Tag Archives: central bank policies

The Freak Chart, by the Northman Trader

Long-term stock market charts are perhaps sending a message that US equity markets may in for a lengthy period of consolidation at best, and perhaps a long bear market. From the Northman Trader at northmantrader.com:

I got a freak chart for you that’s stunning, but bear with me here because it requires some background and patience. Most of us are focused on the daily or weekly action and it’s easy to lose sight of big cyclical trends. We don’t think of them as they take a long time to unfold and the daily noise is so much more dominant.

With the advent of permanent central bank intervention sparked by the financial crisis all of us have come accustomed to markets always going up with the occasional correction in between and the timing of corrections have seemingly become shorter and shorter. Big fat bottoms that happen after just a few days of temporary terror. We haven’t seen a true bear market since the financial crisis and even that one lasted barely more than a year as central banks stepped in. The last longer term bear market came after the technology bust in 2000 when markets bottomed in 2002 and 2003 and then proceeded onto the next bull market.

It didn’t always used to be this way. Going back to 1900 there were multiple extended periods of stock markets going nowhere and trading in wide chop ranges:

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An Open Letter on the Next Great Crisis wrought by the Fed, by Stephanie Pomboy

Stock markets have staged a vigorous rally and the economy has expanded since the financial crisis of 2008-2009. Paradoxically, pension funds have become more underfunded. From Stephanie Pompoy of Macro Mavens at nebula.wsimg.com:

Actions have consequences. Even for the Fed.

That’s not a reference to the market’s grumpy reaction to the central bank’s continued rate hikes and quantitative tightening. No. The impact of both on financial assets were as obvious as they were inexorable. To be sure, Wall Street’s resident soothsayers had a good run spinning tales that ‘this time’ was different. A tightening Fed, we were assured, was a good thing—a ringing endorsement of the economy’s indefatigable strength. But, in the end, there was simply no way around the basic fact: Just as rate cuts and QE were designed to expand the pool of credit and incent the embrace of risk, so would rate hikes and QT necessarily beget the reverse. And so they have.

But while the impact of receding liquidity and the reduced reward for reckless speculation and risk-taking have finally begun to play out on Bloomberg screens everywhere, the real devastation has yet to be revealed. In the ensuing weeks and months the full and lugubrious legacy of the Fed’s great monetary experiment of the last decade will finally come into view. Beyond inflating and bursting a bubble in corporate debt (with leveraged loans acting as posterchild), the Fed’s decade-long financial repression has had a far larger and more sinister impact. It has silently bankrupted the US pension system.

Sound overly-dramatic??

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The Eurozone Is in a Danger Zone, by Alasdair Macleod

ECB liquidity has kept the European economy and European government bond markets afloat. What happens when the ECB tightens the spigot? From Alasdair Macleod at mises.org:

It is easy to conclude the EU, and the Eurozone in particular, is a financial and systemic time-bomb waiting to happen. Most commentary has focused on problems that are routinely patched over, such as Greece, Italy, or the impending rescue of Deutsche Bank. This is a mistake. The European Central Bank and the EU machine are adept in dealing with issues of this sort, mostly by brazening them out, while buying everything off. As Mario Draghi famously said, “whatever it takes.”

There is a precondition for this legerdemain to work. Money must continue to flow into the financial system faster than the demand for it expands, because the maintenance of asset values is the key. And the ECB has done just that, with negative deposit rates and its €2.5 trillion asset purchase program. But that program ends this month, making it the likely turning point, whereby it all starts to go wrong.

Most of the ECB’s money has been spent on government bonds for a secondary reason, and that is to ensure Eurozone governments remain in the euro system. Profligate politicians in the Mediterranean nations are soon disabused of their desires to return to their old currencies. Just imagine the interest rates the Italians would have to pay in lira on their €2.85 trillion of government debt, given a private sector GDP tax base of only €840 billion, just one third of that government debt.

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The Fed IS the Ugly Truth, by Raúl Ilargi Meijer

The back and forth and massive publicity given to what the Federal Reserve obscures a central question: should the Fed even exist? From Raúl Ilargi Meijer at theautomaticearth.com:

This Fed thing just keeps going on, and it needs to stop. There is nothing in the discussion about the Federal Reserve these days that has any value other than it provides even more proof that the Fed has killed off the most essential elements of what once made the US economy function. All markets, stocks, bonds, housing markets, all price discovery, all murdered. No heartbeat. Pining for the fjords.

And instead of addressing that, and I’m not even talking about addressing fixing what is wrong, all I see is neverending stuff about Jay Powell using, or not using, terms such as “patient” or “accommodative”. Like any of it means anything coming from him and his ilk. Other than for making ‘investors’ a quick buck. Like a quick buck could ever trump the survival of entire market systems.

People discussing whether Jay Powell is doing a good job all miss the point. Because Powell should not be doing that job in the first place. The Fed should not have the power to manipulate the US economy anywhere near as much as it does. Because that power is perverting America like nothing else, and the US economy will never recover as long as the Fed holds that power. Is that clear enough? Do we understand that at least?

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The Federal Reserve Is A Suicide Bomber With A Deeper Agenda, by Brandon Smith

How can the Federal Reserve “save” the economy if it’s hell-bent on destroying the economy? From Brandon Smith at alt-market.com:

Central bankers are sociopathic in nature and sociopathic people tend to behave like robots. When one understands the motivations of central bankers, or at the very least what their goals are, their actions become rather predictable. The question is, what truly motivates these people?

I believe according to the evidence that the central banks are motivated by ideological zealotry with the core purpose of total global centralization of economic and political power into the hands of a select group of elitists. This agenda is really just a modern “reboot” of feudalism or totalitarianism. They sometimes refer to the plan in public as the “new world order,” or the “global economic reset.” I often refer to the encompassing ideology as “globalism” for the sake of expediency.

To attain this goal, central bankers must influence mass psychology using traumatic events. Fear opens doors to centralization of power. This is simply a fact of social behavior and history. The more afraid a population is, the more willing they will be to give up freedoms in exchange for safety and security. Therefore, the most effective weapon at the disposal of the globalists and their central banking counterparts is engineered economic crisis — a weapon that can, if allowed, destroy entire civilizations almost as fast as a nuclear war, while still keeping most of the expensive infrastructure intact.

Beyond that, economic crisis is also a weapon that can influence a population to embrace even greater enslavement while viewing their slave masters as saviors rather than villains.

Despite what many people assume, central bankers are not driven by a desire for profit. They print their own capital, they hardly need to make a profit. Central bankers are also not driven by a desire to keep the current system afloat. They have demonstrated time and time again their habit of deliberately sabotaging the system through the use of inflationary bubbles followed by fiscal tightening into weak economic conditions. The U.S. economy today is just as expendable as any other economy the banks have destroyed in the past. It is not special.

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The Donald’s 60% Gone – But No Cigar for CNN, by David Stockman

The Trump rally has been 60 percent reversed. Will the Russiagate farce ever end? From David Stockman at antiwar.com:

At Friday’s close fully 60% of the Trump Bump in the S&P 500 has been liquidated. And we have some nice round numbers to show for it.

The broad market index stood at 2140 just hours before the shocking 2016 election results were reported, and rose by 800 points from there to 2940 on September 21, 2018. That was a gain of 37% on top of the already massively inflated stock market than extant.

It was also Peak Trump. During the last 40 trading days 475 S&P points have gone missing in a relative heartbeat, and there’s miles to go before it’s over.

And that’s also why the Donald’s sojourn in the Oval Office is heading for its sell-by date as well. It has been only the Trump Bump and the misleadingly happy jobs data attendant to the waning days of a failed, octogenarian business cycle that has kept him afloat with his enthusiastic base in the hinterlands and the grudging GOP establishment in the Imperial City.

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Hidden Amongst the Furore: Synchronised Warnings From the BIS and the IMF, by Steven Guinness

The world is not paying enough attention to central bankers and it should be, according to Steven Guinness, who sounds a lot like Brandon Smith. From Guinness at stevenguinness2.wordpress.com:

It has become a disconcerting trend that as geopolitical events intensify and keep a majority of people engaged in the latest outbreak of political theatre, the words of central bankers fall on increasingly deaf ears.

At a seminar of the European Stability Mechanism this month, Bank for International Settlements General Manager Agustin Carstens delivered a speech called, ‘Shelter from the Storm‘.

The speech can be summarised as follows:

  • The IMF may not have enough resources to manage a future financial crisis
  • The post 2008 ‘recovery’ was nurtured by central banks
  • Central bank intervention has coincided with the increased accumulation of debt in both major and emerging economies
  • The challenge for central banks is to meet their inflation target
  • Governments must quickly implement ‘growth-friendly structural reforms’ as monetary policy is ‘normalised’

The latter bullet point refers to Basel III, the regulatory reforms that were devised through the BIS in response to the financial crisis triggered in 2008. The BIS have been pushing the line in recent communications that without these reforms being fully implemented by national administrations, the financial system will remain vulnerable to a renewed downturn. Full adoption of the reforms is not due to occur until 2022.

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