Yesterday's Fed Announcement And A Major Cause Of This Crisis - Transparency
We recently wrote that it was futile to do any type of future analysis on banks because it would be exogenous events that determined their future. That major banks were insolvent and it would be intervention that determined their future. I kept wondering over the last week why financials had moved so far so fast. I should have access to any information anyone on Wall Street has. Now this morning I hear comment about unusual activity in the bond market that confirms what most everyone must now be wondering - was it because Wall Street insiders knew the Fed was going to announce purchase of Treasuries yesterday? What a surprise. More deceit. Given this is our first bank-driven rally since the bear market started, Wall Street was either willing to make a serious bet that insolvent banks were going to be saved or they knew what the Fed's announcement was going to be. Banks didn't run 50-200% in a week because we were oversold. They ran that hard because almost surely someone knew what was going to be announced.
The real issue with the Fed's announcement is of transparency. Of individuals having access to the same information as Wall Street or politicians playing games with our money and our economic livelihood. Of repealing standards to ensure our banking system would remain safe, of being influenced by $3 billion in lobbyist money every year. Of playing games with our economy and banking system that has led us to this point. Therein lies what I believe may be the largest problem we are facing as a nation. One that spreads across government, business, Wall Street, boards of directors and on and on and on. Something that has been a major theme on here. The average American doesn't have access to transparency. Of what scheming decisions are being made and why. Of why changes are being made to the rule of law that we only find out about years after it has happened. When it has already negatively impacted society and may even present irreversible crises. Americans have no confidence not because our political and business leaders aren't good speech makers, as the new President surely is, but because we don't know what is going on. Because we have been deceived and continue to be deceived. This cannot be fixed by printing money or giving lip service to a new age. It can only be fixed by airing all of the dirty laundry. Of knowing from this point forward what every politician, lobbyist and board of directors is doing. Of reeling in the self-appointed ruling class and demanding that our economic policies are populist policies. Not secret agreements that line their pockets with our money.
Okay, as an after thought, lets address the Fed's announcement yesterday. First, as we've said before, money moves markets. And, yesterday's next step in quantitative easing is why the banks have rallied so hard. My favorite group of intellectual heavyweights on CNBC actually said yesterday that we don't need to worry about China buying our treasuries because the Federal Reserve will. That's a brilliant analysis. Let me give you my own analysis. If I applied yesterday's Fed logic to my personal situation, this is what it would mean - I could write personal checks then cash them myself with no money in my account. Then buy whatever I want to with the money I had just created. And, you as a business owner would accept that money. That works. I want the banking system and society's deposits to be saved but let's get real. The Fed may have stepped on the accelerator to allow a stock and bond market rally but it has solved none of the underlying issues that caused this crisis.
Quick update: I should have remarked that this still does not change my position on inflation versus deflation. I was probably the only person on the planet to sacrilegiously write last year that the Fed could print a reasonable amount of money and not cause inflation. We have seen $50 trillion taken out of the global economy. Central banks cannot monetize that loss. Nor can they monetize any substantial future losses.
The real issue with the Fed's announcement is of transparency. Of individuals having access to the same information as Wall Street or politicians playing games with our money and our economic livelihood. Of repealing standards to ensure our banking system would remain safe, of being influenced by $3 billion in lobbyist money every year. Of playing games with our economy and banking system that has led us to this point. Therein lies what I believe may be the largest problem we are facing as a nation. One that spreads across government, business, Wall Street, boards of directors and on and on and on. Something that has been a major theme on here. The average American doesn't have access to transparency. Of what scheming decisions are being made and why. Of why changes are being made to the rule of law that we only find out about years after it has happened. When it has already negatively impacted society and may even present irreversible crises. Americans have no confidence not because our political and business leaders aren't good speech makers, as the new President surely is, but because we don't know what is going on. Because we have been deceived and continue to be deceived. This cannot be fixed by printing money or giving lip service to a new age. It can only be fixed by airing all of the dirty laundry. Of knowing from this point forward what every politician, lobbyist and board of directors is doing. Of reeling in the self-appointed ruling class and demanding that our economic policies are populist policies. Not secret agreements that line their pockets with our money.
Okay, as an after thought, lets address the Fed's announcement yesterday. First, as we've said before, money moves markets. And, yesterday's next step in quantitative easing is why the banks have rallied so hard. My favorite group of intellectual heavyweights on CNBC actually said yesterday that we don't need to worry about China buying our treasuries because the Federal Reserve will. That's a brilliant analysis. Let me give you my own analysis. If I applied yesterday's Fed logic to my personal situation, this is what it would mean - I could write personal checks then cash them myself with no money in my account. Then buy whatever I want to with the money I had just created. And, you as a business owner would accept that money. That works. I want the banking system and society's deposits to be saved but let's get real. The Fed may have stepped on the accelerator to allow a stock and bond market rally but it has solved none of the underlying issues that caused this crisis.
Quick update: I should have remarked that this still does not change my position on inflation versus deflation. I was probably the only person on the planet to sacrilegiously write last year that the Fed could print a reasonable amount of money and not cause inflation. We have seen $50 trillion taken out of the global economy. Central banks cannot monetize that loss. Nor can they monetize any substantial future losses.
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