Signposts

That's the signpost up ahead—your next stop, the Twilight Zone!

-          Rod Serling, The Twilight Zone

Call it QE to infinity, modern monetary theory, magic monetary theory (H/T Zerohedge), whatever.  Goldman Sachs has come out with a report; the Zerhohedge headline reads: Goldman Spots A Huge Problem For The Fed.

Ya think?

To summarize, the inflation of the Fed’s (and every other major central bank’s) balance sheet cannot end, as the volume of required Treasury purchases is overwhelming and will continue to overwhelm the market.

My working thesis regarding this corona hysteria is, and has been from the beginning, that financial markets were past the point of requiring a bailout.  I have seen noithing that has caused me to change my view, and this Zerohedge piece fully supports it.

The first signposts were last fall when the overnight repo market interest rate hit 10% - meaning banks were not willing or not able to lend overnight to other banks.  The Fed stepped in to settle things down, eventually.

The corona gave the pretext for what had to happen in any case: the financial system required bailouts to avoid illiquidity and insolvency.  The Fed and its supporters knew that the people wouldn’t go for this scam again (recall the overwhelming pushback in 2008 / 2009), so they needed to do something to scare the hell out of everyone.  Climate change was way too far out in the future – not personal enough.  Enter the corona.

Now this doesn’t mean that there aren't other objectives or agendas.  Forced vaccines, your papers, please, etc.  I can think of a hundred possibilities – so, it is a target-rich environment.  For those who never want to let a crisis go to waste, well, this is Christmas, New Year’s Day, winning the mega-millions lottery, and a twenty-first birthday all rolled into one.

So, what does all of this have to do with the Zerohedge article?  The last few paragraphs tell the story:

"Can governments continue to borrow at such record levels? No," said George Boubouras, head of research at hedge fund K2 Asset Management. "Central-bank support is key in the massive bond buying we’ve seen for now. But if they blink then at some point, in the medium term, it will all likely unravel - with unforgiving consequences for some countries."

Ironically, this also means that an end to the coronavirus crisis is the worst possible thing that could happen to a world that is now habituated to helicopter money and virtually unlimited handouts, which however need a state of perpetual crisis.

"Once there is an end to the crisis in sight, they will be less and less willing to provide support and it will fall more on the street to absorb paper," said Mediolanum money manager Charles Diebel, who’s adding bond steepeners in anticipation of a coming inflationary supernova.

They “will be less and less willing to provide support,” only without a pretext.  Hence, they need an ongoing pretext:

That, incidentally, would be the endgame for the current monetary regime, which is why anyone hoping that officials, policymakers and the establishment in general, will allow the coronavirus crisis to simply fade away, is in for the shock of a lifetime.

Read the last paragraph twice.

If it takes keeping half of the working class in the developed world unemployed (while sending the occasional $1200 check), so be it.  And if it takes a few million or tens-of-millions of hunger-related deaths in the more poverty-stricken regions of the world, no problem.  At the cost of a few hundred billion dollars and a few tens-of-millions dead, the bailouts to the financial system are in the multi-trillions.

Conclusion

So, I expect we are certain to face a second and third wave, or maybe the virus (or whatever it is) will morph into something else, or whatever.  They have already moved the goalposts at least once: from “flattening the curve” to “finding a vaccine.”  They will move the goalposts as often as necessary and as long as they can get away with it.

We are likely facing perpetual crisis mode until a major economic and financial reset is forced upon the inhabitants of planet earth.

Economic Dr. Mengele

The stupidity, callousness, and corruption just doesn’t quit.  This is a follow-up to an earlier John Mauldin column, where I asked the question Who Will Count the Cost?  Mauldin has continued to write about how wonderful it is that the economy is being destroyed in order to fight the corona; his latest: Bending the Inflation Curve. 

I will get a couple of simple points out of the way – points where Mauldin is wrong, but not points worth spending further time on: Mauldin confuses deflation with depression; Mauldin confuses consumer price and asset price increases with inflation. 

Further, I won’t spend any time on the countless trillions being spent by the Federal government, or created from the Fed (to include the leverage on top of that).  I can’t keep up with the numbers.  Mauldin calls it $8 trillion thus far, and counting.  Good enough for me.

So, why do I read Mauldin?  I find him to be a good gauge for what those who make meaningful financial and economic decisions are up to.  Nothing more.

Before starting with Mauldin, it is worth taking a look at an analysis done at The Market Ticker: Stop IT NOW Fraudsters.  (it is from this post where I got the idea for the title of my post.) 

It is not a long read; I will summarize: every projection model of this corona was wrong, wrong to the high side, and wrong by a factor ranging from two to twenty-five times.  Not 25%...twenty-five times.  And these errors were as compared to the lower boundary of the projections – not the mid-point, not the high end.

And before you say “thank God they put the house-arrest measures in place, see how well these worked!”, it is noted – by those who ran the models: COVID-19 projections assuming full social distancing through May 2020.

And this says nothing of the gross manipulation of the “data” (and I use that term in the loosest sense imaginable) of the number of people diagnosed with and claimed to have died due to the corona).

Now, on to Mauldin:

But thankfully, we are starting to see the curves bend. (emphasis in original)

Well, we are certainly seeing them bend in the national deficit, the unemployment numbers, the Fed’s balance sheet.  These are certainly bending.  Mauldin recognizes this.

Nevertheless, much of the economic damage is already done.

Well, you can’t cry over spilt milk.  Nevertheless, no, much of the economic damage is not already done.

Close to 17 million people have filed for unemployment in the last 3 weeks.

Mauldin sees that the number will grow much higher:

That potential 20–25% of unemployed also represents significant numbers of children and family members who are also without money.

What of the damage done here?  Out of these countless millions of unemployed, how many will ever find similar employment in the future?  After a few years out of the labor market, who will want to hire them?  Many of these are young people: in restaurants, hotels, retail, etc.  This purposefully-driven economic destruction will cost them for the rest of their lives.

Mauldin, without a blink, cites Fed Chairman Powell, who says “Our ability is limited by the law.”  Don’t you take great comfort in that?  Well, wait…what limits the law?

The Fed needs the Treasury Secretary's permission to do this.  That means Trump must approve this….

Not that I would feel any better if it had to get through Congress.  In any case, one wonders why Mauldin even bothered saying anything about “the law,” when he further writes:

Should We Have Listened to Greta?

The desperation was obvious.  Trotting out a seemingly angry child, who somehow miraculously found herself on the most prominent stages, in the attempt to scare us – finally – to give up our lives for so-called climate change.  It was laughable, and I suspect even the most ardent believers of this “settled science” couldn’t help but chuckle – but only when not in the presence of polite company.

Well, maybe we should have listened.  Climate change – to whatever extent one is a believer – was such a distant problem, very few non-elite could stomach the cost today in order to avoid some disaster ten or twenty or one-hundred years from now.

As the laughter toward Greta overwhelmed whatever pity one might have felt for this child, a more immediate catastrophe was offered.  The corona.  How amazingly quickly billions of people would give up any last remaining shred of liberty – to say nothing of Palm Sunday and Easter – when they could see their own lives flashing before them because of…the flu.

Now…I see the shredding of liberty as a side benefit to those who deem themselves our rulers – a side benefit that they are and will gladly exploit.  The immediate benefit of – and most important reason for – corona-gate is to save, for a future day, the final collapse of a financial system built on central banking and fiat.

But what would have happened if we listened to Greta?  Trillions would still have been spent, and central banks would have created countless trillions more (remember the good-old-days, just a couple of months ago, when central bankers were claiming a new mandate to fight climate change?).  in other words, this would also have delayed the inevitable collapse of today’s money and credit regime.

But at least if we listened to Greta, we wouldn’t have countless millions unemployed with the likelihood for many of these that their lives will never be the same.

Really, we should have just listened to Greta.  When will we ever learn?