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Are the Central Banks killing the economy?

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Sat, 2019-10-12 14:01

#1

iyraste1313

Are the Central Banks killing the economy?

It's consistent...every time the economic news sounds badly, the markets jump to new highs.

Why? Because the Central Banks may be forced to intervene to drop interest rates (to the banks and prime corps)...and via its QE, print more money, buy more bonds and stocks......so the financial and real estate assets continue inflating (not counted of course in the "official indicators"), sucking more wealth from the productive economies...

"Global Air Freight Decline Now Worst Since 2008 Financial Crisis...zerohedge

Thu, 2019-10-31 16:19

#2

iyraste1313

Boom turning to bust...Michael Snyder

Not since the last recession have we seen numbers this bad. The “mini-boom” that we witnessed for several years has now turned into a “bust”, and very tough times are ahead.

The following are 14 signs that the U.S. economy is steadily weakening…

#1 U.S. business hiring has fallen to a 7 year low.

#2 Consumer confidence in the United States has now declined for 3 months in a row.

#3 Defaults on “subprime” auto loans are happening at the fastest pace that we have seen since 2008.

#4 The percentage of “subprime” auto loans that are at least 60 days delinquent is now higher than it was at any point during the last recession.

#5 Vacancies at U.S. shopping malls have hit the highest level since the last recession.

#6 Destination Maternity has announced that they will be closing 183 stores as the worst year for store closings in U.S. history just continues to get worse.

#7 The Cass Freight Index has now fallen for 10 months in a row.

#8 U.S. rail carload volumes have plunged to the lowest level in 3 years.

#9 In September, orders for class 8 heavy duty trucks were down 71 percent.

#10 Tesla’s U.S. sales were down a whopping 39 percent during the third quarter of 2019.

#11 The bad news just keeps rolling in for the real estate industry. Last month, existing home sales in the United States declined by another 2.2 percent.

#12 New home prices have fallen to the lowest level in almost 3 years.

#13 According to one recent report, 44 percent of all Americans don’t make enough money to cover their monthly expenses.

#14 A recent survey found that more than two-thirds of all U.S. households “are preparing for a possible recession”.

All over the country, economic activity is slowing down, and this is hitting many small businesses particularly hard.....

...surely the central bankers must be aware that their QE money printing, zero interest rates, real estate and financial asset super inflationism are a leach on the economcs of productiuon?

Thu, 2019-10-31 20:56

#3

JKR

What should the central banks do?

I think Donald Trump's the one killing the economy.

Fri, 2019-11-01 00:28

#4

Sean in Ottawa

I think Donald Trump is damaging the economy.

However, I do not think what we are looking at is a recession and I do not think it is caused by Trump alone.

Without Trump we would still be in the midst of more than one realignment in the global economy and power structure and more than one in the structural domestic economy.

Those who seek to proceed as if there is not something significant going on are imperiling the economy (most of them). Thos who think that it is just about Trump are doing the same (Most of the others).

I think we should not see this as if it is a recession in terms of those cycles we have seen in the past becuase there is no indication that we are in one of those. There is nothing underpinning any kind of future return to normalacy.

Fri, 2019-11-01 09:53

#5

NDPP

KR: 'Sawing Off the Branch It's Sitting On': US Has Itself to Blame for Dollar Collapse (and vid)

https://on.rt.com/a4fb

"Nobody is interested in the major financial destruction that will occur but they will be produced by the United States acting alone..."

Fri, 2019-11-01 12:27

(Reply to #5) #6

JKR

NDPP wrote:

KR: 'Sawing Off the Branch It's Sitting On': US Has Itself to Blame for Dollar Collapse (and vid)

https://on.rt.com/a4fb

"Nobody is interested in the major financial destruction that will occur but they will be produced by the United States acting alone..."

I completely agree with this. Unless there's a huge increase in US productivity very soon which is unlikely, the US's huge deficits and debt and they're low taxation rates will lead to a huge devaluation in the US dollar and a very deep recession which will impact the world.

Fri, 2019-11-01 15:34

#7

Pondering

Not the banks, the people telling the banks what to do. I think one of the reasons neoliberalism has been so successful is by making institutions rather than people responsible for things. "Banks" is not shorthand for the people running the banks. After all, they are just employees, even the CEO. If the banks are responsible for this then there is no one to blame. The only people who will pay are those that aren't responsible for the decisions. Same goes for SNC Lavalin. The only people who will pay are those who had nothing to do with the corruption.

So no, "The Banks" are not responsible. There are people with names who are responsible. We just don't know who they are.

Fri, 2019-11-01 23:31

#8

JKR

Pondering wrote:

So no, "The Banks" are not responsible. There are people with names who are responsible. We just don't know who they are.

Last time I checked, capitalism was legal in Canada.

Sat, 2019-11-02 00:48

(Reply to #8) #9

Pondering

JKR wrote:

Pondering wrote:

So no, "The Banks" are not responsible. There are people with names who are responsible. We just don't know who they are.

Last time I checked, capitalism was legal in Canada.

I don't think there is anything better to replace capitalism as a primary economic system at the moment. That doesn't mean the people pulling the strings are acting in the best interests of the people. The bank of Canada used to lend Canada money interest free until it was privatized.

Sat, 2019-11-02 02:46

(Reply to #9) #10

JKR

Pondering wrote:

I don't think there is anything better to replace capitalism as a primary economic system at the moment. That doesn't mean the people pulling the strings are acting in the best interests of the people. The bank of Canada used to lend Canada money interest free until it was privatized.

Since Canadians have continuously voted for governments who have established and supported the Bank of Canada to be the way it is, who's responsible for the Bank of Canada being the way it is?

Sat, 2019-11-02 09:59

(Reply to #10) #11

Pondering

JKR wrote:

Pondering wrote:

I don't think there is anything better to replace capitalism as a primary economic system at the moment. That doesn't mean the people pulling the strings are acting in the best interests of the people. The bank of Canada used to lend Canada money interest free until it was privatized.

Since Canadians have continuously voted for governments who have established and supported the Bank of Canada to be the way it is, who's responsible for the Bank of Canada being the way it is?

The Bank of Canada was not established as it is now. It was changed.

The people who changed it and maintain it in this form are responsible. Why are the Liberals running the country? Because of voters. Why did Trudeau play dress up in India? Because of voters. Everything Harper did is because of voters. That doesn't mean they voted to have the experimental lakes in Ontario defunded or to have the Bank of Canada changed.

By your reasoning the Trudeau government is responsible for nothing because they were elected so it is the voters who are responsible.

Sat, 2019-11-02 11:29

(Reply to #11) #12

Sean in Ottawa

JKR wrote:

Pondering wrote:

I don't think there is anything better to replace capitalism as a primary economic system at the moment. That doesn't mean the people pulling the strings are acting in the best interests of the people. The bank of Canada used to lend Canada money interest free until it was privatized.

Since Canadians have continuously voted for governments who have established and supported the Bank of Canada to be the way it is, who's responsible for the Bank of Canada being the way it is?

Could be said about every policy.

False becuase elections are never about policy to any great degree and these kinds of policies are never debated or voted on by the public.

But in fairness, this is about responsible government in a representative model.

The representatives who make the decisions are responsible and the public is responsible for the quality of representatives. We are not responsible for individual decisions but we are for the overall quality of the collection of decisions.

Faux populism is an abdication of the public responsibility and holding people responsible for individual decisions is an abdication of the responsibilities of the administrators.

ETA: just saw Pondering's comment at the end -- this is exactly the point

Sat, 2019-11-02 14:16

(Reply to #12) #13

JKR

Pondering wrote:

By your reasoning the Trudeau government is responsible for nothing because they were elected so it is the voters who are responsible.

The Trudeau government has many responsibilities. Their primary responsibility is to maintain the confidence of the House of Commons, the elected representatives of the people. The members of the Trudeau cabinet also have the responsibility of adhering to the oaths of office they took on assuming government. In order to continue on as government after the next election the Liberals will also have to maintain a significant level of popularity with the voting public.

By your reasoning the voters that have elected all our governments over generations are responsible for nothing but it is always some other person, persons, or groups who are responsible for establishing our social, economic, and political, system. I think there is a lot of sense in that old saying, "We have met the enemy and they are us."

Sat, 2019-11-02 16:50

Sean in Ottawa

This argument about responsibility is circular: more than one party can be responsible for something without the other being less responsible. This is a significant part of law even.

However, political responsibility in a responsible government is that people choose representatives who become responsible for the issues not debated at length by the public.

People are generally responsible for the government and the government is responsible for the individual decisions except those specifically put to the people.

Sun, 2019-11-03 18:52

iyraste1313

I don't think there is anything better to replace capitalism as a primary economic system at the moment....

If you accept this, you accept the destruction of Society and the Planet. For the route causes are deeply inset it the private for profit formations of capital.

So many National and Territorial formations of capital for economic production have been tried and must be tried.

What is the point of pondering, if you accept defeat.

It is precisely in these pages that we must be discussing the alternative mechanisms for our common survival. Otherwise what's the point?

Why are not these mechanisms being discussed here?

Sun, 2019-11-03 19:28

iyraste1313

Fed Ups Its Wall Street Bailout to $690 Billion a Week as Media Snoozes

By Pam Martens and Russ Martens: October 24, 2019 ~

Yesterday the Federal Reserve Bank of New York (New York Fed) announced that the giant money spigot it turned on for Wall Street on September 17 would be growing exponentially beginning today.

The New York Fed will now be lavishing up to $120 billion a day in cheap overnight loans to Wall Street securities trading firms, a daily increase of $45 billion from its previously announced $75 billion a day. In addition, it is increasing its 14-day term loans to Wall Street, a program which also came out of the blue in September, to $45 billion. Those term loans since September have been occurring twice a week, meaning another $90 billion a week will be offered, bringing the total weekly offering to an astounding $690 billion. It should be noted that if the same Wall Street firms are getting these loans continuously rolled over, they are effectively permanent loans. (That’s exactly what happened during the 2007-2010 Wall Street collapse: some teetering Wall Street casinos received, individually, $2 trillion in cumulative loans that were rolled over for two and one-half years – without the authorization or even awareness of Congress or the American people. One bank, Citigroup, received over $2.5 trillion in Fed loans, much of them at an interest rate below 1 percent, at a time when it was insolvent and couldn’t have obtained loans in the open market at even high double-digit interest rates.)

This latest announcement from the Fed comes on the heels of an October 11 announcement that it is launching a program to buy up $60 billion a month in Treasury bills and that program will last into “at least” the second quarter of next year.

What the New York Fed is doing is unprecedented in U.S. history and yet you will find no mention of it on any front page of a newspaper today. This is just a partial list of what makes this action unprecedented or highly questionable:

No Wall Street crisis has been announced to the public to explain these massive loans and Treasury buybacks;

Not one hearing has been held by Congress on the matter;

Not one official elected by the American people has authorized these loans;

The loans are not being made to commercial banks (which could re-loan the money to stimulate the U.S. economy). The loans are going to the New York Fed’s primary dealers, which are stock and bond trading houses on Wall Street who count hedge funds among their largest borrowers; (See list below. There is only one bank among the 24 primary dealers.)

Many of the primary dealers are units of foreign banks whose share prices have been in freefall. The Fed is making these loans at approximately 2 percent interest – an interest rate these firms could not come anywhere close to obtaining in the open market;

These same foreign banks are counterparties to mega U.S. banks’ derivative trades – raising the suggestion that this is another bailout of Wall Street’s derivatives mess as occurred in 2008......

........Money is being created from nothing to bail out the financial system!
Our money is being debased. The Productive economy is being leached, what with its agencies converting its productive capacity into financial tradings and interest bearing costs.

Good riddance to the corporatist economy! But what is being prepared to replace it?

Private corporate money and credit creation must be transformed to social agencies. ....Decentralist agencies, bioregional agencies!....Socialism from the bottom up!
This is the alternative to our fast destroying capitalist system!

Mon, 2019-11-04 15:50

NDPP

Keiser Report: What is the Fed Hiding?

https://youtu.be/vYS59HP46eM

"Max and Stacy discuss the fact that the massive daily NY Fed interventions in the repo market are getting worse and worse..."

The Jimmy Dore Show

https://youtu.be/XRQecD-Gopg

"Fed secretly bailing out banking system AGAIN!"

Sat, 2019-11-09 11:08

iyraste1313

China Auto Sales Fall 6% In October As Global Auto Recession Shows No Signs Of Slowingby Tyler Durden Fri, 11/08/2019 - 22:05

China has been spearheading the global recession in the automotive industry and, as one more month has come to pass, there are still no signs of the bleeding letting up.

As the U.S. and China continue to grapple with solving "Phase 1" of the allegedly upcoming trade deal, pressure remains on the automobile industry globally. For October, China retail passenger vehicle sales were lower by 6% year over year to 1.87 million units, according to the Passenger Car Association. October SUV retail sales also fell 0.7% y/y to 853,130 units..........

Consumers are maxed out in debt, the debt of course being used as financial assets to loan more debt and counterveiled with hedged and leveraged derivatives to the tune now of 1200 trillion US$, dwarfing the global economy...and people still think that financial collapse is a myth? Collapse denial?

Sun, 2019-11-10 15:46

(Reply to #18) #19

Pondering

iyraste1313 wrote:

I don't think there is anything better to replace capitalism as a primary economic system at the moment....

If you accept this, you accept the destruction of Society and the Planet. For the route causes are deeply inset it the private for profit formations of capital.

So many National and Territorial formations of capital for economic production have been tried and must be tried.

What is the point of pondering, if you accept defeat.

It is precisely in these pages that we must be discussing the alternative mechanisms for our common survival. Otherwise what's the point?

Why are not these mechanisms being discussed here?

Fortunately capitalism isn't the problem because people will never give it up. Social democracy is a good system though it needs a lot of tweaking. It isn't the system that is the problem it is the people running it. It seems no matter what the system people have a means of gathering power and misusing it. We have to keep tweaking whatever system we are under to prevent it.

Capitalism is difficult to defeat because the grand majority of people embrace capitalism. Telling people they can't make chairs and sell them for a profit would be like telling people they aren't allowed to cook their own food.

The problem isn't lack of alternatives it is that people don't want the alternatives in large enough numbers to do more than create small communities which is great but it won't stop climate change.

an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state.

Capitalism is almost as natural as breathing. Me saying I will bake you a pie if you give me enough apples to bake two is capitalism.

Tue, 2019-11-12 09:36

iyraste1313

I suggest you study Marx and the evolution of finance capital, not the primitive examples of Adam Smith...True enough, it is the sociopaths of any system that wreck hell...but in capitalism especially in its corporate and bankster phases, it is the sociopaths that control........What we need is a discussion stage for preparing alternatives to capitalism in its later stages...True capitalists at the grass roots level, local markets etc, is okay.....under the control of social mechanisms, not in turn controlled by the self same capitalists....

Tue, 2019-11-12 18:13

kropotkin1951

Pondering you need to look closer at the capital accumulation side of the equation. Making more than you need for yourself and trading or selling it to your neighbours is not capitalism. Capitalism is groups of rich people getting together to make laws that allow them to make money because they have money not because they produce anything. Local production and local trade are the future if we are to survive but the focus has to switch to those kinds of businesses and away from large corporations run by MBA's whose only concern is quarterly shareholder profit.

Wed, 2019-11-13 00:15

(Reply to #21) #22

Pondering

kropotkin1951 wrote:

Pondering you need to look closer at the capital accumulation side of the equation. Making more than you need for yourself and trading or selling it to your neighbours is not capitalism. Capitalism is groups of rich people getting together to make laws that allow them to make money because they have money not because they produce anything. Local production and local trade are the future if we are to survive but the focus has to switch to those kinds of businesses and away from large corporations run by MBA's whose only concern is quarterly shareholder profit.

That is how it has developed but it is not the only form that capitalism can take.

Definition of capitalism

: an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market

https://www.merriam-webster.com/dictionary/c

Determined "mainly" by the free market? I think inappropriate reliance on the free market is the problem not capitalism defined as:

an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state.

"an era of free-market capitalism"

Free market capitalism is only one form.

I think the philosophy of individualism coupled with free-market capitalism is the problem. Individualism is losing its popularity as a result of climate change and job insecurity.

If you just want to discuss theoretically that's fine but from a practical perspective you would need majority buy in. Capitalism is not about to commit suicide.

apitalism dominated by social democracy seems to work out pretty well although there is plenty of room for improvement and expansion.

If capitalism or the world financial system does collapse there is no shortage of ideas of what could replace it. The problem is not a derth of ideas. People have been working on alternatives for decades.

https://www.thevenusproject.com/the-venus-project/aims-and-proposals/

Wed, 2019-11-13 00:30

Pondering

Local production and local trade doesn't produce the type of goods that people want. We don't have to throw out the baby with the bathwater. There are many improvements that can be made. The problem is convincing people to demand the change that you or we envision.

Thu, 2019-11-14 11:15

iyraste1313

The "Oh, $hit!" Moment For Subprime Auto Loans Arrives; Serious Delinquencies Blow Out

Authored by Wolf Richter via WolfStreet.com,

Serious auto-loan delinquencies – auto loans that are 90 days or more past due – in the third quarter of 2019, after an amazing trajectory, reached a historic high of $62 billion, according to data from the New York Fed today:

This $62 billion of seriously delinquent loan balances are what auto lenders, particularly those that specialize in subprime auto loans, such as Santander Consumer USA, Credit Acceptance Corporation, and many smaller specialized lenders are now trying to deal with. If they cannot cure the delinquency, they’re hiring specialized companies that repossess the vehicles to be sold at auction. The difference between the loan balance and the proceeds from the auction, plus the costs involved, are what a lender loses on the deal.

But delinquencies are a flow: As current delinquencies are hitting the lenders’ balance sheet and income statement, the flow continues and more loans are becoming delinquent. And lenders are still making new loans to risky customers and a portion of those loans will become delinquent too. And now the flow of delinquent loans is increasing – and this isn’t going to stop anytime soon: These loans are out there and new one are being added to them, and a portion of them will be defaulting........

This subprime market of course is just one...I can´t even go into the technicalities that finance and derivative trade such risky markets based on Central banks zero interest rates to its corporate customers and repo market money printing by the US Fed to maintain the fiction of a sustainable 1200 trillion derivatives market!

Total outstanding balances of auto loans and leases in Q3, according to the New York Fed’s measure (higher and more inclusive than the Federal Reserve Board of Governors’ consumer credit data) rose to $1.32 trillion

Thu, 2019-11-14 20:00

kropotkin1951

Pondering please do some reading. Accumulation of capital, usually by accident of birth or theft, to buy some type of means of production of goods so that one can employ others and take a portion of their labour as profit is the basis for what is called capitalism. Not every economic activity like say an artisan based market economy is capitalism. Now if the artisans form guilds and hire apprentices and laborers then you get to capitalism.

Thu, 2019-11-14 21:07

Pondering

People also want the right to hire out their labor and to hire and pay employees to do tasks. There is nothing inherently wrong with that. The problem is that the people we elect to serve us get corrupted and serve the wealthy instead. Capitalism isn't the problem. Corruption is the problem. Venezuela under Chavez still had corruption.

Realistically people are not ready to give up on capitalism. You might as well try to convince everyone they should be vegans living in communes. You can try but I don't think you will get very far.

Thu, 2019-11-14 21:55

(Reply to #26) #27

kropotkin1951

Pondering wrote:

People also want the right to hire out their labor and to hire and pay employees to do tasks. There is nothing inherently wrong with that. The problem is that the people we elect to serve us get corrupted and serve the wealthy instead. Capitalism isn't the problem. Corruption is the problem. Venezuela under Chavez still had corruption.

Realistically people are not ready to give up on capitalism. You might as well try to convince everyone they should be vegans living in communes. You can try but I don't think you will get very far.

And that is why you are at heart a liberal and not a leftist. I get it that you and all the other liberals in this country don't want change but frankly that is not an argument for a leftist that is merely conceding defeat and joining the other side. But then you don't even have a clue what the sides are so you are incapable of answering the question of which side are you on. You seem to answer it by saying I am on my side and whats the matter with me hiring a Temporary Foreign Worker to be my maid.

Thu, 2019-11-14 23:01

(Reply to #27) #28

Pondering

kropotkin1951 wrote:

Pondering wrote:

People also want the right to hire out their labor and to hire and pay employees to do tasks. There is nothing inherently wrong with that. The problem is that the people we elect to serve us get corrupted and serve the wealthy instead. Capitalism isn't the problem. Corruption is the problem. Venezuela under Chavez still had corruption.

Realistically people are not ready to give up on capitalism. You might as well try to convince everyone they should be vegans living in communes. You can try but I don't think you will get very far.

And that is why you are at heart a liberal and not a leftist. I get it that you and all the other liberals in this country don't want change but frankly that is not an argument for a leftist that is merely conceding defeat and joining the other side. But then you don't even have a clue what the sides are so you are incapable of answering the question of which side are you on. You seem to answer it by saying I am on my side and whats the matter with me hiring a Temporary Foreign Worker to be my maid.

Just the opposite. I do want change. I am not content with utopian visions of overthrowing capitalism. I want ideas that people will buy in on. Climate change cannot wait until the majority of people agree that capitalism is bad and agree on a system to replace it.

We do have to defeat neoliberalism as it is interfering in our ability to combat climate change. Our democracy is corrupted but not beyond repair.

If you genuinely believe in democracy then the people get to choose their destiny even if it is not the one you think best. Democracy means we must convince people to take the path we believe in.

Thu, 2019-11-14 23:10

Pondering

As to which "side" I am on. I am on the side of compassion and justice. I am on the side of clean energy and sustainable living. I am on the side of education and enlightenment. I am on the side of democracy. I am on the side of the collective good and pragmatic solutions.

I believe that most people are looking for pragmatic leadership that will provide stability while we transition to a green economy.

Fri, 2019-11-15 10:25

iyraste1313

By definition a green economy cannot be capitalist, as capitalist economy does not allow any other judgement then the profit motive. A capitalist will not stop a pipeline nor a mine because it is destroying the sustainability of a rural e.g. agriculture based economy to flourish. By definition. Nor will its bankers, nor controlled governments permit this.

A green economy must be controlled directly by people´s organizations, with people´s agendas, planetary agendas. That is part of the definition. Otherwise it is bs.

Fri, 2019-11-15 11:45

(Reply to #30) #31

Pondering

iyraste1313 wrote:

By definition a green economy cannot be capitalist, as capitalist economy does not allow any other judgement then the profit motive. A capitalist will not stop a pipeline nor a mine because it is destroying the sustainability of a rural e.g. agriculture based economy to flourish. By definition. Nor will its bankers, nor controlled governments permit this.

A green economy must be controlled directly by people´s organizations, with people´s agendas, planetary agendas. That is part of the definition. Otherwise it is bs.

That is like the arguments against socialism. It isn't all or nothing.

Tue, 2019-11-19 11:27

iyraste1313

That’s the brutal reality of the last 10 years – all that lovely money central banks created through QE, that was supposed to fuel growth through economic multiplier effects, got sucked into the stock market swamp. ....Bill Blain

so when are socialists going to focus on the financial system?

....That is like the arguments against socialism. It isn't all or nothing. ...

In the case of finance capitalism, there is nothing in between, either credit and money creation is done by People´s organizations or by the billionares...in the case of economics, true enough we can have a competitive small scale and preferably community economic system, but strictly under the control of People´s organizations, preferably some form of bioregional governance system...

Wed, 2019-11-20 10:35

iyraste1313

Japan's exports post worst fall in 3 years as shipments to U.S., China drop

Daniel Leussink

(Reuters) - Japan’s exports tumbled at their quickest pace in three years in October, threatening to tip the trade-reliant economy into recession as weakening demand from United States and China darkened the outlook.......

...what with people maxed out on their credit cards, what with all the easy loan terms available, sub prime everything...

The crisis is getting very very near...and with a so called leftish regime in the NDP refusing to call on the Christo fascist coup in Bolivia against the satanic forces of Indigenous culture?

It is time for a new political movement in Canada!!

Wed, 2019-11-20 13:12

NDPP

Mario Draghi and the Grand Folly of the Eurozone

https://twitter.com/spikedonline/status/1196699740358021120

"After Mario Draghi's 8 crisis-ridden years as head of the European Central Bank, the verdict is in: The eurozone remains economically unhealthy structurally flawed and dangerously technocratic..."

Mon, 2019-12-16 12:45

iyraste1313

Authored by Charles Hugh Smith via OfTwoMinds blog,

It was all fun and games enriching the super-wealthy but now the karmic cost of the Fed's manipulation and propaganda is about to come due.

A "market" that needs $1 trillion in panic-money-printing by the Fed to stave off a karmic-overdue implosion is not a market: a legitimate market enables price discovery. What is price discovery? The decisions and actions of buyers and sellers set the price of everything: assets, goods, services, risk and the price of borrowing money, i.e. interest rates and the availability of credit.

The U.S. has not had legitimate market in 12 years. What we call "the market" is a crude simulation that obscures the Federal Reserve's Socialism for the Super-Wealthy: the vast majority of the income-producing assets are owned by the super-wealthy, and so all the Fed money-printing that's been needed to inflate asset bubbles to new extremes only serves to further enrich the already-super-wealthy.

The apologists claim the bubbles must be inflated to "help" the average American, but that claim is absurdly specious. The majority of Americans "own" near-zero assets that earn income; at best they own rapidly-depreciating vehicles, a home that doesn't generate any income and a life insurance policy that pays off only when they pass away.

The average American uses the family home for shelter, and so its currently inflated price does nothing to improve the household income: it's paper wealth, and we've already seen how rapidly that paper wealth can vanish when Housing Bubble #1 popped. (Housing Bubble #2 is currently sliding toward the edge of the abyss.)

Were legitimate price discovery allowed, the asset bubbles would pop, and the real-world impact on the average household that owns essentially zero income-producing assets would be minimal. Their overvalued house would fall in half, but since it still functions as shelter, the actual economic impact is minimal. As for the life insurance company's losses--where's the benefit today of an "asset" that only pays out when you die?

Meanwhile, the super-wealthy own stocks, bonds, companies and commercial real estate, all of which generate income. The rich get richer in two ways: their assets generate small fortunes in income (unearned income is what separates "the rich" from everyone else) and thanks to the Fed's constant goosing of asset prices, their paper wealth has multiplied.

The dirty little secret that nobody dares whisper lest the whisper trigger a self-reinforcing avalanche is that this Fed-manipulated "market" is illiquid: if any serious selling were to arise, there wouldn't be enough buyers to stave off a complete implosion of the bubbles.

The Fed's game is to create the illusion of liquidity by being the buyer of last resort, only now the Fed is the only buyer. This is the toxic consequence of the Fed's 12 long years of Socialism for the Super-Wealthy: thanks to the Fed's destruction of price discovery, the super-wealthy no longer worry about liquidity, so leverage is the name of the game.

Thu, 2020-01-16 10:17

iyraste1313

The Fed "Just Let The Cat Out Of The Bag", Admits Being Forced To Fuel Asset Bubble

Authored by Richard Breslow via Bloomberg,

The worst kept secret in the financial world is now not only accepted orthodoxy, but finally being discussed openly by, at least some, authorities.

Central bank policies are directly driving asset prices and the bubbles therein. It’s what they do. It has been so stunningly obvious that, at this point, it makes a mockery of things to deny it as an ongoing, and essential, part of how their strategy is implemented.....

...my heart goes out to the people living on the city streets, especially in this era of global warming snowfalls, to my dear friend S., forced to live on a pittance rental for her sickness, dying of stress, chasing warm places and a roof....

And as for the progressives ignoring this fundamental force driving Society? Creating obscene inequality, destroying the economy which cannot match the greed in chasing the markets insterad of building sustainable economy?