Blog Archives

No Matter How Much Money the Fed Prints, We Still Can’t Afford Nice Things

You’d think that with the Federal Reserve printing trillions of dollars since 2008, we’d all be able to afford nice things. But you’d be wrong: after 11 years of Fed money-printing, nice things are even more out of reach for all but the favored few who’ve received the Fed’s bounty of freshly created currency.

The Fed’s trillions were supposed to trickle down into the real economy, but they never did. All those trillions boosted asset prices and the wealth of the $100 million yachts and private jets elite.

Instead costs have soared while wages have stagnated. If this widening gap between wages and costs were accurately presented, there would a political revolt against the Fed and those few who have benefited so immensely from Fed money-printing: the banks, financiers, corporations buying back their own shares, the owners of high-frequency trading computers, etc.

Despite the best efforts of the government’s “suppress all evidence of runaway cost inflation” functionaries, a few facts have slipped through. Let’s start with income from 1980 to the present, as per the Congressional Budget Office (CBO). Note that this is all pre-government-transfer (Social Security, food stamps, etc.) income, both earned (wages) and unearned (investment income).

The top households have done very, very well in the past 20 years of Fed largesse, while the incomes of the bottom 80% have gone nowhere.

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[KR1489] Keiser Report: What Came First, the Chicken or the Fed?

In this episode of Keiser Report, Max and Stacy look at the increasing velocity and quantity of injections by the Fed into the repo markets. They also note that nobody is short the market as nobody dares ‘fight the Fed’. In the second half, Max talks to Craig Hemke of TFMetalsReport.com about the latest in the gold market as Trump renews hostilities in the Middle East and the central bank continues pumping money into markets

Instability Rising: Why 2020 Will Be Different

Economically, the 11 years since the Global Financial Crisis of 2008-09 have been one relatively coherent era of modest growth, rising wealth/income inequality and coordinated central bank stimulus every time a crisis threatened to disrupt the domestic or global economy.

This era will draw to a close in 2020 and a new era of destabilization and uncertainty begins.

Why will all the policies that have worked so well for 11 years stop working in 2020?

All the monetary/fiscal policies of the past decade were simply extreme versions of tried-and-true policies that central banks and governments have used for the past 75 years to restore growth in a recession or financial crisis: lower interest rates, increase credit/liquidity, and ramp up government spending (i.e. deficit spending) to compensate for declining private-sector spending.

These policies were designed to be short-term stimulus programs to jump-start the economy out of a slowdown (recession), which typically lasted between 9 and 18 months.

These policies are now permanent, as the system is now dependent on these policies. Any reduction in central bank stimulus causes a market crash (witness the 20% drop in 2018 as the Fed slowly raised interest rates from near-zero) and any reduction in deficit spending threatens to trigger a recession.

The problem is that these policies create distortions that cannot be fixed with more of what caused the distortions in the first place: more extreme monetary and fiscal stimulus.

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[KR1488] Keiser Report: Capitalism Without Capital

In this episode of Keiser Report, Max and Stacy look at an article from John Authers which basically concurs with Max’s long held thesis that ‘you can’t have capitalism without capital.’ In Authers’ piece, he notes that 40% of the S&P500 are companies with negative tangible book value. In the second half, Max talks to Tone Vays of Unconfiscatable.com about his reservations about the bitcoin bull market, believing a big pullback is still in the cards before prices can aim for a new all-time high.

409Ks, 90% Gains, The Fed and Darth Vader’s Warning

In case you missed it, here’s a snapshot of the most recent Federal Reserve board meeting:

It’s certainly a peculiar moment in history when the President chides everyone who hasn’t gained 90% in their 409K (sic), seemingly unaware that only the top 5% have enough in a 409K to make a difference.

President Trump and the Federal Reserve agree: the “solution” to inequality and malaise is to boost the 409Ks of the top 5%, leaving the rest of the American workforce as glorified servants of the few who benefit from a record-setting stock market.

Note to the Prez and the Fed: goosing the stock market only increases wealth/income inequality. There’s only so many dogs owned by the top 5% the peasantry can walk, only so many Priuses and Teslas to wash, only so many preciously over-scheduled children to tutor, only so many $50 steak dinners to bus, only so many bedpans of the top 5%’s parents to empty. The top 5% who benefit from the stock market’s relentless melt-up can’t generate a tide that raises all ships; all they can do is further enrich themselves on the debt-serfdom of their servants.

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[KR1487] Keiser Report: Permanent War, Permanent Repo

In this episode of Keiser Report, Max and Stacy look at the latest phase of permanent war and how bitcoin, gold, and oil markets responded to the assassination of General Soleimani. They also look at the US central bank seeking ways to make their latest interventions in the repo markets a permanent fixture for bankers.

In the second half, Max talks to Michael Pento of PentoPort.com about his case for gold. Though being not someone who considers himself a ‘goldbug,’ Pento believes there are many things the central banks and governments are doing that warrant a long position in the yellow metal.

Front Running – Green New Deal

In this episode, Front Running looks at the jobs program called the Green New Deal, most associated at the moment with Congresswoman Alexandria Ocasio-Cortez but which has been formulated for quite some years with the ambition to provide an FDR-like jobs program to put Americans to work rebuilding its infrastructure for a post-carbon world.

Two guests join Front Running to discuss the Green New Deal; James (Jim) Howard Kunstler, author of “The Geography of Nowhere” and “The Long Emergency,” and Randy Voller, former mayor of Pittsboro, North Carolina, as well as the former chair of the Democratic Party of North Carolina.

Together they look at the ability of the Green New Deal to be a jobs program of the magnitude that could restore US infrastructure and manufacturing capacity. Kunstler believes that it is a ‘when-you-wish-upon-a-star’ program filled with ‘wishful thinking’ because we can’t keep our fantasy land of suburbia, Walt Disney World, and the US military afloat on alternative energy as these all need an underlying platform built on oil, gas, and coal. Voller has more hope that the Green New Deal can succeed and programs can be implemented locally and immediately for genuine benefit.

You can listen to the podcast of this instead by clicking here.

Transcript is below the fold — >

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Just a Friendly Heads-Up, Bulls: The Fed Just Slashed its Balance Sheet

Just a friendly heads-up to all the Bulls bowing and murmuring prayers to the Golden Idol of the Federal Reserve: the Fed just slashed its balance sheet–yes, reduced its assets. After panic-printing $410 billion in a few months, a $24 billion decline isn’t much, but it does suggest the Fed might finally be worrying about the reckless, insane bubble it inflated:

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Was Marx Right about Capitalism Destroying Itself from Within?

One of the core tenets of Marx’s work is that capitalism will be undone by internal contradictions that would manifest as ever-greater crises that would eventually destroy the system from within.

As the global economy continues to unravel beneath the surface, it’s a good time to re-examine Marx’s claim. If if turns out the current version of global capitalism is indeed unraveling due to its internal contradictions, it would be valuable to understand this now rather than later.

Sartre once observed that students are only taught enough about Marx’s work to refute it. Despite the difficulty of Marx’s writings (only German philosophers can be so convoluted), its elevation to scripture by various academic tribes, and his failure to describe his “scientific socialism” alternative to capitalism in the same detail he devoted to his critique of capitalism, Marx’s work remains relevant and insightful.

Thus we continue to see articles such as Capitalism is unfolding exactly as Karl Marx predicted.

I’m not in either of the two camps, those trained to dismiss Marx’s critiques or those who devote their careers to jousting over Marxist minutiae. It’s been decades since I studied Marx in a college classroom, but I’ve continued to apply his core insights to our era.

To understand Marx’s critique of capitalism, we have to understand that he came to economics via philosophy, specifically the writings of Hegel. In other words, Marx did not approach the study of capitalism from the abstractions of classical 19th century economics (Marx was born in 1818) but from a profound interest in history, social and spiritual development and human alienation. Marx ended up devoting his life to an understanding of capitalism because it is a world-system that drives history and society.

Hegel believed human history wasn’t just “one damn thing after another;” he saw it as teleological, i.e. on a trajectory leading to higher social and spiritual development. Given this context, it’s little wonder that Marx viewed capitalism as a necessary stage of history creating the conditions for the next advancement.

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[KR1486] Keiser Report: Vietnam for a ‘Decent Standard of Living’

In this episode of Keiser Report, Max and Stacy look at the irony of US veterans of the Vietnam War retiring to Vietnam, where they can afford a better standard of living, including healthcare. They also discuss the ‘three truths’ that the Democrats need to accept about 2016 in order to win in 2020.

In the second half, Max continues his interview with Mitch Feierstein of PlanetPonzi.com about the euphoria in the markets. They discuss gold, what Japan’s economy can tell us about the US zombie future and what his predictions are for the 2020 election.

The Fed Can’t Reverse the Decline of Financialization and Globalization

The global economy and financial system are both running on the last toxic fumes of financialization and globalization.

For two generations, globalization and financialization have been the two engines of global growth and soaring assets. Globalization can mean many things, but its beating heart is the arbitraging of the labor of the powerless, and commodity, environmental and tax costs by the powerful to increase their profits and wealth.

In other words, globalization is the result of those at the top of the wealth-power pyramid shifting capital around the world to exploit lower costs of labor, commodities, environmental regulations and taxes.

This manifests as offshoring of jobs, the stripmining of forests, minerals, etc., the degradation of local ecosystems, the decline of tax revenues derived from capital and the explosive rise in stock market valuations as wages stagnate or decline.

A key element in globalization is the transfer of risk from the owners of capital to the workers and public resources. Examples of this transfer of risk abound: rather than pay workers benefits, corporations game part-time/full-time labor laws so workers’ health insurance is paid by taxpayers (Medicaid). Corporations pay wages too low to survive so workers depend on public-sector assistance (food stamps, etc.)

Rather than provide vehicles to workers who drive for a living, corporations such as Uber and Lyft transfer all the risks of ownership, maintenance and enterprise to the drivers. And so on.

Financialization is the exploitation of assets/income that were previously safe from predation by those with access to low-cost central bank credit. While definitions vary, mine is:

Financialization is the mass commoditization of debt collaterized by previously unsecuritized assets, a pyramiding of risk and speculation that is only possible in a massive expansion of low-cost credit and leverage for those at the top of the wealth-power pyramid: financiers, banks and corporations.

One example is the student loan “industry,” which prior to financialization did not exist. A previously safe from predation asset/source of income–college degrees–has been securitized so that loans issued to students for largely worthless diplomas can be sold globally as “secure assets with guaranteed yields.”

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Is This “The Top”?

The consensus seems to be that the stock market is on its way to much higher levels, and soon. The near-term targets for the S&P 500 (SPX, currently around 3,235) range from 3,500 to 4,000, with longer-term targets reaching “the sky’s the limit.”

The consensus reasoning goes like this:

— Central banks can print a lot more money

— Stocks rise when central banks print more money.

The history of the 2009-2019 era strongly supports this simple cause-effect, and so just about everyone is on the same side of the boat, the “don’t fight the Fed” side of ever-higher stock multiples and ever-higher prices.

Simply put: sales and profits no longer matter, the only thing that matters is whether central banks are printing more money. And since we all know they’ll have to print more money to keep the flying pig (the stock market) aloft, then it follows as night follows day that stocks will rise essentially forever.

As soon as the consensus has settled complacently on one side of the boat, contrarians take notice as history has a perverse habit of foiling any overwhelmingly complacent consensus.

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