Here We Go Again

We are back to the insanity of 2008/9 multiplied by 500% for what was essentially a global shutdown orchestrated by the elites, ie; those at most fear of loosing their lives, billionaires, politicians and the like, while around 6 billion people are left loosing their businesses, livelihoods and putting about 20% of these right back into poverty, reversing the well orchestrated false lifting of the bulk of them out of poverty over the last 30 years... My thoughts are below:

I have been thinking of the last 2 years where our "front line" emergency response people around the country were steadily being supplied Naloxone to keep overdose cases alive and rubber gloves to prevent any skin exposure to the chemicals they ingested that if improperly handled could kill a first responder... Yea, 75,000+ OD's a year by 2018 with a small decrease in 2019 mostly to the emergency response being able to jolt people back in the world of the living... Very little mention of the 70.000 alcohol related deaths ever made the press or the 35,000 gun related deaths 60% self inflicted, ie; suicide.  Oh, then there is the health epidemic where millions suffer digestive issues, diabetes, hypertension etc. directly related to the guinea pig effect of Americans being subjected to the worst quality food on the planet.  The "drug" industry has exploded in riches providing "solutions" to these "diseases".  Hell I get back to the US and see Narcolepsy ads on TV!  Narcolepsy!

Anyway, what is going on now with all that?  We are all chasing a virus that fortunately for most is mildly deadly.  We have shut down the global economy on a dime as the billionaires, global elite and politically powerful run scared and pull all the stops to keep from getting it, putting the livelihood of billions of people at risk.  I just read that it is likely roughly 500,000,000 people will fall back into poverty immediately, yea 1/2 billion people drop to impoverished to save the 1%... We are in dire straights but not from the virus.  We are in dire straits because the US was the only developed nation on the planet that tried for less then 2 years to normalize the Fed balance sheet and bring interest rates back to market levels in a global overly leveraged universe.  But they failed miserably.  By September 2019 the "swaps" market froze.  Underlying interest rates spiked more then during the financial crises and the Fed reversed course on a dime and cut rates rapidly and pumped $500,000,000 into the "financial system" to effectively bail out hedge funds that had been playing a game with increasing leverage to scrape a few pennies out of a system that had to low interest rates for to long and when things went the other way they got caught flat footed and had to be bailed out.  This all happened behind the scenes and almost nobody knows about it.  All they know is from that point forward all the money printing went directly to the stock market which reached all time highs by February.  Stock buyback's by corporations reached nearly $ 1 trillion a year for the last 3 years (following years of records preceding) further pumping up stock prices to enrich the CEO's and "investors" in these companies debt.  Any company could sell debt there was so much money chasing any yield above the Central Bank manipulated low rates that went on for far to long.  Investment was sluggish, regular wages stagnant and we were told there was no inflation.  All the inflation was in asset prices and for average wage earners, "health care", "education" and "rents", which by government accounts are under appreciated.

Why am I mentioning this?  Well because the debt accumulated to buy back that stock and the "off balance sheet" debt accumulated by the Private Equity / Hedge Fund Industry gambling in that same debt dwarfs that which existed in 2008 before the last financial crises and was looming over our economy BEFORE this current crises.  What has been the reaction?  US gov creates over $2 Trillion in additional taxpayer debt (10% increase in total debt in one bill) to further bail out a heavily leveraged corporate world.  Yea the couple hundred billion doled out in checks to citizens takes front and center in the mass media which is desperate to convince Americans "this time is different".

NOTE: Just like the heavy media campaign to glorify the military after 911, glorify entrepreneurs after 2009 and now glorify health care workers after this latest crises, each time no one is held to account, not the military and it's near $10 trillion in pointless wars against people in mud huts since 911, not questioning or convicting any financial firm for the 2009 crises and not one mass media person questioning why in a "developed nation" where more people go into bankruptcy over medical bills and nowhere does any human civilization spend more on medical care then the US with no positive metrics to show for it but wealthy "health care" intermediaries, billionaire CEO's and executives, wealthy on the backs of the American Citizenry.
Yet the Government has to step in to quell a crises!, the same government that claims any interference in the desperately broken health care system is some kind of a socialist... where we have laws on our books that even stop the government from bargaining for medicine and supplies in that they in the end pay for at huge markeup with taxpayer money (debt).

But in reality the Fed is also increasing it's balance sheet by $2.3 trillion immediately on as part of it's 10x leverage of $440 billion handed to them to "replace the banking system" as the banks have all but ceased ALL LENDING outside of the new government programs and they will expand to over $4 trillion over the next 9 months to "re capitalize" already over-levered corporations... Really?  Who is on the hook for all this money printing?  Taxpayers.  Who created the crises?  Billionaires and Elites.  Who gets ultimately crushed, billions of people, including billions who "social distancing" is a joke cause they live on top of each other already! 

You have to watch the short video in this link:

https://www.cnbc.com/2020/04/09/chamath-palihapitiya-us-needs-to-let-hedge-funds-billionaires-fail.html?__source=twitter%7Cmain

It's the part where the answer to the CNBC anchor's question is "yes' when answering whether airlines should be allowed to fail.  Think about what he says... Who is getting bailed out here AGAIN.  This whole thing is as bad.  Capitalism has built an entire set of rules and ways to deal with the natural loss of value during a crises.  Those who hold the debt, those who old the equity, they loose.  That is called risk.  It is how things operate.  As of now, the Fed has jumped in, buying corporate debt directly and through ETF's etc.  They are basically funding credit markets, mortgage markets, off balance sheet debt markets and businesses that have no revenue and who have used all their reserves and taken on incredible amounts of debt to enrich those debt and equity holders over the last decade, since the last crises.  They paid each other back to the tune of trillions, further enriching themselves and stratifying the global income / wealth divide to levels never seen before in human history.  And WE ARE BAILING THEM OUT AGAIN!

Depression? Mental Illness? The US is the most medicated, unhealthy, over levered and overly financialized nation on the planet (well China and Japan and Europe all are competing for who can be the most in debt).  We were already on the edge.  This virus has become nothing more then an excuse to "reset" the debt, extend it further out to the future and to print money to buy votes.  I am so incensed by this whole thing I don't know what to do... I can't believe what I see happening every day to prop up an already failed economic system.. I went back to college to learn more and perhaps gain a voice.  I learned more, but what I learned is they were still teaching late 19th and early 20th century theory that has long become obsolete as the economic system has become several degrees separated from any theory emulating at that time.  We have no models any more.  We most definitely have no model for what to do to rescue an economy that stops on a dime, let alone a simple thing like letting interest rates rise.  Now we have stopped on a dime and we are throwing 20-30% of the population of a "developed" nation into immediate unemployment (look what can happen in less fortunate nations).  Where there is NO cash flow to pay all that debt, none. What are the effects 6 months from now, 1 year from now? The money has to be printed, to re-capitalize.  Just like in 2008, bailouts to re-capitalize all the cash that was taken out of the system, evaporated overnight?  One could do some simple math and see how about $3 trillion was removed from the financial system from 1999-2008 after the deregulation of the banking sector.  It went directly into the hands of the players in the gambling game of financial markets.  It was the largest transfer of wealth since the tech bubble of 1998 and that the largest transfer of wealth since the bond bubble in 1988 and you can trace that back to the international debt crises brewed from the oil shock in 1973 forward.  Where we are now is no-mans land.  God help us.

If you think what I write here is in the right direction, write your congress person / senator and tell them, "All the capitalist system to work as it was designed and stop bankrupting our future.  The money printing  experiment of the last 10 years proves irrevocably, it does not work.

The Financial "Crises" is Not Over

I have been reading my weekend section of the FT this afternoon and came across two unrelated articles that struck a chord with me with respect to the financial markets. Some items that are notable, 1) Treasuries, since the credit crises, have been the only acceptable collateral in the "repo market" 2) There are still non financial companies out there that are writing off huge losses in derivative "investments" that are way out of proportion to the revenues they had as functioning companies, making me think more non-financial companies than I originally thought got hood-winked by Wall Street into derivative positions way out of line with the regular functioning of their business.

So what does this mean?

First, the huge demand for US Government debt over the last year, despite a normal economic view that any nation running the kinds of reckless borrowing and printing of money the US has been would make rational investors run the other way, is a direct response to the fact that only treasures are being accepted as collateral in the global credit markets and the US Dollar is "reserve currency" by default. Hence, there is a very large demand component to treasuries that is unrealistic, unsustainable, unhealthy and explainable only within the context of the crash of the credit markets. Low US interest rates cannot be sustained much longer without GREAT cost to our financial system, as we know it. The Trillions of dollars in subsidies being offered by the Fed to the credit markets make the billions of dollars of reckless subsidies to say gasoline in Iran or bread in Egypt look like paltry handouts, yet those subsidies are often referred to as dangerous to those countries balance of payments and government debt ratios. Go figure.

Second, after seeing companies like chicken producer Pilgrims Pride go bankrupt largely due to derivative contracts in corn which went bad costing them millions, I realized that real companies that produced real products were pulled into the derivative markets (along with investment funds like Harvard University's Endowment) with promises from Wall Street Firms to "hedge" their operations at levels that were completely out of context with the needs to do so in their every day operations. So when I read that GM, the Bankrupt now Government owned US Automaker, just pumped $413 Million (Won 491 Billion) into it's Korean joint venture with Daewoo, called GM Daewoo, after GM Daewoo had it's "entire equity base (cash) wiped out by Won 2.3 Trillion of currency derivatives losses", I realized this problem has not gone away.

So how do these two seemingly unrelated articles jog my brain? Well, first, I have presumed for some time that the increasingly oligopolistic nature of American business does some things well. They become extremely inefficient and difficult to manage but hugely profitable due to their purchasing power with very large scale orders(evident by the ability of these companies to lay huge amounts of their work force and turn out higher profits with lower revenues); they are entirely responsible for driving manufacturing out of the US with their desire to constantly lower the cost of inputs to meet needs for quarterly profits; they become faceless, unwieldy and largely wrapped up in getting as large as possible by squeezing out any and all competitive elements while colluding with the other oligopoly members on pricing; the collective "tax" these companies call "profits" begin to look like a tax because no longer are these companies benefiting their many individual owners and pools of investors like when there are many players of all sizes in an industry, but these companies start to look like mini socialist governments, taxing their "customers" with fixed prices, lying to, cheating and outright stealing from their customers (at least 1 out of every 3 grocery store visits I make I have to return and get a refund on an item that was overcharged at the register); paying exorbitant salaries to the "apparatchik" (crony insiders) selected to run the organizations; paying their "workers" lower and lower wages and most importantly, generating HUGE amounts of cash which then must be "invested"; the cash generated is so large only Wall Street firms have the wherewithal to handle the money.

This is where Wall Street and Hedge Funds come in. Where does all the cash generated by these oligopoly companies go? It appears much of it found it's way into the same esoteric products that financial and insurance companies were buying and selling which means huge losses on the books of some companies. This is truly where Wall Street hits Main Street and it is only possible when Main Street has become an oligopolistic town with profits large enough to play with the big boys in New York and Off Shore. Now even these huge companies, which have shown a great penchant for halting internal "investment" and "growth plans", cutting dramatically their "inventory levels", laying off huge numbers of employees and hence creating very large cash balances, need to "play it safe" and buy treasuries as there is uncertainty in the economy and lack of any other "instrument" to invest in due to the collapse in the credit markets. The lack of liquidity from “productive industry” (those who make and sell tangible products) in the US is further exasborating the crises and forcing the Fed to offer more support then would otherwise have been needed.

I sense a great deal of resentment building towards the dollar and treasury markets by countries forced to continue to hold both when they know it is no longer economically wise to do so.

I sense companies are going to continue to accumulate cash and hence buy treasuries as a cushion to a potential continued decline in the economy.

I assume there are still huge amounts of esoteric derivative products on the books of many a financial institution (and otherwise) that are basically worthless but being recorded as having value to avoid a collapse in the institutions.

I assume everyone knows these worthless assets are worthless but have stopped pressing for more collateral because there is no more collateral so nobody sees any benefit in continuing to bleed a turnip dry since losses on one party's books simply reverberate into losses in everyone else’s as well.

I figure, there is no near term end to the financial crises because it will take years for all of the worthless paper to be "wound down" so to speak while companies try to "earn" their way out of the financial mess.

What does all this mean? Is somebody going to blink? The markets now only have to drop 100 points for every man in Washington to find a podium and announce a new "program" or "reinforce their support" of the credit markets or "ensure no change in liquidity or interest rates" or whatever to "calm" the markets so they can continue their rise straight out of the stratosphere. It used to take Paulson 300 points to do the same. One needs little more evidence that the smoke screen being sold the public by the media conglomerates and PR spinsters in Washington is a total lie.

The global financial system is still a complete mess. Wall Street is celebrating every time a company "beats" some arbitrary analyst "prediction" of how much earnings and profits would drop over last year. Yes "drop" over last year. So if my profits are only down 18% and revenues down 10% when the street was looking for profits down 20% and revenues down 12% then my stock is going to a 52 week high! Yes I can celebrate that my stock is worth as much as in early 2008 even though my company is doing 30% or so less business than January 2008.

This is all liquidity driven. I love seeing the CNBC pundits all acting like everything is normal again. They talk stocks and earnings like the credit crises never happened. There is no need to discuss the fact that the Fed IS the Residential Mortgage Market, Commercial Mortgage Market, Consumer Credit Market, Student Loan Market, Auto Finance Market not to mention the other myriad of "support systems" in place to keep other markets from crumbling. The interest rates we are all paying on our credit cards, mortgages, and auto loans are all massively subsidized right now by the Fed and FDIC. The rates are COMPLETELY divorced from "market reality" which to an economic minded person like me no longer resembles "reality" at all.

Companies still being brought to their knees by bad derivative bets; trillions of dollars in "assets" on the books of thousands of banks, companies and hedge funds that are in the best case scenario worth $.30 on the dollar; hundreds of billions of dollars in government debt being sold every couple weeks by the Fed to finance the massive stimulus and deficit spending by the government being soaked up by institutions with no where else to turn to put their dollars; commodity prices completely divorced from economic demand realities; stock market valuations 20-40% elevated from fundamental realities, what does this mean?

Simple, we are seeing global inflation of ALL dollar-based assets, which is reflecting as we speak the massive loss in purchasing power of the dollar. Yet the dollar itself is only marginally off against a basket of currencies from last year's dramatic fall then rise again and the Fed is telling us that consumer prices in the US are stable to falling. How much longer can the relative value of the US Dollar maintain stability while the amount of dollars needed to purchase all commodities priced in dollar continues to rise?

If the US economy faces a second dip and other countries economies follow, especially the few developing nations that have held up relatively well during this latest recession, the underlying demand for commodities priced in dollars would drop further putting downward pressure on the price, but will this result in an actual drop in the dollar price of these assets or will the dollar price for commodities simply continue to rise as institutions increasingly seek to get out of their dollars by buying other assets?

This is the big money question. How far will the equity markets rise before someone decides to take his or her cash out in a big way? With all these dollars floating around now and the obvious inflation in the price of every global asset priced in dollars, the absolute dire state of the credit markets has held the Fed's hand in removing liquidity and getting interest rates back to normal levels. Where is the break point?

Removing liquidity will force reckoning by all those firms with worthless assets on their books and could put credit markets back in crises mode. Not removing liquidity is causing the inflation of all dollar-based assets globally. We are paying a huge, unrecognizably destructive price for being both the global reserve currency and the source of the global financial crises. We screwed ourselves and everyone else and there is no turning back. By not allowing the markets to work out the derivative driven credit crises, not matter how immediately painful it would have been, we have simply delayed the inevitable market correction while simultaneously created a new asset bubble fed by to many dollars floating around. The next move will be a double whammy. I cannot wait.

Fed Urges Secrecy on Banks in Bailout Programs

The out right insult of the title here, the headline in a Reuters article today is indicative of how bad the folks running the Fed are. From their insistence as far back as 2006 that the Trillions of dollars in Insurance Protection floating on unregulated markets would not harm the greater economy to their indiscriminate bail out of multiple unregulated companies while allowing many of them to become banks under accelerated application processes to their obvious ignorance of market mechanisms whereby allowing savvy institutions to rake in Billions in profits from the various Fed programs to float debt and buy back debt (print money) to the absolutely unconscionable allowing of financial and non-financial firms to float Private Debt with direct Public Backing through the FDIC to the complete take over of the consumer and mortgage credit markets to the tune of a couple Trillion Dollars...

Now they want total secrecy. The Fed is paranoid and incompetent and they are "spending" taxpayer money with abandon (flooding the banks with cash through buybacks of debt) while supporting without oversight firms they deem "to big to fail" at the same time they and the FDIC continue to encourage the building of more institutions that are "to big to fail" all the while inviting "private equity" and other unregulated non "financial" firms to buy into their tottering financial system.

Where does this end??? I have had it with these guys and our legislators are complete incompetent, impotent wimps with no backbone to deal with the Fed. Where are they in all this discussion?

From the Article

* Fed urges judge not to enforce order pending appeal
* Banks say disclosure could cause loss of confidence
By Jonathan Stempel

NEW YORK, Aug 27 (Reuters) - The U.S. Federal Reserve asked a federal judge not to enforce her order that it reveal the names of the banks that have participated in its emergency lending programs and the sums they received, saying such disclosure would threaten the companies and the economy....

Preska (Chief Justice Loretta Preska) said the Fed failed to show that revealing the names would stigmatize the banks and result in "imminent competitive harm." The Fed asked the judge not to require disclosure while it readies an appeal.
"Immediate release of these documents will cause irreparable harm to these institutions and to the board's ability to effectively manage the current, and any future, financial crisis," the central bank argued.

It added that the public interest favors a delay, citing a potential for "significant harms that could befall not only private companies, but the economy as a whole" if the information were disclosed.

Give me a break. At this point does it matter? We all know the firms that almost went under, the ones that are technically insolvent and only operating because of the accounting changes instituted early this year. There is no "news" to be revealed in disclosing this other then for the Citizens of this Nation to have the right to see how the Washington Financial Elite bailed out the Wall Street Financial Elite after their House of Cards came crumbling down.

Give me a BREAK!!