Free Money

Market Figures Out Fed No Longer Has Its Back

The Fed is now - for the first time in adult memory for half the world’s traders and money managers - tightening rather than loosening monetary conditions. A quick look at financial history is all it takes to lead anyone with leveraged money at risk to lighten up. Equally important - and vastly more strange when you think about it - this tightening comes at a time when major parts of the global economy are either grinding to a halt or imploding.

An Xmas Message From Satan - "Ignorance, My Poor Dear Americans, Will Not Save You"

"My minions in the Federal Reserve - such loyal servants! - continue feeding an orgy of leverage and debt, spreading ruination under the false guise of prosperity. What a delicious irony, that the fools doomed to eternal damnation in my Empire believe themselves prosperous as they absorb the poison of exponentially rising leverage and debt."

The Market’s Gamblers Are Pumping Air

The Fed pricked the financial bubblethis week as expected. Janet Yellen’s press conference couldn’t have been more perfect as it confirmed that the money printers have come to a stark dead end. The fact is, the global economy is deflating rapidly and the U.S. is sliding into recession. But our Fed chairman is clueless about what’s happening. She and her posse of money printers are going to get bushwhacked by reality in the year ahead.

"In Short Janet, It's Too Late" - Albert Edwards Calls It With These Seven Charts

"The party's over and bond investors who always tend to be more sober types, realize this and have headed for the exits whereas equity investors are so intoxicated they haven't realized that the music has stopped. Equity investors are still gyrating around the dance floor - just as in 1999 and 2007... I believe the Yellen Fed will soon be treated with the same contempt the Greenspan Fed was in the aftermath of the 2008 financial crisis. And they will deserve it."

The Fed's Painted Itself Into The Most Dangerous Corner In History - Why There Will Soon Be A Riot In The Casino

The chart below crystalizes why the Fed is stranded in a monetary no man’s land. By the time of next week’s meeting the federal funds rate will have been pinned at about 10 bps, or effectively zero, for 84 straight months. After one pretension, delusion, head fake and forecasting error after another, the denizens of the Eccles Building have painted themselves into the most dangerous monetary corner in history. They have left themselves no alternative except to provoke a riot in the casino - the very outcome that has filled them with fear and dread all these years.

Forty Centuries Of Wage & Price Controls

Interest rates across the developed markets have been kept at emergency levels (and all time historical lows) for seven years. Do we think that allowing banks to access essentially free money is more or less likely to give rise to the sort of malinvestments that caused the financial crisis in the first place? If you believe that the answer is ‘less likely’, there is a job at your local central bank with your name on it.

The Bubble Finance Cycle - What Our Keynesian School Marm Doesn't Get, Part 2

Greenspan’s phony disinflation success led to the Fed’s embrace of fully mobilized and massively intrusive monetary policy in the guise of the Great Moderation and the wealth effects theory of financial asset levitation. In due course, Greenspan’s self-aggrandizing but purely experimental forays of massive central bank intrusion in the financial markets were supplanted by the hard-core Keynesian model of Bernanke and Yellen. Alas, they operated under the grand illusion that a domestic wage and price spiral would tell them when the domestic GDP bathtub was filled to the full employment brim, and therefore when to lift their foot from the monetary accelerator. It never happened, and they never did. The era of Lite Touch monetary policy was by now ancient history.

Can "SPECTRE" And Trillions In Free Money Finally Save The Global Economy?

"Back in 2008, in the midst of a crisis of global proportions, Ernst Stavro Paulson and the enigmatic Dr.Yes brought SPECTRE out of the shadows and into the collective conscious of the world. They did so by seemingly offering a cunning solution to the fears that gripped mankind in the wake of the GFC—free money!"

Breadth Breaking Bad - Where It All Went Wrong For The Fed

With the S&P 500 just over 1% from its all-time record-high, it is perhaps shocking that only just over 50% of the index members are trading above their 200-day moving average. Worse still,  the divergence between index price performance and underlying component performance has never been greater as The Fed's last money-printing effort drove a wedge between the have-nots and the have-yachts...