Plenty of cults exist - every cult has its 'religious dogma', its idols, its 'prophets', its 'science', its 'proof' and its intolerant liturgy of demands. Cults everywhere: Islam, the State, the cult of Gay and Queer, Marxism, Darwin and Evolution, 'Science', Globaloneywarming, Changing Climate, Abortion....a nice variety for the human-hater, amoral, anti-rationalist to choose from. It is so much fun mocking them isn't it ?
Tempus Fugit Memento Mori - Time Flies Remember Death
The cult of central banks. 1971 the gold standard was abandoned. Since then the average currency value has plummeted – in real purchasing power terms – by 85%. This is a main reason why both parents must work; and why a house valued at $100.000 in 1971, now costs $600.000 or more. Your real inflation per annum from currency-value destruction is at least 3%.
So when an economic crisis arises, thanks to government interference in housing and finance, what happens? More money is printed and rates are held at real negative levels. The result is higher stock and housing prices. But the gains are ephemeral and will not last. Keynesian mysticism is not a panacea for economic ills, financial or housing distortions, or certainly a massive increase in public, private, corporate and governmental debt. The world is drowning in debt that can never be repaid.
How will inflation be 'muted' when the $5 trillion sitting on the Central Bank's balance sheet and which needs to be multiplied by two, to factor in other central banks' balance sheets, flows into the financial system?
“Increasing its balance sheet by more than fivefold since the beginning of the recession.
A lot of the money the Fed has spent to buy these assets has been deposited by banks back at the Federal Reserve as excess reserves.
Excess reserves now stand at over $2.5 trillion. Prior to the crisis, in January 2007, excess reserves were only $2.1 billion.
Excess reserves are cash balances that are not in the economy bidding up prices. We are in complete uncharted territory with these reserves. If they start to flow out of the Fed, the price inflation implications will be severe.”
An objective observer looking at the real economy [real inflation at 3-5%, GDP is meaningless, employment at 60%, record levels of margin and housing debt, sub prime auto loans at a record high....] might be forgiven, if he thinks that an economic contraction, starting with a bubble-stock market is only a matter of time. You can't print money and hold interest rates at zero forever. At some point in time the bill needs to be paid.
David Stockman, former economic adviser to Reagan, and much pilloried by the Liberal-Keynesian-Democratic-Monetarist cult members wrote an insightful article titled; 'The cult of Central Banking'. Cult is precisely the right appellation. The US central bank or Federal Reserve has created no fewer than 10 major financial collapses in the past 100 years; debased the US currency by 95% since 1913; and post-the-end-of-the-gold-standard in 1971 has facilitated the massive increase in government spending, yearly deficits and accumulated debt, which just at the Federal level alone; will bankrupt the US political-economy.
Some facts from Stockman which offend the cult of central banking:
The real economy is not improving:
2. Real unemployment is massive and not due to 'retirement':
Fed's balance sheet is an irreducible disaster:
“Since Greenspan launched the cult of Keynesian central banking and the financialization of the American economy in the late 1980s, the balance sheet of the Fed has grown from $200 billion to $4.4 trillion—or by 22X. The S&P 500 is up 10X notwithstanding three thundering booms and busts in the interim. Along the way, the great financial markets of American capitalism have been destroyed as agents of productive capital formation, efficient resource allocation and honest price discovery. The have simply become a giant, central bank operated and funded casino where the 1% gamble with make-believe money.”
CNBC watchers and PollyAnna lovers hate Stockman, or indeed any person who objects to the cult of the central bank, with their permanent interest rate at zero; and their endless printing of money. These big-brains will dismiss facts, evidence, reality and real economics, and in their place substitute; rhetoric, tautology, Keynesian mythology, Monetarist myth-making and made up numbers from GDP to 'unemployment'. Anything to keep the fraud going. We have a systemic sea-change for the worse occurring, but those who subscribe to the cult of central banking could care less. They are too busy flicking their hair and retelling fantasies as fact. The real economy thanks to the cult of central banking is being destroyed.
The cult of government. Government is your 'friend'. Government loves you. Government is the innocuous 'G' in Keynesian non-science. Government is moral, happy, delighted to aid you. Government only desires the best for the children's future. Government loves Gaia. Government 'built that', and only Government can 'create', 'innovate' and inspire. Rubbish the lot of it, but the general zeitgeist is that the benefices of government know no limits.
This cult applies itself to markets of all stripes and variety. There is nothing that government does not desire to control, regulate, tax, tax again, tax a third or seventh time, and manage. The US for example, is not the home of the brave, market-loving cowboy; but now resembles the home of the over-taxed, uber-regulated child in 6th grade, terrified of falling off the monkey-bars at recess or scratching a knee while playing tag.
In reality government is of course the problem. Governments and their lackeys called 'central banks' create bubbles. Tyrannical, absurd, expansive, corrupt, negligent, cowardly, ignorant of culture and civilization; it has been government and its cults which sell communism, marxism, multiculturalism, easy money, 'quantitative easing', housing 'insurance', and the bailouts of too-big-to-fail firms. Various other 'scientific isms' are paraded daily by government knaves in the mass-media as 'iron laws' of rationality and morality. So much for the dark ages.
Nicholas Pardini, in his 'Pardini Report' gets the facts straight about our current government initiated 'bubble': Detailed Case to short the S&P 500, this time is not different.
Pardini stipulates the following, none of which can really be disputed
-the US [and European] middle class is disappearing
-incomes are stagnant and personal debt is growing
-higher interest rates are a certainty given that the US central bank must eventually exit is current easy money and bond-buying programs
-stock market [and housing bubbles] as in times past, will pop
Pardini: When everyone is a 'bull', something is wrong
Bullish sentiment is nearly unanimous amongst both retail investors and investment professionals. Margin debt on stock purchases is at all-time highs, 75% of newsletters are bullish, the average hedge fund is leveraged long, and bullish option speculation is at all-time highs. This indicates that all the money is on one side of the market. Since economic fundamentals do not confirm such market euphoria, this is a strong contrarian sell signal.
Pardini: The stock market rise is a perfect match to the Fed's expanding balance sheet
Pardini: Stock valuations are near record highs [contrary to media reporting]
“...valuations for US stocks have reached rich levels only seen in 1929 and the late 90's tech bubble. The P/E ratio of the S&P 500 is currently at 19.55, which is 30% above its historical average. As seen in the chart below, valuations adjusted for changes in the business cycle (Shiller P/E) are at highs only previously seen in 1929 and the tech bubble.”
Pardini: The real economy [not the media-reported economy] is very weak
“The real economy is not growing, real living standards amongst 90% of Americans are declining, and this slowdown is reflected in poor earnings. The catalysts for this bull run of easy money and institutional corruption causing multiple expansion is shaky at best. Technical indicators also are overbought, and sentiment is over bullish. With our 2014 price target for the S&P 500 below 1600, our outlook is negative for most developed market stocks. The crash of 2014-2015 will be brutal and come to surprise most market experts despite the signs being obvious for anyone looking at fundamentals beyond FOMC guidance.”
Pardini: Any exit program initiated by the Fed will mean higher rates which pops the bubbles
“Interest rates will rise in either scenario. The combination of increased inflation expectations, higher sovereign default risk, or tightening policy will be the catalyst. Not all of these will happen, but the probability of at least one happening is near certain. Higher rates makes stocks less attractive versus bonds, increases the financing costs of traders on margin or highly levered companies, lower housing prices, and also will trigger more consumer defaults.”
Pardini: Most of us are still broke and there is no easy solution to remedy this
“The bottom line is that the American consumer is broke and has no disposable income. Without disposable income to spend or save, there is limited capacity for real private sector growth and therefore the US economy continues to stagnate even with sustained cheap credit. The only solution to this problem is to either allow a major deflationary bust to lower the prices of basic goods such as housing, energy, and government spending to more "affordable" levels for current wage levels (which may include a haircut in US treasuries) or allow real standards of living to fall stealthily through inflation.”
The media and the business 'channels' posit the opposite of the above. To the big-brains propaganda machine of government, all is fine, fundamentals are strong; there are no bubbles; the consumer is 'robust' as are corporate earnings; and government policies are wonderful.
When such sentiments are expressed as 'facts' you know that the contrary is true.