fox!!!
What if instead of calling it "pegging the Swiss Franc to the the Euro", perhaps they called it "Foriegn Aid to Italy, Spain, Greece and Portugal." Oh right, that wouldn't fly at all.
Diabolical disorientation is a signature of the End Times.
It's always the End Times somewhere.
Ask that dumb fuck Italian POPE. Communism is good, dogs go to heaven. Fuck him!
Negativland-Christianity Is Stupid
omg negativland.
Front 242 - Welcome to Paradise
Guns Now
Much better https://www.youtube.com/watch?v=dGF5Pte3TKs negativland guns now
This video celebrates The Second Amendment (and hot chicks) way more than it lampoons America's violent, over commercialized and vapid culture.
<--Baffle them with bullshit and exit stage left.
<--We (central banks) are firmly in control and know exactly what we are doing.
It's all because the Fed, GS, JPM, Citi, BAC, WF, DB, UBS etc have perfected the Orgasmatron 2.0
Maybe the HR department of the SNB just applied Conway's Law:
In any organisation there will always be one person who knows what is going on. This person must be fired.
And come back as a Consultant.
If the Swiss were too fucking stupid to "get it" when the SNB is preaching from an alter, then fuck um.
One would hope they string up a few banksters.
and to think Yellen "talks" of raising interest rates
she won't ... but mere talking of it ... rather than pulling a SNB ... explains (partly) usd strength
Obama is a sex toy with new pope. Alternative is John Kerry butt plug boy, KY oil juice lubing Petrodollar substansion is becoming on ass leakage.
Pope Francis Brokers Renewed Relations Between U.S. and Cuba
ALL central banks work from a decision tree
at the tippy top
Is printing good for stock markets, yes or no?
If yes, go long ink
Stop bitching and make money.
Said the cocky, 20-something asshole who really believes he won't be all in when this shit goes to zero.
The ultimate bug out bag sits between your ears. And it's for free.
Central banks feel they have put the financial genie back in the bottle. The HF are in disarray and all speculation is now receding from the financial economy but still virulent in the REAL economy; aka in commodities, initiated by the king of commodities : Saud (for geopilitical reasons of his own).
So, having bottled up the financialista madness of Reaganomics (the TBTF are now being collared), the world now has to face the challenge of putting the genie of false Saud paradigm back into the bottle. Surplus oil is a passing mirage...Meanwhile the world gets cheap oil at the expense of the Seven Sister behemoths and HF consorts.
Let us remember that Reaganomics and its neo-con hubris CREATED THREE Frankenstein reptiles to strangulate the real world :
1° THe financialista hubris of "the only rule is there are no rules and Gordon Gekko is WS king, aka the supply side ramp up. And the Squiddy Oligarchs sing : We love it!
2° With USSR demise, the neo-cons and their neo-liberal bedfellows have sung : we are now kings of the world in NWO "massive military supremacy". That is looking a bit yellow around the gills today...Unless...
3° Oil is our spice of life, and the Saud-Carlyle complex controls it in name of NWO Oligarchy. "Long live the petrodollar hegemony. And, you welfare state suckers you will all be toast as the world goes vertical and NWO feudal. The 0.1 % rule."
Thats what the last 30 years have been about. The song of Pax Americana (not the song of Lara).
And now as this is totally unplayable anymore, the chickens are coming home to roost, with China and Saud (two key pillars of the NWO Oligarchy outsource and king commodity meme) going rogue to its initiators (those who think they OWN the show).
Pax Americana has to change its RULE BOOK or pay the consequences. And its mayhem as Jack's beanstalk is now walking on thin air!
Thats where we are. But in a Command economy, the Oligarchs ALWAYS feel they can put the genie back in the bottle !
Hey presto ! Aladdin's lamp of Janet Yellen.
Its tough waiting for the final collapse. Us poor smucks have made a decisioon to protect our few assets, our children and other loved ones ....and the decision is tough since we are going against the flow of madness. We fear that we are wrong, but hang tough cause its all we got ...trust in our good sense. We follow the machinations of the ptb, knowing we need a few more pounds of flouur, and pasta...but have to wait until the final last moment to purchase the supplies. Its tough and it causes angst as we second guess ourselves while still hanging on to what we believe is right. Sometimes we should take a break from all the minutae, knowing the system is totally fucked, and we don't have to sweat every bit of play ....the end is near...it will come without us checking ZH every hour ....but it's tough.
It's a Big Club and you ain't in it
You know I always loved George Carlin, loved his intelligence, social commentary, and sense of humor. One thing I thought he got wrong was the "Its a big club and you ain't in it." Always thought it should have been "Its a SMALL club and you ain't in it." I would also add "So shut the fuck up and eat your gruel." That's what the Club thinks of 99.99% of us.
Darth Soros to Secret Chimp in the oval office this morning. Conversation goes something like this...
Barry we tried the Maidan disruption and lost big. I can't get enough support from the EU peanut gallery to go all in for another false flag after the "botch" with MH-17 and the threats of doing something in each of their countries along the lines of 9/11 and 7/7 is the last line they say we will cross if any of there people get killed like those.
Since we pushed Russia into China's arms with those "cluster fucks" which lost my investment big time first Syria now Ukraine we need another "pivot".
So!...
Just got back from L.A. with Brennan and Clapper with a meet and greet w/ the "tribe". Group of Directors out there have the idea to take one of their movies which will probably bomb this holiday what with all the scandals of death and destruction we have caused in the Middle East and Ukraine and the fallout with the "torture report" and spying on the Senate... Why not take this "Hogan's Heroes" like comedy about our IC assets taking out the leader of North Korea and spice it up a bit with a scandal by saying the government that we are denigrating in this movie who just happens to be our adversary hacked the studio computers that produced it?
Asshole Carter will be in office soon and will drive the hell out of the "cyber security" threat provision(s) we've put into play through the Patriot Actt(s) and NDAA and we'll ratchet things up with the Chinese for helping that new oil partner on it's borders that didn't isolate them the way the EU did.
Kinda kill two birds with one stone!...
That way we increase the value of the flick making the public curious which sells tickets and we fuck with China some more to get them to think about that new relationship they are trying out with the Ruskies in the oil for yuan/ruble.
Steven Spielberg said the best part about this one is he doesn't need to help with the crisis actors and expose himself the way he did the last time in Boston and it's all a nice little manufactured bluff that can be easily orchestrated through Ft. Meade!...
When banks and government finally become one and go completely mad together!...
We can now label the fed with their own term: irrational exuberance
Rich people will do ANYTHING to hold on to their paper wealth. Literally anything.
Pincer squeeze on the middle class.
Rich folk and poor folk behave largely the same. It's entirely a matter of circumstance and chance into which class you're born to. Either way, both of those classes rely on the middle class for their lifestyles.
It figures that in the only real (Manufacturing) job that David Stockman ever had STOCKMAN DROVE THE COMPANY TO BANKRUPTCY.
Or in the language of David's bullshit ivory tower (.gov/bankster/economic bullshitter) - look at per capita Swiss Imports over of 30k (per his number) with a median individual post tax income of only about about 38k (and that's before housing). The Swiss imports are largely raw materials for the Swiss exports.
The Swiss imports are largely raw materials for the Swiss exports.
That's what he's saying, numbnut.
Because of what you repeated, the Swiss people will not be affected much if the Swiss Franc rises.
I sometimes forget that with all the griping around here about exporting manufacturing jobs - a lot of people don't really understand the manufacturing business.
However, apparently you live in the same fantasy world as David Dumbass Stockman where "everything is a simple wash"... It isn't a wash and it doesn't balance out, except perhaps in the ivory towers of an economics 101 class looking at single variable problems where ceteris paribus helps keep reality outside the scope of discussion and analysis. Manufacturing is not fundamentally that complicated - one buys raw materials, adds value, and then sells the finished goods for more than the combined cost of the raw materials and the value addition. In Switzerland, both the imports and exports are priced in EUR or USD. In order for Stockman's lunacy to be correct - demand for Swiss goods would have to be perfectly inelastic (to use the dismal pseudo-science speak of economists). Are you (or David) arguing that there is no price elasticity of demand for Swiss goods?
The data I cited demonstrate how severe the vicious cycle would be in the actual economy (as opposed to the financial bankruptcies of a number of EU Member States and Banks that also lead to the imposition of the peg, in addition to demands from Swiss manufacturers). Moreover, tiny Switzerland (with a population smaller than the city Boris Johnson is mayor of in the EU) is the fourth largest EU trading partner (contagion anyone?).
To demonstrate just how stupid what Stockman suggests is, just look at the historical evidence in Switzerland. From what the peanut gallery often writes, one (who lives under a rock) could be forgiven for thinking that the CHF-EUR peg has been in place since time immemorial, but it was only implemented in the fall of 2011, after about a year long experiment of letting the "un-rigged financialized markets" run their natural course - which was running jobs out of Switzerland. So either David Stockman is a retard, or an NWO globalist job exporting shill. Seriously, think about how stupid and ignorant it sounds to someone in Switzerland, who lived through the currency appreciation and witnessed its effects first hand, when someone says "just go back to the way things were...", and unicorns will shit skittles. NO. UNICORNS WON'T SHIT SKITTLES IN THE SWISS ALPS. FURTHERMORE NO ONE (in the English language press I've read) HAS ADVANCED AN ARGUMENT AS TO HOW ABANDONING THE PACT WITH THE MONEY PRINTING DEVIL WILL HELP, AND NOT HURT, THE REAL SWISS ECONOMY.
You mad?
demand for Swiss goods would have to be perfectly inelastic
If you are cornered on your argument, move the goalposts or better declare a completely other target goal?
Do I really need to write on every comparison I make "This assumes all other variables stay the same or change only very little."
Or are you trying to state no comparison can ever be made?? (or maybe except by you)
but it was only implemented in the fall of 2011, after about a year long experiment of letting the "un-rigged financialized markets" run their natural course - which was running jobs out of Switzerland
Bullshit.
It was implemented after a year because the bigger Swiss companies had FX hedges only for one year forward at the time when the run into the CHF started. (And as usual the CB doesn't care shit about small folks.)
So now back to the point:
Why exactly did you write in bold
The Swiss imports are largely raw materials for the Swiss exports
when you now dispute its meaningfulness?
Because (in the real world) as Swiss exports crater, Swiss imports crater and hence the contagion to the real economy both of Switzerland and the EU, whereas, (in the make believe world of David Stockman - if the imports were for consumption, as opposed to production, then one could make a theoretical argument that it the effect would be a wash, ceteris paribus.
"Bullshit" is not an argument. The peg wasn't about f/x hedges. Perhaps you should have looked real economic indicators like orders, hiring and forward guidance, or hotel occupancy, or the .gov handouts to business that were on the brink.
I admit that way your argument also is conclusive in itself for that part.
I'm personally still not convinced Swiss exports would crater, nor that it makes sense the SNB is in the business of smoothing out the business cycle for exports.
As you clearly are living in Switcerland, please don't bring up laughable stats such as hotel occupancy - your opponent might also know a thing or two about Switzerland.
In the years I'd lived there, at least 9 out of 11 the hotel business was complaining about just that. And guess what? Everyone visiting me almost fainted at Swiss hotel and restaurant prices. But funnily almost no Swiss complained about the CHF being too strong during those times. Maybe Switzerland's hoteliers just need to wait for the next rich clientele group to manifest itself, as Russians are now dropping out... but that's just a theory.
Yeah - they have BLSing hotel occupancy data (and room rate discounts) down to fine art, but I couldn't think of a good objective metric for travel and tourism which is always expensive (which is perhaps why even Jim O'Neil with his fat GS paycheck was griping about it).
Anecdotally, local hotels were offing big (ger than usual) discounts on rooms, and there were very few waits for tables in restaurants. On the other hand, because of the timing the industry managed to avoid a possible disaster with the all important ski lift wait time metric in the 2011-2012 season, only to have very little snow so far in the 2014-2015 season. And the bankster and diplomat mecca Perle du Lac seemed to have recovered quite nicely in the summer 2011 after the dark days of 2008-2009.
The net contribution from "tourism" is unstable because there (at least) 3 distinct segments 1) traditional tourism 2) business and convention travel (which is perhaps more dependent on the whims of EU and global business executives) and 3) cross border workers who drive here to collect a paycheck and depart without even stopping for food or to fill up their gas tanks.
Until the other central banks get their acts together (when hell freezes over) or foreigners stop trying to use Switzerland as a "safe haven" (which partially explains why there is an idiotic bubble in new housing construction costs, but not so much in rents) - I don't see any valor in financial martyrdom. Which is why if the SNB wanted to do the right thing (for the Swiss) I think they should the split CHF into parallel domestic and foreign currencies. Let the crazy neighbors have their crazy money printing, and let something more sensible circulate locally (but make sure that that currency does actually circulate in the local economy). Of course, when TSHTF, revenue from exports and tourism will both be DOA, but unless the SNB anticipates the financial world will end by Q1 2015 - I think a flexible solution that can both serve the domestic economy and respond to the external demands of a new worldwide currency paradigm is preferable to being "all in" on the currently pegged CHF-EUR.
You're still pulling my leg sometimes, aren't you?
Anecdotally, every time I went skiing anywhere in Switzerland the waiting time at any lift was practically zero. I remember vividly how at one location once during a whole day I had to wait like 6 minutes.
At another occasion there were no wait times, but on the lift I overheard a Swiss person telling his seat neighbor "It's crowded today" and it took all the self-control I could muster to not laugh in his face.
(Go to any place in Germany and Austria and the average waiting time during any weekend or holiday season day will be closer to 10 minutes.)
You are talking from a Geneva point of view. Been only there twice, it makes finding a parking spot in Zurich look easy. The number of scooters parked everywhere and driven by upper scale business people is astounding.
On cross border workers: are you aware how much higher income taxes are in neighboring countries? Can you imagine how much higher rents in Switzerland have to be, to make it still a sensible proposal to live cross border from your workplace?
Wanting to do the right thing almost always leads to disaster.
Just like the 2 billion CHF the Swiss federal government put into the "rescue" of bankrupt Swissair while merging it to still successful smaller Crossair, to then a few years later sell all to Lufthansa for one symbolic Euro. What a success: total write-off plus the former independent Crossair sold out too.
The real problem Switzerland and the SNB have is that UBS and CS and the size of their foreign operations have made the country become susceptible to blackmail. The "Namenlose Konten" was the dress rehearsal, then the "Bankgeheimnis" was factually repealed years ago (the handing over of information to the IRS was only the final public confirmation), and now the Swiss currency is at the whim of other powers.
THAT is the real story behind the SNB's moves, and you should not try to put lipstick on that pig ("wanting to do the right thing").
Happy holidays!
I just reread my original comment and realized there was a completely different way of logically interpreting it - sorry about that. I shouldn't post while while waiting for planes. Schöne Weihnachten!
BTFAH? Go right the fuck ahead. If it takes 10 more years, it will be worth being removed from this bullshit. No an ice cube's chance in hell this ends close to even horrendously.
Assholes.