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The End Of Markets: Central Banks Took Over Everything, Changed Everything
Submitted by Jeffrey Snider via Alhambra Investment Partners,
Previously we looked at funding markets and currency proxies for detecting the end to the “dollar” pause that began on March 18. Broader credit markets agree with that assessment so far, as nominal yields and the UST curve shape have started, at least, to be redrawn back into the tightening format. Nominal yields and inflation breakevens turned right at May 6 when Janet Yellen spoke more of the common sense that should be the default setting for monetary everything.
The yield curve overall across the bulk of it has moved flatter, mostly within the past two weeks. Since May 14, the 5s10s has flattened rather sharply (an appropriate oxymoron) dropping from 72 bps all the way down to 60 bps Tuesday and 61 bps yesterday. The 30-year end fell from 248 bps against the 2s down to 224 bps yesterday; from 152 bps against the 5s down to 135 bps.
As noted previously, it isn’t so much that these moves are especially established in order to confirm an actual inflection but rather that everything has started moving again in the opposite direction at largely the same time. That would tend to rule out random volatility in various components which was at least arguable from May 6 at first. With the entire credit and funding markets turning now together, it increases the likelihood that this is something meaningful.
And that is what makes this all the more important, as if I am using the correct interpretation credit and funding markets are all backward in relation to where orthodox narratives suggest and often demand they be. If Yellen’s speech alluding to a stock bubble on May 6 turned the “exit” to ZIRP back on, then credit and funding should be behaving in the same manner as the middle of 2013 – rising nominal yields and a steeper yield curve (eurodollars too). But that was the behavior of the period just prior to May 6, when it was quite clear that credit was taken with the belief, of March 18, that the FOMC had changed its mind away from the exit.
That has really been the persistent trend since November 2013, where the more the FOMC talks about being convinced of a full economic recovery, and thus gets closer, in their collective mind, to an exit from ZIRP, the more upside down these markets get. The only way to explain that is what I alluded to also yesterday, namely that credit and funding are finding “there will not be any normalcy and any attempt to go backward undertakes what amounts to incalculable risk of being disastrous.” In this view, “backward” applies to the idea of financial (and economic) normalcy when operative financial conditions completely prevent that:
I personally find way too much complacency in blindly believing that going from B to C will be only a minor inconvenience. It would be dangerous even under the circumstances where the system shifted from the dealers to the Fed and back to the dealers, with an infinite series of potential dangers even there. But to undertake a total and complete money market reformation from dealers to the Fed to money funds? There are no tests or history with which to suggest this is even doable under current intentions. Poszar and Mehrling’s contributions more than suggest that difficulty, but I think that still understates whether or not we ever get that far.
That, I believe, describes this upside down nature coursing through credit and funding at the moment. Whenever the Fed or its top officials (they call themselves, often, thought leaders without ever demonstrating the capacity for wide-ranging curiosity) get back to this aching, nagging fear of not confirming their past success, eight years is a long time to be in an “emergency” after all, credit markets reciprocate with their irritating fear of centrality in these paradigm shifts themselves.
You could make the case that this is one instance, spread among many facets, where “markets” are just throwing a tantrum having become used to, and dependent on, central banks. There is undoubtedly some of that at work, as certain parts of the financial markets are unduly comfortable with the way things are at this moment, but that is much more so related to the risky parts of finance than the basis here. Funding markets, in particular, are the most closely associated with the changes to come (if, once more, we ever get that far) very much aware that this all amounts to a change not just in interest rates but in the very character of operation. That is far different than just being emotional over the Fed no longer babying and nursing closely financialist components (a reception carried more much openly by stocks).
Critics of the massive interventions (including institutions like the BIS) spawned since late 2008 have maintained that eventually they produce a market system that no longer operates like a market system. We have seen that in some moments as stocks will behave contrary to how they used to, “risk off” on seemingly good news and such, all in the view of monetary policy with usurped primacy. In the case of credit and funding, I think it is actually worse than that as it is the investors and financial agents playing the role of realism, literally making for this upside down re-arrangement. That is why November 2013 looms over everything, as the financial system peered closely at what the “exit” might look like and recoiled drastically in rejection of it.
Central banks took over everything and thus changed everything; they cannot simply declare themselves successful and just give it all back. That might (stress might) have been possible had it actually worked, a true and robust economic recovery to smooth the shift, but the majority part of that November 2013 recoil was the growing acceptance, throughout 2014 and into 2015, that it was never coming in the first place.
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Box cut their throats!
Nail gun to their heads!
G7 agrees to include yuan in SDR basket.
http://rt.com/business/263197-yuan-imf-currency-basket/
A huge basket of fresh, new shit! Better than the old shit!
A huge basket of fresh, new nuts...
Should've known almost no one would look up 'burdizzo'.
Don't forget the Burdizzo's!
The reason WHY the Fed and CB's did what they and did since '08 needs better publicity. Why they changed from marginal manipulation to outright "being the market" since '08...why the big change??? And once you understand the problem, you understand why the Fed's actions are criminal because they were never going to work or "help" the nation...only offer a small and shrinking cadre an opportunity to strip mine the nation on the way out.
It was a "flow" (not "stock") issue of new consumers that killed an already very flawed model. The annual "flow" of new population growth in the US, EU, Japan, elsewhere all peaked in the '80's and annual new population growth began ebbing. By 2008 in the US, the 25-54yr/old annual population change went negative. The sliding #'s of new consumers had been hiden for years by lower interest rates, more available credit (subprime, etc.), longer duration credit. But the '08 outright annual fall of the consumer base was too much.
The Fed and CB's had to "suspend the free markets to save the free markets" (but what they really meant was they needed to suspend free markets because what a market would have done is found real pricing between lots of sellers and declining buyers).
Everything now is simply trying to hde the fact we have shrinking consumer bases and will for a decade...and maybe for the rest of our lifetimes.
I try to outline in the following links...all data from Fed's FRED...
http://econimica.blogspot.com/2015/05/2008-was-tremorwhy-main-event-is-still.html
http://econimica.blogspot.com/2015/05/reality-check.html
They are simply trying to stall the inevitable, they knew what they had caused, and they knew that they could not sustain the lie...
The critical question is, what's next? (Why one world bank / digital currency OF COURSE!) Problem/reaction/solution...
Working way too hard at this.
ZIRP had to fail, because it puts all financial institutions upside down on their loan/investment portfolios.
With the first puff of smoke from rising rates, they die, just like the S & L fiasco. It is only a matter of time.
Rising rates? It might be 100yrs from now and NO ONE will have the nutsack to raise rates. Its that obvious. Thats why i love all the attention on the FOMC minutes..what a fucking joke..
Problem is they'll take us with them.
"The End Of Markets: Central Banks Took Over Everything, Changed Everything"
So-called central banks are nothing more than grifters. Plunders of the underlying society. Nothing but "central grifters."
That the "central banks" have taken over the markets means...
Liberty is a demand. Tyranny is submission..
"The fix isn't in, the grift is."
Debt JUBILEE. Reset. It's a must at this point.
Cars stall Ponzi's erupt.
nah, yellen will invert the yield curve and everything will be hunky dory /s
Banksters slant everything so they can steal wealth.
Well, now we know exactly what has doomed the Roman empire - a never-ending oligarchy orgy.
Well you are getting gang raped .The oligarchs already left ,so its fleecetime.
Mutton will be served.
Cmon be serious, before 1913 and Paul Warburg all things economically were so fucked up..
plebes couldn't bring themselves to draw blood. they're gettin' what they deserve.
When M. A. Rothschild founded this global central bank ponzi scheme, the specific intent was to take over everything.
Less than 300 years later...
Mission Accomplished.
Read the protocols [the tools of your enslavement] for extra credit.
Banksters stole the future.
dingos ate my baby
That's right, you pay the price "they" set. Has nothing to do with supply and demand. And that's with EVERYTHING.
All systems based on usury are unjust and must eventually fail and be replaced with non-usurious alternatives. All else is hot air.