Grandma Yellen is supposed to announce the end of QE this afternoon. We all know that sharks have to keep swimming, or they die. We also know that insolvent Too Big To Trust Wall Street mega-banks need QE, or they die. The entire false recovery since 2009 has been built upon a $4.5 trillion mountain of debt sitting on the Federal Reserve balance sheet. They are leveraged 75 to 1. Lehman and Bear Stearns were leveraged 30 to 1 when they failed and brought down the financial house of cards.
Our entire economic system is dependent upon an ever increasing level of debt. How long before the Wall Street sharks throw a hissy fit and threaten to bring down the financial system again unless they get some QE4?
And how many minutes before Grandma Yellen obeys her bosses and complies?
According To Russell Napier Which World Has No Volume, No Volatility And Rising Prices? The USSR
From Russell Napier of the Electronic Research Interchange
Great Expectations, Pregnant Pandas and Last Wednesday’s Treasury Market
“I must be taken as I have been made. The success is not mine, the failure is not mine, but the two together make me.”
– Estella, Great Expectations
What sort of financial world is a world with no volumes, no volatility and steadily rising prices? The only historical example is perhaps the Soviet Union. When the marginal buyer of any product is the state, or its handmaiden the central bank, then simply nothing happens until the state comes out to play.
Across the world the owners of private sector assets sleep under palm trees in Bangkok, relax over mahjong in Beijing, play sudoku in Berlin, read The Sun newspaper in London or take turns to appear on CNBC in New York – all awaiting the arrival of the state. No two private parties will enter a bargain in the absence of the state, for what if the state does not like their price? Then the price will be moved by state fiat and one, or perhaps both, of those parties will look very foolish indeed.
TAKE NOTHING ON ITS LOOKS
As Magwitch, the escaped convict, remarks in Great Expectations, “What larks, Pip!” when a brief flurry of activity stirs the afternoon once the state shows its hand. Then it’s back to talking nostalgically about supply and demand, the way our ancestors spoke affectionately about gas lighting, trams and the taste of saturated fats. Forecasting is difficult, especially about the future, but it is a simple forecast that this state-induced torpor will one day pass. It did just that between 0900 and 0930 EST on Wednesday October 15th.
On the 15th of October 2014, as this analyst celebrated his 50th birthday, volume in the US Treasury market surged, suddenly and without warning, to a record high. Old timers smiled knowingly, as Magwitch did from behind the headstones, and younger members put aside their Angry Birds and wondered what was wrong.
TAKE EVERYTHING ON EVIDENCE
There it was — a real market come and gone in half an hour, like a pregnant panda at Edinburgh zoo. What did it mean and what should you do? You should pay attention to what happens to the direction of prices when volumes surge and markets work. When the veil is lifted, pay attention to what you see beneath. Last Wednesday, in the space of half an hour of active trading, the Treasury market had one of its most rapid rises ever recorded and equities fell sharply.
There is a very simple lesson that when the markets finally break through the manipulation they move to price in deflation and not inflation. This is key because it means financial repression has failed. Such repression requires the artificial depression of interest rates but, crucially, it must be paired with boosting inflation above such rates. On October 15th 2014, if only for a few short minutes, market forces broke out and the failure of central bankers was briefly evident.
THERE’S NO BETTER RULE
In North Korea today, Kim Jong Un executed ten Workers’ Party officials for watching South Korean soap operas. Meanwhile in the developed world the excitements of October 15th 2014 have passed and financial fiduciaries continue to get paid to both watch and then appear on daytime television. The time will come when you will have to get back to determining prices.
A price is not a diktat but, like Estella in Great Expectations, the product of both a success and a failure. Last Wednesday, just briefly, diktat disappeared and failure outweighed success in the determination of price. Remember, as Yogi Berra sagely advised, “You can learn a lot just from watching.” Don’t forget what you saw between 0900 and 0930 EST On Wednesday October 15th.
“Take nothing on its looks; take everything on evidence. There’s no better rule.”
– Mr Jaggers, Great Expectations
In a “soft” fascist polity (such as Great Britain or the U.S. of A.) speaking truth (reality) to power is a “revolutionary” act. Stand with Rand and BC-LR to all
I recently read a book by Tim Howard [Fannie Mae CFO] called ‘Mortgage Wars’
I suggest it’s perusal.
In effect the FED, which is a charter, saw ‘mountains of surplus’ under Greenspan, and worked to shift that surplus away from another charter, Fannie Mae, to Wall Street.
The results of this pogrom, which began around 1991, or so, are what we see today. The FED owns this.
Posted by Jesse
FOMC On QE III: Mission Accomplished
It is mission accomplished for the Fed’s third stimulus program, if one keeps in mind that Quantitative Easing is a subsidy program for the one percent and Wall Street, not the general public and Main Street.
It is the fallacy of trickle down economics at its most blind and pernicious.
At the end of the day, the Fed’s objective has been to subsidize and preserve their owners in the Banking System, largely intact, down to their thoroughly rotten core. The Fed is not the government. The Fed works with its friends in the government. The Fed is a creature of the Banks.
And the public is being forced to pick up the tab through financial repression and a stealth austerity through market manipulation and price rigging.
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For fuck sake, Admin, that pic of Troll Yellen is more frightening than anything you have ever posted. Couldn’t you find something smaller.
No nipples and no Yellen, FFS!