ALL BLOG POSTS AND COMMENTS COPYRIGHT (C) 2003-2020 VOX DAY. ALL RIGHTS RESERVED. REPRODUCTION WITHOUT WRITTEN PERMISSION IS EXPRESSLY PROHIBITED.

Wednesday, April 01, 2020

The two most important lessons

A 40-year Wall Street veteran imparts the most important lessons he has learned from swimming in the swamp of fake capitalist corruption:
The same players who were bailed out then went back to what they do best. Too big to fail is now bigger, but with one crucial difference – the concentration of toxic risk remains in fewer hands and is enabled by Washington’s pay-to-play swamp. As corporate debt hits new all-time highs, balance sheets remain riddled with accounting fraud and enforcement hits all-time lows; we will soon see who is naked and it won’t be pretty.

Last autumn, I warned investors that Germany’s economy was falling off a cliff and was either in a recession or would be very soon. I cautioned that Italy’s debt is a huge problem and other member states and the rest of the world are not far behind Germany. Now in March, you can expect and will need to prepare for a full-blown economic depression.

Banks, politicians and governments will scapegoat Covid-19 to shift the blame for over 30 years of fiscal profligacy, loose monetary policies, fraud, and the lack of any proper regulatory enforcement away from themselves and onto anything or anyone else. Eventually, taxes will skyrocket to pay for these opaque bailouts, reckless spending policies, and record low interest rates during the past three decades.

Covid-19 presents an easy way to assign blame while forcing through “emergency legislation” allowing big government to implement 1984-style draconian social controls that will impinge and dismantle personal freedoms, liberties and democratic principles as they fleece taxpayers – again. If you think the 2008 recession and bailouts were bad, wait until you see how the greatest economic depression in history plays out.

This bubble has only begun to pop, and there are many more shoes to drop from this centipede before prices hit bottom. The downside will be significantly worse than the upside. Until leverage, valuations and corporate debt return to reasonable levels, stay clear. When these events do happen, we will see once-in-a-lifetime opportunities to create wealth. 

The two most important lessons I learned from my 40 years in international financial markets, lessons that can also be applied to politics and to life in general, are to never make any decision based on emotion or ideology and to never, ever trust the news. Today’s media are exponentially worse than they were in the 1980s and 1990s. They no longer provide news. What they provide are stories that are around 80 percent ideology and opinion,10 percent lies and spin, and 10 percent fact.
Keep your powder dry. Exploit the opportunities as they present themselves. And always, Always, ALWAYS critically examine every piece of so-called "news" with a highly skeptical eye.

Labels: ,

61 Comments:

Blogger Silly but True April 01, 2020 8:07 AM  

Thankfully, Covid-19 is strong enough to survive their scapegoating. It may just come back for more.

Blogger maniacprovost April 01, 2020 8:13 AM  

As always, calling the bottom will be impossible for individual investors. Let's say the debt deflation apocalypse transpires. That would be even less analyzable than a typical market crash.

Given the huge value of the stock market, a market crash by itself constitutes deflation.

Now what if private equity collapsed and all their debt is written off. The money supply would shrink, but it wouldn't necessarily reduce prices of consumer goods and real estate.

And finally, if all debt were wiped out, would the reduction in loan "assets" equal the reduction in the money supply? Prices wouldn't need to change. Debt deflation would occur if loans were paid back, but if they are defaulted... I have to think about that.

Blogger John Regan April 01, 2020 8:23 AM  

It has occurred to me that the COVID-19 crisis is overblown to distract from the inevitable collapse of what you might term the international derivatives market that is at the bottom of the system as it now exists. Or maybe to manage the collapse. And of course by "manage", the system's officials mean to somehow preserve the system through to the other side of the collapse.

But I can't see how a pandemic, or the response to a pandemic, helps preserve the system.

A jubilee is something they will never do. It's unthinkable to them, and it doesn't matter that it's the only thing that will really work.

I mean, how does this play out? You have the pandemic. You impose controls that severely curtail economic activity and throw out some funny money to the rabble to see them through.

Then you can throw trillions upon trillions at the derivatives market to bail them out? Could that possibly keep the game going for another decade or so?

I just don't see it. I don't know what the objective is or how they would figure this could get them there.

Blogger Brett baker April 01, 2020 8:25 AM  

If the God-Emperor cannot get the economy going once the virus trails off, it's going to be bad. A debt jubilee would help, but even that has limitations. On shoring and a massive infrastructure program will also help. We'll just have to see.

Blogger steb April 01, 2020 8:48 AM  

When he says to stay clear, does he mean keep your money in cash?

Blogger Owen Martin April 01, 2020 9:52 AM  

The banks are also investing in loss making renewables like wind. None of these wind farms can make a profit. Billions in loans that will need to be bailed out at some stage.

Blogger Ominous Cowherd April 01, 2020 10:30 AM  

John Regan wrote:I don't know what the objective is or how they would figure this could get them there.
Their objective is to preserve the system that keeps them in power and you out of power.
They didn't start the pandemic, not intentionally at least. Nonetheless, the pandemic is upon us. They don't see the pandemic as working in their favor, but since it is working, they're going to try to harness it any way they can.

Blogger Stilicho April 01, 2020 10:31 AM  

From a bankster perspective, there is no such thing as a bad loan, only bad borrowers and that's what bailouts are for!

Blogger rikjames.313 April 01, 2020 10:43 AM  

First thing I know about first hand that tells me news is fake: In our local market, a dying rust belt city, one of the bigger TV reporters did a push to action story to help one of her fellow blacks who was also in her mega church. In doing so she misstated material facts. I knew she was lying because I was working on part of a business sale the guy was involved in and the actual facts were easily learned. We canceled the deal and walked away based on the fact.

About 6 months later the reporter lied to get public pressure and try to help the bad guy. For some reason it ticked me off and I contacted the news director and regional management for the station's owner.

All they did was have the reporter take down the online version of the story and email me an apology. No correction, no anything.

Second thing I know about that convinced me the news is fake: A few years ago anon had a protest rally that shut down our downtown. As part of that one of our billionaires ended up with his private security force arresting people after some large fights. All three TV stations with news departments and the two newspapers were there (actually one newspaper owns the other). I saw them there. The billionaire was embarrassed about the security force fighting and illegally arresting people and ordered a coverage spike, and there was not a word about in the media. Lots of posts on local discussion boards, but no coverage.

Blogger James Dixon April 01, 2020 10:43 AM  

> On shoring and a massive infrastructure program will also help.

Current interest rates on federal bonds are effectively zero. Even 30 year federal bonds are at 1.35% (per money.cnn.com). Current dividends on a total stock fund like VTI are currently 2.76% (per Google). Why not take out $1T in 30 year debt and invest it in a federally managed total market fund, then use the $14B/year (ignoring the increase in prices due to the purchase, as that's not really possible to calculate) on first the wall then infrastructure repair? Every year for 30 years. At end of the 30 years, sell off what's needed to pay back the bonds and keep the rest.

Repeat each year as long as the interest rates justify same.

Blogger awildgoose April 01, 2020 11:11 AM  

The people in charge love Corona-chan because she has enabled them to let some air out of the bubble while precluding the possibility of any reactions like Occupy Wall Street because, "virus!"

You can bet all the insiders were well-positioned for the drop and made billions buying puts and shorting equities. Those funds are now parked until the market bottom.

Once things bottom out they will seek to use those billions to gobble up distressed assets for pennies on the dollar, rinse and repeat.

Blogger Oswald April 01, 2020 11:16 AM  

Vox is cryptocurrency part of the future or is it part of the old system, and therefore doomed to fall with the rest of the system? The ultimate nothing value currency, not even worth the paper that it is not printed on.

Blogger Maniac April 01, 2020 11:29 AM  

Bad time for a short-term investment in the stock market? If not, anyone have any suggestions?

Blogger dc.sunsets April 01, 2020 11:48 AM  

This is why I question the joy of the Trump Admin's effectively nationalizing the Fed. I'm not saying entrusting (effectively) counterfeiting US money to an international banking cartel (the Fed) was good (it was and is utterly insane), but if VD's analysis on the special purpose vehicles for monetizing debt of all kinds is correct, the Executive Branch now is in the same place as Japan's government: It effectively can monetize an infinite purchasing power, placing it in the hands of THE POLITICAL SYSTEM, which if anything, is even more rapacious than is an international banking cartel.

Was/is Trump better than the D alternatives? Yes. But what do I see when Trump is at the podium back-slapping the CEO's of Walmart, of Big Pharma, etc.? I see Benito Mussolini talking up his system that he called CORPORATISM, where the means of production are ostensibly in private hands, but all decisions are made by the POLITICAL system. If the Administration (this one or any following) can now spend without limit, ordering the Fed to buy the debt of Pfizer and Walmart and Google as well as an unlimited amount of Treasury Debt, then we should remember that whoever pays the piper calls the tune. The Federal government can now effectively outbid every other entity on Earth, included us proles, for everything. And since the future cannot be consumed, only the present, this effectively can crowd out every other market consideration.

That's an astonishing power. I don't argue against costs of actions, BUT I loathe when the costs are hidden. Japan's government has propped up the prices of stocks and JGB's for decades, hiding the costs of their failed/failing policies. But those costs show up elsewhere, in high suicide rates and a population that increasingly wallows in dysfunction.

If the Trump Admin has arrogated to itself full control of credit-money creation, we may now finally see the end-game of when a populace discovers it can vote itself free payments endlessly from a bottomless well called the Public Treasury. It's not rocket-science to see that won't end well.

Blogger Stilicho April 01, 2020 11:49 AM  

@james dixon, thereby backing the dollar with equity via stock market. At a certain point govt owns the market. Might not be any worse than the current state of affairs where the big market players own the govt.

Downside for individual investors who, while they would get profit from govt buying stocks, would eventually have to invest in non-traded companies (e.g. local business, real estate, etc.). Bonus: would cause libertardian heads to explode.

Blogger Matt April 01, 2020 11:50 AM  

It's hard to say, but in general the main advice for deflation is to not have debt. So if you do, paying it off is the best investment.

Blogger Stilicho April 01, 2020 11:51 AM  

@james dixon, this is what appears to be going on with the SPVs vox discussed a few days ago. Scale/scope TBD

Blogger James Dixon April 01, 2020 11:51 AM  

> If not, anyone have any suggestions?

Normally gold would be a safe bet in this environment, but that doesn't seem to be the case here.

Regardless, safety is probably your primary concern. Our bank is still offering just over 1% 12 month CD's. It's better than nothing, and if the market sell off isn't done (which seems likely) you'll be in a good position to buy when it matures.

Blogger Stilicho April 01, 2020 11:52 AM  

@maniac how good are you at surfing the waves without insider info?

Blogger The Cooler April 01, 2020 12:09 PM  

Bad time for a short-term investment in the stock market? If not, anyone have any suggestions?

Gemstones and manufactured housing.

Blogger Grooveware April 01, 2020 12:19 PM  

Offer them 10 cents on the dollar on the 25 trillion dollars of debt have a few years of hardship all is good.

Blogger brbrophy April 01, 2020 12:37 PM  

@Maniac I don't think it's possible to gain on short-term investments unless you have already shorted the markets. If it helps, my strategy has been to only make long-term investments in businesses necessary for physical economic growth. This means businesses that are at the top of the supply chain. The reasoning is if these businesses fail, then everything else will fail too so there's minimal risk.

Blogger Brett baker April 01, 2020 12:47 PM  

I've been thinking about something similar with a transfer tax. Great minds think alike!

Blogger Ominous Cowherd April 01, 2020 1:02 PM  

Oswald wrote:... is cryptocurrency part of the future or is it part of the old system, and therefore doomed to fall with the rest of the system?
Cryptocurrency is either currency, so doomed to fail, or is a silly fad, so doomed to fail.

The thing that forces acceptance of a fiat currency is that the ruler requires that taxes be paid in the fiat currency. Unless a cryptocurrency is made the only tender for taxes, it will never become a true currency.

All the implementations of cryptocurrency I've heard of absolutely preclude privacy. All of them are ideal for grabblers. All of them have non-intuitive failure modes - it's easy for you or someone else to screw up something and have your cryptocurrency disappear.

Blogger RamboBearRon April 01, 2020 1:07 PM  

If you haven't, get cash. Papper or precious metals. Do not keep large cash balances in banks. They have already started to limit withdrawals in the US. I took my six-month cash reserve out and had to go to three separate branches to get the whole thing processed.

Blogger Rattlesnake_Kid April 01, 2020 1:25 PM  

Dirt, bullets, food and silver.

Blogger Akulkis April 01, 2020 2:09 PM  

"Once things bottom out they will seek to use those billions to gobble up distressed assets for pennies on the dollar, rinse and repeat."

And this is mentioned specifically by Jefferson as the reason the GREATEST threat to American citizens won't be any foreign army or navy, but domestic bankers.

Blogger furor kek tonicus ( LeBron James loves Asian Rape Farms and Slave Labor ) April 01, 2020 2:19 PM  

3. John Regan April 01, 2020 8:23 AM
But I can't see how a pandemic, or the response to a pandemic, helps preserve the system.



wrong question.

why would a Sociopath have any attachment or loyalty to a particular system ( whether modern American Muh International Free Trade + Dumbocracy or historical, traditional American Tariffs + Republicanism )? why would a Sociopath have loyalty to anything, other than themselves?

Sociopaths seek only their own benefit, they have no interest in a system which you believe you are acclimated too.

so if they see a path to hit the escape button on risks of Crony Bankitalism, while at the same time preventing the hoi polloi from enforcing consequences on them for their malfeasance
...
why wouldn't they?



9. rikjames.313 April 01, 2020 10:43 AM
The billionaire was embarrassed about the security force fighting and illegally arresting people


as i pointed out back when Antifa was running amuck:
Citizen's Arrests are a thing.

the fact that you are currently employed by a billionaire doesn't cancel your ability to make Citizen's Arrests.

which is not to say that there weren't abuses on the part of the billionaires jackbooted thugs.




11. awildgoose April 01, 2020 11:11 AM
Once things bottom out they will seek to use those billions to gobble up distressed assets for pennies on the dollar, rinse and repeat.



a-yup.

Blogger map April 01, 2020 2:25 PM  

From the article:

"Later that evening, thinking about my conversation, I recalled the highly-rated Wall Street crashes I saw during my career. In 1982, the fraud at Drysdale Government Securities INC. made one of our traders on the floor frantic. He was wildly flailing his arms, jumping up and down, and threw the handset of his phone to the floor, smashing it to pieces. All the while, he was shrieking: “F**king Drysdale has gone f**king bust. They will take down Chase Manhattan Bank with them, and the entire global f**king banking system. Repo is finished.

Repo is an abbreviation for Repurchase Agreements. The Repo marketplace is like a securities dealers’ pawn shop for government bonds – bring us your securities and some other player will provide short-term loans.

Shortly after his tirade, the Telerate screens flashed “Drysdale misses interest rate payments.” Drysdale was crashing and Chase Manhattan Bank, Manufacturers Hanover Trust, and US Trust Co. were all on the hook.

But luckily for them, the Federal Reserve was there to bail them out. The Federal Reserve Bank is not part of the federal government and is not actually a bank. It’s owned by the big member banks and acts to protect banking interests – it seems they enable fraud and cover it up."

Ah, yes…the innocent Fed bails out the profligate banks. Well, let’s see what the Fed was doing with the Federal Funds Rate between 1980-1982.

https://www.thebalance.com/fed-funds-rate-history-highs-lows-3306135

The period from 1980-1982 had some of the highest federal fund rates charged on record, with many periods hitting 20%. The Fed’s control of short-term interest rates sets the floor for all other interest rates. Why would you not expect a bank to go out of business when they have to borrow overnight money at that rate? Remember…that’s not 20% annualized. That’s 20% overnight. If I borrow $1,000 from the Fed, I owe $1,200 the next day. Yet, the story is that this is some kind of “fraud.”

From the article:

“A “broken Repo market” indicates something is very seriously wrong with financial markets, and a few short years later, we had another crisis. Who could forget living through October 19, 1987, Black Monday, when the stock market plummeted 508 points or 22.6 percent – the biggest one-day percentage decline in history?”

But it’s easy to see why the market collapsed. In 1986, the tax reform act raised the capital gains tax to 35%, and the Paris and Louvre accords failed. These accords were an attempt to fix exchange rates so that the floating currencies would move within a fixed range. James Baker and Alan Greenspan got into a fight over this…and Greenspan won, because he did not want his power limited by this exchange rule. The omerta on the fed continues.

Blogger John Regan April 01, 2020 2:33 PM  

@14: "That's an astonishing power."

As soon as the unit of account of any government is irredeemable, that "power" is there. Although it's an illusory power.

I have elsewhere referred to it - properly, I think - as a "conjuring power".

It's just becoming more and more openly used.

Blogger map April 01, 2020 2:34 PM  

dc.sunsets wrote:This is why I question the joy of the Trump Admin's effectively nationalizing the Fed. I'm not saying entrusting (effectively) counterfeiting US money to an international banking cartel (the Fed) was good (it was and is utterly insane), but if VD's analysis on the special purpose vehicles for monetizing debt of all kinds is correct, the Executive Branch now is in the same place as Japan's government: It effectively can monetize an infinite purchasing power, placing it in the hands of THE POLITICAL SYSTEM, which if anything, is even more rapacious than is an international banking cartel.

The Fed was supposed to be the entity to take out Donald Trump. It was supposed to start accelerating the increase in the Federal Funds rate until the economy crashed, thus assuring that Trump would lose either both houses of Congress and be impeached, or he would lose in the next presidential election. Trump, instead, called out the Fed's actions, forcing public scrutiny and negating the Fed's power to destroy him.

Instead, TPTB decided to use a pandemic to crash the economy. Trump triangulated by absorbing the Fed into Treasury. Now, Trump makes the decision of how much currency to print and how much debt to sell.

Remember, the Fed as an independent entity is an illusion, just like independent banks is an illusion. The purpose is to pass responsibility onto another party.

Blogger Ominous Cowherd April 01, 2020 2:34 PM  

Rattlesnake_Kid wrote:Dirt, bullets, food and silver.
Ground, guns, grub and gold. Alliteration makes everything better.

Blogger map April 01, 2020 2:36 PM  

Ominous Cowherd wrote:The thing that forces acceptance of a fiat currency is that the ruler requires that taxes be paid in the fiat currency. Unless a cryptocurrency is made the only tender for taxes, it will never become a true currency.

You cannot have a national currency without a national debt.

Blogger Silly but True April 01, 2020 2:37 PM  

Cryptocurrency has achieved sufficient critical mass to remain a novelty toy for interested collectors, like Garbage Pail Kids cards or Hotwheels cars.

Blogger Dyspeptic April 01, 2020 2:53 PM  

As I have stated repeatedly the Wuhan Virus "cure" will be far, far worse than the disease. The typical cycle of media induced mass hysteria coupled with political/bureaucratic CYA and over-reaction will be far more destructive than doing absolutely nothing about the virus. What we are witnessing is the mother of all "We Have To Do Something" events that is so typical of politicians and their bureaucratic minions. There may not be enough small arms ammunition or helicopters to fix this problem at this point. Maybe something atavistic like mass beatings with baseball bats. Surely we have enough baseball bats to solve this problem once and for all.

Blogger awildgoose April 01, 2020 2:54 PM  

Maniac wrote:Bad time for a short-term investment in the stock market? If not, anyone have any suggestions?

You could buy put options versus major indexes.

Buying put options means you know the max loss at the start. The max loss is what you paid to buy the options.

There are plenty of free e-books out there, I won't put a wall of text here in the comments.

Blogger John Regan April 01, 2020 2:55 PM  

In the interests of precision and accuracy, I'd just like to advise commenters that the term "currency" should be used only to refer to paper money (e.g., in the US Federal Reserve Notes); "money" is a much larger category that would encompass, at the very least, all currency and demand deposits in banks.

There's a big difference between "currency" and "money".

Blogger James Dixon April 01, 2020 3:21 PM  

> At a certain point govt owns the market.

That is the downside, yes. But if the voting rights were held by registered voters rather than a government bureaucrat it would negate a lot of the potential problems that would cause.

> ...this is what appears to be going on with the SPVs...

Key word, appears. We don't really have any idea exactly what's going on with those yet.

Blogger James Dixon April 01, 2020 3:27 PM  

> All of them have non-intuitive failure modes - it's easy for you or someone else to screw up something and have your cryptocurrency disappear.

As has been demonstrated several times.

Blogger Crew April 01, 2020 3:50 PM  

Is the God Emperor holding the tiger by the tail or is he riding the tiger and making it do his bidding?

Blogger Wormwood April 01, 2020 4:12 PM  

Taxes cannot skyrocket to pay for these bailouts. If the taxpayer was forced to pay for the government they got, then they would revolt and vote everyone out of office, and possibly hang them from lampposts, which is why I've been calling for raising taxes. We have been borrowing against the future for some time now, and if the future is here then it's time to default on the debts of our ancestors.

Blogger James Dixon April 01, 2020 4:19 PM  

> Is the God Emperor holding the tiger by the tail...

Wrong portion of the anatomy. :)

Blogger Lurker April 01, 2020 5:44 PM  

"Bad time for a short-term investment in the stock market? If not, anyone have any suggestions?"

Gold (miners and ETFs) perform well when the printing presses are running at full speed.

Blogger sammibandit April 01, 2020 6:10 PM  

There's still 1967 US silver quarters in circulation here. Worth snapping up if they come into your hands. Also worth seeing and feeling the difference of silver in coinage and teaching kids too.

Blogger A trite re-white April 01, 2020 6:18 PM  

Flying by the seats of their pants, and probably acting on bad forecasts and information.

Blogger maniacprovost April 01, 2020 6:24 PM  

govt owns the market.

... But if the voting rights were held by registered voters rather than a government bureaucrat it would negate a lot of the potential problems that would cause.


Perhaps 3% of the massive problems would be negated.

But, since voters do not control the government, one may as well advocate for free banking.

Blogger Ominous Cowherd April 01, 2020 6:37 PM  

sammibandit wrote:There's still 1967 US silver quarters in circulation here.
'64 was the last full year that US coins had silver. For US quarters, if you don't see the copper streak in the middle, it's silver. For Canadian coins, you can't tell by looking at the edge.

Blogger Damelon Brinn April 01, 2020 6:47 PM  

I invested in a bunch of garden seeds yesterday. Would have anyway, but now that people are fretting about food shortages, some excess produce might be profitable this year.

Blogger Azure Amaranthine April 01, 2020 7:42 PM  

"The thing that forces acceptance of a fiat currency is that the ruler requires that taxes be paid in the fiat currency."

That's just one of the potential modes of the currently accepted viable level of subtlety in currency enforcement. Other things have been and will be used.

Blogger Akulkis April 01, 2020 8:29 PM  

"Why would you not expect a bank to go out of business when they have to borrow overnight money at that rate? Remember…that’s not 20% annualized. That’s 20% overnight. If I borrow $1,000 from the Fed, I owe $1,200 the next day. Yet, the story is that this is some kind of “fraud.”"

No, the "discount rate" at the "overnight window" is not an overnight percentage, it's the annualized percentage.

That's why the Fed Rate is the floor for commercial and private bank loans.

Blogger sammibandit April 01, 2020 9:51 PM  

@Ominous Cowherd

Wow. Maybe I'm thinking of Canadian coin. ... upon review I see that some 1967 issues had 80% and some had 50% silver in the quarter for the anniversary of confederation. Ones with the lynx were pure. So if you're lucky to get our quarters may as well check them.

Blogger John Rockwell April 01, 2020 9:56 PM  

@Oswald

Crypto requires internet access and Electricity. Gold can be handled offline and offgrid.

Blogger map April 01, 2020 10:17 PM  

Akulkis wrote:No, the "discount rate" at the "overnight window" is not an overnight percentage, it's the annualized percentage.

That's why the Fed Rate is the floor for commercial and private bank loans.


The discount rate and the federal funds rate are different. The federal funds rate is overnight money for meeting the Fed's reserve requirements. It is the ceiling at which the Fed will lend to meet reserve requirements. Member banks are free to borrow from each other to meet these requirements if they do not want to borrow from the Fed. The Fed Fund's rate is the lender of last resort. The fed funds rate at which they lend is the target rate and the fed funds rate negotiated between the banks is the effective rate.

The discount rate is the rate at which the fed will lend directly, but it is rarely used. Rather, the Fed announces its highest bid, the banks scramble to get better bids among themselves, and that usually provides the rate of borrowing without resorting to the discount window.

The Fed Funds rate applies only to reserve amounts. Before it was 7%, then it was 10% and, as of March 20, 2020 it is 0%. Yeah, you are right. The rates are annualized, so it is the interest rate divided by 365 or so.

https://www.federalreserve.gov/monetarypolicy/reservereq.htm#table1

Yep, reserves are now 0%.

The thing is, the Fed can manipulate the effective fed funds rate by adding and subtracting liquidity from the economy, forcing the effective rate to approach the target rate. But...the liquidity added and subtracted is small because this is a reserve amount...which is now zero.

This is probably why the banks are being so stingy. The Fed is not purchasing securities, so it is not adding liquidity. The banks do not know what the ultimate limitation is on their loan origination, so they do not want to be stuck with loans that they could not trade to other banks or back to the Fed.

Blogger Roddie Piper April 01, 2020 10:27 PM  

It's called "Dutch Disease" and it happens to any nation that discovers a fountain of free money. All the smart people cluster around the fountain trying to snag some easy cash while the rest of the economy falls into ruin. Who cares, we can buy stuff made in other countries with our free money.

The Fed's only solution is to add more nozzles to that fountain. When it starts to run dry and people have to fight for access, things are going to get ugly fast. You can't just say, well, that was fun, now I'll go back to doing something productive.

The Fed can of course increase the money flow a million-fold, but when it does, the total value of that flow will drop a thousand-fold.

Blogger Jack Amok April 01, 2020 10:41 PM  

Odd, the daily Corona-Chan update from the White House started with announcements of enhanced anti-narco operations.

Storms on the horizon?

Blogger Pathfinderlight April 01, 2020 10:54 PM  

If you're thinking we're okay because promethian businesses are failing, think again. This war is about power vs freedom, not money. We're doing well to see the rot for what it is and help defiance it, but we should never get cocky. That's what started the enemy festering in the first place.

Blogger furor kek tonicus ( LeBron James loves Asian Rape Farms and Slave Labor ) April 02, 2020 1:12 AM  

"In January 2019, the Fed updated its reserve requirements for depository institutions of different sizes.

Banks with more than $124.2 million in net transaction accounts must maintain a reserve of 10% of net transaction accounts. Banks with more than $16.3 million to $124.2 million must reserve 3% of net transaction accounts. Banks with net transaction accounts of up to $16.3 million or less do not have a reserve requirement. "

Blogger jkmack April 02, 2020 3:00 AM  

i have an extremely high level of confidence that the boomers who are losing their nest eggs right now, will gladly place the yoke of socialism on their childrens necks, to slide luxuriously into their various graves.

Blogger jkmack April 02, 2020 3:18 AM  

2008 to 2020 was nothing more than training a pavlovian response into a certain group, so that they would be the bag holders for the final event. Buy the dip, Buy the dip, just buy the effing dip, dont think, just buy the dip.

And now, they will take the fall, as they continue to attempt to buy the dip, and see their portfolio fall to 10 or 20% or less, if they select a few of the numerous bankruptcies that are about to be filed. One service I read was flogging SPG which is a reit that holds some prime shopping malls or whatever. it is a sector leader, a great dividend payer etc etc. and now it is down 60%, so they moved it to their "phoenix portfolio" and continue to flog it as a great ultra value play.

Poor idiots who cant see with their eyes and hear with their ears are going to lose all their money.

Blogger Ominous Cowherd April 02, 2020 8:26 AM  

jkmack wrote:Buy the dip, Buy the dip, just buy the effing dip, dont think, just buy the dip.
When everyone know that nobody should hold stocks, that would be a time to buy stocks, except in the current anarchotyranny it's crazy to have any financial assets at all.

Blogger Unknown July 04, 2020 11:14 PM  

Wow! this is Amazing! Which Quote can make you Successful? Scratch here to find out which Quote can make you Successful? …████████████████████████████████████████████████████████████████████████████████████████████████

Post a Comment

Rules of the blog

<< Home

Newer Posts Older Posts