Category Archives: Financial markets

The Four Fuckeries, by James Howard Kunstler

Call them the four horsemen of America’s downfall. From James Howard Kunstler at kunstler.com:

“We want to save the planet, and the life upon it, but we’re not willing to pay the price and bear the consequences. So we make up a narrative that feels good and run with it.” — Raul Ilargi Meier

I doubt there is another era in the history of Western Civ when the forces in-motion acting on society were so mystifying to those acted upon. And isn’t it especially galling that this is so in an age after rational scientific practice had decoded so many of nature’s secrets? Did that project somehow fail in the end? Has the Enlightenment been defeated? How have we become trapped like frogs being boiled haplessly in our own pond-water?

I have reduced these forces to four obvious streams of the sheerest seemingly evil fuckery, which is to say nefariously managed events meant to harm us. They are surely all related in some way. Let’s try to de-mystify them to understand what we’re up against.

First: Covid-19. How is it that we don’t know for sure how this organism came into the world, or understand what ensued after it did? Answer: the people who caused it to happen in the Wuhan lab have been busy covering their asses for three years, and successfully so. Yet we know exactly what Anthony Fauci, Francis Collins, Peter Daszak, Ralph Baric and others did. The paper trail in correspondence and patents alone is clear. We just can’t seem to do anything about it.

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First to Go: The Money, by Bill Bonner

Every bubble the last few decades seems to have popped and then given rise to an even bigger bubble. The bubble currently popping will be the bubble to end all bubbles, and nothing larger will follow. From Bill Bonner at bonnerprivateresearch.substack.com:

(Source: Getty Images)

Bill Bonner, reckoning today from Baltimore, Maryland…

Yesterday, we took a look into the murky past, to see what lurked therein. Today, we turn our minds to the future, which may prove murkier still.

As we saw in China, during the 1930s and ‘40s, the government printed money to pay its bills. It ran up debt it couldn’t pay. And then, the hyperinflation of the 1950s opened the door to Mao’s communists. After that, it was one disaster after another.

Americans think they can continue to borrow and spend forever. Investors are trained to believe that stocks always bounce back. They think that if they just hold on, soon they will be making money again.

And if they owe money, they think they’ll soon be able to refinance at even lower rates.

But all that has changed. Now that we have inflation, it’s a whole new ballgame.  The Fed can still print money, but now it will cause consumer prices to rise even faster. Your stocks may go up, as they did from 1966 to 1982, but inflation will wipe out your gains. And when you go to refinance your house, you will be hit by a double-whammy. Falling house prices may have erased your ‘equity’…while rising mortgage interest increases your monthly payments.

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Post-FTX Regulatory Crackdown Will Erode Liberties, Accelerate Path To CBDC ‘Social Engineering’, by Michael Washburn

An interesting issue is just how much governments can regulate cryptocurrencies. From Michael Washburn at The Epoch Times via zerohedge.com:

The collapse of cryptocurrency exchange FTX, and the worldwide outcry over the billions of dollars wiped off the platform, are likely to trigger a massive regulatory reaction that would further erode citizens’ economic freedoms without addressing the issues that fostered demand for an alternative to the fiat dollar, economists have told The Epoch Times.

A detailed view of the FTX sign prior to a game between the Phoenix Suns and Miami Heat at FTX Arena in Miami, Fla., on Nov. 14, 2022. (Megan Briggs/Getty Images)

An international scandal has embroiled FTX and its founder, 30-year-old Sam Bankman-Fried, in the wake of the firm’s crash earlier this month precipitated by a run on the exchange. Since then, reports have emerged that Alameda Research, a crypto hedge fund established by Bankman-Fried, was trading billions of dollars from FTX accounts without clients’ knowledge.

FTX has filed for bankruptcy protection, Bankman-Fried has stepped down from his role as CEO, and John J. Ray III, the former CEO of Enron, has taken over the insolvent company with a plan to sell it off if a successful restructuring is impossible. An estimated 1 million customers and other investors are facing total losses of billions of dollars.

FTX, in a recent court filing, said it owes $3.1 billion to its top 50 creditors, and its collapse has rocked the $839 billion global crypto market. On Nov. 22, the trading value of bitcoin tumbled to $15,480, a two-year low, before edging up slightly to $15,909.

Ray has claimed that subsidiaries of FTX in the United States and abroad “have solvent balance sheets, responsible management and valuable franchises,” but so far the shock and alarm over the exchange’s implosion have shown no sign of abating.

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An Economic Candle Burning From Both Ends, by Jeffrey Tucker

The past often dictates the future. It’s no longer a question of if the economy collapses, only when. From Jeffrey Tucker at The Epoch Times via zerohedge.com:

Some facts of our times follow. As you read, consider your own household and portfolios and how they measure up.

Disposable personal income per capita has been in decline in real terms for 19 straight months. This is not just dollar amounts but dollars adjusted for purchasing power. We are just now level with 2019, which is to say that Americans have lost three years of financial progress.

Savings has hit a new low of 3.2 percent, which is where it stood just after the 2008 financial crisis, and this contrasts with 6 percent rates after 1980 and 10 percent average rates in the postwar period.

Credit card debt just jumped to a 20-year high and is still soaring.

(Data: Federal Reserve Economic Data [FRED], St. Louis Fed; Chart: Jeffrey A. Tucker)

Money, credit, and capital are draining from long-term investments, drying up the venture capitalists and putting a tight credit squeeze on large businesses where firings in the professional sector have already begun.

Inflation is still embedded and this is because consumers have come to expect it and adjust their spending habits accordingly, plus wage costs are rising in sectors like hospitality, retail, and manufacturing.

As an example, the latest housing-price data shows annualized inflation at 15.4 percent year over year, even as the buyers’ market is mostly locked up. That’s the very essence of stagflation: rising prices amidst declining output.

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There’s No Bottom Until Frenzied Speculation Turns to Dust, by Charles Hugh Smith

At a true stock market bottom, nobody even wants to hear the words “stock market.” As Charles Hugh Smith points out, thanks to central bank intervention we haven’t had an organic stock market bottom for decades. From Smith at oftwominds.com:

Only when speculative sizzle attracts no buyers / marks will the bottom be in.

There hasn’t been a truly organic bottom in stocks in decades. Fifteen years of relentless central bank manipulation since the 2008-09 Global Financial Meltdown has persuaded punters that central banks will always save us should the market turn down because relentless central bank suppression of interest rates and expansion of liquidity (a.k.a. free money for financiers) are now necessary and thus predictably permanent.

Central banks have rescued punters from every market drop. This has pushed moral hazard to near-infinity: since we know the Fed et al. will rescue us, no matter how stupid or venal or risky our bets, then why not increase the leverage, risk and fraud at every turn?

Indeed, why not? With the central banks providing a permanent backstop, it would be foolish not to increase the size and risk of every bet.

Given this central bank-enforced supremacy of moral hazard, the only possible consequence has been the rise of speculation to truly dizzying heights, extremes of leverage and risk that are completely decoupled from the real-world economy.

In this Fed-managed fun house, cryptocurrencies started as jokes became worth billions of dollars–and despite a complete lack of utility, past present or future, these are still worth tens of billions of dollars.

The spectrum of similarly decoupled-from-utility speculations stretches across the entire global financial system. Valuations are based on central bank liquidity rather than real-world metrics such as sales, margins, profits or (gasp) improvements in productivity and real-world utility.

The speculative frenzy boils down to a simple dynamic: Sell the sizzle to a greater fool and pocket the profit. The greater the sizzle, size, leverage and risk, the greater the profits.

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WTF Happened with FTX (Part 1 of 3), by Scott Hill

For those who want to delve more deeply into the sordid tale of FTX. From Scott Hill at bombthrower.com:

(Part 1 of 3 special to Bombthrower by digital asset space analyst Scott Hill)

On November 2nd Coindesk published a leaked balance sheet from FTX affiliated market maker Alameda Research.

Ten days later the third largest Crypto exchange in the world was bankrupt and its founder was under international investigation for fraud.

In this article I’ll go through how Crypto giant FTX fell apart. There is a lot of backstory to this situation which I’ll cover in a following article, discussing the beginnings of Alameda research and the story of how a sketchy hedge fund turned into a major exchange.

As you’ve no doubt heard repeatedly this week, self custody of your Crypto is the safest approach until we know who is insolvent and the extent of the contagion. If you’re not confident with self custody, Coinbase and Kraken seem to be the safest Crypto exchanges, but that is still a counterparty risk that I’m not willing to take personally in these market conditions.

The Balance Sheet Leak

The exclusive scoop from Coindesk looked bad for Alameda Research. The firm, which performed market making on FTX as well as taking directional bets and venture capital investments, seemed insolvent on a realized value basis.

Their balance showed $14.6 billion in assets held against $8 billion in liabilities. On paper solvent on a mark-to-market basis, but digging in there was no way that mark was reasonable.

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The upside-down world of currency, by Alasdair Macleod

Gold is money; everything else is credit. Get that one wrong and the next few years are going to be a whole lot of misery. From Alasdair Macleod at goldmoney.com:

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The gap between fiat currency values and that of legal money, which is gold, has widened so that dollars retain only 2% of their pre-1970s value, and for sterling it is as little as 1%. Yet it is commonly averred that currency is money, and gold is irrelevant.

As the product of statist propaganda, this is incorrect. Originally established in Roman law, legally gold is still money and the states’ debauched currencies are not — only a form of credit. As I demonstrate in this article, the major western central banks will be forced to embark on a new round of currency debasement, likely to put an end to the matter.

Central to my thesis is that commercial bank credit will contract sharply in response to rising interest rates and bond yields. This retrenchment is already ending the everything bubble in financial asset values, is beginning to undermine GDP, and given record levels of balance sheet leverage makes a major banking crisis virtually impossible to avoid. Central banks which are already in a parlous state of their own will be tasked with underwriting the entire credit system.

In discharging their responsibilities to the status quo, central banks will end up destroying their own currencies.

So, why do we persist in pricing everything in failing currencies, when that will almost certainly change? When the difference between legal money and declining currencies is finally realised, the public will discard currencies entirely reverting to legal money. That time is being brought forward rapidly by current events. 

Why do we impart value to currency and not money?

A question that is not satisfactorily answered today is why is it that an unbacked fiat currency has value as a medium of exchange. Some say that it reflects faith in and the credit standing of the issuer. Others say that by requiring a nation’s subjects to pay taxes and to account for them guarantees its demand. But these replies ignore the consequences of its massive expansion while the state pretends it to be real money. Sometimes, the consequences can seem benign and at others catastrophic. As explanations for the public’s tolerance of repeated failures of currencies, these answers are insufficient.

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Citizen reporting beats legacy media on a crucial, complex story (yet again), by Alex Berenson

No news to SLL readers: the alternative media beats the mainstream media every time. From Alex Berenson at alexberenson.substack.com:

While the New York Times et al offer puffery on Sam Bankman-Fried and the FTX collapse, expert outsiders sift through the wreckage and get to the truth; this is Twitter and Substack at their best

Elon Musk was proud of his $44 billion baby this morning.

Musk is right.

Fourteen years ago, when Bernie Madoff’s massive hedge fund collapsed, the New York Times and other elite media aggressively dug into what had happened – and why and how regulators had failed to stop it. I know – I was part of the Times team.

By this point, business reporters were experienced covering financial collapse. Along with al Qaeda and Iraq, Wall Street’s various meltdowns were the story of the 2000s, starting with the technology stock crash in 2000, running through Enron and the other giant accounting frauds, and culminating in the bank crisis and Madoff.

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Doug Casey on How Inflation Destroys Civilization… and What You Can Do About It

Inflation is a hidden tax, and as such, it’s a lie by the currency’s issuer. Since monetary value is at the core of a productive economy, and money of no set value robs producers, inflation does indeed destroy civilization. From Doug Casey at internationalman.com:

International Man: According to a recent Newsweek poll, 63% of Americans “strongly support” new government stimulus checks to combat inflation.

In other words, let’s fight the effects of money printing by doing even more money printing.

What’s your take on this?

Doug Casey: The nature of the US has been transformed. Americans have come to see the government as a cornucopia that can kiss everything and make it better—especially since the bailouts of the Biden Administration.

That attitude has become a cultural value and very hard to change. “Panem et circenses,” as the Romans said, has become necessary for both the government and its subjects. Remember that the prime directive of any entity—whether it’s an amoeba, an individual, a corporation, or a government—is to survive. The present government can’t survive without supporting more than half the population, which has become parasites. But the government itself is the biggest parasite of all. Can parasites live on each other forever? No. To use an overly fashionable word, it’s “unsustainable.”

Where will the US government get the money it needs to survive? It can no longer even remotely survive on its tax receipts; deficits of one to two trillion per year lie ahead for the indefinite future. It can no longer borrow adequate amounts from either American citizens or foreign governments—just rolling over the $32 trillion of existing debt, forget about trillions of new debt, at anything near current interest rates is hard enough. So there’s no alternative left for them but to print more money. And print they will (electronically, of course). The thousands of “economists” at the Federal Reserve and the Treasury Department have no more of a grip on sound economics than government economists in Argentina or Zimbabwe.

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Where Crypto Went Wrong, by Charles Hugh Smith

Cryptos have become just another way for those who have to get more. From Charles Hugh Smith at oftwominds.com:

You want to fix the world with finance? Then fix this: wages’ share of a financialized, globalized, speculative-bubble dependent economy have been falling for decades. Fix this and you really will change the world. Anything less changes nothing.

Let’s start by stipulating my perspective on cryptocurrencies is neither positive nor negative in the usual context of “to the moon” or “worthless,” nor does it track any of the conventional narratives (decentralized finance will conquer the world, etc.)

I’ve thought a lot about “money” and its role in the economic-social order, and its role in the extreme asymmetries of wealth-power-income inequalities that are dismantling the social order in broad daylight. I’ve also thought a lot about work and its role in social cohesion, individual fulfillment and a productive, level-playing-field economy.

I’ve written two books on “money” and the potential utility of cryptocurrencies in reversing the extremes of wealth-power inequality that are destabilizing the social order. I invite you to read both books if these topics interest you:

Money and Work Unchained (2017)

A Radically Beneficial World: Automation, Technology and Creating Jobs for All: The Future Belongs to Work That Is Meaningful (2016)

Once you grasp the potential of community-based labor-backed cryptos, you realize cryptos took the greed-soaked path to the Dark Side of a destructive asymmetry of wealth and power: those who issued blockchain cryptos (in all their forms) would become the new Extractive Elite, the new Power Elite, the New Parasitic Elite, buying the wealth generated by the labor of others for peanuts.

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