Please welcome the nation's new chief slumlord, Janet Yellen. The previous top slumlord, Ben Bernanke, has retired from the position of Chief Slumlord (i.e. chair of the Federal Reserve) to the accolades of those who benefited from his extraordinary transfer of wealth from the many to the few. Why is the chairperson of the Fed the nation's top slumlord? Allow us to explain... We only need to understand two facts to understand the Fed's role as Slumlord.
Nothing can be a more pungent metaphor for today's investment climate than the headline, “Macau gambling revenue hits record $45 bn in 2013.”
How many people in the financial services industry understand how the financial system works?
We've all experienced it, we are dealing with someone who has all sorts of masters degrees, PhD's, and doesn't know the Federal Reserve is a private corporation, and even doesn't know the product their company is selling.
In the spirit of professionalism, we must keep these quotes anonymous, but certainly if you have survived long enough in Finance or read the Financial news regularly, you will not need any references because you've probably heard it before.
For the New Year, it seems that SOH, that last true refuge for pensive brooding bears, has been overrun with pompous bulls peddling & pumping a new 21st century high tech plateau of permanent prosperity, that would make even Irving Fisher's rose twittering cheeks blush. I wonder if old Irving would have Linked himself In or posted his rip roaring 20s rosy market views on a pretty pink Facebook page?
The only thing missing from the cartoon below is there is a minimum net worth requirement for "free money" eligibility.
The rich continue to grow richer, and as David McWilliams (of Punk Economics) so eloquently explains in this brief clip, this has pushed the Fed into a corner. As the Federal Reserve gets a new chair and decides what to do next, whether to print $85 billion a month more or not, McWilliams examines the heist that is the new normal financialized economy - who gets all the loot and why today's kidnappers wear Prada. "Wake up," he blasts, explaining the uncomfortable reality of what happens when financial kidnappers dress up as loyal patriots and extort money in the name of the common good.
On January 29, 1845, the New York Evening Mirror published a poem that would go on to be one of the most celebrated narrative poems ever penned. The poem was entitled "The Raven," and its star was an ominous black bird that visits an unnamed narrator who is lamenting the loss of his true love... So, with the vision firmly planted in your mind's eye of a man completely out of touch with reality, seeking wisdom from a mysterious talking bird - knowing that there is only one response, no matter the question - Dear Reader, Grant Williams presents a chart whose importance is enormous... simply put, this one chart shows exactly why we are where we are...
Neofeudal financialization and unproductive State/corporate vested interests have bled the middle class dry. Yet we accept the officially sanctioned narratives as authentic and meaningful. Why? Perhaps the truth is simply too painful to accept, so we will reject it until we have no other alternative.
"It’s time to put that power back where it belongs," explains Jonathan Zimmerman in today's Washington Post, "Barack Obama should be allowed to stand for re election just as citizens should be allowed to vote for — or against — him. Anything less diminishes our leaders and ourselves." The 22nd Amendment, limiting the Presidential term, according to Zimmerman, reflected "a shocking lack of faith in the common sense and good judgment of the people." Of course, in the increasingly 'entitled' America, it would only cost a few hundred million to bribe all the newly downgraded Middle-to-Lower class Americans with Obamaphones in order to finally get a "dictatorial democracy" by indirectly funding the lower common denominator with $400 in free money every election cycle.
"The reality is,"Kevin Warsh exclaims, "QE policy favors those with big balance sheets, those with risk appetites, and access to free money," while real people "are still looking around and saying what is fed policy doing for me." The problem, he explains, is a disconnect between what markets are discounting about the future and the Fed's credibility with regard their apparently divergent forecasts for unemployment, growth, and interest rates. In a little under 90 seconds, Warsh explains the dilemma and sums up the Fed perfectly, "they're just talking, rather than acting."
The Unspoken, Festering Secret At The Heart Of Shadow Banking: "Self-Securitization" ... With Central BanksSubmitted by Tyler Durden on 11/15/2013 17:45 -0400
The implication of this particular and quite unprecedented shadow banking circle jerk, which could very easily make even the direct wealth transfer resulting from trillions in QE pale by comparison, is so stunning that we leave it up to the reader to come to their own conclusion.
Hunting season is off to a good start this week, and I’m not just talking about deer hunting. It seems that former Fed officials declared open season on their ex-colleagues. First, Andrew Huszar, who once ran the Fed’s mortgage buying operation, let loose in yesterday’s Wall Street Journal. Huszar apologized to all Americans for his role in the toxic QE programs. And then today, the WSJ struck again, this time with an op-ed by former FOMC Governor Kevin Warsh. Warsh is a former Morgan Stanley investment banker whose 2006 to 2011 stint on the FOMC spanned the end of the housing boom and the first few years of “unconventional” policy measures. After such a solid grounding in the ways of the Fed and Wall Street, he recently morphed into a critic of the status quo. His criticisms are welcome and we believe accurate, but they’re also oh so carefully expressed. They’re written with the polite wording and between-the-lines meanings that you might expect from such an establishment figure. He seems to be holding back. So, what does he really want to say?
A central tenet of propaganda is that the Big Lie repeated often enough is accepted with greater ease than small lies. Thus it is no surprise that the leadership and propaganda organs of the Fed, Federal government and the Keynesian cargo Cult of fellow travelers all repeat our era's Big Lie: There is a free lunch after all. There are two free lunches, according to our financial and political leaders: free money, in the form of money created out of thin air by the Fed, and almost-free money borrowed into existence by the Federal government. The problem with Big Lies is reality has not been disappeared; it still exists. Actions create consequences, and not necessarily the consequences that were planned or expected.
At the heart of the matter, money is after all a claim on real-world resources, goods and services. Printing or borrowing money into existence does not create more resources, goods or services to exchange for the money. In this sense, all financial schemes for retirement are misdirections of the real challenge, which is creating enough real-world surplus to support 75 million retirees (not to mention the other 75 million people drawing government benefits). Printing or borrowing money are both attempts to get a free lunch; alas, there is no free lunch. We can only spend what we extract or generate in surplus, i.e. what's left after subtracting the costs of production, labor and capital.
Following record UMich misses, Gallup's economic confidence collapse, the slump in the conference board's measure of confidence, and Bloomberg's index of consumer comfort signaling major concerns among rich and poor in this country (in spite of record highs in stocks), today's Consumer Confidence data from UMich continues to confirm a problem for all those 'hoping' for moar multiple expansion. Falling for the 3rd month in a row, and missing expectations for the 2nd month in a row, this is the lowest confidence print in 2013. Perhaps even more worrisome for the 'hope and change' crowd is that the 12-month economic outlook has collapsed to its lowest since Nov 2011. It would seem that all that free money flooding our 'markets' has reached peak efficacy in terms of confidence inspiration, and as Citi notes, when this cycle has played out in the past, equity market corrections are often quick to follow...