We bring you two quotes about this stumbling, bumbling, incompetent Janet Yellen led Federal Reserve Bank.
We are now quickly reaching the area where not just the Fed but central banks in general are being gauged for what they really are and have been, unnecessary middle meddlers for the most part hurting not helping peoples' lives. And that brings up an excellent question: Have they out lived their usefulness?
This is not an issue that should be left up to a bunch of distant, indifferent elitist bureaucrats or academics or Washington think tank dwellers. Or a gaggle of deplorables from Hollywood.
Actually, scratch three months: just one month ago on the day of this year's Jackson Hole conference, when asked by Steve Liesman what his "judgment on asset bubbles", the Fed's biggest dove James Bullard said that "I think we are on the high side of fairly valued, I could see the process getting away from us, maybe tech stocks, maybe others" even as he qualified that "the Fed model has nothing about asset price bubbles, most models don't have anything about that", and as a result no Fed model ever forecasts asset bubbles, which incidentally explains why the traditional side-effect of Fed policy over the past decade has been, drumroll, asset bubbles.
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Fast forward to this past week's FOMC's press conference, when in a direct question if Yellen is worried she is causing asset bubbles "because of prolonged low interest rates", suddenly all concerns - those voiced by the Fed two years ago and three months ago, as well as those of James Bullard as recently as a few weeks, magically vaporized, and were replaced by this: "we routinely monitor asset valuations... nobody can know for sure what type of valuation represents a bubble."
So, which is it: are valuation metrics "substantially stretched", and have "price to earnings ratios for equities increased to a level well above their median", a process which risks "getting away from us", with asset bubbles emerging in "tech stocks, maybe others"... or as Yellen just said, "nobody can know for sure what valuation represents a bubble"?
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Whatever the answer, we are confident that once Janet Yellen is confident that valuations do represent a bubble, she will promptly advise the investing public to sell.
twitter.com/StockBoardAsset/status/779001298595123201
There is no simple, painless solution. The world has to reduce debt, shrink the financial part of the economy, and change the destructive incentive structures in finance. Individuals in developed countries have to save more and spend less. Companies have to go back to real engineering. Governments have to balance their books better. Banking must become a mechanism for matching savers and borrowers, financing real things. Banks cannot be larger than nations, countries in themselves. Countries cannot rely on debt and speculation for prosperity. The world must live within its means.
~ Satyajit Das, Extreme Money: Masters of the Universe and the Cult of Risk
There is now almost $16 trillion worth of sovereign debt trading with a negative yield. Last week the credit bubble entered new territory with two euro zone issuers of corporate debt, Germany’s Henkel and France’s Sanofi, becoming the first private firms to sell negative-yielding non-financial corporate bonds in euros. This may, just may, happen to mark the top of the great bond bull run that started as far back as the early 1980s.
By Friday of last week, the implications of an ugly slide across bond
and stock markets may have led some fund managers and traders to soil
themselves, or suffer heart problems, or both. By a happy
coincidence, however, Henkel makes Persil laundry detergent, and Sanofi
makes treatments for cardiovascular disease. So any affected “investors”
dumb enough to have bought those guaranteed loss-makers and then
suffered immediate regret don’t have to look too far for a remedy.Doubts Emerge in Global Markets
“Taper Tantrum II” would appear to have arrived. The sell-off in bond markets last week was universal. US Treasuries, UK Gilts, German Bunds, Japanese JGBs, all declined. Japanese bonds are suffering more than most. Kevin Buckland, Wes Goodman and Shigeki Nozawa for Bloomberg report:One of the pillars of 2016’s record-setting global bond rally is starting to buckle. Japan’s sovereign debt is suffering its worst rout in 13 years, handing investors bigger losses over the past two months than any other government bonds amid speculation the Bank of Japan plans to change its asset-purchase strategy. The reversal is spurring concern the second-largest debt market is the vanguard for a broader selloff. … “The impact of the BOJ’s stimulus is that the bond markets worldwide are becoming one market,” said Chotaro Morita, the chief rates strategist at … SMBC Nikko Securities Inc., one of the 21 primary dealers that trade directly with the central bank. “If there’s a reversal of policy, you can’t rule out that it would roil global debt.”
Central Banks’ Abuse of Trust
Yuval Harari, in his excellent history of mankind, Sapiens,
points out that just about everything in the infrastructure of the
modern economy is either some kind of narrative or myth. The buildings
on Wall Street and in the Square Mile may be solid enough, but the rest
of the fabric of our financial system is dependent on trust or
collective belief rather than the material and the “real”.
The powers that be, many who live and regurgitate daily within the confines of places like the Financial Times, the Washington Post and others, keep blaming austerity for the current problems, pushing more for fiscal pump priming now that their silly monetary policies have proved as ineffective as a pack of condoms left unopened in one's wallet.
What austerity?
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