The Central Bankers’ Malodorous War On Savers

Tyler Durden's picture

Submitted by David Stockman via Contra Corner blog,

Well, that didn’t take long!

After just three days of market turmoil the monetary politburo swung into action. This time they sent out B-Dud to promise still another monetary sweetener. Said the head of the New York Fed,

“From my perspective, at this moment, the decision to begin the normalization process at the September FOMC meeting seems less compelling to me than it was a few weeks ago.”.

Needless to say, “B-Dud” is a moniker implying extreme disrespect, and  Bill Dudley deserves every bit of it. He is a crony capitalist fool and one of the Fed ring-leaders prosecuting a relentless, savage war on savers. Its only purpose is to keep carry trade speculators gorged with free funding in the money markets and to bloat the profits of Wall Street strip-mining operations, like that of his former employer, Goldman Sachs.

The fact is, any one who doesn’t imbibe in the Keynesian Kool-Aid dispensed by the central banking cartel can see in an instant that 80 months of ZIRP has done exactly nothing for the main street economy. Notwithtanding the Fed’s gussied-up theories about monetary “accommodation” and closing the “output gap” the litmus test is real simple.

To wit, artificial suppression of free market interest rates by the central bank is designed to cause households to borrow more money than they otherwise would in order to spend more than they earn, pure and simple. Its nothing more than a modernized version of the original, crude Keynesian pump-priming theory—–except it dispenses with the inconvenience of getting politicians to approve spending increases and tax cuts in favor of the writ of a small posse of unelected monetary mandarins who run the FOMC and peg money market interest rates at will.

But the whole enterprise is a crock. The consumer spending pump can’t be primed anymore because households reached a condition of “peak debt” at the time of the financial crisis. Any fool can see that obvious fact in the graph below.

On the eve of the financial crisis in Q1 2008, total household debt outstanding—including mortgages, credit cards, auto loans, student loans and the rest——– was $13.957 trillion. That compare to $13.568 trillion outstanding at the end of Q1 2015.

That’s right. After 80 months of ZIRP and an unprecedented  incentive to borrow and spend, households have actually liquidated nearly $400 billion or 3% of their pre-crisis debt.

Yes, there has been a change in the mix—–with mortgages and credit card balances down and auto and student loan balances significantly higher. But debt is fungible—–so the truth about the aggregate of all household debt is stunning. Namely, not a single dime of the Fed’s $3.5 trillion QE bond buying spree left the canyons of Wall Street.

Stated differently, the entirety of private debt growth since the financial crisis and the inception of “extraordinary” monetary measures in the fall of 2008 has been in the business sector; and on a net basis the modest growth of business debt during the last 7 years has been entirely recycled via stock buybacks, M&A deals and LBOs back into the speculative pools of Wall Street.

So here in summary detail is what B-Dud and the small claque of Wall Street shills surrounding the Fed are actually hiding.

First, it is blindingly obvious from the above chart that the household credit channel of Keynesian monetary stimulus is over and done. During the 20 years after Greenspan took the helm at the Fed, household debt rose like a rocket.

From a level of $2.7 trillion in Q3 1987 it exploded to just shy of $14 trillion by Q1 2008. That represented an 8.5% rate of growth for two decades running, thereby dramatically outpacing the 5.5% rate of nominal GDP growth during the same period. Accordingly, household debt was ratcheted up on a one-time basis from from 55% of GDP to 95% by the eve of the crisis.

So, yes, Greenspan’s activation of the Fed’s printing press during that period did goose the GDP by mortgaging household balance sheets. But that was a one-time parlor trick that is over and done, and will now tax household incomes for the indefinite future.

In fact, the destruction of the household credit channel of monetary transmission is even more drastic than is evident in the chart above. That’s because households do not pay interest and principal on their massive debt burdens out of “GDP” or even so-called DPI (disposable personal income). Nearly one-quarter of the latter, for example, consists of transfer payments to old people and poor people—–most of whom can’t borrow at all or carry only minimal debt.

Instead, most of the current $13.6 trillion of household debt is owed by middle class wage and salary earners, and it is their pool of earned income that services most of the household debt. Accordingly, the household leverage chart below removes any scintilla of doubt about the fact that the Fed is pushing on one huge limp string.

Relative to wage and salary income, the exhaustion of the Greenspan-Bernanke parlor trick is plain as day. Debt soared from 80% of wage and salary incomes in the 1970s, where it had traditionally been associated with healthy household finance, to 220% of wage and salary incomes by the eve of the financial crisis. But since then it has rolled over and has therefore been a depressant to growth, not a stimulant.

Household Leverage Ratio - Click to enlarge

Household Leverage Ratio – Click to enlarge

Secondly, the modest growth of business debt did not fuel added output, either. Instead of spending for plant and equipment, thereby spurring measured GDP growth today and economic productivity and efficiency over the longer run, it went into financial engineering. So doing, it caused the massive inflation of existing financial assets in the secondary markets and thereby delivered untold windfalls to the 1% who speculate there.

Thus, at the end of Q1 2008 nonfinancial business debt stood at $10.4 trillion and since then has grown to $12.2 trillion. But about $500 billion of that went into increased balance sheet cash, leaving a net debt gain of $1.3 trillion. While this gain is modest compared to the 4X increase in net business debt between 1987 and 2008, the more important point is that the business channel of monetary policy transmission is broken, too.

The Fed’s drastic falsification of financial asset prices has turned the C-suites of corporate American into gambling parlors. On the margin, all of the gains in business debt since 2008 has been flushed right back into Wall Street in the form of stock buybacks and debt-financed takeovers.

Non Financial Business Net Debt- Click to enlarge

Non Financial Business Net Debt- Click to enlarge

The evidence that zero interest rates have not promoted business borrowing for productive investment is also plain to see. During the most recent year (2014), US business spent $431 billion on plant, equipment and software after depreciation. That was 7% less than net business investment in 2007.

And these are nominal dollars! So all other things being equal, net business debt could have fallen over the past 7 years. The actual gain in net debt outstanding shown above self-evidently went into financial engineering—-that is, back into the Wall Street casino.

Here’s the thing. You don’t need fancy econometric regression analysis or DSGE models to see that ZIRP is an macroeconomic dud. Simple empirical data trends show that it hasn’t goosed household borrowing and consumption spending, nor has it stimulated business investment.

And that’s what makes Dudley, Yellen and the rest of the posse so detestable. They are deploying formulaic Keynesian incantations about an allegedly incomplete and fragile recovery to continue to pleasure Wall Street speculators with several more months of free carry trade funding, and by every indication several more years of money market rates that are tantamount to zero.

For crying out loud, a “fragile” macroeconmy has nothing to do with it. Zero interest rates have not goosed main street activity for 80 months now—–so why would a rounding error 25 bps or even 50 bps rate in the money markets have any impact whatsoever?

It wouldn’t. This is all about the Fed’s deathly fear that Wall Street will stage a hissy fit if it is not guaranteed free or quasi-free gambling stakes for the indefinite future. That’s why the monetary politburo dispatched B-Dud out to calm the robo-machines and hedge fund gamblers on Wednesday.

Yet what about the tens of millions of main street savers and retirees who are being financially ruined by the writ of B-Dud and the FOMC? In a word, they are being sacrificed to the hair-brained theory that the central bank can create lasting gains in output and societal wealth by rigging the price of debt and inflating the value of risk assets by subsidizing ceaseless gambling in the casino.

And do not think “hair-brained” is an excessive term. There is an in-grown circle of a few hundred monetary apparatchiks in the world that now runs the whole central banking horror show. In addition to the governing boards of the Fed, ECB, BOJ, BOE, PBOC and their senior staffs, there are perhaps a few dozen economists and financial journalists that complete the circle of group-think.

Among these are the blatantly Keynesian editorial writers and commentators of the Financial Times. In a recent editorial that is so outrageously daffy that it could have been posted in The Onion, the FT let the cat out of the bag.

What these unspeakably dangerous fools argued was that cash should be abolished so that the central banks could get on with their job of stimulating “depressed” economies by setting interest at negative nominal rates.

In other words, it is apparently not enough that someone who saved $150,000 over a lifetime of work and foregone consumption should earn just $1 per day of interest on liquid savings deposits or treasury bills. No, the central bankers’ posse now wants to actually expropriate these savings by extracting a monthly levy, and by throwing anyone in jail who attempts to hide their wealth outside the controlled banking system by keeping it in private script or unconfiscated greenbacks.

Since this very idea amounts to a frontal assault on civil liberties and economic justice, it is best to let the FT condemn itself with its own words:

……. But even as individuals have taken recent crises as reasons to stock up on banknotes, authorities would do well to consider the arguments for phasing out their use as another “barbarous relic”, the moniker Keynes gave to gold.

 

Already, by far the largest amount of money exists and is transacted in electronic form — as bank deposits and central bank reserves. But even a little physical currency can cause a lot of distortion to the economic system.

 

The existence of cash — a bearer instrument with a zero interest rate — limits central banks’ ability to stimulate a depressed economy. The worry is that people will change their deposits for cash if a central bank moves rates into negative territory. The Swiss, Danish and Swedish central banks have pushed rates lower than many thought possible; but most policymakers still believe in an “effective” lower band not far below zero.

 

With a recovery under way in most rich countries this may seem academic. The talk is now of when to raise rates. But the fear of the lower band is still causing damage. The dominant argument for beginning the tightening cycle is to have enough “ammunition” for a new stimulus when the next downturn comes. Removing the lower band would leave central banks well equipped to deal with a slowdown even from near-zero starting points.

There you have it. The private economy and its millions of savers exist for the convenience of the apparatchiks who run the central bank.

And this view is not limited to the editorial scribblers at the FT. Their reasoning was identical to that offered by Kenneth Rogoff, the former chief economist of the International Monetary Fund, who recently advocated abolishing high-denomination banknotes such as the €100 and €500 notes.

So B-Dud was sent out to save the day for Wall Street, but it had nothing to do with the “in-coming data”. He was acting for a small posse of destructive monetary rulers who have hostaged themselves to the furies of the casino.

In their palpable fear and unrelieved arrogance, would they now throw millions of already ruined retirees and savers completely under the bus?

Yes they would.

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Bill of Rights's picture

Whats a savings? All your monies are belong to us.

 

 

JungleCat's picture

"Savings" is a coupon you use to get money off sumthin at the store.

Unless you have an EBT card, then you don´t need no "savings".

SuperVinci's picture

"Central Bankers War on Savers"

Gee, a war huh...did it EVER dawn on you that the SAVERS willingly GIVE their "savings" to the system?

Tell the fucking SAVERS to stop enabling banks and bankers then if you want to view banks and bankers as bad.

 

There is no evil bank meme without the SAVERS starting and enabling that process.

mtl4's picture

Is it just me or does B-Dud look like the guy that turned into a rat from Harry Potter?

 

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/will...

MrPalladium's picture

Looks like a faggot who got his two front teeth knocked out when his tranny skills failed him. He should fire his dentist.

Doña K's picture

Adolph Hitler punished the jews in Germany for hoarding cash, gems, gold etc. so that money velocity accelerates.

Is there any difference now?

knukles's picture

Yes.  We are all Jews now.  Well, except the FSA.  And the illegal aliens.  And the 1% and their financial enablers.
So, most of us are all Jews now.

newbie vampire's picture

Yep, we're already in the Fed's ovens. 

toady's picture

Exactly. We figured this out after '08. Wehav have nothing to do with the TBTF, took everything out. Bought beans, bullets, and bandaids. Opened accounts at credit unions. Only run what I need to cover the monthly nut thru there.

rbg81's picture

I am certainly a big believer in the superiority of Capitalism.  Unfortunately, what we have somehow pained ourselves into a conrern where we need growth at any cost.  We also need ZIRP, or even NIRP, to keep the Entitlement State afloat.  There are a lot of convergent factors contributing to this.  But "natural" growth is dead--it has been since the Japanese collapse in 1989.  Growth today only comes from smoke and mirrors.  There are a few tricks to make it happen:

-- ZIRP:  Gives people an incentive to spend rather than save.  Almost makes it much cheaper for Governments to deficit spend

-- Immigration:  Bring masses of people in (legally or illegally) who need stuff.  Doesn't matter to corporations if they actually work for it or become Entitlement state clients to get it.

-- Depressed wages:  Forces those still working to work harder to keep what they have.  Also encourages debt

-- Wars:  Stimulates the economy and provides a distraction for how badly Joe Sixpack is getting screwed.

-- College for everyone:  Mass indoctrination + Massive Debt.  A two-fer!  And the joke is people actually PAY to get indoctrinated.

realmoney2015's picture

Decreasing value of the dollar, Myra, and bailins: oh my. 

Of course there is way to save. Just do it outside of the matrix and outside of the financial system. Gold and silver! Silver is on a bigger discount right now, so that's what I would save in.

JustObserving's picture

But the banksters must serve their masters, not the peons.  Besides, the Fed leaks data to the banksters.

The Fed Won: America's 0.1% Are Now Wealthier Than The Bottom 90%

http://www.zerohedge.com/news/2014-11-11/fed-won-americas-01-are-now-wea...

Our finest criminals, Dimon and Blankfein, are billionaires

"Robust Evidence" Confirms Fed Leaks Data Ahead Of Rate Announcements

http://www.zerohedge.com/news/2014-05-13/robust-evidence-confirms-fed-le...

 

KnuckleDragger-X's picture

But its for the proles own good, since they'd only waste it on things they needed instead of propping up the casino....

silverer's picture

So we're all screwed up for so long, and then the good witch of the north comes along and tells us that we always had the power to screw the central banks: "Take all your money out of the bank and buy gold, and don't borrow to buy anything.  Save up and pay with cash.  Cut all your credit cards in half, and never do business again with the banks.  Now, just close your eyes, and keep repeating, there's no place like gold, there's no place like gold..."

Sudden Debt's picture

Number of protects by the common people: ZERO

It's not a war if the suckers already surrendered in advance!

 

newbie vampire's picture

I regret to disagree.  Once upon a time, there was that Occupy Wall Street moment.   But...................... what can we expect ?     

For the younger generation, if they hold a job, they just gotta go back to earning a living, just to survive.

NuYawkFrankie's picture

re There is an in-grown circle of a few hundred monetary apparatchiks in the world that now runs the whole central banking horror show 

Call it what it is: A Kosher Nostra Criminal Cabal

Doña K's picture

May I have the recipe for that dish please?

buzzsaw99's picture

cash is not the biggest enemy of nirp and they damn well know it.

JLM's picture

Retirement money is a pot to big to ignore by these leeches. Outright theft or a slow bleed in the works.

GRDguy's picture

Actually, most of it is already gone. Stolen. Pilfered. Whatever.  Now they just send out printed/web statements saying just how wealthy you are.  Just like Madoff and Corzine.  They sent out printed statements, too.  They will pretend all's well until the very end.

eddiebe's picture

The system with their unending Nirp and Zirp and Q's don't need savers, so throwing them under the bus is a foregone conclusion. But hey mom and pops, keep concerning yourselves with the blue vs. red theam and above all, watch tv., and oh, keep on working and saving.

large_wooden_badger's picture

Starve the beast. Stop saving and paying in FRNs. Barter, find another means of exhange wherever and however you can. Unregulated free markets are "black". And no, that's not being raciss. It's called that because nobody but the parties that agree to the mutual exchange know the details, which are not transparent or traceable, unless one or both parties decide to share the information with others.

They'll tax you when you earn.

They'll tax you when you save.

They'll tax you when you spend.

Then they'll tax you when you die.

casfoto's picture

A very well managed boycott of all goods, services, banks etc...punch them in the gut. Do a whole month of just buying the basics....if that doesn't work then do 3 months until the whole thing stops and they llisten and then put them in jail where they belong. I do not mind paying taxes but after working like a fool all my life and facing retirement with these odds against me and all the others that have done the same thing is just outrageous.

wmbz's picture

 "This is all about the Fed’s deathly fear that Wall Street will stage a hissy fit if it is not guaranteed free or quasi-free gambling stakes for the indefinite future".

Of course it is, always has been.

Yet when Jack Yellen (the lying cunt) said that Wall St. had very little to do with their decision making process. Not one asshole in Con-gress called her on it. They never do and never will. They are all blowing each other

Lying Pieces of shit...all!

Not if_ But When's picture

How many times must it be repeated that Bernie Sanders - over and over - has blasted the livin' daylights out of Greenspan/Bernanke/Yellen during testimony?  That he forced the Fed audit?  That he and Rand Paul are the (only ones)?

kevinearick's picture

Thieves in Law

 

Ring a bell?

 

Ask the Russian women what liberation did for them.

 

In case you didn’t notice, which you probably didn’t if you didn’t go to university or live in a communist country before, the kids go to college and get a credit card. If they buy what the State wants them to buy, Apple et al, they get a job, dressed for success. With the job comes more credit. If they buy what the State wants them to buy, they get a better job, more credit, and infrastructure is built to grease their way, win-win for the master-slave robots in the consumer economy, which can only strangle itself, ratcheting up rent/income until the demographic and then the financial Ponzi blows up. And then comes war, closer to home, as misdirection escalates.

 

You have been in a depression for quite some time. The critters are just employing digital money to isolate non-conforming individuals and boil the frogs with asset inflation, falling living standards. They call it progress and stability, full employment in Fed-speak, all politics, all the time, eliminating economic mobility and imploding the economy, USSR style. The only people that do not know America is now a communist country are those paid to think otherwise.

 

That’s the law, of, by and for majority peer pressure, always going backwards, for you. How dare you save; are you un-American or something.

VWAndy's picture

In other news. WATER IS WET!

 Central banks working with full governmental assistance and approval drove this bus over everything in its path. Built huge monopolies and regulated good inovation to a standstill. Weaponized everything they could and trashed out what ever they could not control.

 When the Fed pulls the rug out you will know its not a casino. Its a fucking slauterhouse. We are whats for diner.

  The global stall. Think about it.

GRDguy's picture

Agreed. If you're not at the table, you're on the menu.

falak pema's picture

Stockman's analysis confounds the small-time saver with the big-time 1% saver who is the real owner of the FED.

Yes middle America and pensioners will get clobbered, but not the Uber Oligarchy. And that inequality is growing alarmingly.

The FED technocracy represents the alliance between BIG CAPITAL; growing bigger every day; and the political elites who get elected to serve it and protect the FED's actions by legislative measures facilitating what those measures are supposed to achieve; aka increasing the social divide through its runaway financialized madness towards neo-feudal despotism, a process which will ultimately make the USA into a Zimbabwe type autocracy.

We will end up with a Potus like Putin or Mugabe and democracy will be a dodo, if this trend continues.

Our  "inverted totalitarian" politburo will be the CEOs of Apple, Google and Facebook.

They will run the world of which the US will be a big consumer center. Period.

Consumerism replaces citizenship. The drone patrolled world of tomorrow.

A lot of cities are now making their own money for local participants to try and move out of the CB controlled centralized system.

lasvegaspersona's picture

das 'Ubers' you speak will join the 99.999% if they have their trillions in paper. Pray for thier bank accounts if you have any compassion.

newbie vampire's picture

If a situation arises where their safety is "compromised" in any way, local enforcement agencies will guarantee their safety as they make their way to their private jets.

The rest of us will be in the FEMA camps, for our own good, of course.

OpenThePodBayDoorHAL's picture

Hi falak, 10 points for the "inverted totalitarianism" reference. It's either that or some sci-fi version of inverted hyper-Communism, with none of the benefits to regular people and everything to the Politboro. At least under real Communism you could get a crust of bread and the trains ran on time

roadhazard's picture

I've already beat those clowns to my money. You snooze you lose, bitches.

lasvegaspersona's picture

Evil Bankers...if it was not for evil bankers doing their evil stuff the markets would be 666. Pension plans would be outta bidness. We would have already had our deflationary collapse. Your portfolio would already be zero-ish.

No one wants this so we (collectively ) cheer on the 'evil banksters'™ and accept the phoney reinflation they have caused.

YOU can prepare for what must come. Quit bitchin about the bankers and do what you must do. Most people are happy with the current illusion. They are not going to join you in the pitch fork brigade. They are content with the trippling of their 401k that has happened....of course they are unaware that it is an illusion.

Once you see this you will be better able to focus you attention. Proteletizing monetarily ingnorant masses is a waste of time. They'll figure it out sooner or later...I mean later of course.

matinee55's picture

I call for the dismemberment of these less then human fesces

Chosenpeople's picture
Chosenpeople (not verified) Aug 28, 2015 12:41 PM

Our fake market economy is no different from a Soviet-style centrally planned economy, where the oligarchs take in all the profits, and the workers/peasants/serfs eat shit.

DaVinci's picture
DaVinci (not verified) Aug 28, 2015 1:00 PM

If you think it's malodorous now wait until they start charging for using our money.

Bluntly Put's picture

I would expect it would become another tax, perhaps up to 30% of all transactions, even deposits.

I mean why wouldn't they? You have no alternative but to keep all your money in an account for electronic transactions.

RaceToTheBottom's picture

Well, when gold finally takes off, they will create a Windfall tax of 80% for that.  So what is a peon to do?

Maybe hiding it in a business is the only solution.

Bluntly Put's picture

A nation of sheep

Run by wolves

Owned by pigs.

khakuda's picture

Where they are really blowing it is that talk of things like negative rates and continuing talking up of the markets on every single digit correction is causing even the average person to realize that it is hot air holding everything together at this point.  This was always a dangerous game and the Fed has been playing it for far too long.  They alone are causing loss of faith in fair markets, loss of faith in currency and loss of faith in liberty (I work, I earn, they steal from me 8 different ways).

Once lost, those things are hard to get back.

RaceToTheBottom's picture

I love reading Stockman's writings.  He does not pull punches.  

 

I am glad he has not succumbed to ridiculing the garden gnome Yellen and instead focuses on the architects Greenspam and the Bernank.

In.Sip.ient's picture

Who was it that predicted that national currencies

and banks would be obsolete inside of 20 years???

 

All I'm reading here is that BitCoin and gold are a

screaming buy at some point real soon.

 

polo007's picture

According to Guggenheim Partners:

http://www.guggenheimpartners.com/perspectives/media/rates-must-rise-to-...

Rates Must Rise to Avert Next Crisis

July 17, 2015

In 1898, Swedish economist Knut Wicksell argued that there existed a “natural” rate of interest that balanced the supply and demand of credit, assuring the appropriate allocation of saving and investment.

Should market interest rates remain below the natural rate for an extended period, investors will borrow excessively, allocating capital into less productive investments, and ultimately into purely speculative ones.

This is what the US economy faces today after years of meagre borrowing costs. Policymakers have created a Wicksellian dilemma where investment spurred by low interest rates is driving economic growth, but these inefficient investments support growth at the expense of lower productivity in the economy.

In recent years, this investment has flowed into housing, commercial real estate, and equities, driving asset prices higher, exactly the goal of the Federal Reserve in the wake of the financial crisis. But as the recovery in real estate and equities matures, a darker side of this imbalance between natural and market rates is beginning to emerge. Many investments today using artificially cheap capital are not increasing productivity – they are being made, because money is cheap and the profit motive is strong.

Consider the evidence. This year likely will witness record US stock buybacks; the second biggest year for mergers and acquisitions; the highest percentage of non-investment grade borrowers among new issuers of corporate debt; and a record for covenant-light loan issuance. In the midst of all this, stock prices are appreciating at the slowest pace since the financial crisis. Why? Because top-line growth is low and productive investments in core businesses are wanton.

Over time, the natural rate of interest should roughly equate to the average return on new capital investment. Distortions in economic activity begin to occur when the natural rate varies materially from the market rate.

The aftermath of the current period of corporate borrowing and splurging will be nasty. Consider that the majority of defaults of US high-yield bonds during 2008 and 2009 were loans originated between 2005 and 2007 – the final three years of the last credit cycle when M&A and leveraged buyouts peaked. Similar to today, credit remained cheap and the Fed was slow to raise interest rates.

We are not back in the frothy days of 2007, but we are leaving the realm of smart investment decisions and moving into the “silly season” when investors become convinced that recession is nowhere on the horizon and market downside is limited.

It is a world where asset prices continue to appreciate and confidence remains strong, while capital chases a shrinking pool of productive investment opportunities. Similar to the run-up to 2007, rising asset prices and malinvestments today may be sowing the seeds of the next financial crisis.

The harsh reality is extended periods of malinvestment result in declining productivity growth, lower potential output, and slower increases in living standards. A failure to normalize market interest rates soon will result in more capital plowed into investments that are less productive and more speculative.

As productivity declines, long-term growth will be stunted. Eventually, inflationary pressures will build, forcing market interest rates to rise. The longer market rates remain below the natural rate the greater the purge will be once higher rates induce a recession, causing a sharp rise in defaults among malinvestments made during the period of cheap credit.

Today looks a lot like 2004 or 2005, when investors were blissfully ignorant of what awaited. It is still early, but I get increasingly concerned the longer I see undisciplined investors clamoring for bonds with suspect credit worthiness at ludicrously low yields. Higher rates, higher prices, or both are on the horizon. Before long, some of those bonds may become toxic waste.

The good news is there remains time to take action. Policymakers can still make adjustments to avoid the worst phase of the credit cycle. To reduce the continued accommodation of these marginal investments, the US central bank should normalize rates soon. For investors, the time has come to consider opportunities to book gains in assets that in the reasonable light of day a prudent investor would never buy.

newbie vampire's picture

What Savers ?   The truth is any saver with less than a Million in the bank ain't earning enough interest to live on.   At a generous 1% a year, you would get a measly $10k.

The American dream was when a person can earn a decent living, raise a family and pay a mortgage etc. And if that person is reasonably thrifty, perhaps they can retire with substantial savings and an income stream which enables them to enjoy their golden years.

What we've got NOW is the NEW Amerikan dream where we get sub-standard incomes from salaries and wages.   It barely keeps up with the cost of living, let alone be able to take on a mortage or save.   Younger people, with the exception of the Trust Fund babies or working  as one of the monied elite, have little to look forward to.

Amerika is now a country where most will be wage or salary slaves for our Elite.

The only alternative is, if you have the money, to leave for one of the 3rd world countries where you can enjoy a reasonably good standard of living as you immediately become a high net worth person there.