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2013-12-24 10:30 by Karl Denninger
in Federal Reserve , 993 references Ignore this thread
Once The Cat Is Out Of The Bag...

... you know what comes next, right?

PBS promised a “debate” this past Friday night on the “benefits and dangers” of the Federal Reserve as the Fed marks its 100 years of existence tomorrow. Instead of a debate, two famous stock market historians made the same stunning announcement – that the Fed has decided its job is to push up the stock market.

Yep.

And the real problem is that this is both illegal and, in addition, is unsustainable.

But bubbles are what The Fed has been about since 1980.  They either blow them or support them and let others do it, despite the bubble-blowers committing fraud and despite being their regulator, because otherwise this can't happen:

It simply can't folks.  You can't have wages rise at 10% while all monetary instruments go up at 15%.  Or wages rise at less than 5% while outstanding credit goes up nearly 30% (!)  The destruction of purchasing power that is caused by these jackals -- and let's be clear, The Fed is only part of it, but their willful and intentional lack of regulation is across everyone involved -- can only be temporarily "mitigated" through finding some way to allow people to borrow against ever-more-highly levered assets.

Eventually the next sucker to buy at a higher price fails to appear, because irrespective of whether he believes prices will go higher he's out of money and credit.

The problem is that it's not just the Internet company shysters selling worthless IPO paper, or the banks selling worthless mortgage securities, or now the stock market trading with firms at 1000x earnings -- if there are any earnings, ever.  No, it's also that the Federal Government is running huge deficits and has been since 2000, which is exactly the same thing.  When the cops are snorting cocaine on a daily basis you can hardly expect them to arrest their own dope dealer....

It was 1980 when we last saw the American people with an increasing standard of living net-net.  This doesn't mean some people didn't get ahead, but it does mean that as a whole the nation has been falling behind for the last 30 years.

Everyone wants to talk about the last five, or whatever.  It's easier that way.  It also makes it sound like you can put things off for a while, so long as you address them "eventually."

That's wrong.  It's wrong on history, it's wrong on arithmetic, and it's going to be proved to be ruinously wrong when the outcome becomes apparent.

Which, I might add, will be soon.