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From Keynesian Shangri-La To Outright War
Over the last few weeks drum beats could be heard signalling the coming of troops from abroad to lay waste to any foe ahead of them. However, unlike what we first conjure up as troops from an opposing force made up of men and weapons. This battlefield is being waged in the ether of the currency markets.
Although barely covered by the main stream press Central Bankers have now shown they’re now far from working in unison or displaying any semblance of a cohesive group. Rather, they’ve now turned their attention and policies inward in a “shoot first, screw asking any questions later” mindset.
It wasn’t hard to extrapolate recent events happening if one only paid attention to previous clues. The swiftness along with the repercussions going forward are the only thing that were hard to calculate. However, we now see the brutality and to what extent even perceived smaller entities (such as the Swiss) are willing to take to save their own sovereignty just by counting the first wave of casualties through the metaphor of empty money bags.
Once the Swiss National Bank (SNB) decisively went rouge and un-pegged the floor between the Franc and Euro everything changed. We’ll never know who knew what, if, or when. (i.e. All the other Central banks.) Yet one thing is clear: The SNB didn’t care about who or what entity was pegged to their currency in a carry trade, nor the effects it might have on its economy.
It seems they viewed their stance as having no other choice – but to act first irregardless of other concerns. For now this is all one may interpret being on the outside. Yet one thing is perfectly clear – that’s a move usually reserved for battles during war.
I don’t use the term “war” willy-nilly. These are the types of moves when preservation is at risk. When bold actions knowing there will be great casualties (even if it’s monetarily) must be taken. For these are decisions between existing another day – and existence at all.
There’s also another issue within this hypothetical that must be thought through: The SNB did this out of the blue with no indication such a move were even contemplated. In fact, just days prior the SNB signaled its commitment to the peg. So why just days later do what many deemed the unimaginable? Easy, like I stated in an earlier article maybe “they believed they had no choice with what the ECB was about to unleash.” Problem now is – what exactly did the ECB launch?
By all estimations the so-called “Full Monty” bazooka of monetary mayhem which had been anticipated and rolled down the fictional parade-way in a N.Korean styled viewing spectacle of financial armament for all to gawk over, wasn’t all that impressive. Once again the promise of “what ever it takes” seemed more in line with “take it – or leave it.” With the SNB being the first to do just that.
Back to the hypothetical question I alluded to: Ask yourself, if you were the SNB reading over the details as well as listening to the speech given by Mario Draghi as this latest plan of monetary QE is both to be implemented as well as the timing. (for it doesn’t even begin until March) Would you feel possibly set up?
Everyone was expecting a minimum of an additional 1 TRILLION Euros to be expended. Some were even contemplating the need for 2 and for it begin near immediately. What did they get? Jawboning of how 600 this, plus what they’re doing now, carry the one, add in the weight of the shelves and presto – a little over 1 in total. And it begins in two months! If you’re the SNB you have to be thinking: Wait…what?
Does one think the SNB could have handled this news while giving some time (at least till their next meeting) to help prepare its economy for the shock of the un-peg; rather than throwing itself into monetary turmoil based on what was announced last week via the ECB? If I’m a Swiss banker I know what would be on my mind. Yet, that deal is already done.
The real battle and positioning of armaments begins in earnest now. Not for the Swiss, rather I propose every other Central Bank or sovereign with both currency as well as derivatives at risk. This is now war and the spoils will go to those that move first, move often, and move in ways others never contemplate – or can time. The SNB has shown by dint the efficacy (with further unknowns working out in real-time) of such a decision for all to ponder and contemplate.
Over the last few years the idea of centralized monetary power fueled with Keynesian dictates and philosophy have given rise to economic fallacy. Where economic activity and health could be initiated as well as maintained indefinitely, providing everyone involved believed the ruse.
However, that ruse fell to pieces once the Federal Reserve (Fed.) in its bravado believed that after nearly 6 years of an open credit card policy; the unforeseen consequences of their actions would be limited to both the U.S. and within their purview for control. It was a fallacy of thought then – and it’s showing just how dangerous that policy was to continue for so long.
What is the Fed. to do now for both its logistical concerns and actions, as well as its credibility when everything that was supposed to take place via their intervention is now being laid to waste? Have a press conference and say “Oopsy?”
What does the Fed. now do about the one thing all this monetary policy mayhem was implicitly devised for (e.g., 2% inflation) when other Central banks are reacting to the Fed.’s own cutting of the QE credit cards and acting in a self-preservation manner; which is now driving scared money from around the globe directly into the one monetary vehicle that proves the Fed. was clueless in its forethought of unforeseen consequences? e.g. The Dollar.
Now huge flows of scared money are directly flowing into the Dollar causing it to rise, and rise at an impressive pace. All this and its only been a little more than 90 days since the QE spigot was turned off.
Now that the SNB has sanctioned the firing of this first salvo along with the unimpressive releasing of monetary might displayed by the ECB; if you’re let’s say Germany: How do you view all of this? Stay in the Euro as you watch others leave? Do you watch the Swiss carefully and ponder, “Hmmm…they seem to be surviving just fine. I wonder…..” as the ECB once again jawbones more and delivers less; causing your economy to falter or import more inflation than you wanted?
How about Greece, France, Italy, Portugal? Do they look at the Swiss and pose the same thought process? And what are the implications for not just the Euro Zone as a whole but the wealth funds, currency trades, and all the others that are intertwined in a labyrinth of connectivity?
Does the money flee from one currency to another in an algo-fueled HFT manipulated cross paired trades and derivatives that are leveraged so high that the SNB calamity wrought to traders short any currency will pull that risk – and not trade at all?
Maybe they’ll just plow more, and more money into the daily currency of choice: leaving it to sit on whatever today’s Central Bank of choice may be rendering their board members to pull their hair out trying to counter.
Do they stand by raising interest rates? Or go negative? For both have consequences far more reaching in this environment than was just 3 months ago when the signals were to “raise rates.” How’s that going to work? And how will that change be explained in another FOMC conference? Oopsy? Again?
Just like war “safe harbors” are viewed and used depending on the threat and need of any side depending on what they understand is their need – not someone else’s Nor an others time scale. All bets are off when it comes to war, and we’ve now entered one unforeseen by the very generals that said “they knew how to avoid it.”
This is the problem with all Keynesian styled philosophy. 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. Change a line in the speech here, change the meanings of this to that, and BAM! – crisis solved.
However in the real world it doesn’t work that way. Again 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 manged only within the Ivory Towers or walls of academia. The consequences of these policies are multiplying by the day.
For 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?
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We boned some folks
We boned all folks -fixed for you
Like I posted earlier:
If you're going to panic, panic first. SNB FTW!
A glimmer of Swiss independence?
I blame it on the gremlins....
https://www.youtube.com/watch?x-yt-ts=1421914688&x-yt-cl=84503534&v=jljA...
Yeah, but did you pull out...?
irregardless is not a word.
We need MOAR broken glass window panes!
The global gangbangkster cartel know full well they're running a hostile, malignant, rancorous global ponzi scheme for no one's benefit but their own.
Yup. All of this is VERY much planned. Make all the central banks look like out of control murdering psychopathic institutions (which really is almost true...they aren't out of control), make the FED look like the biggest robber barons of all time (true too), build up the BRICS in the meantime, push things towards WWIII (which may actually happen, to 'thin the herd'), then parade the BRICS as the saviors of humanity so their new, shiny SDR-based currency will be accepted by the masses...
...eventually resulting in TOTAL SLAVERY vis-a-vis RFID chips and digital currency.
Meet your new masters, same as your old masters...
That's right, we are all getting punched in the face, what's the plan? Oh, the plan just went out the window.... so be flexible and not married to anyone idea, diversification even if it's guns, gold, silver, real estate, blue chip equities, treasuries, vending machines .....
Everyone has a plan til they get punched in the mouth. ~Mike Tyson
The punchbowl will never be removed for the .1%.
Banksters can never go without.
The rest of the world are all on their own.
"Outright war" against Banksters is not really war, it is survival.
But the world might toss a few turds into the punchbowl
"irregardless"
-1
Thank you.
A cheese-grater on the pendantic mind.
Luckily for me, I am oddly unaffected by my own similar grammatical faux pas.
Hmmm............
I'm not sure, but the correct phrasing might be: "fauxs pas" - like the plural: "passers by"
Indeed. What a moron.
Irregardless actually is a word though. It means regardless, and is used in place of 'regardless' when one wishes to annoy grammar nazis.
(Seriously, it actually is a word.)
Only because dictionary publishers capitulated in the face of rampant fucking idiocy.
Speaking of capitulating to "rampant fucking idiocy", Google's definition for literally includes this: "Used to acknowledge that something is not literally true but is used for emphasis or to express strong feeling."
In other words, the definition of literally is literally no longer the literal definition of literally. The imbeciles who say "literally" when they're being completely non-literal and say it as an exaggeration or to merely emphasize something have won.
This completely incorrect use of "literally" has been added to three established dictionaries.
Once upon a time, the word was used, among other things, to differentiate truth from hyperbole. Today it accepted as correct when used for hyperbole. It can intensify and exaggerate instead of establishing what is true.
WTF!
Google's definition of 'don't be evil' is similarly inaccurate.
Yup, it's Regardless or Irrespective; but not Irregardless, which is like a double negative.
We expect proper grammar and correct spelling from ZH writers.
"Once the Swiss National Bank (SNB) decisively went rouge"
huh? either they went gayish, or maybe a bit red in the face....
Switzerland is the only place I know where a proper bankster can combine red shoes with banker's pinstripes outside of the annual Christmas Party-
clearly, they went thespian, like Hamlet:
"O, what a rogue and peasant slave am I!"
from
http://www.shakespeare-online.com/plays/hamlet/soliloquies/whatarogue.html
shudda studied much harder!!
What is astonishing is there continues to be very few in the halls of academia challenging the Keynesian way.
Academics is very dogmatic. If you don't "play along" you don't get funding or tenure.
Ain't that the damned truth and if you want a government grant, find out what the outcome they want is and convince them that you can supply it......
More about academic fraud and peer review process in economics:
http://mises.org/blog/academic-fraud-and-peer-review-process
The ironic thing is that, as I understand it, tenure was in fact created in order to protect new young faculty with innovative dogma-challenging discoveries.
Yep, but just like the unions the end result turned out differently from hope and change.....
and the flipside of that is...
Everything is awesome when you're a part of the team.
Save for math and pure science, the educational system has been subverted, contorted and reshaped to fit the money agenda. There is no learning, only indoctrination.
Academics in downright vicious. You don't play the game right and don't have enough advocates, they destroy you.
I have been in private industry for 25 years, and have taught at three different colleges, as well. People who stay in academia generally couldn't cut it in the professional world.
When you go to skool, you are either a goodskoolboy or a badskoolboy. Badskoolboys express personal opinions against the grain and get kicked out or drop out. Goodskoolboys listen to their teachers and follow instructions to the tee without going against the grain. Then they themselves get to be goodskoolteachers. Well, not really, cuz there are way too many goodskoolboys who want to be goodskoolteachers, but there aren't enough positions available.
This is a doubleplusgood description of academia.
except for Neils Bohr who was a total pain in the ass, mocked his professors and went on to change science and get an element named after him. School is useless but knowledge can be handy ( though without tools knowledge is just fiction.)
The scope and opportunity of anyone ever doing anything like today is [next to] nil. Different age, different people, mon ami. The average 'scientist' or 'engineer' today, by olden standards, is a complete and utter disgrace. I will take the counter stance and say tools are created by the exercise of knowledge. Compromised knowledge = compromised tools.
Yes, so very true LoP, the paycheck is more important than the truth.
Oy Veh!
You should invite Himmler to a Rabbinical Conference?
When its all based on adversarial paranoia,its just a game that somebody won! who won? not a patriot thats for sure!
And yet the free money (ZERO percent interest policy) keeps flowing to the bankers, financiers, and their political puppets...
currency wars, trade wars, then genocide...
seems humanity hasn't been evolving for quite some time now...
The Domino repercussions of faux alignment.
We shall fight them in the Global Sweat Shops, we will never surrender.
The problem is that the Austrians are living in a delusional dream world where reality is irrelevant.
Countries that followed Keynes did better than those who drank the Austrian kool aid.
Please excuse this intrusion of reality.
Precisely who "drank the Austrian kool aid"? Do tell. Because all I see everywhere on the planet is free money (QE and ZIRP).
The real problem that disinegenuous fucks like yourself intentionally ignore is the fact that all this free money is going to useless fucking bankers and financiers. If a banks can access a billion for 0.25% interest from the Fed, then any business with good credit should have the same access asshat.
Let me be clear motherfucker, such "let the majority eat cake" monetary experiements have been tried before. teh reality is that the wealth inquality and income inequality hasn't been as such since the 1400's.
Congrats you stupid fuck.
jeez Laws
https://www.youtube.com/watch?v=2AB9zPfXqQQ
case of the Mondays?
Classic. It's not good to hold that stuff in don't cha know.
Great, you can send me a check for $250K then, need an address?
I bet you do well in "my dad is smarter than your dad" fights.
Ex, do you think the reality that is created via manipulation of sick minds may be the dream world
Ya Hunh!
I'm thinking this current "extend and pretend" era is not so much "reality" but "perceived reality".
I recently witnesed an outstanding conversation where some older ladies were schooling some younger ones, on the dangers of chewing ice and swallowing it.
"Oh NOooo - you cain't do that! It messes with your blood something awful!!" and went on to give examples of some horrible things that happened to loved ones, who had chewed ice and swallowed it (spoiler alert! some died....).
No joke - not three weeks ago. And in a pretty "modern" Hospital (in the U.S.).
If this planet is still in existence 50 years from now, I'm pretty sure the score of 2007 - 2014, will not be: Keynes: 1 - Mises: 0
Got patience?
The Swiss, faced by the Maginot Line of the ECB, skipped aroud it and ran through Belgium.
How ironic.
"I don’t use the term “war” willy-nilly"
The market seems to be acting as if the aggressive action of the SNB and EC money printing is all priced in. When each actor serves only their immediate interests, then unintended consequences, like butterflies in Central America, will surely multiply dramatically. 2015 will be a bumpy ride.
In theory there is no difference between theory and practice. In practice there is.
Yogi Berra
What's new.
In 1992 the BoE came under an onslaught from FX traders and capitulated.
Bankers just have short memories.
Keynesians are in control AND keep these compelling histories out of sight:
http://www.showrealhist.com/RHandRD.html
Rename them Conpersons in control.
Lets see, create demand for dollars, when you are sitting on a shit load of T bills, and US treasuries look to be a relative bargin..... HMMMM doesnt sound so dumb to me. Unwind a trillion or two into foreign investors, and give you room to QE that back to the US Banks and 1%.... Rinse and Repeat..... Never discount the greater fool theory.
My favorite part of college was when my economics professor told me I was right but for the purpose of the class I was wrong.
I was using real world business principles to formulate my answers, however this didn't match the academic solutions the textbook was based on.
So although I was right in the real world, I was wrong in academia.
Sums up our entire Bankster problem doesn't it. The real world proves them wrong, but the world they know which doesn't really exist says they are right.
What real world? Primates like Homo Sapien don't live in the real world. This is the trait that allows a relatively small number of people to completely enslave a planet. Those who gain from rising up charismatic whores like Keynes know EXACTLY what they are doing. You are mixing up rightous indignation with cold hard reality and painting those who have won everything as morons because they don't match your personal version of reality. Trust me, it's by choice none of this makes sense, that's how they wield control.
There's a lot of very intelligent people on this site who are not mature enough to understand that even the people who know better are not allowed to say the emperor has no clothes. Case in point: The Alan Greenspan before and after he was Fed Chairman is a very different person when he held that position. Did he get smarter after retirement, or less important and more able to speak freely?Academics and educators like to think of themselves as original and radical thinkers, but theirs is the essence of conservativism - taking lore learned in school and passing it on to the next generation.
As for academic practice - Academics spend their whole lives going to school. Outside exposure is often limited to a few summer jobs they had as young students. The rest of their professional lives is devoted to studying some narrow specialty within a group studying the same or similar specialties. As they progress in their careers, they accumulate credentials as "experts" in their fields, and their whole professional standing and ego is invested in that status as "expert". Anyone who presents a view that is contrary to their "expert opinion" is presenting a direct challenge to their exalted status as "expert" and a direct challenge to their ego. Hence academia is noted for the viciousness of the squabbles over what often seems trivial to outside observers.
These issues of ego and status also make academics extremely resistant to any information that could create doubts about their theories. An obvious example is found in "out of place" artifacts which are ignored by archeologists. As some have learned to their sorrow, if they publish evidence of artifacts or site dates that do not comport with the accepted theory of the day, their chances of gaining a tenure-track position at a university disappear. "Science", as practiced, is often not about gaining knowledge but rather about making evidence conform to accepted theories.
The message from academia is clear - conform or perish.
I found the story of what you are describing quite dramatic in Peter Ward's book Under A Green Sky. Quite David vs Goliath yet he unseated the dominant theory and theorists regarding mass extinction events. People shouldn't be surprised to discover 'acedemia' is a mean business too.
"In theory, theory and practice are the same. In practice, they are not." ( Einstein ? )
You know, for all his troubles after his meteoric rise to boxing fame, I think Tyson's quote is one for the ages, and will be the quintessential "I call Bullshit" clarion call to rebutt all these phony pseudo intellectuals in finance/business academia. Speaking of age, I remember seeing him in Albany, NY at a night club called September's back in the mid 80's and he was too young to be served. I was wondering then what was going to happen to this guy? Even though he was rocketing to stardom, it was too much and too fast. But he has sure earned my respect with his comment and certainly can back up his observation from the school (and the ring), of hard knocks.
Yes the Keynesians are desperate to start a war. Krugman was hoping for an alien invation. But it looks like they'll have to settle for Russia or Iran. And if those countries don't take the bait, the USA may have to invade Canada. It really doesn't matter - so long as enough people are killed to help the "economy."
As we used to say in the military: "No plan survives first contact..."