Dec 062019
 December 6, 2019  Posted by at 2:06 pm Finance Tagged with: , , , , , , , , , , , , , ,

Paul Gauguin When are you getting married? 1892



It wasn’t really the plan to make this a series, but it seems to have turned into one. Part 1 is here: The Fed Detests Free Markets. Part 3 will follow soon. And yeah, I did think perhaps I should have called this one “End The Fed” Is No Longer Enough. Because that’s the idea here. But what’s in a name?



Okay, let’s talk a bit more about finance again. Though I still think this requires caution, because the meaning of the terminology used in such conversations appears to have acquired ever more diverse meanings for different groups of people. Up to the point where you must ask: are we really still talking about the same thing here?

I’ve said multiple times before that there are no more markets really, or investors, because central banks have killed off the markets. There are still “contraptions” that look like them, like the real thing, but they’re fake. You can see this every time a Fed chief opens their mouth and every single person involved in the fake markets hangs on their lips.

They do that because that Fed head actually determines what anything will be worth tomorrow, not the markets, since the Fed buys everything up, and puts interest rates down so more people can buy grossly overpriced property and assets, and allows companies to buy their own shares so nobody knows what they’re worth anymore.

The Fed today is in the business of propping up zombies. And when I say the Fed, that also means the ECB and BOJ, western central banks. I won’t get into the PBOC here, but they’re not far behind.

Recently, Christine Lagarde, the new ECB head, said the most incredible thing (at least to my ears, I guess not to hers):

We should be happier to have a job than to have our savings protected … I think that it is in this spirit that monetary policy has been decided by my predecessors and I think they made quite a beneficial choice.

Who on earth ever claimed jobs vs savings is some necessary or inevitable “choice”? Why should it be? If this were true, isn’t that a sign that something is terribly wrong? That you can have a job, but you can’t save anything? And aren’t the central banks to blame for that then?

The entire system has been built for decades around the notion that people save, either to purchase big items, or for their old age, and that people put money into their pension systems. And now central banks come along and in no time destroy what has been valid for all these years. And they never even warned about it.

Anyway, after Lagarde’s remarks, I guess the Fed’s Jay Powell felt he couldn’t be left behind and said:

US central bankers see a “sustained expansion” ahead for the country’s economy, with the full impact of recent interest rate cuts still to be felt and low unemployment boosting household spending, Federal Reserve chairman Jay Powell said on Wednesday in remarks that brushed aside any worries of a looming slowdown.

“The baseline outlook remains favorable,” and the current level of interest rates “appropriate,” Mr Powell said in remarks prepared for delivery to the joint economic committee of congress, a panel that includes some members from the House of Representatives and Senate.

His comments tracked closely to those in his news conference last month after the US central bank cut rates for the third time this year and signaled it was likely done reducing borrowing costs absent a significant change in the economic outlook. Despite “noteworthy risks” including slowing global growth and fallout from the US-China trade war, “my colleagues and I see a sustained expansion of economic activity … as most likely,” Mr Powell said in his prepared remarks for the hearing.

Former Goldman and Bear Stearns banker, and friend of the Automatic Earth, Nomi Prins, tweeted yesterday: “Tuesday, the Fed added $95 billion in liquidity to financial markets. Today, Fed’s vice chair told Congress, “The Board’s latest [review] confirms the current health of the banking system. It depicts a stable, healthy, and resilient banking sector…” The Fed’s official for supervision and regulation told Congress, “The Board’s latest Supervision and Regulation Report… describes steady improvements in safety and soundness, with a gradual decline in outstanding supervisory actions at both the largest & smallest organizations..”

“The baseline outlook remains favorable,” Powell said. That must be why they have been pulling out all the stops and invented new ones, for a decade+. Bernanke, Yellen, the lot of them, all because the baseline has remained so favorable. Why would anyone want to listen to this guy, who so obviously dabbles in complete nonsense? Well, because he’s the one giving the money away.

I think I can tell Mr. Powell what the “full impact of recent interest rate cuts” will be, what it will feel like, and it won’t be anywhere near what he pretends it will be. I must think he knows that too, or he’s an utter fool, and I don’t think he is. He’s just doing a job, while he’s worth $100 million, and that job is very different from how it’s presented to the public.

I’ll tell you about that full impact in part 3 of this Fed essay, which I left on the shelf for a long time because I thought people would declare me nuts, but which now, with increasing chatter of a next recession, maybe can be exposed to daylight. It’s about how grave the damage is that central banks have inflicted on their economies, something I never see discussed. Powell and Draghi/Lagarde and Kuroda are not just the ones giving the money away, they’re also taking it away, just not from the same people. And that latter part is much more important to societies and economies.

A third quote, just to complete the “circle”, deals with BOJ chief Kuroda; it’s from a June 2019 Reuters article entitled How Japan Turned Against Its ‘Bazooka’-Wielding Central Bank Chief:

The direction taken by the BOJ could determine whether Japan’s banking sector avoids a hard landing and whether Abe or his successor will lean on the central bank to take the most extreme step remaining: printing money for the explicit purpose of financing a national debt that is now more than twice the size of Japan’s economy. That could risk a costly downgrade by credit rating agencies for Japan, and, by extension, Japanese corporate borrowers.

The spurning of Kuroda-nomics also has political implications. It is part of a broader public dissatisfaction with what has been labeled “Abenomics” – the prime minister’s plan to reflate the economy out of prolonged stagnation through a combination of aggressive monetary easing, bold fiscal spending and fundamental structural reforms in the economy.

“Kuroda’s radical stimulus kept interest rates low, allowing politicians to delay reforms to get Japan’s fiscal house in order,” said Koichi Haji, executive research fellow at NLI Research Institute. “The foot-dragging could cost Japan dearly. The options left for the BOJ all seem extreme.”

Options left for the BOJ will be even more extreme because Japan’s Birth Rate Has Hit Its Lowest Level Since Records Began In 1899. As a Dutch comment on that report said: “by 2050 there will be one working Japanese for every child or pensioner [..] Japan adopted a law in April designed to make it easier for foreigners to work in Japan. The goal was to attract 350,000 foreign workers. 8 months later, just 400 had arrived”.

And just this week we read that Japan is preparing another $120-$230 billion stimulus package. Extreme has become normal in no time. Only, the ratings agencies could lower their rating for Japan, because of this. Then again, why should they do it only for Japan? Everyone’s in “extreme” territory, or as Ben Bernanke called it in 2008, “uncharted territory”. Same difference.


But Lagarde is right on one thing: it is “the monetary policy decided by her predecessors” that has destroyed savings -and pensions-. How on earth she can call that “beneficial” is very hard to grasp. What is the goal, what is all these central bankers’ goal? That in the end nobody has any savings or pensions anymore, and they all must go into debt or perish? That would create entire societies made up of zombies. And that’s “policy”?

It’s policy to spin a fantasy tale so people like Jay Powell can claim that “the baseline outlook remains favorable” and “sustained expansion” lies ahead for the economy, and it’s policy to pay for that fantasy with money that belongs to savers and pensioners, and that you can then hand out to a bunch of zombie “investors”. That’s policy.

The role of today’s central bankers is possible only because the public are made to think these are very smart people that have the interest of Joe Blow at heart, and because they have “unlimited resources” to make stocks and bonds and the housing market look good. But what would happen if Joe Blow knew what is going on?

The Fed is now considering “policy” that “makes up for lost inflation”. No, stop laughing, I’m serious. Their extreme policies in uncharted territory have failed so dismally, they’ve obviously not been extreme enough.

Once they’ve gone down the path of extreme stimulus (not that they call it that), there’s no way back. Because they’ve just destroyed the markets, and then they go: let’s see how the markets react to that. Well, they don’t. They’re dead. You killed them. There are parties left who love feeding off of your free money teats, but they’re not the markets or even market participants. They’re rich socialists. But they’re also the only ones the Fed cares about.

Still, a central bank that doesn’t have the population at large, at the center of its policies, is a scourge on a society and/or country. And it should be abolished. But in the case of the Fed, ECB and BOJ, it is probably already too late for that. They have done their damage. “End The Fed” is no longer enough. Societies need to develop emergency measures to counter the damage done, or face untold misery, unrest and eventually, revolution.

People don’t see this, because these central banks -temporarily- taper over the disaster they’ve wrought with their “policies”. Time for the media to step in? No, it’s too late for that too, and besides, what media? They’ve been silent all along, why would they speak up now?

More in part 3.



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Home Forums The Fed Detests Free Markets – 2

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  • #51981

    Paul Gauguin When are you getting married? 1892     It wasn’t really the plan to make this a series, but it seems to have turned into one. P
    [See the full post at: The Fed Detests Free Markets – 2]

    Doc Robinson

    “There are parties left who love feeding off of your free money teats, but they’re not the markets or even market participants. They’re rich socialists.”

    More like cronyism than socialism.


    Great essay!
    We should be happier to have a job than to have our savings because your saving are already gone.

    ” …. they’re also taking it away, just not from the same people.”
    Let me guess …. a penny at a time from 90% of the people

    ” ….entire societies made up of zombies”

    ” ….what would happen if Joe Blow knew what is going on?”

    Nothing, because Joe Blow is a zombie.
    However, I expect that the feather will fly when the enablers feel threatened.

    V. Arnold

    Paul Gauguin When are you getting married? 1892

    What a lovely Gauguin; rich colors and beautiful women…

    Spot on Ilargi; you paint a dark reality for those of us not among the 10%.
    I can only conclude that my long term understanding has been validated; and we folk are cast adrift financially…
    All social support has been withdrawn (stolen) and down is where society will continue to slide.
    No lifeboats anywhere to be seen…

    Further, those believing solutions are to be found by voting are stuck within a fools errand…


    As a retiree, what has been happening to me is a direct result of the actions of these central bankers.

    Nothing in my life’s experiences, could ever have prepared me for what has happened since 2008.

    Before 2008, if you had mentioned negative interest rates, I would have said you were “NUTS!”

    Well savings now produce no income because central bankers have made the value of savings worthless.

    So I have had no choice but eat what is left of my savings to survive.

    I stopped investing over 10 years ago because the markets are dead.

    Without price discovery, there are no longer any reference horizons to tell you where you really are.

    So I hold the only thing left that is worth holding.

    I sure hope you weren’t expecting I would create a job for you with my life’s savings.

    I can’t, even if I wanted too. I am too busy just trying to survive, to worry about you.

    You are completely on your own.

    You may get to work but you will not be allowed to save for your future.

    At least I had the illusion, while working, that I could save for my future.

    I had the power of positive compounding working for me, for a little while.

    You have the power of negative compounding working against you.

    The more you try to save, the more you loose.

    You face an uncertain future because you can’t easily save.

    Sadly, I don’t envy your situation in life.

    II have a young son and daughter just entering the work force.

    They are in the same boat as you are. I am very unsure what is the right path for them to follow.

    Yes, I have lived in a place mostly devoid of hope for the future.

    That place was Siberia in 1983. I sincerely hope you can avoid living in a place like that.

    I hope you can figure this out. Good luck!

    V. Arnold

    Reading Wes’ post seems to confirm, it’s basically every man for themselves.
    We’ve long ago lost our tribes; the communty(ies) that help ensure survival. Families are under stress both financially and socially.
    Fear! A weapon once again at the fore in U.S. society (last seen in the 50’s, duck & cover nuclear scare): Debt, virtually no healthcare, unemployment, minimum wage salaries which are far short of a living wage, homelessness numbers rising everywhere; education; out of reach and mostly inferior; and retirement largely out of reach for the average citizen.
    Living abroad, I take no pleasure in what I see happening in my home country.
    To be clear; my rants are wholly directed at my criminal government and its minions, who enable the wholesale theft of the people’s legacy…

    Dr. D

    Buy in cash, not credit. If you’re one of the few than can save, save in gold.

    Or at least when it’s not in a mania.

    V. Arnold

    Buy in cash, not credit. If you’re one of the few than can save, save in gold.

    Amen to that. I think it’s important to note that gold should not be considered an investment; but a store of value.
    As such, price is not important…

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