Is the Central Bank’s Rigged Stock Market Ready to Crash on Schedule?

Central banks are cause of inverted yield curve recessions

We just saw a major rift open in the US stock market that we haven’t seen since the dot-com bust in 1999. While the Dow rose by almost half a percent to a new all-time high, the NASDAQ, because it is heavier tech stocks, plunged almost 2%. Tech stocks nosedived while others rose to create new highs. Is this a one-off, or has a purge begun for the tech stocks that have driven the nation’s third-longest bull market?


Yesterday’s dramatic “rotational” divergence between tech stocks and the rest of the market, which as Sentiment Trader pointed out the only time in history when the Dow Jones closed at a new all time high while the Nasdaq dropped 2% was on April 14, 1999, stunned many and prompted Bloomberg to write that “a crack has finally formed in the foundation of the U.S. bull market. Now investors must decide if any structural damage has been done.” (Zero Hedge)


This is important because, without the nearly constant lead of those tech stocks, the market would have been a bear a long time ago. Tech stocks created half of the market’s gains in 2017. Financials, which led the Trump Rally, also hit the rocks in recent weeks, at one point erasing almost all of their gains for 2017, though they recovered a little of late. If both continue to falter, the rally rapidly implodes and maybe the whole bull market with it.

The Tech sector suffered its worse high-altitude nose bleeds at the end of May — the biggest outflow in over a year. Said Miller Tabak’s Matt Maley in a note to clients:


Everybody remembers 2000, so they might be getting a little nervous with this development. I just wonder how many people have said to themselves, ‘If AMZN gets to $1,000, I’m going to take at least some profits. (Zero Hedge)


Last Friday, of course, may be a one-off, but it may also be happening because central banks are pulling the plug on their direct ownership of the stock market or, at least, their hoarding of tech stocks. That direct cornering of the stock market largely went unnoticed until this past quarter. Central banks now have enough interest throughout the US stock market to be considered as having cornered the entire stock market, which means they have the capacity to let it fall or to keep it where it is by just refusing to sell their own stocks.


Have central banks rigged the stock market entirely?


Whether or not the market implodes now depends entirely on whether central banks let it fall. If they decide to continue to buy up all the slack, they may be able to keep it artificially afloat a lot longer because they can create infinite amounts of money so long as they keep it all in stocks so that it only creates inflation in stock values, as it has been doing, and not in the general marketplace. We have certainly seen that not much of it trickles from Wall Street down to Main Street. So, there is little worry of creating mass inflation from mass money printing.

I have long suspected that central banks were the only force preventing the crash of the NYSE that I predicted for last year and that started last January, which was the worst January in the New York Stock Exchange’s history. Last week, however, was the first time I read something that indicates I was right about the Fed propping up the stock market in order to take us through an election year by the extraordinary means of buying stocks directly.

In an article titled “Central Banks Now Own Stocks And Bonds Worth Trillions – And They Could Crash The Markets By Selling Them,” Michael Snyder writes,


Have you ever wondered why stocks just seem to keep going up no matter what happens? For years, financial markets have been behaving in ways that seem to defy any rational explanation, but once you understand the role that central banks have been playing everything begins to make sense…. As you will see below, global central banks are on pace to buy 3.6 trillion dollars worth of stocks and bonds this year alone. At this point, the Swiss National Bank owns more publicly-traded shares of Facebook than Mark Zuckerberg…. These global central banks are shamelessly pumping up global stock markets, but because they now have such vast holdings they could also cause a devastating global stock market crash simply by starting to sell off their portfolios…. The truth is that global central banks are the real “plunge protection team”. If stocks start surging higher on any particular day for seemingly no reason, it is probably the work of a central bank. Because they can inject billions of dollars into the markets whenever they want, that essentially allows them to “play god” and move the markets in any direction that they please. But of course what they have done is essentially destroy the marketplace. A “free market” for stocks basically no longer exists because of all this central bank manipulation. (The Economic Collapse Blog)


It is no secret, of course, that central banks were attempting to create a wealth effect by pumping up stocks through their own member banks — buying US bonds back from banks with free overnight interest with the proviso that banks use the income to buy stocks. As I wrote during last year’s stock market plunge, even central bankers finally admitted to that.

What is a secret is the fact that they have started buying stocks directly in order to pump up stock indexes. Federal Reserve chair, Janet Yellen, began talking openly about the possibility of doing that last year when it became obvious that the stock market was failing, and I speculated that the Fed actually started to do what they were talking about covertly through proxies so it wouldn’t show up on their own balance sheet.

Those proxies could have been there own member banks, but it turns out to have been other central banks. Their ability to get other central banks to do that for them could go like this. “We’ll buy $100 billion of your bonds if you agree to buy $100 billion worth of stocks in the US stock market to help us keep this thing up through the election season.” (Replace bonds with whatever else that central bank may need to see happen in the economy that it manages.)


The Swiss National Bank is one of the biggest offenders. During just the first three months of this year, it bought 17 billion dollars worth of U.S. stocks, and that brought the overall total that the Swiss National Bank is currently holding to more than $80 billion.

Have you ever wondered why shares of Apple just seem to keep going up and up and up?

Well, the Swiss National Bank bought almost 4 million shares of Apple during the months of January, February and March.


I wonder how many it bought last year when the stock market needed a recovery team. And that’s just one of the Fed’s friends, who was ready to rush in so as to suppress the Swiss franc. These banks are now following the Chinese model of crash protection. This is exactly what China’s central bank did on a massive scale to prop up its failing stock market and end the crash. It essentially nationalized many of its companies by soaking up all the slop in stocks.


Will central banks now let the rigged stock market crash?


If I was right about the Fed shoring up the stock market through proxies — and it appears now that I was – I also said all of last year that they would most likely only do that long enough to make sure Obama’s team won the election. If their recovery was failing as bad as I believed it was, I figured they’d do anything they could to continue to hold it up long enough to make get Team Obama (Hillary) elected. Trump, during his candidacy, was talking a lot about how Janet Yellen needed to go. So, you know the central bank would definitely want to keep Trump out of power. I noted how the Fed held mysterious closed-door emergency meetings last year, including one immediately called with the president and vice president.

Also, if it became clear to them that their recovery was going to fail, they wouldn’t want their globalist friend, Obama, to take the blame — being globalists themselves — and certainly wouldn’t want themselves to take the blame for a recovery that failed the moment they pulled the stimulator’s plug out of the wall. They’d need a scapegoat, and they would love for it to look like the crash was entirely the fault of anti-globalists. So, their private motto, should Trump win, would be “Trump for Chump” if they knew everything was hopeless (as I’ve been saying it is for a long time because their recovery plan was always a horrible solution).

Now that Trump has stocked his cabinet with Goldman Sachs Execs., however, Trump talks a completely different story about Yellen. She’s good now and valuable, and he says he’d like to see more loose monetary policy, so their reasons to eject him may be less pronounced; but, at the time, they didn’t know for sure if they could own him. And it may be all the more clear to them at this point that their recovery is going to fail as soon as they stop propping up stocks.

Now that it’s clear central banks have been buying enormous flows of US stocks, this could explain why the stock market paradoxically rose right after the Fed announced its rate hike in March. Mysteriously, stock prices made their third largest post-FOMC meeting move upward right after their announced rate hike, an event that would normally send stocks down. Even Goldman Sachs said they found the move mysterious. In fact, Goldman noted that stock prices rose as a result of the Fed’s quarter-point rate increase as they would normally be expected to rise had the Fed lowered its interest target by that much. Goldman’s analysis was that this was “almost certainly not” the central bank’s desired outcome.

Yes, “almost certainly not.” Perhaps I have an explanation for this mystery: The Fed appears now to have had friends in faraway places ready to backstop the market the second the decision was announced. I don’t know that’s what happened right at that moment, but we do know now that central banks have been directly supporting the US market this year and last with massive purchases. For their part, Goldman stayed with calling the event a mystery and said that the anomaly only meant the Fed would have all the more incentive to raise rates again at its next meeting.

I’m a little more suspicious than that and far less a friend of the Fed than Goldman, which practically owns the Fed. I always maintained that the Fed would discover it couldn’t raise rates twice without crashing it’s phony recovery. That, however, would not be true if they have friends of nearly infinite financial power waiting in the wings as the plunge protection team. I’m not as content as Goldman to leave it an unsolved mystery. So, I’m going to put out a hypothesis that goes from Goldman’s “almost certainly not” their intention to cause the market to rise to “Oh, I guess it was their intention”:

If you finally start to realize your recovery does not appear it is going to succeed — that it will never become capable of holding on its own — then you will really want the failure of your recovery to happen at a time when you can scapegoat someone else. One way to do that and not get blamed for the failure is to make sure you secretly give the market a huge jog with the right timing and severity to be sure it crashes on that person’s watch.

To do that clandestinely, have your friends lift the market upon your first rate hike that year. That way you make the rate hike when you know the market cannot fail because friends are ready to prop it up, and you prove to everyone you have full confidence in your recovery, even though the only thing you really have confidence in is your own confidence game. The fact that the market rises when everyone would have expected it to fall gives you lots of justification for another rate hike due to the market’s now “proven” resilience to rate hikes. Then, you make sure your friends don’t lift the market when you make your next rate hike. You’ll appear justified in making the hike, but the market will fall from a greater height because of its artificial lift from your friends with more force as it essentially corrects to what is now essentially a double rate hike (since the first one never got priced in) once the artificial lift is removed.

If that’s too jaundiced and conspiratorial for you, I’ll accept that criticism; but a year ago people probably thought I was overreaching in suggesting the Fed was propping up the stock market with direct purchases of stocks through proxies. While I cannot even yet prove the Fed had anything to do with US stocks being propped up that way, we do now know for certain they were propped up that way and to a very large degree. The Fed’s friends were extremely active last year in doing something that central banks, heretofore, were not known to do (outside of such moves within their own stock markets by Japan’s central bank and China’s):


Two weeks ago Bank of America caused a stir when it calculated that central banks (mostly the ECB & BoJ) have bought $1 trillion of financial assets just in the first four months of 2017, which amounts to $3.6 trillion annualized, “the largest CB buying on record.” (Zero Hedge)


We now know some of that enormous stimulus was spent on US stocks.


This time is different


I’m not saying, by the way, that the Fed has never purchased US stocks. We all know it bought lots of stock when it bailed out automakers and banks in the early days of the Great Recession. At the time, that was a peculiar thing to do, in and of itself; but the policy of soaking up slack in the stock market generally by buying perfectly sound companies as a form of economic stimulus is new in the US. In fact, it was so much something that simply wasn’t done (and should never be done) that the US central bank merely suggested it last year as a brave new approach should their recovery fail, should the economy need a new boost after quantitative easing had lost all of its utility due to diminishing returns and should we find ourselves in a recession. (Clearly proposed as a last-ditch effort.)

Well, having run that flag up the pole without hearing too much objection to the idea, is it too much to think that, when the market did fail badly last January, the Fed found other central banks willing to leap into that role for them? Why not? It was no secret that China’s move of that sort was the only thing that saved China’s stock market (though it also made it no longer a true market by effectively nationalizing many of China’s corporations).

Of course, the Federal Reserve could own stocks directly that are hiding within some broad category on its balance sheet as well as any stocks that it still holds from its direct bailouts. They have already begun talking about starting the unwind of their massive balance sheet this year. If that includes an unwind of stock purchases, it will certainly bring the market down in Trump’s first year. If the Fed isn’t planning a stock-market failure by conspiracy, the question remains, will the Fed allow the stock market to fall even if they are just becoming aware their recovery won’t hold?


While normally we would caution that the Fed may simply step in during any concerted selloff amid the broader market (catalyzed by the tech sector) as it has every single time in the past, this time it may let gravity take hold: after all, not only did the Fed caution during its last FOMC minutes that elevated asset prices have resulted in “increased vulnerabilities” and that “asset valuation pressures in some markets were notable” but as Goldman also warned recently, Yellen may be looking for just the right “shock” with which to reaffirm control over a market which is now interpreting a rate hike as an easing signa (see “Goldman Asks If Yellen Has Lost Control Of The Market, Warns Of Fed “Policy Shock”) (Zero Hedge)


On the conspiratorial side, that may just be the Fed’s best friend, Goldman Sachs, helping create the excuse the Fed needs for letting the market go. Why would Goldman want that? Well, so long as Goldman casts its bets against the market, they (and maybe this time their clients) could reap large rewards if the Fed lets the market go. They’d come out like champs.

If the Fed’s recovery plan failed too soon after Trump’s inauguration,however, people would not automatically blame him, and any conclusion people reach on their own is far stronger held. That’s how a confidence game works. If the market fell right after he was inaugurated, people would possibly see it as a mess he inherited. If the failure was seen as something baked in during the Obama administration, the Fed would have to own its own abject failure because the Obama administration reigned throughout the Fed’s recovery program. Moreover, if the Fed’s recovery failed during the Obama administration, Trump’s victory would be certain because America always votes it pocketbook.

For the Fed and the globalists to hope to dodge all blame, Trump would have to be in office long enough to do enough or fail enough for people to say, “This is clearly your fault.”

While that was all speculation when I was saying last year, it does seem to be the way things are playing out. And now that it is clear central banks have been soaking up massive amounts of US stocks, it’s a little more than just speculation.


Putting conspiracy aside, this market still looks like it is falling right when I predicted it would


Whether by conspiracy or sheer blindness and idiocy, the Fed is about to raise rates right into a falling economy. GDP in the first quarter went really soft, and I believe, contrary to what the Fed projects, second quarter GDP will come back negative unless great massaged. (In fact, first quarter GDP may have been negative if it were not such a government-manipulated number in the first place.)


One indicator has remained a stubbornly fail-safe marker of economic contraction: since the 1960, every time Commercial & Industrial loan balances have declined (or simply stopped growing), whether due to tighter loan supply or declining demand, a recession was already either in progress or would start soon…. As US loans have failed to post any material increase in over 30 consecutive weeks, suddenly the US finds itself on the verge of an ominous inflection point. After growing at a 7% Y/Y pace at the start of the year, which declined to 3% at the end of March and 2.6% at the end of April, the latest bank loan update from the Fed showed that the annual rate of increase in C&A loans is now down to just 1.6%, – the lowest since 2011. Should the current rate of loan growth deceleration persist – and there is nothing to suggest otherwise – the US will post its first negative loan growth, or rather loan contraction since the financial crisis, in roughly 4 to 6 weeks. (Zero Hedge)



Why is loan growth finally slowing again? Simple. GDP and loan growth are showing us something that a rigged stock market cannot and will not. The Fed started raising interest rates, and immediately applications for new home mortgages and auto loans started to subside, and the recovery started to falter … just as I said would happen more than a year ago.  I’ve maintained all along that the Fed cannot raise interest rates (reduce its economic stimulus) without crashing its recovery (that, however, was without foreseeing when I first said it that they would prop things up via their potent proxies for a short time because that is simply moving central-bank stimulus from being overt to being covert).

Of course, another significant factor that helped the Fed raise interest rates in March was the fact that the financial market was already ahead of them. Interest was rising on its own purely out of speculation over the Trump effect, wherein markets were repositioning (or, at least, appeared to be) for the anticipated fiscal stimulus of Trump’s big tax cuts and the huge debts to be created by his infrastructure spending plans. (However, we also now know the market was rising due to enormous central bank stock purchases. No wonder the rally was so steep, but that now appears to be all unwinding.)

The Fed has a history of knee-capping its own recoveries by raising interest just as the economy is getting wobbly in the knees anyway, so we should not be surprised (even from a non-conspiratorial outlook) if the Fed fails to see its recovery is crashing all around it and raises rates directly into failure.

Just recall how Ben Break-the-banky failed to see the last recession when he was standing right in the middle of it. The Fed has a peculiar talent for that. Sometimes I think conspiracy rises as the most likely answer only because its so hard to be believe that people who are that smart can be that stupid. Yet, Gentle Ben was either supremely stupid in the area of his supposed greatest expertise, or was lying about the lack of recession, which often happens when people are conspiring. So, you choose — stupid or conspiratorial. Either one is still going to take this market down.


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  1. Ping from niphtrique:

    There is simply too much demand for currency. Negative interest rates can fix that. If interest rates on currencies are negative (and that requires a tax on cash), central banks can sell their holdings of whatever stocks and bonds they have bought up.

    Interest rates are artificially pushed up by the zero lower bound. They should be negative already if markets could function properly.

    • Ping from Knave_Dave:

      Demand for free currency is always infinite. Ask any banana republic. You can give away barrels full of it. If nothing else, it is useful as toilet paper. And, of course, if “negative interest” were an honest word, it would mean the central bank was paying you interest to hold its currency, rather than charging you interest.

      “Negative interest” is a total misnomer. “Positive interest” means the bank charges you interest if you want to borrow money. “Zero interest” means the bank stops charging you interest if you want to borrow it’s money. “Negative interest,’ if it were an honest term, would mean the bank moves to the other side of that equation and pays you to borrow its money. In which case, demand for the currency would become infinite. Thus, central bank’s interest targets for the borrowing of money to where they are now paying you to borrow it.

      Instead, the central bank shifts the entire playing field when they use the term “negative interest” to mean they are now ALSO charging you interest on your savings in addition to charging you interest on your borrowings. What a phony game.

      • Ping from niphtrique:

        Banana republics have the highest interest rates. Negative interest rates are a sign of trust. That is why the interest rate on the Swiss Franc is -0.75%. The Swiss can’t let it go lower because otherwise people would pile up cash. If there was no cash, interest rates in Switzerland could easily go -2% or -3% because Switzerland is a stable country in good financial shape.

        If the supply and demand for money and capital meet at a negative interest rate then that is where the interest rate should be in a free market. This isn’t about free money but making people that have excess funds spend so that those who are short of funds don’t have to go deeper into debt to keep the economy going.

        And to stop the madness of more and more debts and risky lending, the maximum interest rate should be zero. That is because interest is a reward for risk. People who have trouble repaying their debts shouldn’t be able to borrow. But as long as nearly everyone ignores the obvious, things will go from bad to worse.

        • Ping from Knave_Dave:

          Supply and demand of currency don’t meet like that. The Fed targets an interest rate for borrowing by the supply it chooses to create. The supply that it CAN create, unlike just about anything else in this world is infinite because it doesn’t cost a cent to create ones and zeros in a bank’s reserve accounts. Therefore, the Fed chooses a supply that will create the price of money that it wants to create. Money is unique that way.

          The Fed charges banks for the currency. So, if it charges a lot, they don’t want much of it. If the Fed want’s interest rates really low, it floods the market with currency, even to the point of giving it away. However, once they reach the true zero bound where they are just giving money away, demand becomes infinite, too. Banks will always take as much for free as the Fed wants to give them. Problem with that is that the money becomes worthless.

          The Fed never goes to true negative interest where its interest charges for the money it creates in reserve bank accounts become negative charges (negative interest) because then banks would really suck up an infinite supply in order to be paid to borrow the money. That’s why it is actually impossible to go to true negative interest. Demand automatically becomes infinite, and since supply capacity is infinite, there is no balancing of the two.

          Instead, the Fed switches the game from charging interest on money that they deposit in reserve bank accounts to simply charging interest on the money that remains held in reserve accounts — that doesn’t get invested elsewhere in order to move the money along. Thus, supply and demand never meet at a negative interest rate because the no central bank ever pays people to take its money. They will reduce the cost of money down to zero, but they will never pay you to take it. Instead, they will charge you for sitting on the free money they give to you as a way of trying to avoid the problem of banks just piling up infinite amounts of money in their reserve accounts once interest reaches the zero bound. (Who wouldn’t say, “I’ll accept an infinite amount of your money in my reserve account” when the cost of money hits the zero bound?) To avoid that conundrum, they start to charge banks for holding the money so that banks will find ways to pump the money out into the broader economy, rather than just stockpile up a truly infinite supply that costs them nothing.

          In short, demand always becomes infinite at the zero bound on the cost of money so that supply becomes whatever amount the Fed decides it wants to create. However, the Fed’s goal is not that banks start hoarding free money, but that it moves into the economy. So, the Fed starts creating money in their reserve accounts and starts charging them to sit on it (versus charging them to receive it) so that they will take lots of it but only as much as they can find ways to invest and push out to the rest of the economy; but it NEVER charges them true negative interest — i.e. pays them to take it.

          • Ping from niphtrique:

            The madness is not in borrowing but in lending. That has to stop. Interest is a reward for lending. Why would people still lend money at such rates? The debt expansion can will stop when the maximum interest rate is zero.

            The FED only prints money to pay for the accumulation of interest. Otherwise the monetary system would collapse under the weight of interest charges. Another good reason for a maximum interest rate of zero.

  2. Ping from Kim:

    Tech stocks getting hammered today.

    • Ping from Knave_Dave:

      Yes, and world’s least volatile stock market nudging back up on volatility. One more hammer on the heads for techs could solidify a trend, except that the ETF/Algo-rigged market is now self-programmed to where even the IT guys have NO IDEA what is buried within the self-editing algorithms. Couple on top of that the major stock ownership of central banks, and anything could happen. More on that in another article most likely. With all that said, reality is breaking down the back door, and most likely the algos work detrimentally in reverse.

  3. Ping from Spatial Memory:

    Bearish doji star on DJIA downside to 20996- at least 12 confluences t/a methods. SPX eight t/a confluences at 2394.7, six confluences 2364.3, QQQ bearish engulfed, no significant t/a confluences, violation 132.56 significant. Jmho

    Looking like Kabuki dance and secret bulge bracket handshake right on scheduled with calendar of events. Russell rebalance-

    June 16 & 23 – updated US index add & delete lists posted to the FTSE Russell website after 6:00 PM US eastern time.
    June 23 – reconstitution is final after equity markets close
    June 26 – equity markets open with newly reconstituted Russell US Indexes


    One more sharp relief rally short squeeze into window-dressing and funds reporting – some fresh July inflows then test gravity. Pattern recognition savants may recall similar differential equation event after fresh June inflows. NASDAQ unable to sustain three day displacement at those levels sure was – is significant. If reengineered – now float weighted Russell indicies can’t “cure through ‘relative valuations’ then heavy tape be like honey for bears. Old wall St Winnie the Pooh adage – hubts for honey can get little sticky. Think it through – you and Pooh. Anyway heavy tape through q3 and SPX rebalance charade. IWM:SLY rusell2000:sp600.

    Jmho cause I never provide legal, tax, economic or any advice, service, product whatsoever. 🙂

  4. Ping from V_ANGERY:

    Alrighty. The federal reserve did indeed raise the interest rate and seem confident that they will raise it again this year.

    Is it plausible that in your conspiracy theory that the federal reserve may intend to raise rates several more times before letting the cumulative rate hikes hit the market at the same time?

    here’s my reasoning.

    The longer into Trump’s presidency they go the better their chances of convincing a sizable proportion of voters that it is his fault, at least in their own minds. I see communities on 4chan or Reddit like r/The_Donald which have 6-8 million reccurring visitors and huge community involvement, more upvotes per capita than any other subreddit, a significant proportion of which will be american and would lash out against the federal reserve if they tried to lay the blame on the free market, capitalism or Donald Trump.

    Given the recent culture wars between social justice and common sense it seems likely to me that the rift that would occur would be between younger (15-30), mostly white americans against the elderly (dependant on their pension gibsmedats) and a majority of other races.

    White males pay the most tax per capita and are probably the most demoralized with economic globalism and will be hard to tear away from the banner of nationalism in my opinion.

    I think that this rift, well known by the elites would incentivise them to wait longer and accumulate more rate hikes.

    • Ping from Knave_Dave:

      Hi V

      I think they could prolong the stock market’s rise quite awhile to far more astronomical heaps (now that it is evident their central-banking globalist allies truly are buying stocks directly), given infinite capacity to create money out of thin air so long as the money doesn’t circulate into the general economy where it would cause hyperinflation.

      However, the limiting factor on how long they can prolong the stock market is going to the crashing of the macro economy around them, regardless of their stock-pumping inflation. The overall economy is going to start hitting the rocks now because of declining auto sales, increasing auto loan defaults, increasing automotive layoffs, possibly stalling home sales (still don’t know if the last stat was a one-off or is the big turn), defaulting student loans, and, most of all, the retail apocalypse that is going to create huge layoffs (has already started to) and is going to have a large domino effect on malls and shopping centers and restaurants. Add to that whatever may happen with bonds and black-swan events like wars. Then add to that the likelihood that oil prices are going to cause some banking troubles, too (though I’ve been wrong on that before but it is starting to look like it is going to happen again at last). Finally add in the social unrest you mention and that I predicted at the start of the year would become increasingly problematic.

      Once enough of those almost inevitable forces come together (they don’t all have to), the macro economy will become so bad that there will no longer be any sense that I can see in patching along the stock market as the tale of their failure will already be in the telling by numerous other events. If the general economic failure is as bad and as soon as I believe it will be, their recovery will be blamed as having failed, and they will be pressed to put the blame at Trump’s feet sooner than later.

      They are, indeed, living up to expectations and raising interest into a failing economy — either by oblivious lunacy or by conspiratorial design. I’m still more inclined to believe they are really just that dumb (blinded by their school of thought), just as still appears to be the case for the crash in 2008. However, my inclination to lean conspiratorial is directly proportional to their apparent stupidity, as it becomes increasingly hard to believe they can be this dumb — except that a good part of the world seems to live in the same oblivious lunacy.


      • Ping from Spatial Memory:

        You may not believe it but the bulge bracket and the fomc open market operations have existed and dominated capital markets and price discovery for nearly a century before mainstream media spelled it out for the neophytes with acronyms like rtc, qe, tarp, operation twist, etc.. Throughout their brilliant work they have continuously symbiotically evolved with changing market dynanics complementing fiscal policies of both parties all while maintaining both currency and pricing stability to a point where they probability of the type of fat tail – tail risk event you continuously predict at any moment is under 0.03% or approximately one in 300,000. Perhaps such traditional adages of 100 minus your age equals prudent equity allocations as in zero to three percent GDP / growth rate with zero to three percent inflation – creeping to moderate- inflation environments equities outperform and those with oblivious lunacy continue to benefit and thrive. Like you, I do expect some increased volatility and price dislocations after June 30 fund reports are booked but I’m not expecting as disastrous consequences. A three to six percent pullback would be constructive, a ten percent correction would be a surprise and like result of an exogenous event. Nothing that can not be cured by S&P500 rebalance machinations by Aug- Sept in time for q3 window dressing and reporting. No need to begin growing your own food just yet. Jmho

        • Ping from Knave_Dave:

          “the fomc open market operations have existed and dominated capital markets and price discovery for nearly a century…. Throughout their brilliant work they have continuously [maintained] both currency and pricing stability to a point where they probability of the type of fat tail – tail risk event you continuously predict at any moment is under 0.03%”

          So, that is what their Great Recession was — a 3-in-tenthousand or one in thirty-thousand chance (I can do the math of the imaginary fact better, myself, thanks) of failure. Oops. Oops all-genius Fed crashes the entire globe for all of us by not seeing something coming that was an obvious as freight train to me.

          And, while the FOMC has existed for about a century, it did not even begin to dominate price discovery until the days of QE and perpetually low interest rates began, and even those compare to the trend started by the Fed of central banks buying up as many stocks directly as it takes to stabilize their, as you admit “controlled” markets.

          But their genius is a blind and dumb (or evilly conspiratorial, take your pick) today as it was in 2008. What amazes me is that someone like yourself could ever think they have things under control after the wreckage they put hurtled the world in the 2007-2009 train wreck. They weren’t expecting disastrous consequences then either. In fact, Alan Greenspan and Ben Break-the-Banky were both talking about how extremely well the economy was doing and about how safe deregulation was … and all kinds of other patently stupid nonsense.

          The only thing stupider than all that is not being able to see how stupid it was even after the world was left in wreckage. (You con’t have to bail out smart people — because that is what the Fed and the federal government really did was bail out the Fed’s own stupid mistakes. And we’re still bailing thanks to blindness as stunning as your own and still repeating all the same mistakes thanks to the same brilliant blindness — still making banks bigger and inflating bubbles with credit and free money, and still holding the bad debts of the past in the Fed’s coffers.) Never before did so many presumably smart people look so all-out dumb for their catastrophic failures and still keep their jobs and get richer. (So, it does incline me to think they are actually brilliant con men conspirators; but it more fun to give them the moral benefit of the doubt and just call them stupidest people on earth because I think they’d take being called a “con” as a compliment while they might not like being thought of as all-out dumb as toenails.)

          And here you are praising the stupidity of it all as if it were sheer brilliance! The world’s biggest banks go bust, and you say, “These guys are brilliant!” Their only brilliance was as con men, conning their cronies in politics into bailing them out and conning the public to believe that would be better than letting them fall on everyone and then (the coup de gras) solving the problem of being too big to fail by merging the failing behemoths into even bigger monstrosities of conglomerated cancer. Oh my gosh, what a mess of stupidity if they actually believe their nonsense as you profess to or of a tower sheer conning talent if they don’t believe it but managed to get the public to shut up while they did it all. I still haven’t figured out whether you really believe this stuff or are just trying to pull on people’s chains.

          At any rate, some are finding you amusing, so continue on.

          • Ping from Spatial Memory:

            Certainly a unique spin on the regurgitated misconceptions foisted by mainstream media spin doctors. The notion that fomc operations has not dominated price action pretty much predating the frb prolly even the second national bank very telling – the homespun guesswork of those dynamics beginning with media spin qe had me rofl.

            Reality is price action never lies. Aggregate asset valuations are higher. Aggregate market capitalization is higher. Aggregate economic activity is higher. Aggregate assets on frb balance sheet higher. Aggregate economic activity higher. All while some insist central bank remains clueless behind the curve and imminently doomed. Seems like an expensive position to have maintained long before media told them we and without painfully expensive since

            • Ping from Knave_Dave:

              Speaking of activities like regurgitation, this discussion is like playing chess with a pigeon. No matter how good you are, the bird is just going to crap on the board and strut around like it won anyway.

            • Ping from Spatial Memory:

              With all due respect knave most ornithologists will agree pigeons often appear to have methodical, critical thinking characteristics and most times extremely honest and forthright. So no offense but smart moneys on the bird. Get you game up knave! 🙂

            • Ping from Knave_Dave:

              Don’t they call the really honest ones stool pigeons? ; )

            • Ping from Spatial Memory:

              Maybe in some redacted 302s

      • Ping from esqualido:

        In 1923 Weimar Germany, stocks at times doubled on a DAILY basis (and, it might also be noted, everyone hit the top tax bracket in one day, which is yet another way your friendly government rapes you), but it goes unmentioned that as long as the national debt expands, (and every dollar of deficit spending is counted as a dollar of GDP) it is not unexpected that stock indices should achieve one high after another. A 1/4% raise in rates is like a fart in a gale. If you do not believe this, have a look at the Caracas Stock Exchange chart here: it is up 66% IN THE PAST MONTH, yet it is plain to everyone that their economy is in the toilet:

        • Ping from Knave_Dave:

          While I know nothing about the Venezuelan stock market, I am learning more and more (as are others like Bank of America) about just how rigged the US stock market is. I’ve been talking about how I think it is rigged, but it is worse than I thought where even the programmers of the algorithms have no idea what they are doing because they are designed to be self-modifying based on their own successes or failures!

        • Ping from esqualido:

          Up another 8.6% today: purely an indication of inflation

  5. Ping from Chris P:

    Great comment response Dave. The great recession blog pushes back politics. Great read!!

  6. Ping from

    As the jewish banking fortunes were attained through fraud, their assets are to be seized and returned to the people

  7. Ping from Spatial Memory:

    All about Russell rebalance and transition to float weighted and the divisor modifications – divergence vs S&P600 key metric through q2 window dressing machinations and carry through Sept S&P500 rebalance and q3 window dressing

  8. Ping from Auldenemy:

    It is hilarious to me when Goldman Sachs make comments on interest rate policies in such a way as to look like they don’t know anymore than Main St. about what is going on. They are shareholders in the filthy Fed! Ex Goldmans

    • Ping from Spatial Memory:

      Such a ludicrous misconception of the structure of the frb- good you can laugh along while proving such ignorance beyond doubt.

      • Ping from Knave_Dave:

        Are you kidding me? You didn’t know that the Federal Reserve Sytem is wholly owned by national banks that are its shareholders via their shares in the twelve reserve banks of the nation, and that those shareholders at each reserve bank elect their own president of the reserve bank and that that president serves on the Federal Reserve Board on a rotating basis? And you didn’t know that Goldman Sachs usually has other former Execs who serve in some of the government “appointed” positions of the FRB as well as typically serve as Secretary of the Treasury, often as reserve bank presidents, and certainly as council … and then as Auld says in the central banks of numerous other nations? You didn’t know this???

        • Ping from Spatial Memory:

          From the frb website:
          … Some observers mistakenly consider the Federal Reserve to be a private entity because the Reserve Banks are organized similarly to private corporations. For instance, each of the 12 Reserve Banks operates within its own particular geographic area, or District, of the United States, and each is separately incorporated and has its own board of directors. Commercial banks that are members of the Federal Reserve System hold stock in their District’s Reserve Bank. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. In fact, the Reserve Banks are required by law to transfer net earnings to the U.S. Treasury, after providing for all necessary expenses of the Reserve Banks, legally required dividend payments, and maintaining a limited balance in a surplus fund….

          Educate yourself and you’ll see how ABSURD the comments and those homespun misconceptions are.

          • Ping from Logan D'Alessandro:

            Just ban the guy Dave. He’s simply trolling and looking for a reaction. His tone makes it obvious he doesn’t really intend on a friendly conversation. What’s hilarious is how he’s not even right.

            • Ping from Knave_Dave:

              I hate to ban people and do not ban them for your opinions; but will ban someone who is simply trolling because they just irritate everyone by wasting their time. I agree that he is just trolling because he writes as if he agrees that the Fed is the problem to one person and then as if they are “brilliant” to another. So, obviously, he trolling by just saying whatever he thinks will irritate someone and slinging a lot of obtuse jargon to sound a lot smarter than he apparently is. So, i have been thinking about banning him for trolling (would be the first time I’ve banned anyone), not for having opinions that are usually far different from mine and usually said in as insulting a manner as he can muster. I don’t care what he thinks of me; but since he derides the Fed in one post and then praises them the next, I don’t think he’s speaking his opinions at all. I think he’s just baiting people with any contrary statement he can muster. So, he needs to settle down or get banned.

            • Ping from Spatial Memory:

              Hi knave. I’m not trying to be trolling nor irritating, but the fact is the frb has brilliantly navigated the US economy from a classic free market – demand economy to a controlled demand economy post 2001 to a command economy post 2008 while brilliantly retrofitting and reengineering the vestiges of legacy indexes and benchmarks. I have tried to point out many of those dynamics in the comments- that may appear as obtuse jargon and “sound a lot smater” than some may want to believe. Blame the messenger, ban the messenger, denigrate the vernacular, reject the premise but recognize reality that markets have clearly responded and created generational opportunities. The overarching issues presently are the new admins delusions that those dynamics can be reversed and a demand economy restored and fiscal policy measures and the fiscal multiplier able to offset the necessary corresponding changes to monetary policy and multiplier effect.

              That uncertainty and the effects on volatility seem imminent from the perspective of market, economic and political cycles and without continuous excellent avant garde work by frb, the dreaded bulge bracket and global central banks the trajectory back away from the potential liquidity trap certainly won’t be pleasant.

              Anyway knave, if you have to ban me then go ahead. You’re probably not a bad guy – seems like you’re trying to help the people- but for now I have to go help myself and get to the gym before chaos begins here again. I’ll scout it out later and see if I’m banned.

            • Ping from Knave_Dave:

              That was better.

              All command economies have been disasters because the Fed and all those like them are continually FAR from brilliant. Yes, they have taken it from a free-market (demand) economy to a command (centrally controlled/engineered economy), and central planners like the Fed always fall flat on their faces. They always act like they know best, and they don’t.

              They’re so blame stupid, in fact, that they HAVE NEVER seen a recession coming. Every time, it hits them in the face. Every time, they are raising interest rates right into the recession. The ultimate example was Ben B., who stupidly said there was no recession in site when he was standing in the middle of one. How blatantly dumb was that. I could see it as plain as day, so it is mind-boggling to me that his own confirmation bias was so deep that he couldn’t see it coming when the Great Depression and how it happened was what he wrote his thesis on!

              It is astounding how dumb they are in the area of their supposed greatest expertise.

              Of course markets respond to free money! How could they not respond to trillions of dollars of free money. But there is no end game to that. It only creates wealth for those who have extra income that they can afford to put at risk and who also think they understand markets well enough to gamble in that casino; but there is no end game because it ends as soon as the free money ends.

              Now that I know factually (and not just by deduction as in the past) that other central banks are pumping money via direct purchases into our stock market, of course the market is still going up. But that isn’t going to be able to continue forever, and the end result is going to be horrid. And that end is very near. What is about to unfold is a monumental Fed disaster caused because the elite planners are blinded by their own egos into believing their theories are working.

              OF COURSE trillions of dollars of free money inflates stocks, but it doesn’t help Joe Gardner buy a house, so that market collapses as they raise interest. That’s why it is now stalling out. They’ve raised interest a tiny couple of notches. It doesn’t feed babies; it only keeps the caviar coming to the rich who can play in those markets.

              It CANNOT spill over as a wealth effect to the general populace, because the second all that money starts pouring from stocks and bonds into feeding babies and buying clothes, it will create hyper-inflation as it has in every country that has engaged in this kind of money printing. That is all the great stock market your praising is: it’s just hyperinflation happening in stocks. Wherever that money goes and creates some velocity, it is going to create inflation. So, if it starts actually inflating Joe’s pay check, it also inflates the prices of everything Joe starts buying.

              Therefore, Joe Paycheck gets to remain stuck where he is at, and the banksters get bailed out all over again; but next time, the citizens will revolt because they are so sick of being left out of the grand scheme that they voted for Donald Trump. When that fails, they will go ballistic, and the price you will pay is living in a country that is filled with violence and discord. (I’m not advocating that respond; I’m predicting it.) If the banksters get bailed out when this goes down, expect the nation to blow up.

              This does not end well. Command economies — ones that function as directed by central planners — never do. Not ever! If the Fed had any brains, it would have taken its own words to heart. “These banks are too big to fail” means make them so they are not! Break them up like Ma Bell was broken. Make them small enough so that when they do fail, no single bank can have a knock-on effect that destroys the rest. Instead, they “brilliantly” did the opposite and engineered them to be twice as big as they were when they were too big to fail. The Fed cannot even understand its own moments of wisdom.


            • Ping from Spatial Memory:

              At this point in a world dominated by command economies and the competitive advantages that go along with those dynamics it becomes impossible for demand economy entities to survive. As for Central bankers not recognizing deteriorating economic data, perhaps they clearly recognize such and certainly not yell fire in a crowded theater- or market in this case. Their first and favored tool remains “moral suasion” and must lean in when calamities occur while “aligning key interest rates” with “key growth metrics” regardless how spin doctors characterize market types or conditions. To say they don’t telegraph such transitory occurrences seems disingenuous as there have been many classic frb warnings in recent time from “conspicuous consumption warnings” to “irrational exuberance” to recent “frothy valuations” warnings. Ultimately though price action never lies and sometimes looking past and trading through the noise is imperative. So although it may appear they are and have been asleep at the switches to most, their objectives are not always aligned with the masses – and their abilities to coordinate some type of “stability” in the currency and capital markets while complementing fiscal policy through decades of reckless fiscal policies has been nothing short of incredible brilliance. jmho

            • Ping from Knave_Dave:

              It’s hard to believe you really believe what you are saying. It was clearly central bank policy that created the Great Recession (a catastrophe as real as gravity in the realm of human activity). It was they who constantly advised the president toward banking deregulation. It was they who masterminded the conversion to a “controlled demand” economy, as you called it in 2001.

              They constantly lowered interest under that program to keep the growing housing bubble inflating because the Law of Diminish Returns required endlessly lowering rates in order to maintain the same levels of growth, and growth was essential in order for people to afford the payoffs of the Fed’s approved ARM time bombs, which required the reassurance of increased housing prices in order for people to be able to lock into a low fixed rate when the balloon payment or interest increase hit or to be able to sell out without damage if they couldn’t refi. It was easy for me to see where that was headed. How did your own brilliance and theirs miss this obvious dynamic?

              As a result of their failure to even comprehend the final trajectory of their own program under the increasing gravity of diminishing returns, their controlled-demand economy crashed massively in 2008, which is why they moved to your next step then of a straight controlled economy. (I.e. rigged economy.) the controlled-demand economy, as you called it, also crashed because the Fed’s constant belief that banks would regulate themselves out of self-interest (absolute folly of the imagination from day one) meant the Fed did a horrible job of regulating banks and didn’t see all the corruption that was building beneath the surface.

              When their stage-one brilliant rocket crashed and destroyed the entire world of finance in 2008, then they came up with this new cockamamie idea that, having done so well during stage-one, they could do even better if they seized absolute control of all markets by rigging them with infinite amounts of free money as their stage-two brilliant rocket. That rocket is now traveling straight to earth at 30,000 miles per hour under full power, and they don’t see it, nor do you.

              You both continue to think that because the stock market is accelerating on rocket fuel that all things are going brilliantly. But, of course, the stock market will burn hot on high-energy, trillion-dollar rocket fuel. What market wouldn’t? That’s not proof of their brilliant success. It’s proof that rocket fuel burns hot. The market’s survival is now as totally dependent on constantly increasing that burn rate by keeping interest down, balance sheets up, as the housing market was. Now they have a housing bubble, stock bubble and bond bubble all spinning out of control at the same time. And you are foolish enough to think they will, because of their unproven brilliance, do a better job of landing that rocket than they did in 2007-2008? How can you seriously believe they are brilliant when their failures directly wrecked the financial world in stage-one rocket science.

              Their brilliance can only be measured by the magnitude of their repeated explosions.

            • Ping from Kim:

              The problem with central banks is that they think they can bend the natural laws of economics. Just like gravity and entropy and physics, there are natural laws that govern economics.

              Maybe the FED can circumvent econimic law for a while and that may seem brilliant to some folks, like a slight of hand maneuver or a really cool magic trick. Wow! Eventually, economics will re-assert themselves.

              Keynesian policy was never intended to be a long term solution. It was intended to be a short term fix until natural economics righted themselves.

              IMHO, the FED is in this too deep. Also, they are not the all-seeing great Eye. Surely central banks will miss something in their great, brilliant master plan. Maybe something regional like the ongoing problems between Spain and Catalonia (just an example) or the rift now between Eastern Europe and Brussels.

              It won’t take much to set off the reassertion of natural economic law. NIRP and even ZIRP is as unnatural as The island of Dr. Moreau.

            • Ping from Spatial Memory:

              Chairwoman told me capital markets are continuously confirming someone’s beyond brilliant financial engineering – quantum physics and quantum superpositioning can mitigate any two dimensional linear macroeconomic disruptions and forward looking price discounting machinations with magic like efficiently in topological space so keep calm & carry trade on. Gravity is a myth.

            • Ping from Kim:

              Chairwoman told you that? Did she let you sniff her yellenbutton too?

            • Ping from Spatial Memory:

              Tough to resist such a gravitational coupling constant but for now let’s rely on CODATA findings. 🙂

            • Ping from Kim:

              Lol. Good morning thmart thtuff.

            • Ping from Knave_Dave:

              Exactly, Kim. That is exactly the folly of centrally planned economies (command economies). A national economy is far too complex for any masterminds to ever steer it. A demand economy steers itself, but needs reasonable regulations as rules of the road to keep it from flying off a curve due to extreme greed. Even Adam Smith recognized the need for basic regulations as rules of the road to create a fair playing field to cut of known corrupt human behavior. Anyone who thinks they are smart enough to mastermind the economy is the world’s greatest fool in their self-importance.

            • Ping from Kim:

              True. And the pool of “neophyte” (lol) beneficiaries from this “economy” will dwindle until there are but a handful.

            • Ping from Kim:

              Don’t ban him! He is entertaining. I had several good laughs yesterday. He reminds me of Million Dollar Bonus. Love it. That’s some good funny stuff.

              Now if he becomes abusive, or starts spamming, then I would ban him.

            • Ping from Knave_Dave:

              Always a tough call on the laugher curve of comedy vs anger. So long as you’re enjoying him.

          • Ping from

            The Fed is a private jewish bank and since they are crooks, bloodsuckers and vampires they can take our national debt and stuff it up their goddamn kosher keisters

          • Ping from Knave_Dave:

            What you have shared is EXACTLY what I was saying, except that the Fed likes to SAY it isn’t owned by anyone. I like to say it is. They say it isn’t because none of the shareholders receive dividends per se and none of them can sell their stock, which they are required to own. I like to say it is because

            1) All of those member banks, as shareholders, are the sole voting members in each reserve bank.

            2) As such, they alone elect their reserve bank president.

            3) Reserve bank presidents all have rotating positions on the Federal Reserve’s board of governors, which has absolute control over the Fed.

            4) While they do not received dividends per se nor can they make profits by selling their stocks, they all PROFIT directly from the free money the Federal Reserve creates. For example, during QE, the Fed told its member banks that, if they bought US bonds at the market rate from the treasury, the Fed would buy those bonds back a day later for a half a percent interest. That’s massive interest for a 24-hour period. Thus, the presidents of the federal reserve banks that sit on the board voted to create out of thin air half a percent interest on virtually any amount of US treasuries that they also chose to buy from the government.

            Pretty slick deal. Decide as a board to give interest to their own banks for bonds that their banks sell back to the Fed overnight, knowing full well the Fed, since the board runs it, is guarantees buying any bonds the banks can afford to buy. Then go out and buy the bonds with your bank and sell them the next day to the Fed for an overnight profit of 0.5%! That money was created out of thin air by the Fed, which simply deposited the promised sums in the reserve accounts of each member banks as soon as it took ownership of their bonds.

            So, don’t tell me, AS THE FED CLAIMS, that the voting shareholders do not profit directly from their ownership of the reserve banks, which effectively own the Fed because they control it: 1) They occupy six of the board positions; 2) They have great sway in suggesting who the government-appointed members are that outnumber them. Supposedly, the fact that the government appoints the other voting board members means the banksters cannot and do not control the Fed. That’s ridiculous, of course, because the banksters own the politicians who appoint those board members.

            The money paid to member banks in their reserve accounts does not get counted as a profit of the reserve bank, so it does not go to the treasury. The banks keep it.

            I hope you see now how gullible your belief in the Fed’s incomplete statement is. IMHO

      • Ping from

        Is that all you got you pussy jew troll? You are so fucking lame. I am coming for you and you will not escape you bag of slime.

    • Ping from

      What he said. Someone has been paying attention

  9. Ping from DB Cooper:

    How in the hell did Walker get relegated to this chithole? Anybody? ROFLMAO

    • Ping from Spatial Memory:

      Everyone vanished and that idiot at economic collapse bans anyone that isn’t a sub idiot leaving only socialbeachclown and some hayseeds. Rotflmao

    • Ping from Auldenemy:

      Haggith is one of the most intelligent guys out there when it comes to analysing post 2008 central bank policies and the affect of those policies on all major world economies. That is why Zero Hedge and other popular and respected alternative media sites regularly publishes his articles. So crawl back under what ever dark little stone you inhabit. The only, ‘Chithole’ on here is you.

  10. Ping from Usingh1980:

    I think it is much more logical for a foreign CB to buy US stocks and sell bonds to the Fed in the hope that the large stock purchases are key to preventing sudden crashes.

    It seems unlikely to me that they would buy so many stocks deliberately to sink them at a later date.

    • Ping from Knave_Dave:

      Sure, that makes perfect sense, but it also means (if they are going to do something that until recently was unheard of and do it in such large amounts), they must have truly believed the market was in risk of a sudden crash last year and this and needing some serious propping. So, it reeks of a market being artificially propped as I was saying all of last year.

      As to what they gain by letting it fall, I don’t think they bought with the intention of deliberately sinking it. I should have been more clear about that. I think they bought with the sole intention of making sure their guaranteed globalist Hillary made it into office. They didn’t want an apparent Fed hater and loose cannon like Trump to be the head of the United States.

      Now that they lost that political gambit, I think it would still be less of a deliberate crash than a realization that the economy is falling apart, despite their efforts, where it becomes less valuable to try to glue the overall economy together with the stock market, which is only one part of the total economy, than it is valuable to let Trump take the blame for their overall failure.

      The latter would put their entire existence at risk and their proprietary monetary system because the ONLY thing that gives their money value is people faith in the Fed to manage it as a solid currency. If they become aware that their recovery is going to die no matter what else they do, they can, at least, pivot to using that as a way to kill off the anti-globalist persuasion in the country by saying, “This happened because the country elected anti-globalist Trump.” Round everybody up into the same pen to make it easier to shoot them all … figuratively speaking.


      • Ping from Usingh1980:

        If I was a central bank and I had to invest money somewhere – I would put it into US stocks in large enough quantity that I would be relatively unaffected by what some random whale in London or Paris was doing. Once I buy stock, I would be paying out in dollars, I would raise the dollars by selling my bonds to the Fed. As long as my portfolio grew at a rate exceeding what my bond payment to the Fed was, I would be doing well.

        In this arrangement I would have NO interest in watching the value of the stocks drop. Even if Trump was in power, I would still want the stock market to go up because even if Trump and his bullshit was politically destroyed – I would still be on the hook for that bond payment to the Fed. I would never want to do anything that breaks my bond to the Fed.

        The idea of blame-shifting to Trump is viable only if people listen to reason about him. Neither the left nor the right are particularly rational when it comes to Trump. The Right Wing sees a fantasy come true and the Left Wing sees a living nightmare. This polarization makes all discourse on Trump impossible. Tomorrow if the market crashes on his watch, his supporters will lose their livelihoods in a flash but they will still continue to worship Trump because they are too stupid to do anything else. And the Left Wing will be too busy saying “I told you so”. They are never going to be in the same camp.

        The blame-shifting will yield nothing by way of mitigation to the fundamental lack of productivity that comes with an aging workforce that refuses to renew its skill sets. This is not a viable strategy for restructuring the global debt situation. With a collapse of productivity in the US and EU due to an aging population, the debt cannot be serviced and it has to be restructured. The good and bad debt has to be separated and the bad debt deleveraged.

        What the Fed and other CBs define as bad debt is very different as they are investing over 100 year scales. Right now a vast fraction of the bad debt is linked to lifestyle choices that too reliant on artificially depressed carbon energy prices. Once the true cost of carbon energy (including sequestration cost) is taken into consideration – we see every American creating several thousand dollars per year in debt. Over a lifetime this is about 250,000. If you compare that to the debt typically owed per person over a life time (mortgage, auto, college loans, credit cards) – it is about 5x higher.

        The Obama admin for its part tried to do the right thing by encouraging emission reductions. Trump has no intention of doing that. He is actively obstructing all efforts to gently deleverage that bad debt. By attacking the clean energy industry – he is damaging the only sectors of the US economy that are growing in the true sense. This forces all central banks to rely purely on stock market rallies to secure themselves against failing debts.

        So it makes no sense for any central bank to desire a market crash. What every CB wants is to deleverage bad debt. Trump getting in the way of that just adds political risk on that debt. When banks face added risks, they charge more for premiums and interests on those debts, and since Trump can’t afford anything, he will be hard put to pay out those charges. This most likely means that Trump will be forced to abandon his opportunistic alliance with carbon energy groups as actually raising capital for growing that sector will be impossible due to premiums associated with that. As Trump flip-flops on issues political dissonance in his base will multiply and he will be forced to seek even more extreme and unsustainable positions to secure himself against the political fallout of his complete inability to deliver anything to anyone. As Trump will not be able to shield anyone from market forces – my guess is that Trump will preside over a very messy and painful deleveraging – mostly due to his own inability to see beyond his Twitter feed on any issue.

        I am not really saying anything new – this is basically the trajectory of his entire life. No banks with the exception of the Russian ones are interested in loaning him money, he keeps doing more and more extreme things to raise operational capital and with each extreme position he takes the price of that capital becomes higher.

        Obama by contrast presided over a much smoother deleveraging. The stock market crash occurred just as he was taking over, people lost jobs but the US agriculture sector survived and luckily no one starved to death like the Great Depression. What we are likely to see under Trump will be a repeat of the 1929-1931 situation. As Trump blunders around in a sea of political crises, the market will crash due to a failure of critical government oversight. When that happens he will resort to populist but economically destructive tariff regimes which will cause a depression like the Smoot Hawley idiocy did in 1930.

        No Central Bank is interested in ousting Trump. The Fed as seen from the minutes of its recent meeting is only interested in normalizing its bond portfolio. This will most likely deflate the speculative bubble that has built up in the markets. The remaining CBs will support the Fed’s move as they do not want speculative bubbles either.

        • Ping from Knave_Dave:

          Explain to me why you NEED to invest money if you are a central bank with the power to create money at will. Any money you lose, goes out of existence … out of the money supply. If your investments lose money, you just write down your balance sheet.

          The Fed claims it wants to reduce its balance sheet anyway in order to start removing liquidity from the markets. Other central banks know they soon need to do the same. So, at the end of the day, why do they care if they have to write it down? In fact, why would the Fed even want profits at this point, when it is already stating outright that its balance sheet is too high and that it needs to stop reinvesting for profit?

          They, of course, turn over their profits to the federal government; but if the alternative is selling bonds and, thereby, driving up the federal government’s interest rate, maybe reducing profits that go back to the treasure is an easier path. It’s always mystified me why the one organization in the US that owns the money tree and creates money at its own will needs to worry about profits on its investments. It seems like a charade to me. For some reason, I cannot see the emperor’ clothes. Others tell me he’s wearing some.

          • Ping from Usingh1980:

            Money w/o a link to a real physically traded commodity or service is meaningless. A Central Bank has to generate money (i.e. supply of debt for specific economic transactions). By controlling which transactions it supplies debt to, the Central Bank basically creates the future.

            Unless the transactions it support are actually sustainable, i.e. able to generate physical resources in a fashion that allow for the total number of transactions to grow – the investment is wasted and “wealth” is lost. If a Central Bank has to write down the debts, then it is not in a good place.

            That is why on the 100 yr timescale the CBs have to get away from carbon fuels. There is too much more value to be gained out of using carbon in construction and building materials. The case for GHG emissions is also quite strong and any adverse climate shifts will impact the viability of other economies on the 100 yr timescale.

            • Ping from Knave_Dave:

              Central banks to the best of my knowledge never invested in stocks, except to save dying banks or other major institutions that were considered “too big to fail,” like bankrupt auto manufacturers that would have a huge domino effect in the midwest. Until the last crisis, they also never created money for their member banks to invest in stocks. They simply adjusted interest rates and made comparatively small credits to banks in their reserve accounts to increase money supply to keep up with demand. The goal in money creation (until the event of quantitative easing) was not economic stimulation, but control of inflation/deflation by making sure that the supply of money matched the demand for money. (As population grows, more money is needed just to keep prices from falling due to a shortage of money; i.e., money becomes increasingly scarce for each individual because the number of individuals using it has grown; and, so, it becomes worth more, meaning prices keep dropping if money supply does not match up to demand.)

            • Ping from Usingh1980:

              Yes – but the population has to *want* money. People want to buy “stuff” with the “money”. Without a stable link between “money” and “stuff” – the notion of a meaningful money supply is unviable. That is where the long term perspective of a CB comes from. It has to guarantee that over a 100 years scale people will still want money. To the CBs this is 100 year long debt trafficking cycle.

              Re-monetizations are possible, but inadvisable as it breaks the continuity of the debt trafficking (as the Indians are finding out now with their stupid demonetization).

      • Ping from Usingh1980:

        The Fed and CBs have *NO* interest in Donald Trump or Hillary Clinton. These are too short term a phenomenon for them to really care about. They invest on the 100 year timescale. It is a completely different mindset which ordinary investors will never understand because our portfolios are too small and short lived.

        The Fed and other CBs only want to deleverage from bad debt. They picked up a lot of bonds during the 2008 crisis but it was not quite clear how much of that was toxic. It is best that the market sorts that out. The Fed and other CBs have to normalize their balance sheets. This is normal deleveraging that happens every 5-7 years.

        It is Trump’s job to ensure that the people that voted for him don’t get mauled in the process. Since historically speaking Trump has shown no interest in his investors, I would be quite shocked if he actually did something that protected his voters. If his voters slowly come to terms with who they have actually elected (as opposed to the fantasy they cling to) what can be bad about that?

        In stark contrast to this the Obama Admin was very forward thinking and run by competent professionals. The market was successfully able to deleverage smoothly from most of the bad real estate loans. The result was a recession but nothing like the great depression where the agricultural economy collapsed and millions died due to starvation.

        The bigger problem for the market as a whole is that substantial amounts of the debt currently circulating is linked to economically unviable ideas of carbon energy usage. The price of oil is artificially low in the world and if corrected by the price required to sequester the CO2 produced, the actual price of oil it would substantially increase the price of carbon energy. The biggest exposure is in the new carbon resource extraction projects but the is significant risk in places that don’t have any direct links to high risk carbon extraction projects (like current agricultural produce pricing).

        As no one is actually paying the costs of carbon sequestration, we are seeing a build up of an unaudited debt. This creates a massive systemic risk which needs to be mitigated. Pushing ahead on the Paris treaty was a way to start auditing this debt and work out payment schedules to contain the risk. Trump bizarrely got in the way of that for reasons no one can understand.

        The Fed may find that upsetting but their simplest remedy is to charge a higher premium on the added risk posed by Trump’s “unpredictability”. They gain nothing by pushing Trump out because that will happen automatically. As you add risks to debt, you drive the premium up. The increased premium will drive up the costs of all political transactions with Trump.

        Trump’s record on financial issues is quite bad, he has a penchant for extreme bs, and add to that the fact that Trump and his voters are so invested in destroying Obama’s legacy. One can anticipate a very messy deleveraging. As the promise of paradise doesn’t pan out publicly Trump will seek out even more extreme positions in the hope of distancing himself from previous failures and in doing so drive up the costs associated with his continuation in power. Eventually the balloon will expand beyond what can be contained and it will burst.

        The most likely trajectory now is that Trump will face a market crash due to his bizarre behavior and deregulation of the derivatives side of things. Rather than face up to his own mistakes he will attempt to lay blame on the Fed, when that backfires in the GOP ranks, he will attempt to pass some weird tariff increase on Mexico. As Mexico cancels imports of US corn and pork, the US agriculture sector will collapse. This is how Smoot Hawley drove the US economy into the ground in 1930. That will most likely repeat. Those Trump voting states that have somehow survived the TrumpCare carnage will find themselves staring at a massive depression due to the tariffs.

        That will be the downfall of Trump – not the Fed or any other CB.

        • Ping from David Haggith:

          I think they have plenty of reason to blame their failing recovery on someone else. As Soc. Gen’s Albert Edwards writes today, “While politics in the West reels from a decade of economic crisis and stagnation, asset prices continue to surge on the back of continued rapid growth in G3 QE. In an age of “radical uncertainty” how long will it be before angry citizens tire of blaming an impotent political system for their ills and turn on the main culprits for their poverty – unelected and virtually unaccountable central bankers? I expect central bank independence will be (and should be) the next casualty of the current political turmoil.” ( )

          The massive turn of revolt toward central banks when their “recovery” fails, as it is clearly doing, give them all the reason in the world to need a scapegoat for their very survival, which is contingent upon the voting masses still having faith in them (the only thing that gives their fiat money any value at all) and on those masses keeping them in monetary power. (All of which can easily be changed.)

        • Ping from Knave_Dave:

          Oh, I don’t think the Fed’s reason for scapegoating Trump would have much to do with wanting to get rid of him, though is a concern that is far more immediate than their 100-year plan simply because he has the power to change the Fed board substantially in the very near future, should he want to. The reason however, I think the Fed has every reason to want to use him as a scapegoat was best summarized by Soc. Gen’s Albert Edwards in an article I read today:

          “While politics in the West reels from a decade of economic crisis and stagnation, asset prices continue to surge on the back of continued rapid growth in G3 QE. In an age of “radical uncertainty” how long will it be before angry citizens tire of blaming an impotent political system for their ills and turn on the main culprits for their poverty – unelected and virtually unaccountable central bankers? I expect central bank independence will be (and should be) the next casualty of the current political turmoil.” ( )

          The only thing that gives fiat money is the faith people have in its managers — in our case the Federal Reserve. When the Fed’s recovery is clearly seen by the masses to have failed badly, the Fed needs greatly to fear a loss of faith in their leadership. The Fed only exists by the will of the masses to allow it to exist. Should their be a citizen’s revolt against central bankers because their policies brought financial armageddon, you can be sure the central bankers have every reason to try to deflect that blame onto Trump, even as you are already doing — never mind that the reasons for its failure were baked in from the beginning and have been easily foreseen all along the way and never mind that I’ve been saying, since before the election, that TheRump will be the perfect buffoon for them to blame. He easily has half the United States hating his guts virulently, and he makes himself look guilty of all kinds of stuff, whether he is or not. So, he will certainly be the Fed’s fall guy, but not because he had anything to do with the fall. It’s been easy to see that coming from miles back.

          • Ping from Usingh1980:

            Trump would like to believe that he has the power to change the Fed board substantially but I suspect the reality of this is somewhat distinct from that belief. It is very difficult to see how a leader as unpopular and legally weak as Trump is could do anything that would impact the Fed’s functioning.

            Faith in the Fed is not IMHO an issue. Only insane people question the credibility of the Fed. Where it matters the Fed is trusted.

            Trump on the other hand is the opposite of that. Where it matters he is not trusted. He could attempt to change the Fed leadership but that would most likely be projected against his previous comments about the “missing a debt payment” and he will lose whatever limited public support he has.

            I think the rate at which he is burning through money in his trips to his golf clubs and hotels, he will most likely bankrupt the federal government long before its scheduled debt ceiling. But that is more of a problem for his supporters than for the Fed.

            • Ping from Knave_Dave:

              I think that is right on, Singh. Trump’s appointments to the Fed will be all guided by the experts he has around him, and he has surrounded himself with banksters and Goldman Sachs execs in all of his cabinet’s financial/economic positions. One of those experts, Cohn, is already said to be in consideration for Yellen’s post, as I’m sure you know, and (as I’m also sure you realize) is a former VP from Goldman Sachs. So, great! How is having yet another GS top exec in control of the nation’s central bank EVER going to prove to be a good thing!

              It’s absurd for anyone to think Trump is on a course to improve anything in terms of the central bank. A survey of his advisors tells you where he is most likely to go — the direction he’s clearly already headed. Moreover, Trump has no idea, himself, what the central bank needs to be, AND Trump now wants a central banks that is as big on loose stimulus as Obama had because without that, his plans will all fail because the downdraft from financial tightening is certain to overwhelm his contemporaneous fiscal stimulus … if it ever happens.

  11. Ping from Usingh1980:

    I don’t understand why foreign CBs would be party to such a scheme. It doesn’t look like they gain anything in this process.

    • Ping from Spatial Memory:

      They are the scheme and have already gained everything many times over. Neophytes are considered privileged if they can fall in line along the term structure of the carry trades and momentarily afford the luxury of their brilliance while utilizing some of their assets.

      • Ping from Kim:

        FOLLY! By the time these types of contradictory statements are made:

        Neophytes are considered privileged if they can fall in line along the term structure of the carry trades and momentarily afford the luxury of their brilliance while utilizing some of their assets.

        . . .it’s too fucking late. (Reserve the f-bomb for responses to particularly idiotic statements.)

        • Ping from Spatial Memory:

          Never been more efficient more like it. More hedging – diversified and non-correlated and leverged macro and micro etfs – options than ever can trade on nearly any fractal plus historic low carry costs and low classic divergence translates to historic low implied volatility. Too late for what?

          • Ping from Knave_Dave:

            According to my own fractal theory of history, The Fed’s obvious bunglings as the pattern has been observed to date will carry on in ever greater complexity or repetitions and perplexity until they end in chaos. Historic high implied volatility, given the volatility of their last engineered global catastrophe for which 99% of the world are still paying so that 1% can profit astronomically.

            • Ping from Kim:

              Hence the contradictory and illogical assertion that “neophytes” can ever “afford the luxury of their brilliance”.

              Omg. Just omg. Laughable.

  12. Ping from Spatial Memory:

    Hi Knave-
    The derivatives markets notional values are in the quadrillions while aggregate market capitalzations of all global public trading equities (stocks) is approximately 65 trillion so extrapolated out central banks and co (the bulge bracket) have owned far more than recent Facebook hyperbole- and all other assets. Exters Pyramid may help illustrate many “rigging” misconceptions.

    As for current technicals, Fridays closing prices able to retrace higher and regain back 30%+ of the intraday losses by the close was a short term positive. Today’s price action likely provides a proverbial “retest” and IMHO likely holds. The calendar of (market) events through June 30 likey provide some short term “support”- especially significant is this years Russell indicies rebalance. Traditionally that annual event includes indicies component changes and divisor modifications. This year’s Russell rebalance will include a transition from a “capitalization weighted index” to a “float weighted index” – as occurred in sp500 in 2008/2009 and in NASDAQ in more recent years. That transformation has certainly added to the positive price action over recent years – as you wrote about a few articles ago. The rebalance date is June 23 and then end of second quarter reports for mutual funds prints based on June 30 closing prices likely adds some strength – traditionally know as window dressing. Last week’s price action was likely expected by many as top down managers flattened out after fresh June 1 inflows were marked up. Bottom line I think you are correct with you forecasts for weakness beginning end of June – July range as traditional correlations between Russell 2000: s&p 600 effects on broader market are tested. The market weakness may be transitory as SPX sp500 rebalance before end of September window dressing will likely provide another short term cure. Central banks have become extremely efficient at financial engineering and traditional metrics suggest zero to three percent GDP equities/ stocks generally outperform while the upper end or anything north of 3% precious metals begin to outperform or anything less than that range may signal a currency issue and again metals have their day. With silver being a proxy for equities and gold married to bonds and proxy there metals seem in play.
    OK gotta run for now – good luck knave. I think you’re on to something with your timing but I’d ignore 99% of the nonsense foisted by that pathetically clueless unnamed fool and site that’s been forecasting total economic collapse.

    • Ping from Spatial Memory:

      …approximately $6.6 trillion tracking the Russell US indexes as of December 31, 2015, Russell reconstitution is a notable event for US equity investors. The 2017 Russell US Index reconstitution schedule is as follows:

      May 12 – “rank day” – Russell US Index membership eligibility for 2017 reconstitution determined from constituent market capitalization at market close.
      June 9 – preliminary US index add & delete lists posted to the FTSE Russell website after 6:00 PM US eastern time.
      June 16 & 23 – updated US index add & delete lists posted to the FTSE Russell website after 6:00 PM US eastern time.
      June 23 – reconstitution is final after equity markets close
      June 26 – equity markets open with newly reconstituted Russell US Indexes
      FTSE Russell has made a number of updates to its Russell US and Global Index reconstitution process this year. These updates are part of an ongoing effort to align FTSE Russell indexes since the combination of the two leading index families in 2015, bringing greater consistency and efficiency to clients:

      Shares outstanding and free floats will converge across all FTSE Russell Indexes effective at this year’s reconstitution and will be maintained similarly going forward. Changes to shares outstanding and free floats for all Russell indexes will now be implemented quarterly rather than the current monthly cycle, with intra-quarter changes implemented for certain defined events in accordance with set guidelines.
      Rank date, the date used to determine Russell US Index membership, usually in late May, will be on Friday, May 12 to facilitate the scheduled June alignment of shares outstanding and free float across the FTSE and Russell indexes. Fundamental data used to determine index constituent characteristics such as style and stability will still continue to be based on May month-end data.
      Russell Global ex-US Indexes will now be fully reconstituted in September to align with the FTSE indexes annual country classification cycle.
      Other methodology enhancements are being introduced this year at reconstitution:

      Eligibility of new market exchanges: As of reconstitution 2017, the IEX and BATS market exchanges will be eligible for membership in the Russell US Indexes.
      Free float restrictions: FTSE Russell has clarified the treatment of shares held by investment funds or investment companies. Notably, shares held by an investor, investment company or investment fund that is actively participating in the management of a company, owns shares in a company for strategic reasons, or has successfully placed a current member to the board of directors of a company will be restricted.

      Dummy lines/Placeholders: The Russell US Indexes will now utilize dummy lines and placeholders to facilitate replication of certain market events.

      FTSE Russell index expertise and products are used by institutional and retail investors globally and approximately $10 trillion is currently benchmarked to its indexes. Other examples of leading edge index reconstitution methodology for FTSE Russell include the FTSE Global Equity Index Series and FTSE UK Index Series quarterly reviews, which happened earlier this week, and the FTSE Annual Country Classification Review for global markets, which concludes each year in September.

      A full summary of planned updates along with background information on reconstitution can be found…

    • Ping from Knave_Dave:

      With the benefit of hindsight only, today’s market didn’t hold very strongly with the Nasdaq particularly taking another sudden jog down. The capitulate of tech stocks could still turn out to be a one-off — too early to tell — but with some new information (to me anyway) about central banks recent high ownership of the tech market, it all comes down to depending on what they want to do.

      Unlike other buyers of stocks, they don’t have to worry at all about taking losses because they’re the ones that print the money, and their losses simply equal money evaporating back out of the system — something they say they are ready to engineer anyway. If they want more money back in the system, they just issue more of it entirely at their own will. So, I can’t see that the losses, if they decide to let go can hurt them; but the only reason I can see for their letting go is if they know they are no longer able to control the economy through the stock market or interest because the patient is dead and if it becomes more profitable to try to stem the anti-globalist tide by letting things fall on the anti-globalists watch.

      I normally eschew conspiracy theory, but even without the conspiracy theory, it is increasingly evident that the economy is going to start cracking up on the schedule I’ve been saying it would and for the reasons I’ve been saying it will — the stock market being only one aspect of the economy and no longer a worthy gauge of anything now that its completely rigged by central banks.


      • Ping from Spatial Memory:

        Your homespun notions of the vestiges of legacy demand economies metrics and relevant benchmarks or indicators may as well include doomsday cries for buggy whip supply chains and farriers in current horseless carriage world of command economies and avant garde financial engineering. Eschew on reality reflected by data points and continuous price action confirmations for such a protracted time frame juxtaposed to your aforementioned normally eschew conspiracy theory – “…no longer worthy guage of anything…”

        • Ping from Knave_Dave:

          I believe they call your way of seeing things “confirmation bias.” The economy has flaws as broad as a plank in the face, but you can’t see them coming because you focus on the metrics you want to believe in. Or your just trolling, which I think is far more likely.

  13. Ping from Don_in_Odessa:

    Who’s the counter party to short selling? Such massive soaking up of market instruments renders the notion of profit on the downside for such large amounts almost impossible. Thus causing a crash by the PTB seems counter productive. The bankster class would be the biggest losers. Although if foreign central banksters really are doing this thing, the notion of which now seems to be lifted out of the back pages and crack pot conspiracy theorist’s nightmares, then one central bank’s paranoia could indeed start the ball rolling. If such an international conspiracy to support markets exists, hopefully they have a failsafe in place to limit a cascade. Of course that would require a certain amount of “common sense” smarts. If history serves us well, a doubtful commodity available to them.

    • Ping from Spatial Memory:

      Seems like with central banks balance sheets overweight sovereign debt, i.e. govt bonds and traditional reflex for “risk off” / “flight to quality” machinations being to sell risk assets – stock- and buy such instruments -bonds- coinciding with central banks goals of reducing their balance sheets exposure to such debt – plus the fact they “own” exponential amounts of the aggregate amounts of all asset classes through derivatives then such and event of massive stock sales and corresponding massive bond buying may seem counterintuitive to some but certainly wouldn’t seem counterproductive to those looking to reduce balance sheet overexposure to HISTORIC low yielding – historic high priced debt and as “forced” “buyer of last resort” acquiring “assets” at lows…. sort of like the tales told by those back page crack pot conspiracy theories of standard oil of new york and sony. 🙂

      • Ping from Don_in_Odessa:

        Hmm… perhaps they create more ETFs and other type tranches/derivatives to soak up sales and transfer risk to smaller entities???

        • Ping from Knave_Dave:

          Like you, Don, I’m not big on conspiracy theories, and so I’m reaching outside my norm on this one; but something smells seriously rotten in Denmark.

          For example, how can the economy be as sound as the Fed has been saying and merit two back-to-back emergency meetings of the Fed Board last year followed immediately by an emergency meeting with the president, which the president summarizes by saying, “We just met to compare notes.” Really? The Fed Pres calls THREE emergency meetings in one week just to “compare notes” while everyone maintains the economy and banking system is progressing exactly as hoped.

          Then you find that, indeed as you suspected all of last year, central banks were soaking up stocks. You don’t know exactly how much because these huge recent “assets purchases” include both stocks and bonds and probably other kinds of assets, but you know that, at least, one particular bank, according to Bank of America, decided they really need to own the majority share of Facebook. Hmm. Central banks don’t need to make money off of great investments because they can create money out of thin air, and Facebook is one of the best performing stocks. (But then maybe that is the primary reason why the FAANGs are doing so well.)

          So, just like you and Spatial are musing about here, I think of their recent statements about the need to slim down their bloated balance sheets, and think, “Well, that’s one way to do it!”

          Admittedly, there are holes in the theory, but the alternative seems to be that there are holes in their head if they think the economy is going to do perfectly fine through the retail apocalypse that is now at our doorstep and the deja-vu rolling over of the auto market with all of those effected returning with pink slips to face adjustable-rate mortgage increases again, having bought houses back at peak prices. They have to be very dumb if they think they dare raise interest rates into that coming storm. Nothing like an uptick in interest to hit to the old ARM time bombs hard.

          Still, they do have a history of appearing to be exactly that dumb. Let’s see if they see the writing on the wall and don’t raise interest (because having done so is clearly already killing their attempted recovery).


  14. Ping from V_ANGERY:

    What are the ramifications of the fed’s policies?

    I reckon your conspiracy is credible from a “tax livestock” point of view, but surely this impossible system must fail at some point with or without the fed’s permission.

    Let’s say they tried to keep the global economy propped up by preventing market crashes. When will this cease to be effective and reality take hold once more?

    • Ping from Spatial Memory:

      When the spread on the term structure of their 10 year debt – yield (interest rate gap) divergences from the proverbial gdp/gnp/potential output gap for a protracted time frame and translates to nontransitory changes throughout the slope of the skew of affine term structures (volatility indicies (VIX 30 day term structure of SPX), etc.). Liquidity traps in command economies … yikes! 🙁

      • Ping from Kim:

        Jebus. And what is the square root of gibberish along the slope of the skew of who cares? Do you really buy into this crap? This is a blog.

        It’ll stop when the central banks decide it stops and not a minute before.

        • Ping from Knave_Dave:

          Yes, if central banks have cornered the entire stock market by owning enough of key stocks to determine by selling or holding whether the market falls or floats, then it will end when they let go.

          The next question people will ask is, “Why would they ever do that?” And my thought is that they didn’t buy in order to crash, they bought to save Team Obama, and they truly believed that would hold; but that, if it didn’t, they’d have all they need to let it fall on Trump’s head and teach all us anti-globalists a good hard lesson (in their minds).

          On the other hand, the whole economy is about to fall apart right in front of them, and once the general economy has fallen apart, holding the stock market together may not have much value. The beauty for them is that they don’t have to worry about their stocks losing value. They want their balance sheets to shrink anyway, and there is more than one way to skin a cat.

          As for it hurting all their bankster friends, not if they banksters can find enough ready partners to take their trade in shorting stocks. And nothing like a big rally to get everyone hyperventilating and get the last tier to buy into the Ponzi scheme as the bankster bail out.

          • Ping from Auldenemy:

            What is it Jamie Diamond of the vastly corrupt JP Morgan earns a year? Last time I looked (about 3 years ago), it was well past $30 million a year

            • Ping from Knave_Dave:

              To qualify to be one of the nation’s highest paid bankers, you have to be able to take an august institution that has grown for decades and turn it bankrupt overnight while being smooth enough to get the government to donate $20 billion to bailing you out so you can cover your crash team’s bonuses. From there, you double the bankrupt institution in size with riskier gambles for the next ten years now that all moral hazard has been removed.

        • Ping from Auldenemy:

          Well said. Spewing out unintelligible clap trap is just an exercise in narcissism. We know central banks have completely warped every time honoured principle of what money is and how it works in developing and developed nations. We have global gobs of

          • Ping from Spatial Memory:

            Warped being the operative word throughout is accurate. Weak and warped regurgitation of media spin and attempt to blame anyone – even central bankers – who’s brilliant work has generated the Greatest Economic EXPANSION and asset APPRECIATION while ludicrously suggesting some warp factor in the exact opposite regardless of empirical economic and market data. Warp factor 10 syndrome.

            • Ping from Knave_Dave:

              What economic expansion? You mean stock market expansion? GDP has been on the longest period of slowest growth in history. It bounces between mediocre and pathetic. Wages have remained essentially stagnant (adjusted for inflation), and benefits have shrunk throughout the expansion. Many full-time jobs were replaced with part-time jobs. As my site says at the top, “It’s been a great recession … for a few.” Stocks, of course, are up, because that is where all the free money was directed. Doesn’t help most people who don’t get the free money and don’t have any surplus of their own to put at risk. Meanwhile, retirement funds, which haven’t been able to get safe interest or a decade are collapsing left and right. Some expansion!

            • Ping from Spatial Memory:

              Obviously you and your readers have suffered tremendously as a result of your misconceptions and attempts to misconstrue current economic and market data to fit you great recession blog name. Clearly time for the great recension. 🙂

            • Ping from Knave_Dave:

              I hope you recover from your head injury. I think you’ve been walking tall under the low-hanging pipes — g-dong, g-dong, g-dong.

            • Ping from Kim:

              Empirical economics and market data? Hahah, are you must be taking accounting classes with mark zuckerberg?

              Why don’t u crawl up Yellen’s pantyhose and kiss her big fat balance sheet?

            • Ping from Spatial Memory:

              Creepy double entendre to double entry accounting principles

              Double-entry accounting is based on the fact that every financial transaction has equal and opposite effects in at least two different accounts. It is used to satisfy the equation Assets = Liabilities + Equity, in which each entry is recorded to maintain the relationship.

            • Ping from Kim:

              You should get a job working as Yellen’s chief belly button sniffer. Cauth you tho thmart with ur thmeller.

            • Ping from Knave_Dave:

              Except the Fed doesn’t believe in double-entry accounting. It creates money in reserve accounts without creating balancing debits anywhere else because there is nothing to back the money to which one can write a liability against. They most important accounting in the world, and they are the only ones who don’t engage in double-entry bookkeeping. They live in a unique world of magic money.

            • Ping from Knave_Dave:

              “you must be taking economics classes at Trump University?”

              or just taking hallucinogens.

          • Ping from Knave_Dave:

            Missed you while you were away, Auld.

  15. Ping from Kim:

    I don’t see how the central banks can continue to buy up anything. Is there anything left to buy? At 1.5 trillion, what’s left?

    Most of these tech companies produce nothing of any tanglible value what-so-ever.

    • Ping from Knave_Dave:

      At this point, I think they could just about hold the market from falling by just holding what they have — the advantage of cornering the market. Once you’re at that point, you don’t have to do much to keep prices from falling.

    • Ping from Don_in_Odessa:

      Devaluation occurs as the money enters general circulation, begins to change hands at an increasing rate, which in turn increases demand for goods and services. The banksters prefer the word “inflation” though. This effect is charted by the velocity money kept by the Fed. The velocity of money continues to decline. When we see the velocity of money rate increasing, then know inflation (devaluation) is at the door. What we can infer from the data is the increase in the money supply is not entering into general circulation. Here is a link to the Fed’s data chart:

      • Ping from Knave_Dave:

        That is exactly right. The devaluation of money (inflation of prices) is happening only in the one area of the economy where money is circulating with furious velocity — in stocks and in bond trades. The much anticipated inflation from money printing is all happening in stock prices where the inflation of money supply has all gone.

        If it flows out of that eddie, all hell will break loose in terms of general inflation; but so far it has remained largely contained there. Of course, the Fed can crash that money supply quickly if it has to by using stocks as the emergency brake. Start dumping vast holdings of stocks, their value plunges, and the money on their balance sheets evaporates as quickly as the market crashes.

        It’s an odd thing for them to, but if they are aware that their recovery is a failure and looking for someone else to blame it on??? Or if slaughtering anti-globalists once and for all helps consolidate their own power??? Any other ideas why it is suddenly appealing to major central banks to invest in Facebook?

        I’m sure I’ll understand it better after the dust settles. Right now I’m trying to understand something before the event. Maybe there is no event, but I’m confident we’ll find out very soon if there is to be one. I think the economic crumbling is already looking great enough to go beyond their control. They are not gods. At best, they manipulate and cajole the economy; but, at the end of the day, if people stop buying, things grind to a halt. 23,000 closed stores in two years has gotta hurt!

        • Ping from Spatial Memory:

          You may find this hard to believe the majority of central banks including frb balance sheets are in Treasury bonds and similar instruments. Traditional reflex reaction to market uncertainty and weaknesses is a move further in the risk curve – often known as flight to quality and would most likely be a positive response in such and increase in their proverbial balance sheets- no conspiracy theories just basic banking and finance 101.

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