Free Money

GE stock is down almost 13% over the last 7 years, and this is with record shares being taken off the market.  However, Jeff Immelt thinks he has a solution for this problem after 15 years at the helm of GE. 

And it’s dragging down the economy.

When Will Bad News Cease to be Good News for Stocks? It is quite amazing to watch this. Even as one economic datum after another indicates that a major slowdown is underway that could well turn into a recession (keep in mind that this is not a certainty – at similar junctures in recent years, aggregate economic data recovered just in the nick of time), the US stock market continues to take everything in stride. The longevity, intensity and persistence of a bubble is per se not proof that it will inevitably continue – it is only an indication of the likely amount of pain the market will eventually dispense.

This long-term weakening of the economy is the direct result of financialization and the Federal Reserve's policy of propping up impaired debt with more debt and constantly bringing demand forward with zero interest rates.  The U.S. economy is slowing to stall speed--the point when gravity overcomes the lift provided by central bank free money. This deceleration is evident in a number of indicators such as gross domestic product (GDP), which is now at 0% according to the Federal Reserve Bank of Atlanta's GDPNow model.

There is only one way to end the financial tyranny of the Federal Reserve--abolish it, and put an end to the predatory pathologies of its policies...

• Iran, powers push for nuclear deal as clock ticks toward deadline (Reuters)
• How DIY Bond Traders Displaced Wall Street’s Hot Shots (BBG)
• MillerCoors Caught in a Downdraft (WSJ)
• Saudi-led strikes again hit Yemen overnight (Reuters)
• Even With Free Money, Merkel Still Reluctant to Spend (BBG)
• Britain Uses Tax Breaks to Lure Digital-Game Developers (WSJ)
• China to Insure Deposits in Move Toward Scrapping Rate Curbs (BBG)
• As China Expands Its Navy, the U.S. Grows Wary (WSJ)

The imperial spiral into the stratosphere of stupidity is well underway. With zero accountability for those in power, there’s no way to realistically stop it before crash and burn. The best we can hope is to bring the responsible to justice afterward and pick up the pieces by going back to the Constitution.

So what has transpired is another day and another play in the casino. This ketchup and mac merger could not be more emblematic of how the Fed’s destruction of honest financial markets has fatally deformed American capitalism. Warren and Jorge are understandably singing Janet’s praise. Everyone else should be getting out the torches and pitchforks.

Janet’s Yellen’s pettifogging today about her patient lack of impatience was downright pathetic. Her verbal hair-splitting is starting to make medieval ritual incantations sound coherent by comparison. But unlike the financial media’s dopey dithering about “dot plots”, Yellen at least has something to hide behind all the gibberish. Namely, she and her merry band of money printers are becoming more petrified each month that they will trigger a thundering Wall Street hissy fit if they move to “normalize” interest rates - even as they are slowly beginning to realize that continuance of ZIRP much longer will only intensify the market’s addiction to rampant speculation, free money carry trades and the associated risks to financial stability.

A wicked web of deceit, with just a good measure of theft and forgery thrown in for old time’s sake!

Borrowing in USD was risk-on; buying USD is risk-off. As the real global economy slips into recession, risk-on trades in USD-denominated debt are blowing up and those seeking risk-off liquidity and safe yields are scrambling for USD-denominated assets. Add all this up and we have to conclude that, in terms of demand for USD--you ain't seen nuthin' yet.

Currently, a new form of danger arises. The Keynesian pettifoggers at the Fed have painted themselves into an epochal corner. After 78 months of ZIRP they have no idea about how and why they got here; and now, mired deep in the lunacy of free money, they are clueless about where they are going next. There is not a chance the US economy has decoupled from the rest of the world. The great credit-driven boom was universal and fueled by out of control central banks. Now comes the bust phase, and these same money printing central bankers have no clue what to do about it.

Suddenly the narrative that “everything is awesome” is showing to not be as “awesome” as it was first proclaimed. Merely a few months have passed since the ending of QE and praises of awesomeness everywhere are morphing into questions more akin to “Oh no: not again!” And with that we are now watching those who pushed, pulled, and levitated that narrative scramble desperately to push another narrative back onto the stage that worked so many times before: “Every sell off over the last 6 years has shown to be a profitable buying opportunity.” i.e., Just buy the dip (JBTFD). Yet it would seem these dips; are far different.

Next week is all about the Fed, and the positioning or should I say De-Positioning will be taking place right up until the last minute of this all-important Fed Meeting.