Originally posted at NotQuant.com,
As most Fed watchers know, last week was interesting because Janet Yellen, speaking at IMF came out and said something quite surprising. In a nutshell, she said “It’s not the Fed’s job to pop bubbles”. While many market participants immediately took this to mean, “To the moon, Alice!” and started buying equities hand over fist, there’s another possible explanation for Mrs. Yellen’s proclamation of unwillingness: The Fed could be preparing to do exactly what it said it wouldn’t.
Here’s a quick re-cap of events: In the recently released Annual Report of the BIS: Bank for International Settlements (commonly thought of as the “central bank’s central bank”) the BIS made a rather ominous recommendation to it’s member banks: Pop this bubble now. Their specific language wasn’t quite so direct, but the message was just as clear.
The risk of normalising too late and too gradually should not be underestimated… The trade-off is now between the risk of bringing forward the downward leg of the cycle and that of suffering a bigger bust later on .
Few are ready to curb financial booms that make everyone feel illusively richer. Or to hold back on quick fixes for output slowdowns, even if such measures threaten to add fuel to unsustainable financial booms,” …
“The road ahead may be a long one. All the more reason, then, to start the journey sooner rather than later.”
As we noted last week, there are a couple of fascinating things to note about this recommendation. First, for anyone who thinks that the concept of intentionally crashing the stock market is the stuff of conspiracy theorists, that notion is now dead and buried. It’s extremely clear from the BIS’ language, that the concept of initiating a collapse is openly discussed as a policy measure. This was a direct recommendation to bring on the crash – or as they say so colorfully, to “bring forward the downward leg of the cycle”.
But what else is fascinating is that just days after the BIS report was released, Janet Yellen seemed to counter the BIS in her presentation to the IMF:
“At this point, it should be clear that I think efforts to build resilience in the financial system are critical to minimizing the chance of financial instability and the potential damage from it. This focus on resilience differs from much of the public discussion, which often concerns whether some particular asset class is experiencing a ‘bubble’ and whether policymakers should attempt to pop the bubble. Because a resilient financial system can withstand unexpected developments, identification of bubbles is less critical.”
What Yellen seemed to be saying — quite possibly in direct response to the BIS’s recommendations — is that the Fed isn’t in the business of popping bubbles, nor does it see a reason to intervene in their development.
So to summarize: The BIS publicly recommended popping the bubble now… and Yellen said no.
So what’s going on?
We could take all of this at face value if we chose: The BIS playing hawk, and the Fed playing dove. And that might well be the case — as to some extent Yellen is still something of an unknown entity.
But there is one more twist to the puzzle: Yellen has openly stated that she would not be offering clear guidance to the market as her predecessor had advocated. The age of Fed-glastnost is apparently coming to an end.
So indulge us for a moment as we present another possibility:
Yellen is going to orchestrate a controlled collapse. Or, at least one which we hope is controlled.
There are political considerations to be made, however: The Fed, which has not only come under intense fire for overt market manipulation, but which is also deeply concerned with market perception, simply cannot afford to be perceived as an instrument of the market’s collapse. To be seen as the instigator of a crash could do irreparable harm to the institution.
So just maybe the Fed fully intends on heeding the advice of the BIS, and is strategically positioning itself as a stalwart dove to shield itself from the public fallout of it’s orchestrated financial calamity. A particularly sound play from a political perspective in the event that things don’t go as smoothly as planned.
One thing is certain at this point: An intentionally orchestrated crash is the direct recommendation of the BIS, per it’s annual report. That this action exists as a potential policy measure is now confirmed.
The remaining question is: Would the Federal Reserve pursue such a policy measure openly, or behind the same curtains from which most of their historic policies were enacted.
As we re-think Mrs. Yellen’s speech to the IMF, we are less certain that the Fed is as unwilling to intervene as Mrs Yellen would have us believe. Bringing forward the next leg of the cycle, may well be on the Fed’s agenda.
Kinda feels like it has already began. Perfect timing most Americans have become so self absorbed and stupidified nobody has noticed. They are smart idiots. (Socialist and commies). Lol
Controlled collapse, what a hoot!
Here are a few quick things I think about when I think about Stocks tanking.
1. Overnight thousands of small/mid-sized, leveraged, businesses are going to find themselves outside their covenants not because they aren’t paying, but because their “assets” “devalued.”
2. Overnight thousands of cities/counties/states are going to find their pension plans decimated, and their budgets blown to hell.
3. Overnight millions of ‘murkins “saving” for their “retirement” are going to find themselves bankrupt when their “assets” that are “working for them” go to near zero.
Then, when the wheels are coming off the bus, the Federales will swoop in to “fix” it, first they will only be taking the “rich guys” money. The citizens will believe it even as more of them lose their jobs when their struggling bosses are targeted as “rich” and the businesses close.
Next step will be to take whatever small amounts are left in the bulk of the 401(k)s and force them into Federal oversight and bonds. It will be touted out to “save” the pension system of the public employees.
Sometime during this rout, China will decide our money is only worth a portion of what they currently accept it for. At that point everything from Mott’s Apple Juice, Kraft Mac ‘n Cheese, insulin and toilet paper will become out of the reach for the majority of us.
Controlled collapse they say.
Fucking anarchy and death looks more like it.
TE, spot on, the sad part is the people will first demand the fed gov save us all by doing everything you outlined.
Fucked and doomed.
The BIS and IMF are the only banks buying our IOU’s (T-bills), vis-a-vis Belgium, except for the Fed, which is “tapering”, which is bullshit, as they’re doing repo’s anyway. Greenspan, Bernanke, and Grandma Yellen had/have no clue what they’re doing, except enriching their bankster friends and Wall Street.
The coming collapse is going to be biblical. The Fed. already has $4 trillion in “assets”, most of which is toxic crap, gambling losses they took off the hands of their butt buddies. Their actual assets that have hard value are only 4% of the crap, which means the Fed is all but insolvent, which nobody accepts, since they can keep printing money; but insolvency in assured with $4 trillion in assets the Fed will have to unload some day.
When history looks back on what happened to this country, everyone is going to wonder how the people let the bansters destroy a country by funding the ultra-rich and by funding a socialist government that bankrupted the entire country for the benefit of the FSA losers, the war on poverty, which has already pissed away $20 trillion, the trillions pissed away on wars, losing reserve currency, the petrodollar. This country is in $78 trillion public/private debt. It’s game over. Hope you’re prepared.
Grandma Yellen has Alzheimer’s, and shit’s herself every time she hears the word “inflation”, which she calls “noise” in what’s left of the diseased, ancient neurons left in her brain.
[img
[/img]
[img
[/img]
Well , I like the possibility of real change. A financial collapse at this point is the only thing that will get fat white people off their ASSES.Only by scaring the hell out of people is there any hope for real lasting change at a federal level. So as bad as it may get I think this is what the nation needs.A TOTAL ECONOMIC COLLAPSE MAY SAVE THIS NATION or we’ll kill each other in a violent civil , race ,class war.I got about 6000 rounds of ammo but I would like to have 10 times that much.
@TE,
Could it be you’ve out-doomed Admin and AWD?!?! 😮
Lmao at those pictures awd! Very clearly put why we’re so fucked
Anyone read the 299 Days series? It’s fiction, but the anonymous author claims to be a WA state govt worker who sees what he writes about in his day-to-day life. The series is about a former govt worker who becomes a prepper in time for the collapse of the economy and the widespread chaos as the system tanks. He may not be Stephen King, but he did pretty good job creating a believable scenario with realistic characters you can relate to. It’s worth reading. Yu can find it here:
Iif you’re cheap, you can torrent it, too.
AWD,
Second pic you posted had me laughing pretty good… 🙂
Thanks for the first good laugh of the day.
Triage is the medical term for assigning degrees of urgency when evaluating a patient. It used to be the societal method for assigning priorities in civic life- what things are more important than other things in order to promote the health and welfare of our particular societal arrangement. Clearly those who control the levers of power, our institutions and agencies, our economic and political structures, our religious and academic institutions have chosen to triage in a way that places more value on things that in the past were either marginal or unimportant to the health of our State and to retard or eliminate those that are crucial for the long term health and success of the body politic.
We can question motives until we are blue in the face and never adequately address the real issue- should we comply with the destruction of our own communities, families and lives in order to facilitate their further expansion and political control, or simply cease to participate.
Going Galt is a difficult decision to make for most people who are even willing to confront the issue. No one wants to give up the multitude of benefits we receive as members of an advanced civilization, such as indoor plumbing, dentistry, automobiles, readily available entertainment, etc. These perks are the carrot on a stick that has been used to get us to accept most of the current outrages that now make up public life in the 21st century and the thought of giving them up either completely or to a degree is more than most people are willing to consider and so they grit their teeth and fume as each brand new miserable outrage is foisted upon our collective consciences.
The fact is that most of those things will not disappear if we choose to walk away. Knowledge of chemistry, structural engineering, electrical production on a small scale, independent economies, food production, etc are readily available if somewhat more time consuming than by purchasing them from specialists. In many cases- such as providing your own nourishment- is much more efficient, better for you and more rewarding in terms of flavor and satisfaction when done outside of the system. My wife may not be able to set my broken arm as satisfactorily as an orthopedic surgeon, but she prepares a better meal than Thomas Keller. And I know because she has done both.
One of the first things we have sacrificed is the right to make choices. We’re told we have more than ever, but clearly that’s a lie. I have a collection of old rakes for use on the farm, none under a hundred years old, no two alike and each in perfect working order. I can travel anywhere in this country and look for a rake at any box store and my choice will be limited to a plastic, Chinese made POS that will not last a season even if handled with extreme delicacy. We have choices we can make, we can quit this sick and bloated corpse of a world and head down the path to a different and far better one if we stop fearing the things we may have to sacrifice. If we make the right kinds of decisions, if we learn to triage our own lives so that we may ultimately save them, we may find that things we thought we couldn’t live without were the very things that were killing us in the first place.
It would have been easy for me to have mocked the poor creatures in the photos on the Hell, Motherf*#@*ing Yea thread, but that wouldn’t change a thing in their lives or mine. They are lost to history, their value to our society no more than a sandbag in a trench war. Those who can impact the future know better than to abdicate their lives to sloth and gluttony, want and desires, to be nothing more than a living, breathing appetite instead of a productive and inspirational figure that lights the way into the future wherever it may lead.
The people who are reading this are, for the most part, informed enough to understand that nothing lasts forever, they are also cynical enough to think that nothing they do will alter or change the outcome in any way. Such a belief would be a critical error to make. If ever there were a time when doing the right thing, making the correct choice, deciding which attribute had more value than another were critical to the life of the patient, now would be the time.
Sometimes the only way to win is not to play the game.
I agree with you Harscrabble. Iam not where I can move to the sticks, but it is a goal.
I buy antiques that work.
I got a nice blacksmith rig. My 100 year+ old anvil and blower are awesome. My 100+ year old drill press is a work of art.
My hand crank grinder isn’t perfect, but it won’t fail me when the juice is down.
My antique ice cream maker is fun and a productive way to make ice cream on a hot day-it’s funny how many folks my age and older hate it and have memories of painfully cranking ice cream with their folks. I enjoy it. The kids at the church picnic I was invited to on the 4th loved helping crank it.
I have antique tools and brace drills that will last forever, with care.
They are much more reliable than modern stuff.
Same goes for my cast iron cookery.
My wild food hobby makes me feel a little closer to nature and more durable than my fellow sheeple.
I also derive satisfaction from making my own detergent from Arm and Hammer Wash Soda, 20 Mule Team Borax, and Fels Naptha soap for a fraction of what folks pay for Tide. (I’ve just noticed the prices went up on those ingredients after years of costing less then 5$ for all 3.)
I’m a suburbanite, but I’m slowly working on learning different old ways/tech.
I’ve also been talking to the farmers at the local farmer’s market to learn more about how to get into small scale farming and/or selling.
The wife is also starting to see, just a little bit, the value of home schooling and downsizing to the sticks. It’s been a lot ofarguments and discussions to make that headway. For someone who grew up with martial law and the collapse of communism in Eastern Europe, she has a remarkable normalcy bias.
Hubris demands that Yellen believe in her own ability to completely control the economy.
“Problems in the financial system boil down to two basic but interrelated kinds of problem: bad laws and bad people.
If the laws are bad, a good legislature can fix them.
If members of the Board of Governors are misbehaving, Congress or the President can fire them.
If we have good laws that are simply not being enforced, then someone in the executive branch needs to be replaced.
So the solution to these complicated problems is simple: elect people who care more about the general population than they care about the people who own the banks.
Yet as long as voters believe that we are being ruled by a “shadow government” whose activities cannot be observed or influenced by the general public, they will not bother to elect better people to the real government. So in other words, the Fed is not the problem. The problem is that the wealthy are using their money to get the political system to serve them, while the general public is not using its power of numbers to get the political system to serve the general public.
As Walt Kelly’s character Pogo once told us, “We have met the enemy, and he is us.”
.
http://www.opednews.com/articles/The-Fed-Is-Not-the-Problem-by-Laurie-Endicott-Th-Banking_Banks_Congress_Conspiracy-140708-709.html
+10 for Pogo reference!
I don’t think a good legislature could fix this now.
I was in an argument with my sister 2 weeks ago and I told her we could elect an army of George Washington clones to fill Congress and even they couldn’t save the nation.
I don’t believe even the most honest person would succeed at this point.
Yellen thinks the Fed is invincible because they’ve managed so well to keep the real bubble (the US bond market) inflated using their gold shorting trick. It works until one day it doesn’t.
Who give me a thumbs down ? Damn cowards .. I am ready for the Zombie Apocalypse . Got my guns , got my bullets , got little bb and five cases of Jack Daniels . I’ll fight this whole fucking world and have a good time doing it .As one of the founders said ….by failing to prepare , you are preparing to fail …I am ready , is you ?
@Stucky: “Yet as long as voters believe that we are being ruled by a “shadow government” whose activities cannot be observed or influenced by the general public, they will not bother to elect better people to the real government.”
The “deep state” IS the shadow government–those corporations and elitists who control the politicians and choose who is on the ballot with their campaign contributions. Therefore it is impossible to elect “better people” until our election process is reformed. And what are the chances of that ever happening? (Answer = Zero/None.)
hardscrabble farmer – The problem is overpopulation, there will be a triage. The question is will the triage be Darwinian or Governmental.
The only “controlled collapse” that I’m aware of is of the expert demolition of buildings and smoke stacks by teams of highly skilled men who place the explosives so the structure collapses in upon itself rather than blows apart.
None the less, no matter how well they do, it throws crap all over creation and makes a big mess.
I’ll believe a controlled economic “collapse” when I see it.
MA
@Roy,
I do not think the triage will be governmental. I can not help but notice that the government can’t manage a damn thing. I’m also not much worried about the U.S. military. The U.S. military hasn’t been in a real fight since the Civil War and has shown itself incapable of dealing with any type of 4th Generational Warfare (aka Afghanistan). As soon as it gets down to a man with a gun vs. a man with a gun, the US military will melt away because it doesn’t have the numbers to deal with 320 million well armed Americans. It is just a numbers game.
How all this plays out is anyone’s guess but as Fredrick the Great said, “The man that defends everything defends nothing.” Uncle Sam will attempt to maintain all its facets of power and in doing so will lose everything. It is in their nature.
Nickel. …I keep watching the Knob Creek Shoot video’s and it makes me doubt that we as citizens are outgunned by the military.