Englund

 They have done it again, and in a way that makes a flaming mockery of both honest market economics and the so-called rule of law.  In effect, the triumvirate of fools at the Fed, Treasury and FDIC have essentially guaranteed $9 trillion of uninsured bank deposits with no legislative mandate and no capital to make these sweeping promises good. That’s right. In the case of the direct bailout of all depositors at SVB and Signature Bank, these closed institutions have now been ridiculously christened on a postmortem basis as “SIFIs” (systematically important financial institutions).  That makes them eligible for a hidden backdoor bailout mechanism in the 2009 Dodd-Frank Act, which gave authorities the power to guarantee any and all bank deposits above the standard $250,000 limit.  Then again, we will just note the hideous abuse of language implicit in this weekend’s maneuver. Total assets of the US banking system amounted to $30.4 trillion at the end of 2021. Accordingl...

Sometimes you need to call a spade a spade, and yesterday's testimony before Adam's Schiff Show by former NSC official Tim Morrison is just such an occasion. In spades! In his opening statement, this paranoid moron uttered the following lunacy, and it's all you need to know about what is really going on down in the Imperial City. “I continue to believe Ukraine is on the  front lines  of a strategic competition between the West and Vladimir Putin’s  revanchist Russia . Russia is a failing power, but it is still a dangerous one.  The United States aids Ukraine and her people so they can fight Russia over there and we don’t have to fight Russia here. To wit, whether out of naiveté, contrariness or just plain common sense, the Donald has declined to embrace the War Party's Russian boogeyman and demonization of Putin. He thereby threatens the Empire's raison d'etre to the very core. David Stockman. Posted On Wednesday, November 20th,...

There’s not going to be a deal, because the problem that Trump is focused on and obsessed with is that we bought $543 billion worth of stuff from China last year, and we sold $120 billion. It’s not because of bad trade deals  If you look at manufacturing, our average wage is over $30, which includes the cash wage plus the health benefits, retirement, and Social Security taxes, and all the rest of it. And in China, it’s about $5.  The QE experiment has failed entirely. We’ve had massive increases in the Fed’s balance sheet, which went from about $850 billion on the eve of the subprime crisis to a peak of $4.5 trillion.  central banks of the world. Collectively, they have driven bond yields to rock bottom. I would say we’re now in the mother of all bond bubbles in history. David Stockman. September 18th, 2019

The Federal Reserve Bank of New York announced plans to inject another $75bn into the US financial system when trading resumes on Wednesday, a day after making its first such intervention in more than a decade to alleviate funding pressures in short-term lending markets. FT 18 September 2019 Some old financial melodies from 2007-2008 are getting a replay. It’s a rule of thumb that if you’re even talking about such geeky fare as long-short market-neutral strategies or overnight repurchase agreements, then something has already gone wrong. John Authers Bloomberg 18 september 2019   The US dollar bond pits alone will soon be shocked with $1.8 trillion of homeless government debt  as the US Treasury issues $1.2 trillion of new paper and the Fed dumps $600 billion of old debt during the fiscal year that incepted three days ago. David Stockman, October 4th, 2018

 The bond traders and speculators are not front-running recession:  They are front-running the Fed and the rest of the central banks based on their now three times repeated experience since the arrival of Greenspanian monetary central planning that central banks will flood the markets with liquidity and bond-buying in the event of a recession, thereby driving bond prices skyward and yields to rock bottom. That is, the central banks drive bond prices sky high and speculators, who purchased these bonds on repo and other short-term practically zero-cost credits, laugh all the way to the bank. Never before has the stupidity of a tiny group of PhDs and political apparatchiks domiciled in the central banks generated such unspeakable windfalls for so many speculators and gamblers. David Stockman. August 16th, 2019

By David Stockm an. Posted On Tuesday, July 23rd, 2019 The US Treasury has been running down its GTA account for months to pay salaries and keep the government going.  This has been a net injection of money into the US economy.  It is akin to QE and has overwhelmed the effects of quantitative tightening (bond sales) by the Fed pulling in the opposite direction.  Or put another way, it has masked the underlying withdrawal of dollar liquidity.  US debt ceiling  “This agreement is a total abdication of fiscal responsibility by Congress and the president,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a Washington advocacy group.

the existential problems we are talking about (and neither of us use the word “existential” lightly) will resolve themselves in a highly tumultuous manner if we as a society don’t face them directly and soon.  Total federal debt is now $22.5 trillion plus another $3 trillion of state and local debt.  Annual deficits are running at an average of $1.2 trillion and growing.  John Mauldin 12 July 2019

The CBO forecast that does not include a recession has total debt rising to over $33 trillion.  Forget Turning Japanese, We Are Turning Greek John Mauldin 28 June 2019

You have to wonder how much longer Wall Street's incorrigible dip-buyers can deny the obvious. The Fed and its global convoy of central banks have flat-out ruined financial markets---meaning that they have become an unstable, unpredictable roller-derby divorced from the main street economy and uncoupled from the financial fundamentals. Accordingly, the only remaining tools of navigation in the stock market are the fickle lodestar of momentum-chasing and the eternal hope for yet another round of monetary stimulus. But the latter assumes that our monetary central planners know what they are doing, when, in fact, they constitute a posse of the financially deaf, dumb and blind, stumbling around in the monetary darkness. After all, central bankers and economists even a few decades ago would have been at least at DEFCON 2 in response to the absurd yields posted in the bond markets this AM. To wit, the 2-year Italian government bond...

David Stockman May 31st, 2019

As far as we can tell Alan Greenspan was right only a single time after he took the helm of the Fed in August 1987.  Said the Maestro: - A decision to base policy on measures of money presupposes that we can locate money. And that has become an increasingly dubious proposition. Note that these words were spoken on June 28, 2000 in the very inner sanctum of the Eccles Building. They were recorded word for word in the FOMC meeting transcript and released with a ten year lag  Friedman had been a closet Keynesian all along, and had erroneously claimed that GDP growth and prosperity were a function of money supply growth, and that the change rate of the latter, in turn, could be managed to nearly the decimal point by the rate of growth in high-powered money ladled out by the Fed. David Stockman May 21st, 2019 Monetarism Alan Greenspan

It means all their 2018 statements of optimism and predictions of raising rates in 2019 and previous insistence on a balance sheet roll-off being on “autopilot” were all wrong.  Reality and markets rolled over them. They didn’t see the slowdown coming, and only after markets dropped 20% in December did they change their policy stance and have now cemented a dovish stance for years to come. https://www.marketwatch.com/story/the-feds-total-capitulation-is-a-bad-omen-for-the-stock-market-2019-03-2 1 It was just two months ago that Jerome Powell set off a market panic by suggesting the FOMC would do what it thinks is right and let asset prices go where they may.  https://englundmacro.blogspot.com/2019/03/the-fed-is-playing-dangerous-game.html

I don’t want to be a tone deaf CEO; while the company is doing fine, it is absolutely obvious that a big chunk of [people] have been left behind  — 40% of Americans make less than $15 an hour:  40% of Americans can’t afford a $400 bill, whether it’s medical or fixing their car  15% of Americans make minimum wages.  70,000 die from opioids.’ Jamie Dimon, chairman and CEO of JPMorgan Chase & Co. https://www.marketwatch.com/story/jamie-dimon-the-wealthy-are-doing-fine-but-the-poor-are-being-left-behind-2019-03-18

It was just two months ago that Jerome Powell set off a market panic by suggesting the FOMC would do what it thinks is right and let asset prices go where they may.  They /Fed/ were promising at least two if not three more rate hikes in 2019. The stock market fell out of bed. To understand what’s going on, we need to review some ancient history, and by “ancient” I mean December 2018. That’s several eons ago in today’s news cycle. Powell’s predecessors had given the Fed an unofficial third mandate: defend stock prices as well as maintain low inflation and full employment.  His comments that day seemed to reveal Powell had no interest in continuing that practice. ... Powell has turned the other direction and is now bent on pleasing investors, the exact opposite of the impression he so carefully gave in December. The Powell Put  Can it have short-term, market-friendly results? Absolutely. For longer than we might think? Assuredly.  Can corporations c...

David Stockman, 72, the so-called “Father of Reaganomics,” is at it again with his most recent prognostication of doom for Wall Street and the broader economy Marketwatch 23 Februar 2019

We have known for years that QE had helped to keep the stock market aloft, and it was logical to believe that  1) QT would follow QE, and that 2) QT would have the effect of reversing the impact of QE.  Wednesday may go down in history as the day when the market finally grasped this. John Authers 20 December 2018

The Dow Jones Industrial Average  ended with a decline of 352 points after being up by as much as 382 points before the FOMC’s announcement. https://www.marketwatch.com/story/powell-party-pooper-here-are-the-worst-performing-stocks-after-the-fed-wrecks-the-market-2018-12-19 It's The Balance Sheet, Stupid! It's not about a piddling 50 basis points on the Federal funds rate next year To the contrary, the clear and present danger to the greatest financial bubble in modern history is the fact that Powell affirmed without hesitation that the Fed will proceed---on automatic pilot no less---to drain that other Swamp via QT or balance sheet run-off. David Stockman

The CBO calculates that servicing costs will triple in size to nearly $1tn by 2028 Gillian Tett FT 8 November 2018

zombie companies Excessive leverage may light the fuse, but the real problems are deeper. US government deficit will be (drumroll, please) approximately $1.4 trillion per year for the next five years,  which will mean $29 trillion total debt by 2024.  And that’s without a recession.  John Mauldin 2 November 2018

 NASDAQ 100 was recently up nearly  220%  in inflation-adjusted terms since the pre-crisis peak in 2007 compared to a mere  2.2%  gain in industrial production over the same 11 year period. We are talking apples-to-apples here: Constant dollar stock prices versus real physical output; and also from the prior peak, not the March 2009 stock market bottom. David Stockman 22 October 2018