Guest Post by Sven Henrich
Occam’s Razor: The simplest explanation is often the best explanation. In this case: The Fed panicked in December and by caving to markets reignited the bubble in a major way and now they are losing control as they are trapped and twisted in their own narratives. No rate hikes until 2020 but markets are printing new all time highs less than 4 months following Powell’s famous balance sheet flexibility cave on January 4th, just a couple weeks after President Trump told him “to stop the 50Bs” on twitter.
And markets have done nothing but gone up since then:
2019 pic.twitter.com/KxTZl2BDd4
— Sven Henrich (@NorthmanTrader) April 29, 2019
But this appears to be only act one of the drama. Now a mere weeks after a constant drum roll by Kudlow and Trump demanding the Fed to cut rates by 50bp the Fed may actually do just that according to Nomura.
Such a move would surely end whatever may be left of the Fed’s “independence” credibility which one can critically question already following the December cave. Loss of credibility being ironically one of the key risk factors Deutsche sees as a threat to the expansion:
DEUTSCHE: “There are 5 different ways this expansion could end”
1) A sudden blowup in credit markets
2) The US consumer gets tired
3) The US trade war intensifies, in particular with Europe
4) Fed credibility is severely damaged
5) China gets a current account deficit pic.twitter.com/059hmNSU60
— Carl Quintanilla (@carlquintanilla) April 29, 2019
Whether they will cut rates at this meeting or not is speculative, but fact is global growth is slowing still and markets are pricing in a rate cut:
The Fed has already made itself the market’s play thing and hence can’t ill afford to disappoint markets this year and consequently the Fed faces a perhaps impossible choice this week:
Cut rates here by 50bp could only exacerbate the bubble and set markets onto their combustion path following a total credibility loss.
But disappointing markets this year could well set the stage for a larger selloff the Fed is so desperate to prevent at every turn, especially now that the Fed has fueled the most vertical rally in this cycle:
So now they’re trapped. Inside the bubble the Fed itself helped create. No, the market is not the bubble. The Fed is the bubble and they’ve blown up markets all around them.
And as a result:
The Fed owns the next crash.
— Sven Henrich (@NorthmanTrader) March 21, 2019
But no worries, The Fed is already tinkering on the next version of QE.
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Good one AC…I enjoyed that.
Oh, so that’s how Bernanke and Geitner did it???
Big fat bubble? Nope, greatest economy ever!
Winning! In all seriousness, Trump must play the hand he’s dealt. The enemy is the Casino, run by Satan.
2 Corinthians 4:4 – “In their case the god of this world has blinded the minds of the unbelievers, to keep them from seeing the light of the gospel of the glory of Christ, who is the image of God.”
How’s it going Stukfuk, still cock gagging?
I don’t believe anyone can make micro-predictions with any degree of accuracy and based upon past economic logic at this point when all economics at .gov level has become theater. It’s like predicting a fixed horse race.
The only macro prediction that can be made is what Mises said: It ends in a crack up boom.
However, the timeline for that is truly questionable and could be, and so far has been, far longer than anyone could imagine.
Why? Because productivity gains, at this point in history, are truly astounding. If/when a country like Zimbabwe or Venezuela debauches their currencies via printing, the devaluations that take place in purchasing power come swiftly in years or months. Those countries are poor comparables to the U.S. when it debauches the dollar. The Dollar cannot, of course, be debauched infinitely or forever, but the dollar can be debauched at a pace greater than productivity gains for an extremely long time period (century+ I would guess from what has already been done) because the gains are great enough to minimize the debauchery in relation to real purchasing power. It can also come in fits and starts, now getting ahead of productivity and then falling slightly behind, or even with, productivity, in a “2 steps forward, 1 step back” pattern that can extend the time of debauchery even further with minimal ill effects on society (not zero).
The productivity gains (along with BS statistics) are so astounding that it is not truly possible to quantify them in an economically meaningful way and to apply it to the real world (for almost everyone on the planet). The amount/quality of data necessary is, at best, restricted to a few top level bureaucrats that work for a few top level billionaires (trillionaires, more likely) that have access to the real data fed to AI’s running on quantum computers that are 30 years advanced and represent the highest level of secrets.
The point of the debauchery is simple: Allow no others to gain an amount of wealth to challenge the already entreched (trillionaires?) – suck up all extra gains via the wealth-transfer known as devaluation.
The macro-data, and much micro-data, available to the public and many people that consider themselves highly knowledgeable in economics (“real”, based on Human Action or bullshit based on econometrics) is inaccurate at best, and often, outright lies. This is the data used to write most econ. articles. Sometimes it’s right but it seems at this point that it is more often “hobgoblin-ized” by producivity gains that reduce or flatten the destructive influence that the Feds larcenous behavior, combined with the BLS’s bullshit, should be manifesting in the real world at much higher rates and with much higher costs.
I am not speaking in favor of the Fed, debauching currency or manipulating data. I am presenting a line of thought as to why those immoral actions have gone on for as long as they have with minimized (not zero) economic destruction for the U.S..
Maybe it stops tomorrow or later this year. I wouldn’t bet on it though – things like the Lockheed Fusion Reactor are REAL and that form of energy creation IS productivity and it will be sucked up, like other gains, via devaluation.
Any stops or starts in “the economy” at this point in history are, I believe, ALL controlled events.
You JFK’d it. “Things don’t just happen. They are made to happen.”
What I’ve seen as we’ve deindustrialized the US is increased productivity (mostly in other countries) that devalues labor here and squeezes two-earner families out of the middle class amid rising costs.
I expect the next economic maelstrom to be tax-induced, all governments at every level stealing ever more money from anyone whose income is not below a poverty.
Regulator-sanctioned corporate malfeasance and Nanny.gov’s unfunded liabilities will soon form an ominous horizon – a pension crisis. People on a fixed income with no job possibilities aren’t going to get what they were promised, with disastrous effects.
Many major cities and many States will have to curtain essential services and will demand that Uncle Wet Nurse let them suckle. Watch what happens to the Dollar’s purchase parity when everybody stops buying Treasuries. Bankrupt Nation. First European Bond markets, then Japan’s, then Babylon’s.
JFK is a good reference, he warned of a shadow government, and was murdered to stop the introduction of a US Note to compete with the Federal Reserve Note.
No sh*t.
I’d love to simply abolish the FED and central banks around the world. The advent of the computer and almost the instantaneous information age means that central banks are no longer needed. They’re the tools of another century, and didn’t work all that well in the 20th Century, either. However, they’re still in total control, and President Trump was RIGHT in demanding that the “tightening” end. Why? Because it’s through the mechanism of short-term interest rates that the economy enters either growth or recession. The power of the FED is that it can raise rates to the point where the short-end is higher than the long-end and CAUSE a recession that has NOTHING to do with any “business cycle.” If this occurs BEFORE an election, the President loses, and the opposition takes control, and then the FED lowers rates and the market goes up, and the economy eventually starts to grow, again. President Trump MUST realize this, and he was absolutely right in exerting pressure on the FED to stop the bullshit rate hikes. Frankly, this is a GREAT reason to end the fed. It’s been one gigantic Ponzi scheme since its inception. Add this to the FACT that both the FED and the SEC are IMMUNE from FOIA demands. That’s RIGHT, IMMUNE! If you end up on the “wrong” side of the SEC they can screw you over without telling you a damn thing about why they’re screwing you over.