Could it be that America's ruling classes, its Imperial state and the Federal Reserve, no longer rule their own destiny?Could their smug confidence be their undoing? Only two things could upset the ruling class apple cart: a financial crash that the Fed can't stop, much less reverse, and Donald Trump winning the presidency.
Watching Ms. Yellen answer questions during the “Humphrey-Hawkins” testimony the last two days was painful. It is time to put the central bankers of the world in straight jackets and throw them into the cuckoo’s nest where they belong.
What we see happening today is the last gasps of a broken system ravished by the very much cancer-like progress of debt. Yes, it took longer than it should have, and than we thought. But that’s pretty much irrelevant, unless you were trying to get rich off of the downfall of your own world. Always a noble goal. There’s one reason for the delay only: central bank hubris. And now the entire shebang is falling to bits. That this would proceed in chaotic ways was always a given. People don’t know where to look first or last, neither central bankers nor investors nor anyone else.
Three out of the five major economies are already experiencing stagnant or negative private credit growth. Three down, two to go. Helicopter money--government issued "free money" to households--is no replacement for private credit expansion.
There has been an economic coup d’état in America and most of the world. We are now ruled by about 200 unelected central bankers, monetary apparatchiks and their minions and megaphones on Wall Street and other financial centers. Unlike Senator Joseph McCarthy, we actually do have a list of their names. They need to be exposed, denounced, ridiculed, rebuked and removed.
Do you remember when Greenspan was befuddled when natural market rates wouldn't obey his commands in the previous decade? Well, I sure hope Yellen does. Even if she doesn't the high yield financed US energy probably won't be around long enough to find out.
Issuing more credit will only make the 2016 crash worse. Trying to stop the current crash with more credit and lower interest rates is like sending the cavalry on suicide charges against entrenched machine guns, artillery and tanks. The coming financial slaughter will be as senseless, wasteful and ineffective as any suicide attack in the Great War.
As the towering forces that are prevailing against failing global economic architecture and the pit of debt beneath that structure, as laid out below, it is clear that the 'Epocalypse' - encompassing the roots "economic, epoch, collapse" and "apocalypse" - is here, and it is everywhere. The Great Collapse has already begun. What follows are the megatrends that will increasingly gang up in the first part of 2016 to stomp the deeply flawed global economy down into its own hole of debt.
In March 2014 Wall Street’s ex-items S&P 500 earnings forecast for 2015 was about $133 per share; it ended up 20% lower at $106. Yet here they go again - the consensus for 2016 started out at $137 per share last spring, and is just now beginning to make its way back toward the high $120s. It is a barometer of the abject complacency and intellectual sloth that has descended on the casino owing to two decades of Fed coddling and seven year of free money for the carry trades. In the case of Chipotle, it was always just a burrito. In the case of the US and world economy and financial markets, it’s not even that.
The invention of the blockchain and crypto-currencies such as Bitcoin have opened the door to non-state, non-central-bank currencies - money that is global and independent of any state or central bank, or indeed, any bank. This doesn't just open the possibility of escaping the debt-serfdom of central and private banks - it opens the door to an entire global economy that's free of the inequality and concentration of wealth and power that is the only possible output of central bank created and distributed money.
The amount of wasteful over investment on companies and ideas that should have never seen the light of a ledger book, let alone day, has been astounding. Without the intervention of the Fed’s QE (quantitative easing) free money enabling risk taking to supersede business fundamentals to fund and fuel speculative investments in ways that mirror the dot-com days: there would be no "Valley" as it currently stands. Unicorns, Non-GAAP, IPO’s, and more were the terms bandied or used to encapsulate what it was to be a "disrupter." Now with iconic Silicon Valley impresarios such as Theil or others being reported that to be looking for ways to cash out without an IPO, a nuclear winter pertaining to the world of Unicorns may be as '1' is said to represent: imminent.
The prospect that the leaders of our monetary politburo are about to be tarred and feathered by economic reality might be satisfying enough if it led to the repudiation of Keynesian central planning and a thorough housecleaning at the Fed. Unfortunately, it will also mean that tens of millions of retail investors and 401k holders will be taken to the slaughterhouse for the third time this century. And this time the Fed is out of dry powder, meaning retail investors will never recover as they did after 2002 and 2009.
"We are right back at it: trying to stimulate growth through easy money. It hasn’t worked, but it’s the only tool the Fed’s got. The biggest hope I had was that we would enter a new era of personal responsibility. Instead, we doubled down on blaming others, and this is long-term tragic..."