This page has been archived and commenting is disabled.
Saxobank CIO Explains "The New Nothingness"
Submitted by Steen Jakobsen via TradingFloor.com,
“The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to its close. In its place we are entering a period of consequences.” – Churchill
I have noticed a very troubling trend recently – everywhere I go, I’m the optimist. This concerns me and should concern you as well as I am normally introduced as someone who has predicted five of the last two crises.
I write this on the Copenhagen-bound plane that brings me back from a visit to Slovenia and Croatia, where everyone has given up on the future. I found the same on a recent trip to Hong Kong and Australia, and on another occasion in Turkey before that.
We have zero growth, zero inflation and zero hope. That combination has left the countries of this circumstance in total apathy as zero rates are being interpreted as meaning that no reforms are needed. No inflation means no new margins as well as no new wage bargaining, and zero hope means politics and elections may change the affiliation of countries’ leaders, but not their politics and certainly not their vision for the future.
This is one of the unintended consequences of zero-bound economies and policies. This apathy has, however, reached a zenith-point that needs to be addressed. Media and policymakers continue to talk about what we can’t do, leaving no room for talk of we can do and characterising dreams as mere fantasies, things best left to children.
This new nothingness is creating a youth, a political system and an economic outlook which is based more in peoples’ heads and minds than it is in reality.
Every country I visit has terrible macro policies, and features a political class who are mainly interested in maintaining the status quo (as well as a dynamic micro economy). There are always business people and students who are willing to do more and better – to go higher, longer and further – but they are drowned in this "nothingness reality".
Here is my solution, then, which should and would work.
First of all, everybody needs to respect why God gave us two ears and one mouth: it means you listen twice as much as you talk. We are designed to listen more than we talk!
Secondly, everyone needs to be more ambitious. For yourself, your country, your company… talk about what you can do and not what you can’t do.
This is my political and economic platform (or rather my non-platform, given that I am not actually running for office); it’s simple and costs close to nothing to implement:
Promise No. 1: I promise to do absolutely nothing as your president, except support the country in everything it does.
Macro kills productivity, innovation, personal freedom, and dreams by misallocating capital and resources and by limiting ideas and expression. A rich society grows from the bottom, not from the top.
Promise # 2: The public sector will not be allowed to grow in size for the next ten years.
No one will be laid off, but the private sector needs to be able to outgrow the public sector, while the remaining public sector needs to be more ambitious. The public sector should be the best at the job it does – nothing less, nothing more. The public sector has a central role in any society, and its role is to that which only it can do.
Promise # 3: For every new law introduced, one law needs to be go away. There need to be “sunsets” built into most laws which deal with business, tax and incentives. The administrative complexity is reaching new all-time highs every single week, creating “control costs” which have no utility are unproductive.
Promise # 4: All credit and political capital should be invested in SMEs – small-and medium sized companies.
EU studies show that 85% of all new jobs are created in the SME space. Additionally, 100% of productivity and innovation lies with SMEs. Most of this sector’s considerable contribution comes from startups, hence there needs to be a focus on incentive structures for starting a new business.
I suggest tax amnesty for first three years (most companies don’t make money before their fifth year anyway!) and propose that investments into startups be made deductible in top tax and pension schemes
This is it – It represents the reverse-engineering of my Bermuda Triangle of Economics theory which explains how today, and through zero bound rates, 20% of companies (listed companies, banks and state-owned-enterprises) get 100% of credit and political capital. This means their funding rates are 300-400 basis points lower than a normal business cycle.
Meanwhile, SMEs (the other 80% of companies) get zero credit and zero political capital.
Stocks go up as discounted cash-flows (300-400 bps below normal) result in higher valuations. Unemployment and inequality keep rising and there is no growth – no productivity, no political changes and no hope.
There is a reason why hope is at zero. The systemic failure of policymakers to understand and reverse the worst monetary experiment in history has created a situation where we need a deep crisis to shake off the mantle of this nothingness reality.
I am optimistic – technology and smart, capable, well-educated people stand ready to do their part if they only get the chance. The 80% can get us back on track in less than five years as growth, if given the chance, will be exponential and not slow.
My travels prove to me that the world is stuck in neutral. Everyone, in a sense, wants to be “half-pregnant”, wallowing in the idea that “things could be worse” while not dealing with reality.
At a certain point, even central bankers will realise they can go no further.
The consequences for markets are manifold: Companies can’t continue to grow top-line earnings when their customers – the 80% – have less to spend. At this point, a zero-rate environment is one in which “financial engineering” has reached its inbuilt maximum, the pinnacle of the Excel spreadsheet maker's art (discounted cash-flow close to zero = infinite valuation).
In addition? Zero expected returns for equity markets, a normalisation of interest rates – not based on growth but instead on the need to “normalise” zero bound – and a tectonic shift from investing in “paper money” to doing so in productivity and jobs among the 80%.
Expect the Federal Reserve to issue a margin call on asset inflation in June or September, a Grexit, and a much stronger US dollar (EURUSD at 1.10) in a final move where lack of liquidity and shortage of access to USD funding will create a “mini-crisis”.
The world only ever changes direction after a crisis, and all macro changes stem from policy mistakes. 2015 is a lost year. I think that 2016 will see us leave the nothingness reality behind, however, and I am now as optimistic as I have ever been.
Why, you might ask?
Because things have never been worse!
»
- 20208 reads
- Printer-friendly version
- Send to friend
- advertisements -
Central bankers realize they can only do moar...they are "all in" because of the imbalances they have created...any slowdown or stop now would result in a quick collapse...ongoing CB activities will result in a slower collapse and CB'ers can pick and choose who gets harmed and who gets "helped"
For CBs there is only one road......MOAR
America and most advanced economies are bankrupt...
http://econimica.blogspot.com/2015/02/fundamentally-flawed-chapter-31-why.html
This has nothing to do with the economy any longer...there is only an asset recovery without even the premise of an economic recovery.
Here...
http://econimica.blogspot.com/2015/04/stocks-or-economydoes-either-represent.html
or Here...
http://econimica.blogspot.com/2015/02/fundamentally-flawed-chapter-34-us-real.html
CB's are simply doling out the haircuts and deciding who makes it out whole. Most are and will be harmed while a small, well connected cadre make out very nicely
here is a tipping point...netanyahoo will consider himself alone in the world, and hello war. He said as much recently and the us govt just confirmed. http://www.bloombergview.com/articles/2015-04-27/boehner-congress-doesn-...
This guy is predicting the next crash.... https://www.youtube.com/watch?v=jVO8sUrs-Pw&feature=youtu.be
Check the dates of stock market crashes if you will please...
http://en.wikipedia.org/wiki/Stock_market_crash
You'll be alright. Just don't drive over any of Amurika's 85,000 functionally obsolete bridges.
http://thehill.com/blogs/congress-blog/economy-budget/196388-the-real-scandal-is-nations-deteriorating-bridges
That's a myth:
http://davidstockmanscontracorner.com/the-madison-county-bridges-in-nowh...
“things could be worse”...
Heh, he... You could be Federales en the Battle of Zacatecas!
Government IS the problem.
Which is the question...
Every dragon has a head mate...
I want to know what Saxobank are doing for SMEs. If anything.
Also. Things have never been worse? On what planet, Mr. Jakobsen?
More to the point, on what planet do the already incredibly wealthy have any incentive to see that the proles of their jurisdiction live any better than they do now? I'll buy a ticket for the first rocket going there.
Don't shoot the messenger. In a world of lies, telling the truth is an act of courage.
I think any "solution" that doesn't begin with Guillotines will fail. Want to truly inspire us Mr Saxobank?....pay-up for yours and your cronies fuckups in full. Once I see real justice, then we can talk about how "we" still have to begin with all the heavy-lifting.....
a fucking banker on a soapbox. die mutherfukker!
from wiki: In 1946, the US financial sector owed $3 billion of debt, or 1.35% of GDP. By 2009 this had increased to $15.6 trillion, or 109.5% of GDP...
most of the shit those maggots own is gubbermint guaranteed. end tbtf. bust the trust. put the nyc moneychangers into the street.
+1 yeah. felt like i was geting preached at - like i'm not working hard enough already. this guy has it all figured out with a weird sort of caveat nothing will change until monetary policy changes - ssssssssure. it also seemed like he endorses the fucking bailouts and the QEs that sollowed, but, that its now time to shut the tap off. So, its another asshat telling us, once again, how things could be better if we just changed our attitude with a second order caveat the appears to recognize that new attitudes are not possible unless and until monetary policy changes.
fuck i feel so much more informed.
cheers
You better learn how to aim first.....
https://plus.google.com/117105684737450236348/posts
When some dude kicks off with a churchill gag i am always wary of what will follow.
This great orator ( that's all he was besides an aristocrat ) should have been before the firing squad during/after the sorry-ass battle of Gallipoli in 1915 and a second time in 1940 during the German invasion of Norway.
The history books might say differently but this only goes to prove that with a brain-dead public you never run out of Fodder.
"............interested in maintaining the status quo (as well as a dynamic micro economy)."
Succinct summary of our .gov governance.
Crucified: Ukraine’s US-backed Azov Nazis nail pro-Russia fighter to cross, burned alive (VIDEO)
Black Ops 3 trailer asks “how far can we push technology before it starts pushing back” (VIDEO)
Can't find the Jail Bankers in any of this windbags solutions.
First things first - stop wasting money and time on usefull things.
The Bloody Road To Death....Sven Hassel 1977,,,,Nazi nostalgia paperback
I just downloaded a few Sven Hassel books. I first started reading them when I was 13. Much better for a teenager than the WWII text books we had to go through.
Useless article & ideas when you believe the size of the current government is okay.
Simple solution: Be reconciled to Christ; all other solutions are pointless.
Heres the thing. We need to provide people with a Basic Income. A Basic Income is a weekly/monthly stipend that gives folks enough to live off of. It removes the population from the 'fight for survival' and lets them build whatever kind of small businesses they want. Its welfare for everybody.
We already have welfare for the poor. Our cities would be burning if we didn't. We already have welfare for the rich -- our entire financial system would be in rubble if we didn't (and I'm willing to entertain the idea of that being a good thing.. just not in this paragraph). Its time to extend welfare so that everybody gets enough to be able to go without starving and get a roof. Thats it -- you dont starve, and you get a roof. And there are no conditions, and it is universal. It is Guaranteed Universal Basic Income.
If we tapped into our black budget, if we tapped into our narco economies (legalize drugs), if we stopped waging wars of conquest, hell, if we just tapped into welfare as it exists right now - we could get enough money to free everybody from the "work to survive" paradigm. This taps into the biggest resource we actually have: the untapped creative power of 300 million people who are now forced to work in uninspiring places just to draw a wage. Giving those people freedom is like turning on 300 million light bulbs -- who knows what kind of power that can generate? A lot.
Steen's suggestion, which is par for the course in terms of status quo thinkers - is roughly this:
In other words, the free money spigot should be directed not so much at central banks balance sheets (thank you QE!), but at small companies. Great, you can immediately see how this leads to what is basically another scam. I can see all the potential for fraud in this right now: major financial institutions splitting off little 'splinter groups' and registering them as small businesses. You would have companies of 25,000 people suddenly split into 5,000 companies of 5 persons each. You need an entire industry of regulators and inspectors to make sure these monies aren't being misallocated.
For god's sake, let's give up the pipe dream that there is some ennobled, dignified, capitalistically-kosher use of money if it (1) goes into a recognizable business and (2) returns some kind of revenue stream. Oh, if it produces some shitty revenue stream then its suddenly an investment! Great job! Because we only want to invest money where we will see a return on investment, right? In light of crashing demand, perennially low wages, and the dying middle class, I'd say that investing in people is a worthwhile thing to do. Investing in some idiot in a blue button-up shirt's prospectus of what does or doesn't constitute a 'profitable business' - wow, its like QE for unemployed MBA students.
Give us, the people, the goddamn money already. We constitute the social capital which has allowed all this wealth to be created in the first place. Our parents and grandparents built the fortunes of the rich, we purchased the oil that uplifted the oil barons, we bought the cars that raised GM to what it was, we supplied the tax dollars that funded the originators of silicon valley, and we bought the computers that made Microsoft and Apple what they are/were. Now give us, the people, the goddamn money.
I did buy a second hand HMV record player a few years ago and do play second hand vinyl on it, There is enough stuff already in existence buy only food and smokeables! Better still buy nothing and grow! Even better; write the narrative!
Dude you understand very little about the healthy socio -economic aspects of an unfettered price discovery process. Price discovery also extends to wages as well as "prices" of goods and services. Wage is just another "price".
Now if the Fed had not immorally and UnCinstitutionally printed QE, then the Fed Gov't spending would have been laid bare for all to see, the Banks would ahe been Chapter 11 w/o QE and the immoral management of those banks would have been poorer and gone. That is how the US was set up to work.
Why didn't it? See the anks and politicans .... although I repaet myself.
I disagree that I don't understand price discovery.
The primary driving economic force of the last 7 years overtly, and possibly the last 40 years covertly, has been fiat money creation and government debt issuance; second primary dynamic has been money multiplier effects in the stock market, real-estate sector and narco-economy (giving insiders the ability to create massive multiples or get a huge 'pop'). That is the 'free money spigot' that waters everything in its wake. Its a public/private monster that has taken over the world.
This spigot also resulted in the internet being created, unless you believe that DARPA's budget is somehow cleanly and reliably accounted for by tax monies alone. It isnt, there is an unofficial black budget that exists going back decades and was possibly the first illegal money creation precedent going back to cold war military research.
I'm just suggesting that these primary economic forces -- which clearly have trumped price discovery and efficient markets (which are not efficient, thats dogma, if my research is correct) -- be pointed directly at the middle class. So we can pay off homes, cars, educations, stock up on goods, and pursue whatever dreams we have managed to retain in this system.
You're making the same mistake as the bankers. Instead you have shifted the money printing to benefit the middle instead of the top tiny few percent.
Money isn't production. Only production represents wealth. Money is just the universaly accepted claim ticket on produced goods and services. Price discovery is the value that the market places on a particular good or service at one particular time and place.
Any interference with that mechanism causes imbalances to occur which will eventually need to be corrected before stability can return. It's not necessary to decide what a certain intervention will achieve. It's only necessary to understand that it will cause instability which will in time require correction.
Think of it like geometry. A triangle has a specific set of criteria which is always applicable no matter what kind of triangle it is. There is no requirement to continually measure triangles in order to establish these criteria. We can just accept them. The money supply is one such criteria. It must be kept stable in order for the market to work properly. Create an impossible length or angle in a triangle and it's no longer a triangle. This can be applied to economics. Intervention in price discovery, money supply or, any other normal market behaviour will result in an imbalance. If an imbalance is present, then adding a further imbalance in the hope of correcting the first imbalance is fools gold.
I want unicorns and sunshine for everyone. Is that too much to ask?
Reminds me of a comment by David Cameron when he realised the magnitude of the economic problems he had inherited. He moaned at the people in general for taking on too much private debt. It's the equivalent of complaining that roads attract vehicles.
Is it that these bankers a realising what the rest of us have been telling them for ages? Is it only now that it becomes clear that when the tide goes out, eventually even the rock pools go dry? It's no good having production if no one can buy anything and there is no hope of producing anything if capital is plundered.
Government and bankers had a responsibility to protect money. They were so bound up in their own power and greed that they failed to realise it's true importance, they thought it was the oil that made the machine work and so adding a bit more oil, more or less wouldn't have an effect. Now they are discovering reality. It isn't oil, instead it represents trust and fidelity. Once you bugger that up divorce is imminent.
The author is a banker... remember its NOT the stock, its the Flow. Thanks Tyler(s) ya Bytchez...
NOTICE: I control growth and I have decided that the Committee to Ruin the World [the tribe de Rothschild Bank, and family] need to be taught a lesson in life. America and Wall Street need to understand that they do not control growth since I stole Alan Greenspan's mojo. Frankly, after 28 successive business quarters of no growth since Bear Stears was subjected to a bear raid there has been NO FUCKING GROWTH WHATSOEVER.
NOTE: Professor Emeritus Karl Marx posited REVOLUTION via the masses of SERFs made indigent via the deep capture of uncontrolled runaway Casino Capitalism, and HERE we are folks! The rest of you can twiddle your thumbs, but I'm ripping this crumbling infrastucture down for purposes of rebuilding on a more suitable substrate just like that anti-Capitalist hero of World historiography always suggested would happen.
:|
Promise # 3: For every new law introduced, one law needs to be go away.
I also once believed better rules such as that one would help solve the problem.
They won't.
Even the best rules will soon be gamed.
Unless there is an outspoken majority strongly supporting a rule, it will help exactly zero.
So we need to form a majority that wants and then supports the rule. Until that happrens, it will get much worse before it finally gets better.
To the author. You may have good intentions. But QQQQ anyway.
Expect the Federal Reserve to issue a margin call on asset inflation in June or September
Article went from decent to WTF with this one sentence. Author is not paying attention at all if he thinks the Fed is EVER going to raise interest rates. It's not. It is permanently stuck at zero and they can't hike rates without blowing up the system. So until the time comes when it is actually desirable for the Fed and its masters to have the whole system come chaotically crashing down around them, interest rates stay at zero - forever.