Notice how there seems to be a collection of negative global data points kind of clustering? I have.
How does the Fed get dollars to European banks when said banks run out of dollars in which to do dollar denominated business? Print some new ones, then have the euro banks swap euros for the new dollars. A little of this. A little of that. And presto, mini euro-bailout. (Or maybe not so mini depending on the circumstances.)
The reason we had the Crash in 2008 was because the Fed kept rates too low for too long. In response to the tech implosion and then the 9-11 attacks Allan Greenspan and the FOMC panicked and ended up inflating a worldwide housing boom which morphed into the disaster (to put it mildly) which is the Great Recession. There’s more to it than that but that’s basically what happened.
Consider now that Ben Bernanke (and Janet Yellen) have kept interest rates much lower for even longer than Greenspan did.
Yeah, the reckoning has been coming for a very long while. The Fed is out of control and lost. The stock market as it is is not sustainable. Many other markets are in the same boat.
Any market which reflects the wants and desires of the rich (aka those closest to newly “printed” money) is pretty much in a bubble. Art, wine, etc. Even residential real estate in places like London and New York are bubblicious.
It isn’t going to keep going. When this bubble bursts there will be serious dislocation economically and politically.
Below Marc Faber opines on Carl Icahn’s comments.
Congressman Hensarling deserves some praise. He has spearheaded the effort to kill the Export-Import Bank (let’s hope that thing gets put in the grave) in the face of massive lobbyist firepower and now he’s putting the Fed squarely in his sights.
Hensarling’s area of interest with regard to the Fed is the 2012 leak of Fed Minutes to prominent insiders 19 hours before the the public got to see the information. This is important, market moving information which if gotten early could have been very “helpful” to traders. (We’d love to know if any of the banks involved moved on the early information.) This is what Bloomberg had to say about the incident in 2013.
The Fed initially said recipients were primarily congressional staffers and trade organizations. A list of 154 recipients released later by the Fed show that banks also were among them. The list included Barclays Plc, BB&T Corp., BNP Paribas SA, Capital One Financial Corp., Citigroup Inc. (C), Fifth Third Bancorp, Goldman Sachs Group Inc., HSBC Holdings Plc, JPMorgan Chase & Co., Nomura Holdings Inc., PNC Financial Services Group Inc., Regions Financial Corp., U.S. Bancorp, UBS AG and Wells Fargo & Co.
Other financial firms included IntercontinentalExchange Inc., the Atlanta-based owner of the world’s largest credit- default swap clearinghouse that has agreed to buy NYSE Euronext for $8.2 billion; buyout firm Carlyle Group LP (CG), and financial- market data provider Standard & Poor’s.
You can read the entire article HERE.
This supposedly was an accident. Boy, what an accident. I sure think the American people deserve to know the details of this accident. So does Congressman Hensarling. But the Federal Reserve is fighting to keep things secret. Why?
In 1937 after years of a meager “recovery” the economy slumped again as artificial economic props were taken away. The Great Depression was born anew. 4 years later we were in a global war.
Let’s see, depression, then mediocre growth underpinned by artificial economic stimulants, sounds pretty familiar.
This is what happens when interest rates are set by a politburo instead of by the market.
Is the Federal Reserve above the law? It sure seems to think it is. In the name of “independence” the Fed thinks it can do whatever it wants including ignoring a congressional subpoena. (Really this is probably one of the least of its “crimes.”)
“Independent” does not mean “sovereign.” Someone should remind the Fed of this.
The key drivers for the increased inequality (as we have said many times before) are the financialization of the economy and the emergence of a truly crony capitalist system. The two are of course entwined. The cronies enjoy bailouts and bonuses from banks which get bailed out. The unconnected get to do the bailing. (In various ways.) That’s basically the gist.
Ole’ Helicopter Ben put this long emerging trend into overdrive. But don’t blame him for inflating the assets of the already wealthy while the rest of the country was left behind. And don’t blame him for waging a war on savers. (Basically the prudent middle class.) Nope, he’s not to blame at all for the gulf in the economy. That just happened. Ben explains that over the long term monetary policy is neutral.
Man, if only.
Capital controls are already a reality in some places on the western periphery. There is talk among some economists about abolishing cash. How long until the Federal Reserve notes in your account are there permanently or semi-permanently? You already can’t take out more that $10,000 without your bank alerting the Feds.
The question I have is, is it your money or not? (I know the answer, but I still ask the question.)
Absurdity, Bizzaro World, whatever. The financial realm has become a distorted fantasy. What is up is down. What made sense now does not. Market mechanism? Don’t harsh my buzz dude. Here, have a few mushrooms more.
It’s a simple concept but one which is lost on many modern economists and lay people alike.
In the event of an economic downturn get government out of the way. Let markets clear. Then like a forest after a forest fire the economy will come back with real growth.
Of course no one likes this idea—the one that actually works—because when things go bad everyone wants leaders “to do something, anything!” This action from planners and pols then in turn extends recessions/depressions as was the case during the Great Depression and the most recent depression.
But this was not the case during the acute, but short, 1920-1921 depression. Lack of government action allowed the system to correct and thereby lessened the long term pain.
We are 6 years out from the Crash and everything still feels weird. The economy hasn’t come back. It’s a strange new beast. Alive and not alive. A zombie. Feasting on the last scraps of the real economy.
We all know it’s coming. We don’t know how it’s coming. But it’s like we are walking through the economic forest at night just waiting for a puma to take our head off.
Call it the new abnormal.
Since 2008 the world has been turned upside down. In our collective panic we have disrupted whatever used to pass for economic homeostasis. Now the globe is moving (moved) toward a negative interest rate environment for government bonds.
Please, take my money. I’ll pay you to take my money! Why am I paying a government to hold my money? Well, because the economy is so healthy of course.