Who knew that conjuring fiat debt from thin air was a heroic act? From Michael Maharrey at schiffgold.com:
According to Owen Ullmann in an op-ed published by USA Today, there are some unsung “heroes” in the battle against the coronavirus pandemic – the brave and courageous bankers at the Federal Reserve.
I think Ulmann misspelled “villains.”
Ulmann writes that the Fed “has taken extraordinary steps to prevent the global economy from crashing into irreversible catastrophe as business around the world grinds to a virtual halt.”
This is like praising the arsonist for trying to put out the fire he set by throwing more gasoline on it.
The Fed certainly has taken extraordinary steps. Just a few days ago, it announced QE infinity. It committed to buy an “unlimited” amount of US Treasury bonds and mortgage-backed securities. It also announced a new program to buy corporate bonds for the first time ever.
In Ulmann’s Keynesian wonderland this is fantastic news.
The Fed can create unlimited amounts of dollars — that’s right, trillions, if required — to ensure that banks have enough funds to make emergency loans to businesses large and small.”
Yes indeed. Printing new money out of thin air so companies, governments and individuals already drowning in debt can borrow more money is the prescription for saving the economy! Free money for everybody!
It doesn’t take much to knock a tottering building over. From Michael Krieger at libertyblitzkrieg.com:
And so castles made of sand fall in the sea, eventually.
– Jimi Hendrix
There’s a widespread belief out there that the U.S. and the global economy in general is on much sounder footing ever since the financial crisis of a decade ago. Unfortunately, this false assumption has resulted in widespread complacency and elevated levels of systemic risk as we enter the early part of the 2020s.
All it takes is a cursory amount of research to discover nothing was “reset” or fixed by the government and central bank response to that crisis. Rather, the entire response was just a gigantic coverup of the crimes and irresponsible behavior that occurred, coupled with a bailout designed to enrich and empower those who needed and deserved it least.
Everything was papered over in order to resuscitate a failed paradigm without reforming anything. Since it was all about pretending nothing was structurally wrong with the system, the response was to build more castles of sand on top of old ones that had unceremoniously crumbled. The whole event was a huge warning sign and opportunity to change course, but it was completely ignored. Enter novel coronavirus.
Nothing’s going to stop the debt tsunami from crashing into shore. From Tyler Durden at zerohedge.com:
Two weeks ago, when looking at the latest CBO forecast which predicted that the cumulative US deficits would increase by $13.1 trillion over the next decade, we highlighted perhaps the most troubling chart in all of finance right now, namely the CBO’s long-term forecast for US debt, which can be described in one word: exponential.
Commenting on this chart rather laconically, we said that “in other words, the MMT that will be launched after the next financial crisis, and which will see the Fed directly monetize US debt issuance from the Treasury until the dollar finally loses its reserve currency status, is now factored in.”
Neither the chart, nor the comment was lost on SocGen’s resident bear Albert Edwards, who after living through a harrowing earthquake during his vacation in Jamaica, chimed in on the chart above, writing in his latest Global Strategy Weekly that “this is a ticking timebomb and the chart… is screaming out for attention. The sources of this debt explosion are well known and documented with, for example, the unfunded liability of an aging population boosting Medicare expenses and the off-budget social security deficit spiralling upwards over the forecast period.”
Slowly but surely, the central bankers and their cronies and minions are edging towards a digital global currency. From Steven Guinness at stevenguinness2.wordpress.com:
Amidst the annual spectacle of the World Economic Forum in Davos, the Bank for International Settlements this week announced that multiple central banks have created a group that will ‘assess potential cases for central bank digital currencies‘.
Here is the press release from the BIS in full:
The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Sveriges Riksbank and the Swiss National Bank, together with the Bank for International Settlements (BIS), have created a group to share experiences as they assess the potential cases for central bank digital currency (CBDC) in their home jurisdictions.
The group will assess CBDC use cases; economic, functional and technical design choices, including cross-border interoperability; and the sharing of knowledge on emerging technologies. It will closely coordinate with the relevant institutions and forums – in particular, the Financial Stability Board and the Committee on Payments and Market Infrastructures (CPMI).
The group will be co-chaired by Benoît Cœuré, Head of the BIS Innovation Hub, and Jon Cunliffe, Deputy Governor of the Bank of England and Chair of the CPMI. It will include senior representatives of the participating institutions.
The bull markets in bonds and stocks will not go quietly into that good night. From Sven Henrich at northmantrader.com:
One day this bull market will end and the age of the central banking enabled debt bubble will be exposed for the hubris that it is and all the sins of “potential side effects” that central bankers warn about but never do anything about will come back to haunt all of us. It’ll be the age of the great unwind. Nobody will tell us in the moment when it peaks and I suspect it will not start with a bang, rather a whimper, but only end with a bang.
And this great unwind will not last a month or a year, but many years as all the excesses will have to work themselves through the system and all the systematic buy programs will turn into systematic sell programs that will be just as relentless on the way down as they were on the way up.
They very notion of the permanent can kicking we are witnessing now will reveal itself to have been a fantasy. People forget that 2019 and into 2020 came about because of systemic failure of epic proportions. The single one time central bankers tried to tighten blew up in their faces. And the Fed’s forced re-expansion of their balance sheet has now bestowed this blow-off top that has pushed asset prices the farthest distance above the underlying size of the economy that we’ve ever seen. A perversion of the financial system that has created wealth for the few not seen since the 1920s.
The rich get richer and everybody else is responsible for the ever-mounting debt. From Sven Henrich at northmantrader.com:
There’s an old adage: There are two guarantees in life: Death and taxes. Let’s modernize this a bit shall we? While it’s true even the rich still die these days (for now), but taxes are already a debatable question. After all taxes for corporations and the rich have come down dramatically in recent years and gaming of tax codes is the professional obsession of myriads of full time lobbyists and accountants who have found and lobbied every which way for the ultra wealthy to minimize tax exposure in tax havens, offshore accounts and clever deduction schemes.
No, the modernized version of the death and taxes adage has morphed into something more sinister:
There are two guarantees in life: The rich get obscenely rich, everybody else gets to carry ever more obscene public debt levels.
This week we again get to see an annual ritual: The rich and powerful meet in Davos (119 billionaires are attending) and they get to ravel in having gotten even richer versus the year before and obscenely so as easy money by central bankers have once again levitated the prices of the very assets disproportionally owned by the wealthy: Stocks.