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How The Fed Creates Zombies In One Simple Flow Chart
We’ve written quite a bit over the years about the many unintended consequences of unbridled money printing. In fact, it was just last month that we asked the following question which, on the surface, comes across as counterintuitive: “Are Central Banks Creating Deflation?”
The premise is simple. By keeping rates artificially suppressed, the central banks of the world effectively make it impossible for the market to purge itself of inefficient actors and loss-making enterprises. As a result, otherwise insolvent companies are permitted to remain operational, contributing to oversupply and making it difficult for the market to reach equilibrium. The textbook example of this dynamic is the highly leveraged US shale complex which, by virtue of both artificially low borrowing costs and the Fed-driven hunt for yield, has retained access to capital markets in the midst of the oil slump and has thus continued to drill contributing to the very same price declines that put the entire space in jeopardy in the first place. Here’s what Citi’s Matt King said about this dynamic last month:
It’s that linkage between investment (or the lack of it) and all the stimulus which we find so disturbing. If the first $5tn of global QE, which saw corporate bond yields in both $ and € fall to all-time lows, didn’t prompt a wave of investment, what do we think a sixth trillion is going to do?
Another client put it more strongly still. “By lowering the cost of borrowing, QE has lowered the risk of default. This has led to overcapacity (see highly leveraged shale companies). Overcapacity leads to deflation. With QE, are central banks manufacturing what they are trying to defeat?”
Now, Citi is out with a new note bemoaning the fact that the monetary policies ostensibly designed to rescue the world from the deflationary bogeyman have had the effect of destroying creative destruction creating a legion of zombie corporations in the process.
From Citi:
How odd! Markets not following fundamentals…
Beware unintended consequences…
And here’s King summing up the legacy of every iteration of QE the market has seen since the crisis:
“Sometimes the side effects outweigh the benefits.”
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Who is buying that new shale equity? CALPERS and Detroit?
Bubble economy! Get QE4 ready Janet, and another $17 Trillion in national debt!
To the moon! There is no stopping the financialization miracle! Money is free!
http://www.usdebtclock.org/
The link you provided doesn't work?
! !! !!!FUCK!!! !! !
How does one catch that potential divergence for a blast of that kinetic energy squeezed down under pressure for maximum ejaculation?
Is it only SJB.
I have been ending up at wanting to short high yield a lot recently. Is SJB the only way and is it any good? Not like they will have lots of cash for bail outs ins bad debt mergers etc.... When u add in other juicy tidbits of other stuff to the puzzle.
Looking at SJB, it is one of those stocks that has to be day traded - don't even think about a buy and hold strategy (just like VXX/UVXY). A better choice is to buy puts on SPY or HYG.
http://schrts.co/rBXHwu
They do not create "zombies" from their grift, but poverty, misery, death and lies.
Liberty is a demand. Tyranny is submission.
Guillotine the Fed. Audit the heads.
Ricky Martin - Livin' La Vida Loca
http://www.youtube.com/watch?v=p47fEXGabaY (3:43)
Surrounded by 100 gorgeous women, and he’s gay.
Who better than Rickey Martin to know how banksters feel about all those excess reserves at the Fed.
(like, what the hell am I supposed to do with this?)
Oil Companies Are Getting a Second Chance in the Bond Market
22 April 2015, by Sridhar Natarajan, Cordell Eddings and Asjylyn Loder (Bloomberg)
http://www.bloomberg.com/news/articles/2015-04-21/oil-firms-find-debt-reprieve-in-u-s-as-buyers-binge-on-bargains
You think the thieves give a damn while they are raking in the dough. They are banksters. That's what banksters do.
Z??zzzzzzzzzombieeeeeeee
Doing the same thing over and over and expecting different results is what, again?
Yellen and Bernanke and all the self annoited Geniuses ...working on theories that were
crafted BEFORE the international linkages now in place. Before China, before we became a massive debtor nation...
and the Fed has created their own mandate....INFLATION and ZIRP...both of which fly in the face of their "official" mandate of Moderate rates and STABLE prices.
The Fed will fail, and they who pushed the big buttons will walk away ... unharmed personally..much like the Goldman Sachs partners, the Countrywide people, and the Fannie and Freddie people....
Pray and delay wasn't good enough for just the banks. Now we've got it throughout the economy. Thanks Fed!