Lock Out Below! Lockdown Economy Plunging

Lock Out Below! Lockdown Economy Plunging

Mike Shedlock crystallized the Lockdown Nation catastrophe at hand by focusing on the unemployment claims numbers for Michigan Wednesday morning. And it doesn’t get any more transparent than a staggering 25% of the state’s work force already having filed unemployment insurance claims under the existing Federal/State UI program—only to have its computers crash and burn when the normally uninsured gig workers and self-employed tried to file this week for the new Federal $600 per week Covid benefit:

More than 1 million people — over a quarter of Michigan’s workforce — have filed for unemployment during the COVID-19 pandemic, the state’s top labor official said Monday.

Last week, Michigan reported more than 828,800 unemployment claims filed in the state from March 8 to April 4. Michigan’s pre-coronavirus record for new unemployment claims occurred during the Great Recession in January 2009, when there were 77,000 claims in a week.

In an embarrassing twist Monday morning, Michigan’s unemployment website crashed — again — but this time just as the head of the state labor department was expected to outline how the state would apply benefits for self-employed workers.

Just hours earlier, the unemployment website announced “self-employed workers, gig workers, 1099-independent contractors and low-wage workers can now apply for federal benefits online,” but, when attempting to file, an error message popped up: “This site can’t be reached.”

Likewise, the stunning collapse of the Empire State survey this AM left nothing to the imagination. The negative 78 reading for April was orders of magnitude worse than readings during the Great Recession and the post-dotcom crash.

https://www.zerohedge.com/s3/files/inline-images/empire%20fed%204.15.jpg?itok=x2GXzBgC

Likewise, the cliff dive embedded in this morning’s report on March retail sales was way off the charts—with the 8.7% m/m drop posting at more than double the worst reading during the Great Recession.

Moreover, March was only a warm-up: The April numbers will be 2X-3X worse.

 

In fact, when you look at even the March numbers at the product level, the plunge is even more dramatic. Food and beverage and general merchandise sales were actually up smartly owing to the fact the grocery delivery services, Amazon warehouses and home-cooked meals are out of necessity booming.

But when you look at discretionary and Lockdown items sold in the public facility based retail categories the sales crash in March was already in the negative 20-30% range, and, again, the results for April will be far worse.

Even then, March readings like these have never before been recorded on a month/month basis:

  • Electronics and appliances:-15.1%;
  • Gasoline stations: -17.2%;
  • Sporting goods and hobby stores: -23.3%;
  • Motor vehicles and parts: -25.6%;
  • Food services and drinking places: -26.5%;
  • Furniture and home furnishings stores: -26.8%;
  • Clothing and accessory stores: 50.5%

Not only are these double digit plunges severe in absolute terms, but relative to history they are literally coming from another economic planet. For instance, the Lockdown of bars and restaurants resulted in a -26.5% m/m change, which compares to the worst ever previously reported figure of -1.5% during the dark economic bottom in February 2009.

We will address the disaster that will ensue from the halting, baby-step “re-opening” of the economy being demanded by the infectious disease lobby and the Dem governors and mayors below. But here’s the point: All the upstream supply chains which deliver food and liquor, consumable supplies and equipment to  the restaurant and bar business have never previously suffered a measurable recessionary downturn as shown below. This time, however, they will suffer massive loss of sales owning to the near total shutdown of their customers.

In the case of the 50% plunge in sales at clothing and accessory stores, the cliff-diving numbers are even more fantastic. The chart below is not a rate of change measure. It represents actual sales dollars and means that in a single month, 25 years of sales growth was wiped-out.

Accordingly, the $11.1 billion of sales posted by these retail units for March was the lowest sales level since May 1995—–and these are nominal sales that give no account for the 40% increase in the general price level that has occurred in the interim.

The same story pertains with regards to furniture and home furnishings stores.

During the last 27 years, monthly sales have never dropped more than 5%, but in March sales collapsed by nearly 28%. Within two months, sales from these venues will easily by off by 50% or more for January 2020 levels.

 

Likewise, auto sales were down by 27.2% in March, and based on current industry information, are likely to be off by 50 to 60% during April.

This magnitude of instant collapse literally has no precedent since the collapse of sales in what was still the infant auto industry during the 1930s.  The low point in the Great Recession, for example,  was a 10.6% drop in October 2008 while the 15% drop in September of 2009 was a government instigated calendar aberration which occurred when Washington’s cash-for-clunkers boondoggle came to and end.

 

Needless to say, the collapse of retail sales is rapidly passing through to the production end of the economy—-with the March industrial production numbers published this AM providing merely a hint of the disaster to come later this spring.

Manufacturing output was already down by 6.3% in March, which is more than double the trough decline of 3.5% in December 2008 and the 2.5% drop in at the bottom of the 1982 recession.  Again, however, by April and May the plunging bars on the right margin of the chart will be down by 20-30%, at minimum.

Obviously, one reason 25% of the Michigan work force has already applied for unemployment is the auto assembly lines are tanking like they did in the winter of 2008-2009. Then, of course, both Chrysler and GM were already in bankruptcy and the Fed still had a massive trove of dry powder.

 

So the question recurs. How long can the Lockdown madness continue when it is self-evident that the US economy is going into cardiac arrest?

And They’re Gone! Lockdown Nation Wiped Out 10 Years Of Jobs Recovery In Four Weeks

And they’re gone!

We are referring to the 22 million jobs the BLS says were created since the Great Recession. But with today’s report of 5.2 million new unemployment claims, the four week total now stands at, well, 22 million jobs lost.

https://www.zerohedge.com/s3/files/inline-images/2020-04-16_5-30-49.jpg?itok=IuKYdKyD

So let’s just cut to the chase. There are two death watches underway in America, and the above chart tells you all you need to know.

The  morbid, sensationalized CNN/Cuomo Brothers/MSM/infectious disease lobby’s Covid Death Watch has spawned a hysteria among officialdom and much of the broad public that is literally killing economic function and rationality.

For example, the odds of the chart below happening from a normal business cycle downturn or even a so-called exogenous shock like the 1973 oil embargo or the 9/11 national security shock or the worst hurricanes or earthquakes of the last 53 years is virtually nil. The exploding red line on the right margin is government-made and hysteria born.

After all, each the above referenced economic blows, including 7 recessions, did actually happen during the period encompassed by unemployment claims chart below. But relative to the eruption of the last four weeks, they caused nearly invisible squiggles, rounding errors in the last half century of economic history.

Indeed, the 22 million claims over the last four weeks are 10X the size of the worst 4-week period during the Great Recession, and the latter was thought to herald the risk of the 1930s all over again, according to the Bernank himself.

Needless to say, this savage, government-inflicted blow to normal economic life would be one thing if the nation were actually confronted by a deathly Black Plague style pandemic or even an invasion by little green men from Mars.

But no matter how many times the out-of-control politicians, government-funded disease “experts” and the mendacious mavens of the 24/7 cable TV Death March deny it, the Covid-19 is just a highly contagious and somewhat virulent flu that mortally threatens only a very small share of the population — namely, the elderly who already have multiple life threatening diseases and conditions or what are called co-morbidities.

Today’s economy crushing Lockdowns, therefore, are a combination of blunderbuss and a one-size-fits all mantra gone haywire. And it’s happening because the so-called infectious disease experts around the CDC, WHO and Dr. Fauci’s Institute for Allergy and Infectious Diseases gave government officials the utterly wrong answer: To wit, they explained how to 100% stone-cold stop the spread of a virus that in today’s world can’t be stopped and needn’t be.

If politicians had any functioning gray matter between their ears they would have asked this question, instead: When the Covid-19 virus makes its inexorable trip through the population pool, who is most at risk of serious illness or even death, and what are the most efficacious and quickest methods to protect those people who will bear the brunt?

Yes, Covid-19 is a new strain, but its a corona virus variant that epidemiologists and other medical experts know a lot about, having studied SARS, MERS and H1N1 and their variants for the better part of two decades now. Accordingly, had they been asked to do their proper job — recommend how to protect the vulnerable and likely most serious victims — rather than how to extinguish the inextinguishable, they would have based it on the following crystal clear realities about the disease.

To wit, here are the risk-of-death ratios for the Covid epicenter population of New York state. These would not have been a mystery to the experts who have studied these kinds of flu-based viruses, yet among the 12,192 reported corona deaths through April 16, the mortality rates were:

  • 0-29 years: 60 deaths and 0.8 per 100,000;
  • 30-49 years: 653 deaths and 13 per 100,000;
  • 50-69 years: 3585 deaths and 73 per 100,000;
  • 70-79 years: 3253 deaths and 258 per 100,000;
  • 80 years & over: 4641 deaths and 1,214 per 100,000.

For crying out loud. You do not need to be a PhD epidemiologist or credentialed health policy expert to understand that when the risk of death for octogenarians is 1500X higher than for the under 30 population, then you do not have a one-size-fits all general public health emergency.

What you actually have is a radically skewed adverse response among the elderly to a common virus circulating among the entire population. And it bears fatally almost exclusively upon those who are already suffering from serious and even life threatening illnesses, and who are also overwhelmingly known to the health care system and doctors who are treating them.

Yet for want of doubt, let us repeat that among the 4,641 WITH Coronavirus deaths among those 80 and older reported by New York state, there were more than 9,000 (2 per deceased) cases of the top 10 co-morbidities including:

  • Hypertension: 2,809 (61%);
  • Diabetes: 1,418 (31%);
  • Hperlipidemia: 955 (21%);
  • Dementia: 936 (20%);
  • Coronary artery disease: 679 (15%)
  • Five others: 2,243 (48%)

Nor is this some kind of aberration unique to the New York cases. A nationwide analysis of hospitalized Covid-19 patients for the month of March shows pretty much the same condition of extensive co-morbidities.

Hospitals Try Glucose Monitors to Reduce Contact With Covid-19 ...

As for the under 50 population, even when you average in the slightly higher mortality rate for New York’s 30-49 years population, the total mortality rate for the under 50 population is still just 5.5 per 100,000.

Is that a rounding error and reducible to the absolutely unavoidable risks of human life?

Yes, it is. In fact, it’s just one-seventh of the normal rate for auto fatalities, other accidents and suicides (34 per 100,000) among this demographic, and only 6% of the normal mortality rate (91 per 100,000) due to all causes for this 67% share of the state’s population.

So what Lockdown Cuomo is really doing is putting the 13.05 million under 50 years population under house arrest not for their own good, but, apparently, in order to protect the 382,000 octogenarian population that is bearing the brunt of the serious illness and death or, more broadly, the total 1.64 million population 70 years and older.

Stated differently, this group accounts for 8% of the New York population but has suffered 65% of the deaths WITH Coronavirus reported to date.

Yet it is not evident at all that quarantining the healthy under 50 years population has done anything at all to protect the vulnerable elderly; at this stage the game, the morbidly ill elderly shouldn’t have been, and wouldn’t have been, going to bars, restaurants, hair salons, pet stores and retail emporiums, anyway.

The truth is, America’s across-the-board Lockdown is on its face irrational — especially when there is a far more deft, targeted alternative. To wit, New York data suggests that nearly 75% of the 12,192 deaths reported in the state to date are Medicare beneficiaries.

That’s right. Their names, addresses, social security numbers, Medicare treatment records, attending physicians etc are known to the government — meaning that they could have been systematically traced, contacted, isolated, assisted and treated by the medical care system and health agencies from the get-go.

Indeed, when it comes to practicality and rational trade-offs, the entire Medicare eligible population could have been targeted for assistance, protection and treatment for a tiny fraction of the $3-5 trillion that the fools on Capitol Hill are fixing to pump into the economy to off-set the massive losses of income and cash flow owing to the Lockdowns.

In the case of New York state, for instance, we have the very epicenter of the world’s Corona epicenter in the form of its roughly 3.6 million Medicare beneficiaries. This 1% share of the US population accounts for upwards of 36% of all WITH corona deaths in the US to date.

Would that the virologists, epidemiologists and other government health agencies have pointed Governor Cuomo in the direction of tracing, isolating and aiding Medicare’s medically vulnerable beneficiaries in lieu of savaging the state’s economy, and, ironically, his own state budget.

Needless to say, the old “but for” argument just doesn’t wash. That is, the specious claim that “but for” the Lockdowns the toll of illnesses and deaths would have been far worse.

We’d suggest that Japan proves just the opposite—even though its population is far older than that of New York.

As it happens, Japan has had no sweeping Lockdowns and even Prime Minister Abe’s so-called emergency decrees have been toothless gestures, possibly designed to provide cover for the $1,000 per head helicopter money he wants to pass out to the nation’s entire population in order to revive his sagging political fortunes.

But whatever Mr. Abe’s motivation, the facts could not be more dispositive. Japan’s restaurants, bars, shops, trains and other public venues are still largely open. But to date it has reported just 8,626 infected cases and 178 deaths.

We have often characterized Japan as a dying old age home heading for bankruptcy owing to its insane monetary and fiscal policies. But at the moment it still has a population of 126.5 million, which means that its reported cases amount to just 6.5 per 100,000, and its Covid-19 mortality rate as of April 15 was just 0.14 per 100,000.

That’s right. Sitting cheek-by-jowl with China, it has suffered one-seventh of a death per 100,000 population during the three months since Covid-19 became a thing.

For purposes of comparison, the rates for Locked-Down New York states are in a different planet:

  • New York’s reported cases amount to 1,100 per 100,000 population or 169X higher than the rate reported by Japan;
  • New York’s total WITH Covid death rate is 63 per 100,000 population or 450X that of Japan.

At the end of the day, the great H.L. Mencken got the essence of the matter right when he observed nearly a century ago that,

“The aim of politics is to keep the populace alarmed by menacing it with an endless series of hobgoblins, all of them imaginary.”

That is to say, the Covid-19 is real but it’s not remotely the kind of deathly pandemic that warrants trashing America’s entire economic and social life.

Recently, the Donald was making noises that are a reminder that even a blind squirrel occasionally finds an acorn:

“WE CANNOT LET THE CURE BE WORSE THAN THE PROBLEM ITSELF.”

So just maybe the Donald will actually come through on the urgent need to “re-open” because at the moment that imperative outweighs everything else.

The Money-Printing Gods Have Failed

The Money-Printing Gods Have Failed

Hooray!

Finally even the robo-machines and day traders are puking, not BTFDing. Today’s 3,000 Dow Point Dump says even they have had enough of the craven dolts who occupy the Eccles Building.

You do not need a PhD in economics—or even a night school survey course—to see that COVID-19 is temporary supply side shock which 0.05% money market rates are powerless to combat.

Likewise, you don’t need to be a finance wizard to see that with 10-year USTs at 0.78% and 30-year mortgages at their lowest level in history more QE is a sick joke. Adding another $700 billion of government and GSE debt to the Fed’s already hideously bloated balance sheet can’t possibly drive interest rates meaningfully lower, even if rates were a barrier to activity, which they are not.

In fact, the new barrage of QE5 is nothing more than a blatant financial fraud authorized by the official criminals domiciled in the Eccles Building. Today, and for years in the past, the FOMC has been scurrying about in the dealer markets swapping counterfeit credits plucked from thin air for Treasury and GSE bonds that funded the consumption of real economic resources such as government salaries, purchases and private housing construction.

The traditional argument for central banking, of course, was that a little bit of financial fraud (3% per year balance sheet expansion per Uncle Milton Friedman, for example) could help lubricate the banking system and nudge GDP to steadier performance over time.

But what we have now is epic-scale counterfeiting. That is, upwards of $5 trillion of fiat money liabilities at the Fed and $25 trillion at all the world’s central banks, compared to just $500 billion and $2 trillion, respectively, at the turn of the century; and the latter of which had taken decades, and in some cases, centuries to accumulate.

Moreover, on top of everything else in the last several days, these madmen announced in late morning today a new $500 billion O/N repo to be offered two hours later. Just like that—up to one half-trillion dollars of Fake Credit was to emanate from the Fed’s “buy” key during lunch hour!

Fortunately, only $19 billion got taken down, proving these economic morons and arsonists have absolutely not idea what they are doing.

So not knowing, however, they have succeeded in turning the entire financial system into a cesspool of false prices and destructive gambling rackets, thereby stripping

capitalism of the honest money and capital markets its needs to function and thrive. What lies ahead, therefore, is a no man’s land of statist economic and capital demolition.

Needless to say, you don’t need to be a cynic to understand why the Eccles Building launched this limp baby bazooka last night. The Federal Reserve now, and for many years past, has been the abject handmaid of the Wall Street gamblers, bullies and crybabies.

The Fed heads are deathly afraid of honest stock market prices (i.e. a crash) because they know it will make a mockery of their risible claims that the US economy is in a “good place” or that the consumer is “strong” and that they have delivered the hallowed state of Keynesian full employment, world without end.

In truth, decades of Keynesian central banking have sucked the lifeblood out of main street prosperity, stability and resilience. It has destroyed savers; addicted households to debt-based hand-to-mouth living; eviscerated the purchasing power of wages via its 2.00% inflation obsession; and turned the C-suites of corporate America into stock trading rooms and financial engineering joints in the service of Wall Street speculators, not the construction of resilient, value-creating enterprises.

But now the mask of self-serving rhetoric is being ripped-off the Fed’s (and Wall Street’s) phony narrative about the alleged strength of the main street economy— especially the purported Energizer Bunny of household consumption.

After all, just consider the implications of Nancy Pelosi’s Friday Night Abomination—a mass scale soup line of Washington-ordered handouts that is every bit as insidious as the TARP bailout of September 2008.

That is, anyone on Wall Street back then who was illiquid, deserved to be liquidated; and anyone on main street today who has not had enough common sense to put aside at least two weeks of rainy day funds—which is the amount of sick leave Nancy ordered businesses to pay— might profit from spending 14 days begging, borrowing and scrounging for canned soup.

So let’s be very clear. This isn’t about humanitarian necessity or safety net minimums. There are upwards of 110 million American now receiving welfare, food stamps, Medicaid, subsidized housing etc. and not a dime of it that aid—deserved or not—is imperiled by COVID-19.

For crying out loud, Pelosi’s mandated sick pay covers just 80 hours of work for the minority of American workers who are employed by firms with less than 500 employees and (apparently after the allowed DOL waivers) more than 50.

So consider the median wage earner, who doesn’t work for a Small Business (< 50 workers) or a Big Business (> 500 workers), but got their economic porridge just right, thereby qualifying for Nancy’s bequest.

According to the Social Security Administration, there were 167 million US persons who generated a payroll tax record in the most recent year (2018). Among them, there were 9.29 million workers right around the median wage who generated $330 billion of gross pay or an average of $32,450 each.

That is to say, two weeks’ pay amounted to the grand sum of $1,250. Yet these cats down in the Imperial City insist these workers positively can’t get by for even 14 days by drawing down savings, belt-tightening and selling some excess junk on e-Bay if they get the COVID-19 or the quarantine, as the case may be.

We doubt whether that’s strictly accurate, but are quite sure that Federally mandating employers to provide sick leave—and then paying for it on the other side with a tax credit handout— is just another fatal step down the slippery slope of socialization of economic life that will eventually bankrupt the US Treasury.

The fact is, the entire Keynesian policy regime of the present era encourages households, businesses and governments alike to borrow to the hilt and spend every dollar of income in hand-to-mouth fashion. It has therefore left all economic sectors vulnerable, fragile and, in the metaphor of the day, defenseless against even the short-term dislocations generating by public health measures to contain a strain of flu which is highly contagious but not even remotely a Black Plague scale phenomena.

Indeed, the chart below puts the lie to the “strong” consumer canard. The second set of bars covers households right in the middle of the wage distribution cited above, with annual incomes between $25,000 and $45,000.

At each income interval the bars cover households which actually have savings accounts according to the most recent survey of the Federal Reserve, meaning that even the dark green bars representing median amounts significantly over-state the case.

Accordingly, at best the median wage earning household has cash savings of just $1,400. Yet that is not evidence that households are inherently irresponsible spendthrifts; it’s merely the consequence of central banking policies that positively punish savers and encourage them to shop until they drop.

The evidence for the Fed’s role in leaving large swaths of the working population naked in the face of even a modest interruption of paychecks is dispositive. As shown in the chart below, there have been only 9 months since the eve of the financial crisis in early 2008 during which liquid savings generated a return that even matched the inflation rate.

As it happened, during most of that 12-year period, the liquid savings rate as represented by the 90-day T-bill (purple line) earned well less than 1.0% when the inflation rate was consistently 2.00% or higher.

Moreover, after the brief interlude in 2019 when the T-bill yield crossed above the inflation rate, the positive yield wasn’t even a rounding error, albeit enough for the crybabies of Wall Street and the ignoramus in the Oval Office, respectively, to come down on the Fed with a ton of bricks for daring to raise rates too much, too fast.

Needless to say, these monetary cranks have now gotten their way. Today the 90-day T- bill posted at a ridiculously low yield of just 0.23% at a time when the running core inflation rate (CPI less food and energy) most recently clocked in at 2.37% ( February).

So the real yield on liquid savings is negative -2.14%.

Is it any wonder that households have no savings?

Is it any surprise that the Republican sheeples of the beltway just rolled-over Friday night and voted through the Dems’ latest plank on Bernie’s highway to social democracy?

The fact is, the free market would be more than capable of handling a temporary disruption of the supply side—even in the form of the kind of shutdown hysteria that is now issuing from any and all Federal, state or local officials who can manage to grab and open mike, as we will outline in Part 2. In the meanwhile, Gary Kaltbaum gets the last word:

He’s printing money to buy bonds but bonds are already yielding under 1% on the 10 year and around 1.5% on the 30 year. Mortgage rates are not coming down much more. Loan rates are not coming down much more. But again, Aunt Mary and Uncle Bob are screwed because there goes any return on riskless income investments. You already know what we think of these people. We have highlighted them time and time again. They have done nothing more than distort price and yield, screwed savers, bubbled up asset prices, enabled massive leverage and massive debt and deficits but let’s keep depending on them. What’s next? You deposit money and also have to give them the toaster? Does this compare to 1987? To our eyes, it is worse. In 87,

 

Reprinted from The Future of Freedom Foundation.

Hey, Jay, Enough Of Your Stinkin’ Easy Money!

Hey, Jay, Enough Of Your Stinkin’ Easy Money!

It doesn’t get any more pathetic than this. The Fed cuts the absurdly low money market rate by another 50 basis points at 10AM and before noon the Donald is banging the podium for more. 

So if you ever needed a final warning to get out of the casino, today’s back-to-back eruption of financial insanity from the two most powerful economic actors on the planet should be it. 

Even then, we might be inclined to give the Donald a tad bit of slack. After all, he’s an absolute dunderhead on economics and spent a lifetime as a leveraged real estate speculator, where, in fact, lower rates are always, but always, to be welcomed when you’re rolling the dice with other people’s money. 

Still, it doesn’t get any more primitive or dangerous than the Donald’s current conviction that the price of money should be graduated lower based on the current year international league tables of GDP growth or the level of presidential braggadocio, as the case may be. 

Effectively, however, the tiny posse of fools who run the ECB and the BOJ are burning down the financial foundations of their own economies. So the Donald insists we burn down ours, too. 

Folks, that’s the sum, substance and full extent of his “thinking”: 

“As usual, Jay Powell and the Federal Reserve are slow to act. Germany and others are pumping money into their economies. Other Central Banks are much more aggressive,” Trump said, referring to the Fed chairman. 

“The Federal Reserve is cutting but must further ease and, most importantly, come into line with other countries/competitors. We are not playing on a level field. Not fair to USA. It is finally time for the Federal Reserve to LEAD. More easing and cutting!”

By contrast, the empty suite and sniveling coward who announced today’s emergency 50 basis point cut deserves no quarter whatsoever. The man is so petrified of a hissy fit by the boys, girls and robo-machines in the trading pits that he has just plain abandoned any pretense of rational financial thought. 

In fact, you could dismiss his meandering comments at the post-announcement presser as risible drivel and be done with it.

Except, except….Powell and his merry band are so drunk with financial power that they now believe any ragged, threadbare, illogical excuse to display their muscle and placate the crybabies and bullies of Wall Street is all that’s required. That is, there are no trade- offs, no risks—just cut and print, rinse and repeat. 

Thus, spake Pusillanimous Powell, averring that the central bank’s action would provide– 

“….a meaningful boost to the economy” by loosening financial conditions and shoring up business and household confidence.

“We saw a risk to the outlook for the economy and chose to act,” Powell said, noting the impact on tourism and travel and on company supply chains. “I do know that the U.S. economy is strong…I fully expect that we will return to solid growth and a solid labor market as well.”

“We do recognize that a rate cut will not reduce the rate of infection, it won’t fix a broken supply chain; we get that, we don’t think we have all the answers,” Powell said. Still, he said, it will help support “overall economic activity.”

Needless to say, this is group think run amuck. There is apparently no longer a single Fed head who understands that interest rates are not merely one-way control dials, which exist solely to enable the FOMC to fine-tune the path of the nation’s $22 trillion GDP. 

Somewhere over the last decades of Keynesian central banking, the truth that savers are being harmed every time the Fed pleasures Wall Street speculators with another rate cut has been lost completely. So has the notion that rate signals intended to encourage homeowners to buy a house or businesses to build a plant also foster ever more carry trade speculation on Wall Street and reward C-suites for investing in Wall Street pleasing buybacks and M&A deals, not productive investment in plant, equipment, technology, intellectual capital and human resources. 

Accordingly, we have now reached the point were the Fed is no longer even in the business of safeguarding sound money and financial system efficiency and stability. Instead, it’s morphed into a grand macroeconomic underwriter, purporting to insure the US economy against any and all bumps in the road, regardless of their origin. 

We already had them insuring against the Donald’s Trade War madness with 3 rate cuts last summer. Then with their repo facility madness in the fall, they were essentially insuring against the adverse rate and growth impacts of Washington’s borrowing binge. 

And now they are throwing the untoward impacts of plagues and flood onto their underwriter’s table. So presumably anything could be next—even a mass outbreak of hangnails and toe fungus.

In fact, the true nature of central bank intervention in financial markets is just the opposite. To wit, tampering with asset prices is the most dangerous and potentially destructive thing any agency of the state could undertake because it fuels greed, recklessness, speculation, malinvestment and economic errors throughout the length and breadth of the system; and, to paraphrase Keynes’ famous observation about inflation, in ways that not one in a million could possibly comprehend. 

In other words, what was announced this morning had nothing to do with central banking by any even loose historical definition of the term. It was actually another, even more over-the-top exercise in monetary central planning of the GDP and all that is subsumed under its $22 trillion girth. 

But why in the world would anyone—even arrogant, self-regarding Fed heads—believe they can comprehend the infinite complexities and feedback loops of the GDP? That is, the $22 trillion here and the $85 trillion worldwide economy in which it is intricately and intimately intermeshed. 

Yet if you presume to know that a 1.05% money market rate rather than a 1.55% rate will produce optimum economic outcomes under the shadow of Covid-19 uncertainty and disruption, then you positively do need to comprehend all the highways and bi-ways weaving through $22 trillion of input/output tables that only crudely comprehend the blooming, buzzing mass of activity which is actually the US economy. 

Self-evidently, the Fed heads no longer even try to explain the macroeconomics of rate-cutting when they are cheek-by-jowl with the zero bound. They just assert ex cathedra that it will do some good—and not even from the actual quantitative flow economics that the Fed historically avowed. 

That is, back in the day, if credit was not flowing to homeowners because high rates made borrowing prohibitive, it turned the rate dials lower in order to reduce bank disintermediation and thereby give S&Ls the means to lend, home-buyers the incentive to borrow and home-builders a boost to their order books. 

And, by contrast, if rates got so low as to cause building activity to skyrocket, thereby fueling rampant wage, lumber and building lot inflation, they proceeded to dial up rates to cool things down. 

We think the powers of the free market were always up to the task of credit flow regulation on their own: Freely mobilized interest rates always clear markets and bring forth more savings if needed, and more credit demand where economics require. 

So central bank regulation of credit flows was never really necessary, but here’s the thing: In the present regime of massively subsidized and mispriced capital which the world’s central banks have fostered, there simply isn’t any credit flow channel to regulate. 

Debt capital has become virtually unlimited and tantamount to free so there simply are no interest rate or credit supply barriers to spending and investment. 

Likewise, the world economy has become so over-invested and malinvested in physical production capacity that the old-fashioned “demand-pull’” inflation just doesn’t happen. Or at least until now it hasn’t because the subsistence rice paddies and villages of the developing world had not yet been drained of cheap labor. 

That’s why today’s monetary central planners don’t even talk about credit flows to the main street economy any more. There is no problem there for their ministrations to solve. 

Instead, they talk about “easing financial conditions” and “supporting financial confidence”. That is to say, monetary policy is no longer even about money or credit; it’s an exercise in state-directed psy-ops. 

And when you look into the real purpose of Fed psy-ops, which was the explicitly acknowledged purpose of today’s emergency rate cut, you quickly come to understand why Wall Street has morphed into a casino and the Fed its dutiful handmaid. 

To wit, “easier” financial conditions mean low credit spreads and high stock prices or “risk on”. By contrast,”tighter” financial conditions are defined by widening credit spreads and falling stock prices and PE multiples and “risk off”. 

Needless to say, in today’s debt-entombed main street economy, the Fed’s psy-ops with respect to “financial conditions” are neither here nor there. No wannabe homebuyer is influenced by the Fed’s psy-ops and no businessman stocks or destocks inventories or adds or subtracts from CapEx budgets based on whether the casino has been coaxed into a temporary risk-on or risk off mood by the Fed heads. 

Stated differently, Fed policy is now almost exclusively about keeping stock prices high and rising, and nipping any even half-assed effort at correction in the bud, and violently so. 

Self-evidently, today’s grand exercise in psy-ops failed spectacularly and like never before. The casino shifted by 1200 Dow Points between the post-cut announcement high and the intra-day low. And in the wrong direction! 

Moreover, that bust comes on top of the 4800 Dow point plunge from the February 19th high to the February 28th intra-day low, which was followed by a 2000 point rise from last Friday’s low to Monday’s insane closing high. 

In other words, the Fed long ago exited the sound money business. After the great financial crisis and its balance sheet pumping spree thereafter it also existed the credit flow control business. 

And with today’s monumental error, it has now, apparently, euthanized its psy-ops tool, as well. 

In the days ahead we will elaborate on the truly dangerous new financial world that now exists in the wake of the Fed’s self-defenestration. But in the meanwhile, Gary Kaltbaum captured the madness now loose in the land in his trenchant commentary issued immediately after the Fed’s announcement:

Powell lowered rates in the past few minutes because the market was heading lower today. He wasn’t going to make the move today until he saw the DOW down 300 early. This is not about a virus. This is not about an economy. This is about the markets…AGAIN! This is about the Bernanke, Yellen, Powell, Kuroda, Carney, Draghi, LaGarde markets that have made markets addicted to their easier money moves with an unaccountable and limitless amount of conjured up money. Do you not think he sees what we have reported to you? That like a well-trained dog, markets react to his every whim?

So what did Powell just do…or at least try to do: He screwed Aunt Mary and Uncle Bob…AGAIN! Yes…how dare you want risk-less income investments! How dare you want a decent money market rate! Screw you Mr. and Mrs. Saver.

The continuation of the asset bubble. (SEE A CHART OF ANY INDEX PAST 11 YEARS) A widening of the wealth gap. Yes…all these politicians complaining about the wealth gap? Look no further. The continuation of the distorting or price and yield in bond markets.

BOTTOM LINE: Another in a long line of moves to stanch any bleeding in the markets. Mr. Powell is easily Mr. Obvious. By the way, do you know how pundits and futures markets give percentage chances of rate cuts in the future? Since we have nailed these rate cuts all the way down, here is our latest.

WE GIVE IT A 100% CHANCE THAT WE WILL NOT ONLY EVENTUALLY BE BACK AT 0% BUT WE WILL EVENTUALLY DO THE NEGATIVE RATE DANCE. BOOK IT NOW!

LASTLY: If we ever get to the day where markets do indeed shoot the middle finger back at these market interlopers…head for the hills. If we ever get to the day where the markets see these moves as desperation…head for the hills. Initial reaction…rally 700 points in minutes…drop 600 points in minutes…rally back 300 points in minutes. Welcome to your central bank markets. He got that last bit right. It may well have happened within minutes after he hit the send button.

Reprinted from The Ron Paul Institute for Peace and Prosperity.

Yes, Virginia, There Is A Deep State And It’s Feeding The Anti-POTUS Mob

Yes, Virginia, There Is A Deep State And It’s Feeding The Anti-POTUS Mob

The prepared statement of the latest UkraineGate whistle-blower is well worth the read. It tells you all you need to know about why the Deep State apparatchiks are coming out of the woodwork in a massive assault on America’s duly elected president.

They are deathly afraid Trump will begin to dismantle a far-flung Empire which has

  • wreaked havoc around the world,
  • bled America’s fiscal accounts dry, and
  • fostered unspeakable prosperity among the beltway’s legions of empiresupporting agencies, contractors, think tanks, foreign lobbies, NGO’s and Kstreet racketeers.

Whether out of common sense, naiveté or just contrariness, the Donald has dared to question and disrupt the Empire’s core policy on the Ukraine/Russia file. And that’s apparently exactly why the whistleblower de jour, Lt. Col. Alexander Vindman, wrote his now ballyhooed memos.

He feared that Trump’s appropriate desire to get to the bottom of the welldocumented Ukrainian involvement in the Obama Administration’s illegal spying on his 2016 presidential campaign would undermine the bipartisan consensus on Capitol Hill for Washington’s utterly wrong-headed Ukraine policy.

Stated more crudely, Washington overthrew the duly elected government of Ukraine in early 2014 because its leader was deemed too cozy with Moscow. And in the vanguard of that illegal meddling in the governance of a sovereign foreign state was Obama’s state department led by neocon Assistant Secretary Victoria Nuland, Washington’s selfappointed roving proconsul John McCain and at length Vice-President Joe Biden.

After aiding a motley phalanx of ultra-nationalists, crypto-Nazi and political fortune seekers in overthrowing President Viktor Yanukovych, Washington has stood-up what are essentially puppet governments. The purpose has been to cause maximum abrasion with Putin and Russia; and at a cost of billions in aid from the US and other western agencies designed to prop up the economic basket case and cease pool of corruption which passes for the Ukrainian economy.

The Deep State narrative turns these realities on their head, of course, claiming that the mess in Ukraine is all the doing of the demonic Vladimir Putin. Accordingly, the very safety and security of the citizens of Lincoln NE and Springfield MA is allegedly on the line in a territory on Russia’s doorstep, which has historically been a meandering set of borders in search of a country when it was not otherwise a willing vassal and economic adjunct of Mother Russia.

As it happens, Lt. Colonel Vindman is a vociferous partisan of Washington’s Big Lie about the Russian ogre, and was virtually a fifth column operative in the viper’s nest of neocons at the Donald’s national security council. In fact, Vindman reported to Russophobe Fiona Hill, who reported to the Walrus of Forever War himself, John Bolton.

So despite all the Democrats’ crocodile tears for the constitution and rule of law, Vindman’s beef wasn’t really about their whole abuse of power canard. Nor did it touch upon the risible Dem/MSM nonsense that in asking a foreign government to undertake a legitimate action (an investigation of the corrupt use of taxpayers money by the former Vice President) Trump was committing a violation of U.S. election laws.

To the contrary, the gravamen of the colonel’s concern was domestic politics and the possibility that in withholding the $380 million of pending Ukrainian aid (which should have been zero in the first place) and pressing the Biden investigation, Trump would alienate Capitol Hill Democrats and leave the Deep State’s policy of using the Ukraine as an anti-Putin battering ram high and dry.

…. I was worried about the implications for the U.S. government’s support of Ukraine…. “I realized that if Ukraine pursued an investigation into the Bidens and Burisma, it would likely be interpreted as a partisan play which would undoubtedly result in Ukraine losing the bipartisan support it has thus far maintained.”

This would all undermine U.S. national security. Following the call, I again reported my concerns to NSC’s lead counsel.

Folks, Lt. Col. Vindman was not elected to nothin’. If he’s a proud 20-year veteran of the US Army and diplomatic service as he claims, fine.

But his job is to implement policy as decided by the elected representatives of the people, not to free lance in the cause of the Empire group-think in which he is obviously and hopelessly steeped.

So let’s cut to the chase: The policy he feared the Donald might be jeopardizing by his pressure tactics with President Zelensky has been a travesty from start to finish. The Ukraine has no bearing on America’s homeland security whatsoever, and the policies of its government vis a vis Russia or any of its other neighbors are none of Washington’s cotton picking business.

You can’t be more emphatic about the utter irrelevancy of Ukraine to America’s homeland security. Even at the pre-coup peak in 2013 it had a miniscule GDP of $185 billion, which has since plunged by 30% to $130 billion. Even if Putin were foolish enough to annex the approximate 30 million Russian-hating Ukrainians outside of the Russian-speaking eastern Donbas region, which he surely is not, it wouldn’t amount to a hill of beans in the strategic equation.

Ukraine amounts to just 8% of Russia’s pint-sized GDP and is actually worthless to the Kremlin. That’s because the cost of occupation and pacification of the non-Russian speaking majority of the country would vastly outweigh whatever industrial and material output it might steal from the Ukrainians.

Besides, what in the hell is wrong with Washington when it gets all hot and bothered about a no-count territory plagued with economic failure and which generates annually about two days worth of US output?

Moreover, even if you have warm and fuzzy regard for the rights and liberties of the Ukrainian “nation”, which has existed only infrequently as an independent state with wildly variant borders during the last 800 years, the question remains. Namely, how in the world can it be argued that its people were not better off in 2013 under an elected government of the Regions party that tilted toward Russia compared to the economic calamity which exits today and is only saved from complete collapse by US and European subventions?

So here’s where the Deep State’s hegemonic “sole super-power” world view comes in. Washington’s Ukraine policy has nothing to do with homeland security or prevention of military attack on American shores.

Instead, it is based on policing the world and demonizing the rump-state of Russia which emerged after the Soviet Union slithered off the pages of history in 1991. What was left was a decimated economy with half the former population and a current day GDP of $1.6 trillion, which is actually less than the GDP of the New York metro area.

Still, the Warfare State needs palpable “enemies” and adversaries—no matter how tendentious the case— to justify its massive fiscal drain ($1.1 trillion counting everything) on US taxpayers, both current and unborn; and it also needs expansive missions like spreading the blessings of democracy, prosperity and western culture to the far corners of the earth.

And that’s not our hyperbole in the slightest; it’s essentially the content of Vindman’s whistleblower testimony to Shifty Schiff’s Star Chamber proceedings today.

Thus, when it comes to the blatant lie that Russia is an expansionist power, Vindman’s purple prose would make even the late war-mongering Senator from Arizona proud:

Since 2008, Russia has manifested an overtly aggressive foreign policy, leveraging military power and employing hybrid warfare to achieve its objectives of regional hegemony and global influence. Absent a deterrent to dissuade Russia from such aggression, there is an increased risk of further confrontations with the West. In this situation, a strong and independent Ukraine is critical to U.S. national security interests because Ukraine is a frontline state and a bulwark against Russian aggression.

Wow! That’s just bellicose rubbish. A “frontline state and bulwark”my eye.

In fact, during the years since 1991 when Washington has invaded and virtually destroyed upwards of a dozen sovereign countries, Russia hasn’t invaded anyone!

But the reference to 2008 does tell you exactly where Vindman is coming from. He’s obviously referring to Russia’s thwarting of Georgia’s invasion of South Ossetia in August 2008.

That incident has been spun by the Deep State ever since as Russian aggression when it was just the opposite.

To wit, it was an aggressive military invasion by Georgia designed to reclaim the breakaway republic of South Ossetia. The real culprit was its mercurial leader and Washington tool, Mikheil Saakashvili, who had been egged on by Senator McCain and the usual cast of neocons with the promise of Washington military help, which fortunately did not happen.

But a subsequent 1,000 page report by an independent EU fact-finding mission led by a renown Swiss diplomat makes clear that the Georgian accusations of Russian aggression were completely fabricated.

“It was Georgia which triggered off the war when it attacked (South Ossetian capital) Tskhinvali” said Heidi Tagliavini, the mission head, in a statement. Although the EU commission tactfully avoided using the word “lie,” the report implies that Saakashvili did not tell the truth about how the war started.

The same is true of the so-called annexation of Crimea and the Kremlin’s support for the breakaway republics in eastern Ukraine.

As to the former, the population of Crimea is overwhelmingly Russian, and for 171-years from 1783 to 1954 it was an integral province of Czarist Russia. It got arbitrarily assigned to the Ukraine Soviet Socialist Republic by Khrushchev after he won the post-Stalin power struggle in 1954 as a reward to his compatriots in Kiev—even though less than 15% of the population was Ukrainian.

After the US funded, supported and instantly recognized coup in Kiev in February 2014 and the immediate passage of virulent anti-Russian legislation by the putsch, the Russian-speaking population of Crimea voted overwhelmingly (87%) to return to Mother Russia. The so-called coercive annexation by Russia is a figment of War Party propaganda, and implies a willingness to use American money and arms to enforce the dead hand of the Soviet Presidium.

And the same story goes for the Donbas. The largely Russian speaking population of this industrial region, which is highly integrated with the Russian economy, wants to be separated from the Ukrainian nationalists in Kiev who have launched a vicious war to subdue them.
But if the Donbas were to be partitioned or even if it voted to join the Russian Federation, so what?

The honest truth of the matter is that Europe is flush with partitioned states. These include Slovakia and the Czech Republic as well as the manifold offspring of Yugoslavia including North Macedonia, Slovenia, Croatia, Bosnia, Montenegro and Serbia, which, at the insistence of Washington, got further carved up by the partition of Kosovo.

That is to say, once Washington upended the tenuous political/ethnic balance of postSoviet Ukraine by supporting the nationalist coup, there was still no reason that the Yugoslav model of partition could not have settled the matter.

In fact, the 5-year war on the Donbas—which has killed upwards of 20,000 and brought economic and fiscal ruin to both the region and Ukraine as a whole—wouldn’t have lasted more than a few weeks without the promise of western economic and military aid and political support.

The needless tragedy there is not the fruit of Russian aggression. It’s the consequence of Washington meddling, including all the corruption which has flowered after Ukraine was turned into a Washington vassal and found it necessary to hire Washington lobbyists and racketeers like Hunter Biden and Devon Archer (then Secretary of State John Kerry’s former campaign bundler) to keep the cash flowing.

Needless to say, the Deep State slathers this toxic reality in a narrative that is pure hogwash. And Colonel Vindman has it down pat: Namely, under the tutelage, money and political and military cover of the Washington Imperium, Ukraine is to be brought into the “Euro-Atlantic community” as a splendid new democracy.

The bolded term, of course, is an undisguised euphemism for NATO:

In spite of being under assault from Russia for more than five years, Ukraine has taken major steps towards integrating with the West. The U.S. government policy community’s view is that the election of President Volodymyr Zelensky and the promise of reforms to eliminate corruption will lock in Ukraine’s Western-leaning trajectory, and allow Ukraine to realize its dream of a vibrant democracy and economic prosperity.

The United States and Ukraine are and must remain strategic partners, working together to realize the shared vision of a stable, prosperous, and democratic Ukraine that is integrated into the Euro-Atlantic community.

Here’s the thing. The expansion of NATO to the very doorstep of Russia was the most colossal mistake of the post-cold war period. And the War Party’s insistence that this should to taken all the way to the incorporation of Ukraine and Georgia—-historic vassals of Russia—actually trespasses upon the very border of insanity.

Indeed, the father of containment and the intellectual architect of NATO in the late 1940s, the great George F. Kennan, hit the nail on the head when lightweight Clintonistas like Strobe Talbot and Madeleine Albright launched the NATO expansion process in the 1990s:

“I think it is the beginning of a new cold war,” said Mr. Kennan from his Princeton home. ”I think the Russians will gradually react quite adversely and it will affect their policies. I think it is a tragic mistake. There was no reason for this whatsoever. No one was threatening anybody else. This expansion would make the Founding Fathers of this country turn over in their graves. We have signed up to protect a whole series of countries, even though we have neither the resources nor the intention to do so in any serious way. [NATO expansion] was simply a light-hearted action by a Senate that has no real interest in foreign affairs.

”What bothers me is how superficial and ill informed the whole Senate debate was,” added Mr. Kennan, who was present at the creation of NATO and whose anonymous 1947 article in the journal Foreign Affairs, signed ”X,” defined America’s cold-war containment policy for 40 years. ”I was particularly bothered by the references to Russia as a country dying to attack Western Europe. Don’t people understand? Our differences in the cold war were with the Soviet Communist regime. And now we are turning our backs on the very people who mounted the greatest bloodless revolution in history to remove that Soviet regime.

”And Russia’s democracy is as far advanced, if not farther, as any of these countries we’ve just signed up to defend from Russia,” said Mr. Kennan, who joined the State Department in 1926 and was U.S. Ambassador to Moscow in 1952. ”It shows so little understanding of Russian history and Soviet history. Of course there is going to be a bad reaction from Russia, and then [the NATO expanders] will say that we always told you that is how the Russians are — but this is just wrong.”

He couldn’t have been more right about the substance of what would happen. But little did even Kennan realize that once in motion any even tepid effort to question or stop it–per the Donald’s campaign rhetoric about the obsolescence of NATO—would actually provoke a Deep State assault on American democracy itelf.

So there’s your Deep State at work. It isn’t some kind of sinister conspiracy lurking deep in the shadows of the national security machinery.
To the contrary, it’s right there in the broad daylight of the Imperial City. It is populated by hundreds of thousands of foot soldiers like Colonel Vindman who make a career of drinking the Cool Aid, collecting a pay check from the state and propagating the policies of Empire First—policies which are immoral, illegal, unaffordable and have absolutely nothing to do with protecting America’s liberty, prosperity and security inside the great ocean moats, which once upon a time birthed a peace-loving Republic.

We have no illusions, of course, that the Donald is a peace-lover. He’s self-evidently first and foremost a Donald-lover.

Still, what is underway in Washington—first with the RussiaGate hoax and now with UkraineGate and impeachment—is an extra-constitutional political lynching, and one that has turned Washington’s desperate, mendacious Dem pols into complaisant handmaids of the Deep State.

So Lt. Colonel Alexander Vindman isn’t some kind of whistle-blowing hero. He’s just another mindless cog in the wheel of Empire talking his own book and thereby abetting the political mob that is now threatening the very constitution he was sworn to uphold.

Reprinted from The Future of Freedom Foundation.

Swan Song of the Central Bankers Part 1: Last Week Wasn’t an Error

Swan Song of the Central Bankers Part 1: Last Week Wasn’t an Error

Last week’s twin 1,000 point plunges on the Dow were not errors. Instead, these close-coupled massacres, which wiped out $4 trillion of global market cap in two days, marked the beginning of a bear market that will be generational, not a temporary cyclical downleg.

What hit the casino wasn’t an air pocket; it was a fundamental change of direction, signaling that the three decade long central bank experiment with Bubble Finance has now run its course.

Moreover, this epochal pivot is not tentative or reversible in any near-term time frame that matters. That’s because the arrogant but clueless Keynesian academics and apparatchiks who run the Fed think they have succeeded splendidly and that the US economy is on the cusp of full-employment.

So they’re now hell-bent on positioning the central bank for the next downturn. That is, they are reloading their recession-fighting “dry powder” thru interest rate normalization and a second giant experiment—-this time in shrinking their balance sheet by huge annual amounts under a regime called quantitative tightening (QT).

Needless to say, both the magnitude and the automaticity of this impending monetary shock are being completely ignored by Wall Street in favor of bromides like “the market knows” QT is coming because the Fed has been transparent in its forward guidance.

So what? Knowing the steamroller is coming doesn’t stop you from getting crushed if you remain in its path. In fact, the $600 billion annualized bond dumping rate incepting in October is a fearsome number; it’s larger than the entire $500 billion Fed balance sheet as recently as the year 2000.

By your way, that had taken 86 years to accumulate through two world wars, the Great Depression and 9 lesser recessions. Yet that monumental change of dimension has faded from the working knowledge of Wall Street punters and commentators alike only be virtue of the insane 9X expansion to $4.5 trillion that occurred over the subsequent 14 years.

Moreover, you can count on the Fed’s impending bond selling spree to get a turbo-charge from the bond pits.

Read more at David Stockman’s Contra Corner.

Swan Song of the Central Bankers Part 1: Last Week Wasn’t an Error

Swan Song of the Central Bankers Part 1: Last Week Wasn't an Error

Last week’s twin 1,000 point plunges on the Dow were not errors. Instead, these close-coupled massacres, which wiped out $4 trillion of global market cap in two days, marked the beginning of a bear market that will be generational, not a temporary cyclical downleg.
What hit the casino wasn’t an air pocket; it was a fundamental change of direction, signaling that the three decade long central bank experiment with Bubble Finance has now run its course.
Moreover, this epochal pivot is not tentative or reversible in any near-term time frame that matters. That’s because the arrogant but clueless Keynesian academics and apparatchiks who run the Fed think they have succeeded splendidly and that the US economy is on the cusp of full-employment.
So they’re now hell-bent on positioning the central bank for the next downturn. That is, they are reloading their recession-fighting “dry powder” thru interest rate normalization and a second giant experiment—-this time in shrinking their balance sheet by huge annual amounts under a regime called quantitative tightening (QT).
Needless to say, both the magnitude and the automaticity of this impending monetary shock are being completely ignored by Wall Street in favor of bromides like “the market knows” QT is coming because the Fed has been transparent in its forward guidance.
So what? Knowing the steamroller is coming doesn’t stop you from getting crushed if you remain in its path. In fact, the $600 billion annualized bond dumping rate incepting in October is a fearsome number; it’s larger than the entire $500 billion Fed balance sheet as recently as the year 2000.
By your way, that had taken 86 years to accumulate through two world wars, the Great Depression and 9 lesser recessions. Yet that monumental change of dimension has faded from the working knowledge of Wall Street punters and commentators alike only be virtue of the insane 9X expansion to $4.5 trillion that occurred over the subsequent 14 years.
Moreover, you can count on the Fed’s impending bond selling spree to get a turbo-charge from the bond pits.
Read more at David Stockman’s Contra Corner.

Now Comes Boondoggle Don — Why Infrastructure Won’t MAGA

Now Comes Boondoggle Don — Why Infrastructure Won’t MAGA

America’s economy is faltering not from too little infrastructure spending, but from too much debt—-$67 trillion of total public and private debt, to be exact. So it appears that the bond vigilantes are returning from 24 years of hibernation just in the nick of time to put the kibosh on the Trumpite/GOP’s latest hare-brained scheme to balloon the public debt.

As if the impending FY 2019 collision between $1.2 trillion of new Treasury borrowing and the Fed’s $600 billion bond-dumping campaign (QT) incepting this coming October were not enough, word now comes that Tuesday’s night’s State of the Union (SOTU) adress will feature a $1.7 trillion infrastructure plan.

We’d say rechristen the Donald as “Boondoggle Don” and be done with it. On top of the $1 trillion + deficits already rumbling down the pike, the very idea of a massive debt-financed, pork-barrel driven borrow and spend spree 104 months into a business cycle expansion is sheer lunacy.

And don’t take our word for it—even if we have been smoked by the bond vigilantes up close and personal, and more than once. With this morning’s breakout to a 2.72% yield on the 10-year treasury note, it is more likely than not that the bond-selling stampede has commenced.

Read the rest at David Stockman’s ContraCorner.

Now Comes Boondoggle Don — Why Infrastructure Won’t MAGA

Now Comes Boondoggle Don — Why Infrastructure Won't MAGA

America’s economy is faltering not from too little infrastructure spending, but from too much debt—-$67 trillion of total public and private debt, to be exact. So it appears that the bond vigilantes are returning from 24 years of hibernation just in the nick of time to put the kibosh on the Trumpite/GOP’s latest hare-brained scheme to balloon the public debt.
As if the impending FY 2019 collision between $1.2 trillion of new Treasury borrowing and the Fed’s $600 billion bond-dumping campaign (QT) incepting this coming October were not enough, word now comes that Tuesday’s night’s State of the Union (SOTU) adress will feature a $1.7 trillion infrastructure plan.
We’d say rechristen the Donald as “Boondoggle Don” and be done with it. On top of the $1 trillion + deficits already rumbling down the pike, the very idea of a massive debt-financed, pork-barrel driven borrow and spend spree 104 months into a business cycle expansion is sheer lunacy.
And don’t take our word for it—even if we have been smoked by the bond vigilantes up close and personal, and more than once. With this morning’s breakout to a 2.72% yield on the 10-year treasury note, it is more likely than not that the bond-selling stampede has commenced.
Read the rest at David Stockman’s ContraCorner.

Flying Blind, Part 1: How Bubble Finance Destroys Economic Efficiency And Rationality

Flying Blind, Part 1: How Bubble Finance Destroys Economic Efficiency And Rationality

You could say thank heavens they have finally stopped buying the “dip”. Then again, there apparently aren’t any left!

That’s the case, anyway, even if your notion of a “dip” is any day the market doesn’t go up. So far there has been exactly one such occasion during 2018. Or worse still, if you assume the traditional metric of at least a 5% drop, you have already been out of the dip buying business for a lifetime—- whether measured in market lives or even dog years.

That’s right. Heisenberg reminds us this morning that we are in undisputable record territory. It has been fully 395 trading days since the market had a 5% drop, and that’s never happened before in all of recorded history.

DaysWithout

Than again, the central banks of the world had never even dreamed of snatching $22 trillion of fiat credit from thin air prior to 1995, either. But in the nine years since the financial crisis they generated $14 trillion of new footings, and more than $20 trillion during the last three bubble cycles combined.

Needless to say, this $20 trillion emission of something for nothing has deformed and poisoned the entire warp and woof of the global financial system. Everywhere financial asset prices have been massively inflated and falsified, causing a two-phase distortion of the global economy.

Read the rest at David Stockman’s Contra Corner.

Janet Yellen Powell Puts On Some Pants And A Tie

Janet Yellen Powell Puts On Some Pants And A Tie

It can’t get any worse than this. Jerome Powell is a Wall Street-coddling Keynesian and Washington lifer who passes for a Janet Yellen replica—that is, save for his tie and trousers and his as yet underdeveloped capacity to whine pedantically.

During his years on the Fed since May 2012, Powell has voted approximately 44 times to drastically falsify interest rates and to recklessly and fraudulently monetize trillions of the public debt. That is, Powell has been all-in for a destructive central banking regime that is literally asphyxiating capitalist prosperity in America.

We will get to the latter in more detail momentarily, but just consider the plight of bank account savers during the 65 months “Jay” has served on the Federal Reserve Board. They have been continuously savaged by negative real interest rates averaging -1.8% per year. That cumulates to a 9% confiscation of inflation-adjusted principal during that five and one-half year period, but this purported Republican dissented not a single time.

And now he is being appointed Fed Chairman by a purported Republican President!

Read the rest at David Stockman’s ContraCorner.

Trump Joins the War Against Assad

Trump Joins the War Against Assad

The Donald’s missile “attack” on Syria’s al-Shairat air base is surely the most impetuous, thoughtless, reckless and stupid act from the Oval Office that we can remember — and that covers 50 years at least. And we put “attack” in quotes because it’s now evident that virtually every one of those $1.4 million per copy Tomahawks amounted to a big fat nothing-burger.

To wit, 36 of the 59 missile were duds and landed somewhere that was not the al-Shairat air base, including a nearby village where apparently a number of civilians were killed. The 23 that did hit the base actually missed the main runway, which, by the way, was back in operation launching Syrian air force sorties within 24 hours. None of Assad’s operational warplanes were hit, either — just a handful of old MIG-23s that have apparently long been languishing in the base’s “repair” boneyard.

Yes, the Donald’s sharpshooters did annihilate several glorified Butler buildings, otherwise referred to as “hangars”, and a few fuel tanks — the better for some post-attack fireworks to be posted to the War Channels (CNN, MSNBC and Fox).

But what the Tomahawks surely did not hit was the chemical weapons storage facilities alleged by the Pentagon to be at the base. With Washington’s satellites monitoring al-Shairat like a cloud of bumble bees, there was not a whit of evidence of Syrian personnel running around with gas masks after the missiles hit.

Had there been, the War Channels would have been playing it in an endless loop all weekend. Naturally, the Pentagon says these apparently non-existent stores weren’t even targeted owing to humanitarian (?) reasons.

Right, copy that!

Read the rest at the Ron Paul Institute for Peace and Prosperity.

Keynesian Myths, Monetary Central Planning and The Triumph of The Warfare State – Part 1

Keynesian Myths, Monetary Central Planning and The Triumph of The Warfare State – Part 1

Remarks by David Stockman To The Committee For The Republic, Washington DC, February 2014

Flask in hand, Boris Yelstin famously mounted a tank outside the Soviet Parliament in August 1991. Presently, the fearsome Red Army stood down—an outcome which 45 years of Cold War military mobilization by the West had failed to accomplish.

At the time, the U.S. Warfare State’s budget— counting the pentagon, spy agencies, DOE weapons, foreign aid, homeland security and veterans—-was about $500 billion in today’s dollars.  Now, a quarter century on from the Cold War’s end, that same metric stands at $900 billion.

This near doubling of the Warfare State’s fiscal girth is a tad incongruous.  After all, America’s war machine was designed to thwart a giant, nuclear-armed industrial state, but, alas, we now have no industrial state enemies left on the planet. The much-shrunken Russian successor to the Soviet Union, for example, has become a kleptocracy run by a clever thief who prefers stealing from his own citizens.

Likewise, the Red Chinese threat consists of a re-conditioned aircraft carrier bought second-hand from a former naval power—-otherwise known as the former Ukraine. China’s bubble-ridden domestic economy would collapse within six weeks were it to actually bomb the 4,000 Wal-Mart outlets in America on which its mercantilist export machine utterly depends.

On top of that, we’ve been fired as the world’s policeman, al Qaeda has splintered among warlords who inhabit the armpits of the world from Yemen to Somalia and during last September’s Syria war scare the American people even took away the President’s keys to the Tomahawk missile batteries.  In short, the persistence of America’s trillion dollar Warfare State budget needs some serious “splainin”.

Read the rest at DavidStockmansContraCorner.com. And I mean it. Read all of it. It’s the best thing that any person ever wrote.

Part 2.

Part 3.

Part 4.

Part 5.

Conclusion.

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