Feces and fans. Never a good combination for anyone who happens to be near the spinning blades, basic logic and common sense dictate the only way to achieve a positive resolution is to stop the flung excreta from reaching its destination in the first place. To do something tangible to intercept or divert such scat whilst still early enough in flight, saving the machine but more importantly all in the potential stench radius.
These manure references, and those to follow, are sadly all-too-appropriate given the fast-approaching circumstances.
Now imagine this situation and the existence of a professional who claims to be highly adept at poop-stopping. So good, he says, you are invited, even encouraged to come sit by the fan wearing your nicest, cleanest white outfit. Nothing to fear, he assures, pay no attention to that highly noxious crowd of flatulent bovines, famous for hurling their waste at high velocity when spooked, the super-fantastic-crap-catchers are on the case!
Only, when the moment of truth arrives, the filthiness finds flight and…our hero stands there doing nothing other than talking to both you and, strangely enough, the flying obscenities, comforting each as the inevitable befoulment plays out exactly as had long been feared.
Even more strange, afterward while the literally soiled are convulsing and retching, this same professional spends all his post-event time congratulating his own efforts. Those were some really soothing words, he tells himself. With the growing outbreak of chaos all around, Mr. Fecal Stopper sure did wax poetic about the true nature of de-boweling (even making up smart-sounding terms, like de-boweling) while keenly exhibiting a real grasp of turd history all the while it hit the fan anyway.
It sounds like only the kind of satiric yarn some master like Robert Louis Stevenson might have spun. But no, that’s our world. For those who don’t see the truth surrounding it, they keep living it.
Actual money in actual money markets long ago caught wind of what really goes down.
The same man who told Congress in 2010 how the Global Financial Crisis of 2007-09 grew from “intense strains in the global dollar funding markets began to spill over to U.S. markets” was the Federal Reserve’s Chairman who had just stood by and witnessed the whole thing unravel from the sidelines. In lieu of actual monetary policies, sophistry.
Courageous Ben Bernanke.
He’d hawked his so-called miracle cleaning snake oil his entire time at the Fed. Not just the infamous “subprime is contained” (also, interestingly enough, said before Congress), but repeated reassurances that no huge monetary disaster would ever befall our nation’s banking and monetary machinery. Certainly not with the man, the guy everyone said was the most astute expert on monetary breakdowns, including the biggest of them all, the Great Depression, sitting in the Big Chair.
Bernanke had even gone so far as to say it, out loud, to Milton Friedman of all people, back in 2002. He does love to talk, this one:
“Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again.”
Five years later, the Fed did it again; the excrement would reach its most horrific redistribution, more vulgar and polluted than anyone could have imagined. The absolute worst total mess since that other one.
To which all he ever offered was the story behind Uncle Ben’s Magic Elixir.
A decade and a half after having lived with the reeking consequences, finally the guy fesses up to the charade. He was never a central banker, instead pure swindler and conman, nothing ever other than a snake oil salesman. Safe within the comfortable confines of his post-disastrous career atop the Federal Reserve, the utterly "brave" Bernanke finally in May 2022 warms to a Brookings Institute crowd by copping directly to the dishonesty:
“I think monetary policy is 98% talk and 2% action, and communication is a big part.”
Even now, his math is clearly fiction; money-less monetary policy is 100% fairy tale, only action in the design and execution of a simpleton puppet show based on that same song and dance whose true audience is the media-at-large. Those who are cowed into believing the show is gospel truth so as to lay it on thick, spreading it far and wide to the masses.
The Fed’s Ben is hardly the only one to have admitted to selling fake remedies. As Emil Kalinowski pointed out just this week, next week will be the seven-year anniversary of Haruhiko Kuroda’s Peter Pan Moment of Inadvertent Clarity.
Our world’s true master of the QE illusion, Kuroda’s lengthy Bank of Japan career, out-spanning Bernanke’s, has been one prolonged theater act. He never once printed any money, action as any true central banker would know it, instead spending all his worthless time while squandering our precious few opportunities play acting.
“I trust that many of you are familiar with the story of Peter Pan, in which it says, 'The moment you doubt whether you can fly, you cease forever to be able to do it.’ Yes, what we need is a positive attitude and conviction.”
No, dammit, what we need is someone to take this seriously for once but these are not serious people. They need to answer for the last fifteen years (or thirty-plus if you’re Japanese), then more importantly how the smell is rising once again from the pasture while the fan blades still spin as wildly as ever.
This Bloomberg headline from Wednesday cuts through the official spin only too well; Traders Defy Fed Hawks as Half-Point Hike in July in Doubt.
Only two rate hikes in to what is supposed to be a prolonged and ultra-aggressive inflation-fighting campaign, a bottle of elixir we’re told to take ultra-seriously for its purported otherworldly properties, instead the market is more and more disavowing the fairy tale for the growing reek of monetary reality.
We have markets experiencing dangerous “volatility” – ironically, the media spins it as if the rate hikes are the cause! – combined with growing real money shortfalls and the dastardly imbalances they conjure. That’s the thing about getting covered in it; having been lied to and suffered the smelly consequences before, the faintest whiff of a repeat sends you running for the exits no matter how confident the officially encouraging talk comes at everyone.
Eurodollar futures have been experiencing inversion for nearly six months already, inversion that has spread in breadth as well as depth. It began, like always, including 2006 or more recently 2018, in the far-off contracts. Before too long, the inverted futures prices weren’t so far off.
Putting these into chromo-graphic terms of specifically this market’s color scheme, thankfully no brown, the curve distortion began in the blues and has worked inward from there; infecting next the greens before taking down the reds. The latter was a huge warning over how traders were already defying Fed hawks as the entire series of rate hikes had fallen under serious doubt.
Reds are typically all about the Fed and its jawboning. But when contrary reality intrudes, such as this year, talk isn’t cheap it’s downright dangerous. Eurodollar reds turned on the Fed and now up for inversion is the inner whites. This is big.
Hardly an outlier, there’s any number of corroborating action-takers. Swaps markets, beleaguered by the real money of balance sheet capacity problems along with the real big one in the form of collateral scarcity.
As to the latter, you’ve heard it here too many times before. T-bill rates perform far louder and more convincingly about monetary sufficiency than any fake central banker. Though the FOMC plans two more rate hikes by August, expecting to add a combined 100 bps to RRP and IOER, the 8-week bill (87 bps yield) is nowhere near the 180 bps both those policy benchmarks are said to be aiming for.
The primo 4-week bill is still yielding just 53 bps, 27 less than RRP and 37 below IOER right now. Add 50 bps to those latter in about three weeks.
What it all means is very simple: Jay Powell speaks about inflation when real money is deeper in the throes of deflation. He’ll dialog about the need to stop consumer prices while the malodorous halt to consumer prices has been priced into curves for months already; months before the first opening act of the latest rate hike puppet show.
The more 2022 passes, the more confident the market gets about more fans and more feces. The more confident the market signals, only more talk from puppeteers. What a world.
Red and then white inversion, to go along with the still-inverted middle of the Treasury yield curve, absurdly low T-bill rates (huge premiums paid in price), that is 100% action.
Do we give Ben Bernanke some partial credit for belatedly, at least, confessing to what he’s done? I’m not sure it helps all that much because for much of the public faith in fairy tales is again so fickle. From crypto to equities, the hide-your-money-from-the-dollar-crash is dying off quickly enough as the actual dollar exchange value surges unstoppably higher from the shortfall of money motion and motivations.
People want to believe in the technocratic ideal; the wise man behind the curtain pulling all the levers, smartly controlling our fate so as to efficiently achieve what Economists call optimal outcomes. But the Wizard was just a bumbling old man playing to his audience’s biases; L. Frank Baum’s fairy tale very much on the nose.
In the market’s nose today is nothing any snake oil can cure, nothing so far as the prevention of pitching nastiness. Sell it somewhere else, Ben and Jay (and Janet), we’ve got to get ready to clean up more (of your) shit.
