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“'Easy Money' Is All They Know"

Friday, September 13, 2019 18:57

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“’Easy Money’ Is All They Know”

by David Stockman

“Madness is something rare in individuals –

but in groups, parties, peoples, ages it is the rule.”

- Friedrich Nietzsche, “Beyond Good and Evil” (1886)

“If the present trend continues, the Dow Jones Industrial Average will close higher for the eighth straight day.

Nice way to close the week. But who’s to say the Tweeter-in-Chief won’t get involved before the bell rings? As of yesterday morning, the administration’s negotiators were open to an “interim” trade deal with China. As of yesterday afternoon, the White House denied such a step would be considered. As of yesterday evening, the Donald was saying “it’s something we would consider, I guess.” Chris Scott will be here Tuesday to make sense of it – along with whatever else happens on the China/Trade War front between now and then…

That the stock market continues to levitate is a testament to decades of central bank madness. Record highs for the equity indices are not endorsements of the Donald’s toxic mix of Trade War, Fiscal Debauch, and Easy Money.

Folks, MAGA is a crock. And I’ll be exposing it in my Keynote Address – “After ‘Peak Trump’: Charting Uncharted Waters” – at the 2019 Irrational Economic Summit October 10-12, right outside Imperial Washington.

The President of the United States is an economic half-wit whose views on global commerce, debt, and interest rates are a clear and present danger to prosperity. And he’s bullying them into the policy arena at an exceedingly fraught time. Indeed, the chickens let loose amid more than 30 years of egregious money-printing by the Federal Reserve are coming home to roost.

As to the matter of our rogue Keynesian central bankers, Trump outdid himself recently, showing that the ship of fools domiciled in the Eccles Building can’t hold a candle to the Donald’s monetary mind-melt: “Our Federal Reserve cannot “mentally” keep up with the competition – other countries. At the G-7 in France, all of the other Leaders were giddy about how low their Interest Costs have gone. Germany is actually “getting paid” to borrow money – ZERO INTEREST PLUS! No Clue Fed!”

Sorry, folks. This is buck-naked gibberish. It’s also a reminder of why the Donald doesn’t give a whit about the nation’s hemorrhaging fiscal accounts. During his first 31 months in office – corresponding with the very top of the longest economic recovery in history – he’s added $2.7 trillion to the net public debt. Yet he thinks it’s just ducky that the German government is getting paid to borrow money.

To the contrary, the race to the interest rate bottom is not some kind of international sports contest. It’s an historic financial catastrophe in the making. And if the other G-7 leaders were actually “giddy” about the slow-motion destruction of their bond markets and banking systems wrought by the European Central Bank, then “impaired” would be a better term for their mental condition. After all, anything less than alarm about these 10-year yield quotes from today’s bond ticker is the same thing as failing the financial breathalyzer test:

• Germany: -0.54%

• Belgium: -0.21%

• Netherlands: -0.43%

• France: -0.26%

• Italy: 0.84%

• Spain: 0.23%

• Portugal: 0.23%

• Greece: 1.50%

What these ludicrous yields imply is that speculators and fools have driven bond prices to well above par. That means huge guaranteed capital losses on redemption or market correction. That Italian 10-year, for example,

was issued recently with a 3% coupon, meaning that today’s buyer will get whacked for a 70% loss upon redemption. A year ago, the Portugal bond was trading at a yield of 1.87%, the Spanish bond at 1.46%. The moves since imply massive capital losses for speculators coming in at today’s tiny yields.

Now, the ECB is driving its deposit rate down to -0.50%. And it’s going to restart “quantitative easing” in November. That should nudge the European financial system even closer to implosion, with Deutsche Bank leading the way down the drain…

Yet the Donald wants the Fed to emulate that madness. By the dim lights under the Great Orange Combover, his man Jerome Powell is “clueless” and “mentally” incapable of keeping up with the monetary arsonists elsewhere around the planet… When it comes to the trade file, of course, the Donald is at least as out to lunch. His latest gyrations leave little doubt about that.”

- http://deepstatedeclassified.com/

Source: http://coyoteprime-runningcauseicantfly.blogspot.com/2019/09/easy-money-is-all-they-know.html

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