Tag Archives: central bank policies

Banks Are Evil, by Adam Taggert

Adam Taggert makes a strong case that modern banking and bankers are indeed evil. From Taggert at peakprosperity.com:

It’s time to get painfully honest about this

I don’t talk to my classmates from business school anymore, many of whom went to work in the financial industry.

Why?

Because, through the lens we use here at PeakProsperity.com to look at the world, I’ve increasingly come to see the financial industry — with the big banks at its core — as the root cause of injustice in today’s society. I can no longer separate any personal affections I might have for my fellow alumni from the evil that their companies perpetrate.

And I’m choosing that word deliberately: Evil.

In my opinion, it’s long past time we be brutally honest about the banks. Their influence and reach has metastasized to the point where we now live under a captive system. From our retirement accounts, to our homes, to the laws we live under — the banks control it all. And they run the system for their benefit, not ours.

While the banks spent much of the past century consolidating their power, the repeal of the Glass-Steagall Act in 1999 emboldened them to accelerate their efforts. Since then, the key trends in the financial industry have been to dismantle regulation and defang those responsible for enforcing it, to manipulate market prices (an ambition tremendously helped by the rise of high-frequency trading algorithms), and to push downside risk onto “muppets” and taxpayers.

Oh, and of course, this hasn’t hurt either: having the ability to print up trillions in thin-air money and then get first-at-the-trough access to it. Don’t forget, the Federal Reserve is made up of and run by — drum roll, please — the banks.

How much ‘thin air’ money are we talking about? The Fed and the rest of the world’s central banking cartel has printed over $12 Trillion since the Great Recession. Between the ECB and the DOJ, nearly $200 Billion of additional liquidity has been — and continues to be — injected into world markets each month(!) since the beginning of 2016:

To continue reading: Banks Are Evil

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Now That Everyone’s Been Pushed into Risky Assets… by Charles Hugh Smith

Risk can be disguised or hidden, but never eliminated. From Charles Hugh Smith at oftwominds.com:

A funny thing happened on the way to a low-risk environment: loans in default (non-performing loans) didn’t suddenly become performing loans.

If we had to summarize what’s happened in eight years of “recovery,” we could start with this: everyone’s been pushed into risky assets while being told risk has been transformed from something to avoid (by buying risk-off assets) to something you chase to score essentially guaranteed gains (by buying risk-on assets).

The successful strategy for eight years has been buy the dips because risk-on assets always recover and hit new highs: housing, stocks, bonds, bat guano futures–you name it.

Those who bought the dip in hot housing markets have seen spectacular gains since 2011. Those who bought every dip in the stock market have been richly rewarded, and those buying bonds expecting declining yields have until recently logged reliable gains.

The only asset class that’s lower than it was in 2011 is the classic risk-off asset: precious metals.

Investors who avoided risk-on assets–stocks, bonds, REITs (real estate investment trusts) and housing in hot markets–have been clubbed, while those who piled on the leverage to buy every dip have been richly rewarded.

Those who bet volatility–once a fairly reliable reflection of risk–would finally rise have been wiped out. By historical measures, risk has fallen to levels not seen since… well, just before the last Global Financial Meltdown.

Globally, financially assets have soared from a 2008 low around $222 trillion to over $300 trillion. Even in today’s financially jaded world, $80 trillion is an impressive number: over 4 times America’s GDP of $18 trillion annually, and roughly equal to global GDP.

To continue reading: Now That Everyone’s Been Pushed into Risky Assets…

Debunking The Big Lie, by Keith Weiner

Can there be a “good” central bank policy, if the conceptual and moral basis for central banking is fundamentally wrong? From Keith Weiner at acting-man.com:

Debunking a Lie

Don Watkins of the Ayn Rand Institute wrote an article, The Myth of Banking Deregulation, to debunk a lie. The lie is that bank regulation is good. That it helped stabilize the economy in the 1930’s. And that deregulation at the end of the century destabilized the economy and caused the crisis of 2008.

As of early 2015, Dodd-Frank had imposed altogether 27,670 new restrictions, more than all other laws passed under Obama combined (that is really saying something, considering the regulatory frenzy let loose by his administration). Note: the law may have “only” 2,300 pages, but more than 10 different regulatory agencies have been producing administrative laws for six years in a row to put it into practice – and they are not finished yet. Don’t you feel safer already?

If deregulation is the problem, then re-regulation is the solution. So, in the wake of the crisis, Congress enacted a 2,300-page monstrosity of regulation known as Dodd-Frank.

Watkins does a good job describing government regulation of finance, in particular addressing the savings and loan industry. He gives an example where people commonly assume that Congress reduced regulation, the Graham-Leach-Bliley Act of 1999.

The headline is that this law reduced regulation, and allowed banks to be in the securities business. However, the truth is that it mixed in a dollop of increased regulation.

The economic cost of Dodd-Frank (one guess as to who is going to end up paying for this…). Note: this is not cumulative – the cumulative tally so far is a cost of $36 billion (about $310 per household!); it has so far taken 74.8 million paperwork man hours to create this monster. You will be happy to learn that the law not only makes us perfectly safe, but introduces racial and gender quotas as well. The number of final rules exceeds those generated by Sarbanes-Oxley by a factor of 30 – so far.

To continue reading: Debunking The Big Lie

Should Trump “Unleash” Wall Street? by Bill Bonner

Wall Street is a perfect case study in how an industry deteriorates in a mixed economy. From Bill Bonner at bonnerandpartners.com:
LOVINGSTON, VIRGINIA – Stocks show little movement. Investors are waiting for something to happen.

And wondering…

Corporate earnings have been going down for nearly three years. They are now about 10% below the level set in the late summer of 2014.

Unleashing Wall Street

Why should stocks be so expensive?

Oh, yes… because the Trump Team is going to light a fire under Wall Street.

But they must be wondering about that, too.

Raising up stock prices – as we’ve seen over the last eight years – is not the same as restoring economic growth and family incomes.

And as each day passes, the list of odds against either seems to be getting longer and longer. As the petty fights, silly squabbles, and tweet storms increase, the less ammunition the administration has available to fight a real battle with Congress or the Deep State.

Still…

“Goldman Stock Hits Record on Bets Trump Will Unleash Wall Street,” reads a Bloomberg headline.

Goldman Sachs is a pillar of the Establishment, with its man, Steve Mnuchin, heading the Department of the Treasury. So a win for Goldman is not necessarily a win for us.

“Unleashing” suggests a win-win deal, as in allowing the financial industry to get on with its business. But there are different kinds of “unleashings.”

Some things – like Dobermans – are kept on a leash for a good reason. Unleashing the mob… or a war… might not be a good idea, either.

Untying Wall Street from bureaucratic rules is at least heading in the right direction. But it will only benefit the Main Street economy if Wall Street is doing business honestly, facilitating win-win deals by matching real capital up with worthy projects.

Deep State Industry

That, of course, is what it is NOT doing. It is a Deep State industry aided and abetted by the Fed’s fake money.

To continue reading: Should Trump “Unleash” Wall Street?

 

Markets Smell a Rat as Central Banks Dither, by Wolf Richter

There are a lot of good reasons not to allocate much money to bonds as an asset class right now. For one, as Wolf Richter points out, central banks are probably not going to be as strong a bid for them as they have been. From Richter at wolfstreet.com:

Markets are suspecting that central banks are in the process of exiting this fabulous multi-year party quietly, and that on the way out they won’t refill the booze and dope, leaving the besotted revelers to their own devices. That thought isn’t sitting very well with these revelers.

In markets where central banks have pushed government bond prices into the stratosphere and yields, even 10-year yields, below zero, there has been a sea change.

The 10-year yield of the Japanese Government Bond (JGB) jumped 2.5 basis points to 0.115% on Thursday, the highest since January 2016, after an auction for ¥2.4 trillion of 10-year JGBs flopped, as investors were losing interest in this paper at this yield, and as the Bank of Japan, rather than gobbling up every JGB in sight to help the auction along, sat on its hands and let it happen.

And on Friday morning, the 10-year yield jumped another 3 basis points to 0.145%!

In September last year, the BOJ started the now apparently troubled experiment of trying to control not just short-term interest rates but also the entire yield curve. It targeted a 10-year yield of about 0% (it was negative at the time). Analysts believed that this would mean a range between -0.1% and +0.1%, and that if the yield rose to +0.1%, the BOJ would throw its weight around and buy.

But the fact that the BOJ allowed the yield to go above that imaginary line signaled to the markets that it no longer has the intention of capping the yield at +0.1%, that in fact the BOJ has stepped back.

To continue reading; Markets Smell a Rat as Central Banks Dither

 

Federal Reserve Initiates End Game As Trump Heads To White House, by Brandon Smith

The Fed and the global bankers are withdrawing liquidity from the financial system just as Donald Trump ascends to the presidency. He and his “movement” will get the blame. From Brandon Smith at alt-market.com:

For years, alternative economic analysts have been warning that the “miraculous” rise in U.S. stock markets has been the symptom of wider central bank intervention and that this will result in dire future consequences. We have heard endless lies and rationalizations as to why this could not be so, and why the U.S. “recovery” is real. At the beginning of 2016, the former head of the Dallas branch of the Federal Reserve crushed all the skeptics and vindicated our position in an interview with CNBC where he stated:

“What the Fed did — and I was part of that group — is we front-loaded a tremendous market rally, starting in 2009.It’s sort of what I call the “reverse Whimpy factor” — give me two hamburgers today for one tomorrow. I’m not surprised that almost every index you can look at … was down significantly.” [Referring to the results in the stock market after the Fed raised rates in December.]

Fisher continued his warning (though his predictions in my view are wildly conservative or deliberately muted):

“…I was warning my colleagues, “Don’t go wobbly if we have a 10-20 percent correction at some point. … Everybody you talk to … has been warning that these markets are heavily priced.”

Here is the issue — stocks are a mostly meaningless factor when considering the economic health of a nation. Equities are a casino based on nothing but the luck of the draw when it comes to news headlines, central banker statements and algorithmic computers. Today, as Fischer openly admitted, stocks are a purely manipulated indicator representing nothing but the amount of stimulus central banks are willing to pour into them through various channels.

Even with the incredible monetary support pooled together by international financiers, returns on equities investments continue to remain mostly flat. It would seem that the propping up of indexes like the Dow has been only for the sake of keeping up appearances. For many people, revenue is barely being generated.

To continue reading: Federal Reserve Initiates End Game As Trump Heads To White House

Bill Gross Reveals The “Global Establishment’s Overall Plan” In Eight Simple Steps

Bond maven Bill Gross outlines how governments and central banks intend to extricate themselves from the debt crisis, and it isn’t pretty. From Gross at zerohedge.com:

Continuing his anti-establishment bent, in his latest letter “Red is the new black”, Bill Gross first exposes the “current global establishment’s (including Trump’s) overall plan” consisting of 8 simple steps to “solve the global debt crisis” (yes, the sarcasm is oozing), at which point he goes on to say that “it pays to not fight the tiger until it becomes obvious that another plan will by necessity replace it” and adds “that time is not now, but growing populism and the increasing ineffectiveness of monetary policy suggest an eventual transition.”

His monthly words of caution: “Red” (in some cases) may be the new “Green” when applied to future investment returns. Be careful – stay out of jail.”

The full Bill Gross’ latest monthly letter courtesy of Janus

Red is the New Green

I’ve got nothing against national anthems, and I wouldn’t kneel even if I was Colin Kaepernick. I just think as a country, “America the Beautiful” might have been a better choice for ours and that in some cases, some words of “The Star Spangled Banner” don’t ring true. A few countries’ anthems are, in fact, quite pleasing to my ear. “O Canada” has a beautiful melody and words to match, although you’d probably have to be watching hockey to hear it. Our “Star Spangled Banner”? For me – not so much. I can sort of see the “rockets’ red glare”, but it’s hard to sing and quite long – especially if you’re waiting for the kickoff. But like I said, I have nothing against it, except maybe the last stanza. Not the “Home of the Brave” part. Having spent two years in Vietnam, ferrying Navy SEALs up the Mekong Delta, I witnessed a lot of bravery. Not me. I was duckin’ quicker than Bill Murray’s gopher in Caddyshack. The SEALs though. Yeah – tough guys – very brave.

To continue reading: Bill Gross Reveals The “Global Establishment’s Overall Plan” In Eight Simple Steps