Thursday, February 18, 2016

An Economic Coup d’etat.........

An Economic Coup d'etat

Virtually every stock market in the world has completed a top. When you get a lot of markets or a lot of sectors doing the same thing — which we call the law of commonality — it's usually followed by a pretty important move. So if everything is breaking down, that's not a good sign on a long-term basis.

Most long-term indicators are now bearish.

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. They need to be exposed, denounced, ridiculed, rebuked and removed.

In the name of Keynesian economic model that is an insult to even the slow-witted, The people in charge are conducting a rogue regime of financial repression, manipulation and unspeakable injustice that will destroy both political democracy and capitalist prosperity as we have known it. They are driving the economic lot of the planet into a black hole of deflation, mal-distribution and financial entropy.

What kind of crank economics contends that brutally punishing two of the great, historically-proven economic virtues——-thrift and prudence—-is the key to economic growth and true wealth creation?

Our 200 unelected rulers are enthrall to a dogma of debt that is so primitive that it's just plain dumb.

By purchasing existing debt with digital credit conjured from the "send" key on central bank computers, they make room for more and more of it. And they do so without the inconvenience of deferred consumption or an upward climb of interest rates owing to an imbalance of borrowings versus savings.

Likewise, by pegging the money market rate at zero or negative, they enable even more debt creation via daisy chains of re-hypothecation. That is, the hocking of any and all financial assets that trade at virtually zero cost of carry in order to buy more of the same and then to hock more of them, still.


The truth is, the world is up to its eyeballs in debt. 

Since the mid-1990s, the 200 rulers have ignited a veritable tsunami of credit expansion. Worldwide public and private debt combined is up from $40 trillion to $225 trillion or 5.5X; it has grown four times more than global GDP.

Whatever has caused the growth curve of the global economy to bend toward the flat-line, it surely is not the want of cheap debt. Likewise, the recurring financial crises of this century didn't betray an outbreak of unprecedented human greed; they were rooted in heretofore unimagined excesses of leveraged speculation.

If the $10 trillion of US debt growth since the eve of the Great Recession was not enough to trigger "escape velocity", just exactly how much more would have done the job?

Our 200 financial rulers have no answer to these questions for an absolutely obvious reason. To wit, they are monetary carpenters armed with only a hammer. Their continued rule depends upon pounding more and more debt into the economy because that's all a central bank can do; it can only monetize existing financial claims and falsify the price of financial assets by driving interest rates to the zero bound or now, outrageously, through it.

But debt is done. We are long past the peak of it.

So what is at loose on the land is not public servants carrying out the law; its a posse of Keynesian ideologues carrying out a vendetta against savers. And they are doing so on the preposterous paint-by-the-numbers theory that when people save too much we get too little GDP, and when we don't have enough GDP, we have too few jobs.

These fools think this is owing to such nonsense as all the blather about "stresses in emerging markets including China" and that "slow growth in developed economies could spill over to the U.S…….translating into weaker exports, business investment, and manufacturing in the United States, slower progress on hitting the inflation target……etc."

The implication, of course, is that stalling world growth requires more central bank stimulus, and even a scramble toward NIRP by central banks which have not yet joined the Looney Tunes brigade of the ECB, Sweden, Denmark, Switzerland and Japan.

Not even close. The amount of debt pouring into the negative yield basket is owing to speculators buying bonds on NIRP enabled repo. Their cost of carry is nothing, and the prices of NIRP bonds keep on rising.

So yields are plunging into the financial netherworld because speculators are front-running the financial death wish of the central banks.

Until they stop. Then look out below. The mother of all bubbles—-that of the $100 billion global bond market—-will blow sky high.

At length, savers will get their relief and our 200 financial rulers will be lucky to merely end up in the stockades at a monetary version of the Hague.

Meanwhile, the War On Savers continues to transfer hundreds of billions from savers to the casino in the US alone—–even as the global economy careens towards a deflationary collapse.

No comments:

Post a Comment