Stocks and Precious Metals Charts - Fire the Fed - Imperial Finance: Currency Wars

 

“Currency warfare is the most destructive form of economic warfare."

Harry Dexter White, US Representative to Bretton Woods, 1944

"The war was entirely one of choice; Iraq was not posing any significant threat to the United States and U.S. interests. The costs were huge. Estimates by academic experts of the war’s long-term monetary cost to the United States — covering everything from bullets to medical care for disabled veterans — are on the order of two to three trillion dollars.

The selling of the Iraq War to the American public was an exploitation of mass gullibility.  That feat was accomplished not so much through lies as through a rhetorical drumbeat that cultivated certain misperceptions among Americans.

Current circumstances give little or no hope that the public response would be much different to the selling of some future untoward war.  If anything, the nation has sunk even deeper into a post-truth era, with lies by the tens of thousands at the presidential level having been a major part of recent American political history."

Paul Pillar, The Selling of the Iraq War: Gullibility and Mass Hysteria, March 15, 2023

“See, in my line of work you got to keep repeating things over and over and over again for the truth to sink in, to kind of catapult the propaganda.”

George W. Bush, New York, May 24, 2005

"Cliches, stock phrases, adherence to conventional, standardized codes of expression and conduct have the socially recognized function of protecting us against reality.  The sad truth is that most evil is done by people who never make up their minds to be good or evil."

Hannah Arendt, The Life of the Mind


Stocks were in slumping mood this morning but were cheered by the move of the Swiss Central Bank to throw a life line to troubled behemoth Credit Suisse.

And then the Banking Boys, herded by the Treasury and the Fed, offered to cough up a hundred billion or so in loans to First Republic Bank, which was swirling down the drain.

Are these loans or deposits?  I hear they are deposits.  

If deposits, will the FDIC backstop them against loss as well?   I hear yes.  LOL

Sheila Bair, the former head of the FDIC, was barfing over all this ad hoc favoring of big tech billionaires after the bell.

Gold and silver churned around.

The VIX fell sharply on the bailouts, which we are assured are just transitory.

The Dollar fell a bit. 

And Treasury Secretary Janet Yellen and money meister Jay Powell basked in the glow of another job well done.

After the bell the Fed released figures showing that the Discount Window and the new Special Facility is doing a bang up, record business lending out funds to troubled Banks.  

All is well.  For the favored few.

"And with all that in mind, what is very clear, and what most policymakers have come to understand, is that the collapse of Silicon Valley Bank is 100% the fault of the Federal Reserve. 

SVB was regulated by the San Francisco Federal Reserve Bank, and examiners at the SF Fed didn’t see serious problems until the fall of the bank was imminent. This is despite public reporting in the Wall Street Journal about the hole in the bank’s balance sheet months earlier. 

The incompetence of Fed examiners is married to supreme smugness by those same regulators.  Indeed, nearly all of my contacts in bank regulation are uniform in hating the Fed, which is composed of, as one of them told me, 'arrogant patronizing fucks who are not any good at their jobs.'

The closer you get to the facts the worse it looks. Supervisors should never have allowed a bank funded with between 90-100% uninsured ‘hot money’ deposits by venture capitalists to bet on unhedged long-term bonds.  And you didn’t need to be a genius to get this fact.  Everyone in Silicon Valley knew that SVB was insolvent, it was pretty much an open secret.  The piggishness of the place, and the social climbing, was legendary.

And the collusiveness of the bank with the Fed itself was very clear. I mean, Becker was on the board of the San Francisco Fed until the day his bank collapsed, when the SF Fed quietly replaced him with a ‘vacant seat’ notice."

Matt Stoller: Fire the Fed

Quad option expiration tomorrow.

Have a pleasant evening.

Stocks and Precious Metals Charts - The Empire of Lawlessness

 

"We've become now an oligarchy instead of a democracy. I think that's been the worst damage to the basic moral and ethical standards to the American political system that I've ever seen in my life."

Jimmy Carter

“Fear and debt. The two most powerful tools of empire.”

John Perkins, The New Confessions of an Economic Hit Man

"Over the past 30 years the plutocrats have used their vastly increased wealth to capture the flag and assure the government does their bidding.  This marriage of money and politics has produced an America of gross inequality at the top and low social mobility at the bottom, with little but anxiety and dread in between, as middle class Americans feel the ground falling out from under their feet.

Millions of Americans have awakened to a sobering reality: they live in a plutocracy, where they are disposable.  Now we have come to another parting of the ways, and once again the fate and character of our country are up for grabs.  Democracy only works when we claim it as our own."

Bill Moyers, last episode of Bill Moyers Journal, 30 April 2010

"Our plutocracy, whether the hedge fund managers in Greenwich, Connecticut, or the Internet moguls in Palo Alto, now lives like the British did in colonial India: ruling the place but not of it."

Mike Lofgren, The Deep State: The Fall of the Constitution and the Rise of a Shadow Government, 5 January 2016

"Special privileges and the use of the taxing power for private gain, these are the twin pillars upon which plutocracy rests.  Accumulating by conscious frauds more money than they can use upon themselves, wisely distribute or safely leave to their children, these denounce as public enemies all who question their methods or throw a light upon their crimes.

Plutocracy is abhorrent to a republic; it is more despotic than monarchy, more heartless than aristocracy, more selfish than bureaucracy.  It preys upon the nation in time of peace and conspires against it in the hour of its calamity.  Conscienceless, compassionless and devoid of wisdom, it enervates its votaries while it impoverishes its victims."

William Jennings Bryan, Speech at Madison Square Garden, 30 August 1906

Stocks went on another wild ride today.

The downgrade of a number of US Banks, including First Republic Bank to 'junk.'

And then there is the ongoing saga of Credit Suisse and the various attempts to pull it back from the abyss to which it has been descending.

But never fear, some well placed rumours and stabilizing buying in the major indices managed to bring stocks back a bit with big cap tech going well into the green.

The Dollar rallied hard to take out the 104 handle again.  Euro-weakness and all that.

Gold and silver took a little bit of a trip themselves with all this volatility.

When they finally break into the light of day the shenanigans that have been ongoing in the highly leveraged, highly secretive precious metals market is going to look like a coronal mass ejection of monetary malfeasance and manipulation.

It's been a long time coming.

The VIX bounced up and then down.

Treasuries are 'trading like penny stocks' was one of the few incisive remarks on financial TV today.

The most nebulous was the bold assertion that blockchain is the remedy for our repetitive banking crises. 

Have a pleasant evening.

Stocks and Precious Metals Charts - The Fed's Frankenstein - Peak Hubris

 

"The mechanics of what is happening with money now is fascinating, and seems to be clarifying in my mind.  It is hard to imagine a more inherently ineffective system of capital and resource allocation than crony capitalism.  It is like playing a game in which the rules are rigged to deliver the money in the system to a relative minority of insiders, thereby bankrupting all the other customers.

It is said that in a purely competitive capitalist system, all businesses are vectored to zero profit in a process of creative destruction. As a certain class of participants clearly recognizes this they take every opportunity to corrupt and game the system through fraud.  This is why markets must have regulators.  At times the fraud overcomes the regulation to such a degree that the normal market balances are rendered ineffective and the system passes to a crony capitalist system, if not an outright oligarchy."

Jesse, Crony Capitalism: The Fed's Frankenstein, 17 December 2010

"The real danger comes from encouraging or inadvertently tolerating inflation and its close cousin of extreme speculation and risk taking, in effect standing by while bubbles and excesses threaten financial markets."

Paul Volcker

"Day by day the money-masters of America become more aware of their danger, they draw together, they grow more class-conscious, more aggressive.  The [first world] war has taught them the possibilities of propaganda; it has accustomed them to the idea of enormous campaigns which sway the minds of millions and make them pliable to any purpose."

Upton Sinclair, The Brass Check

"The undeserving maintain power by promoting hysteria."

Frank Herbert

"For over a decade, low interest rates have allowed venture capitalists to accumulate huge funds to give increasingly unprofitable firms with unrealistic business models increasingly larger valuations.

Over the last year, rising interest rates to combat inflation have meant less free money for science-fiction projects, pressuring investors to change their entire approach and actually fund realistic ventures at realistic valuations with realistically sized funds and deals. Drops in valuations meant smaller checks, which meant smaller deposits at Silicon Valley Bank, and more and more withdrawals as startups ran out of cash themselves. It also meant the bonds SVB bought were now worth less than when purchased, so they’d have to be sold at a loss to generate some liquidity, so that clients could withdraw their deposits.

You would be hard-pressed to find another parasite that has so thoroughly wrecked the body and environment of its host, all while trying to convince the host that it is deserving of praise and further accommodation.

We should ask whether a system that subsidizes a bunch of well-connected, wealthy libertarians as they enrich one another with lottery tickets is truly the only way we can and should develop technology."

Edward Ongweso, Incredible Tantrum Venture Capitalists Threw Over Silicon Valley Bank, March 13,2023

"Greed is a fat demon with a small mouth, and whatever you feed it is never enough."

Janwillem van de Wetering

Stocks came in shaky today, but after a great deal of 'behind-the-scenes' assistance, the Exchange Stabilization Fund was able to provide a jolt of courage to the bulls, who went in buying, at least for a little while.

A late day rally saved the day for a 'bounce.'

The volatility in US Treasuries is almost astonishing.  But I don't suppose we should be surprised by much anymore.

Gold and silver backed off a little bit.

VIX fell.

The Dollar chopped sideways.

Crisis averted?

Perhaps.   Or perhaps we are just sowing the seeds for an even greater and more comprehensive crisis in an increasingly rotten, crony capitalist system.

PPI tomorow.

If the Fed doesn't raise 25 bp at their next meeting we will know that they have either lost their nerve, or that the situation with the financial system is much worse than they have been letting on.

Have a pleasant evening.

Stocks and Precious Metals Charts - Economic Donkeys

 

"To put it bluntly, this [Silicon Valley Bank] was a Wall Street IPO machine that enriched the investment banks on Wall Street by keeping the IPO pipeline moving; padded the bank accounts of the venture capital and private equity middlemen; and minted startup millionaires for ideas that often flamed out after the companies went public. These are the functions and risks taken by investment banks. Silicon Valley Bank – with this business model — should never have been allowed to hold a federally-insured banking charter and be backstopped by the U.S. taxpayer, who was on the hook for its incompetent bank management.

Wall Street On Parade, SVB Was an IPO Pipeline in Drag as a FDIC Bank, March 13, 2023

"The real problem with our financial system is that our economic and political system work together to encourage excessive risk, and this risk in turn leads to cycles of prosperity and collapse.  This policy of responding to the aftermath of bubbles, rather than addressing them before they get going, through tighter regulation, has become the mantra of most central banks. 

Each time banks fail, by bailing the system out again, we teach our finance sector a lesson: you can safely take too much risk because, when you lose, the taxpayer will pick up the bill.  Such a system is destined to fail, but the party can run for a long time."

Simon Johnson and Peter Boone, Economic Donkeys, 19 September 2009

"You should thank God for bank bailouts.  Now, if you talk about bailouts for everybody else, if you just start bailing out all the individuals instead of telling them to adapt, the culture dies.   There's danger in just shoveling out money to people who say, 'My life is a little harder than it used to be.'  At a certain place you've got to say to the people, 'Suck it in and cope, buddy.'"

Charlie Munger, September 2010

"It [inequality] is visible in the ever rising costs of healthcare and college, in the coronation of Wall Street, and the slow blighting of wherever it is that you happen to live. And you catch a glimpse of inequality every time you hear about someone that had to declare bankruptcy because a child got sick. Inequality is about the way in which speculators, and even criminals, get a helping hand from Uncle Sam, while the Vietnam Vet down the street from you loses his house."

Thomas Frank, Listen Liberal

"Moral hazard is the probability that a party insulated from risk will behave differently from the way they would behave if fully exposed to the risk. It also encourages the rise to power of the sociopath in the affected organizations.  Unfortunately there is a small but powerful oligopoly of privilege that is trying to project themselves onto the global stage while believing that they are immune to ordinary consequence, and have become addicted to the notion that 'others must pay' for their failures.  Moral hazard comes from rewarding bad behaviour in markets with wristslaps and bailouts.  It is a danger to the economy and to the public."

Jesse, Moral Hazard, 22 March 2008

A fresh run on some of the 'banks' and their subsequent failure had the risk markets reeling.

The government took extraordinary action to bail out wealthy depositors and tech startups over the weekend.

The President appeared before the market open with encouraging words, and to reassure the public that they would not be paying for the bailout this time:  at least not right away.

Does anyone really believe that the Big Banks will be eating their FDIC fees and not passing them along to the public?  

That the bailout of the wealthy and their tech toys scams are essential to the future of democracy?

Let's call it self-righteous pigman syndrome. 

 There was a remarkable plunge in short term Treasury yields as expectations of more draconian Fed rate increases fell off the table.

The provided some support for stocks which went on an intraday roller coaster ride.  Almost business as usual.

The Dollar took those yield drops on the chin.

As you might expect gold and silver rocketed higher in a genuine flight to safety.

Here we go again.

There is still plenty of time to machinegun the lifeboats as we have a quad option expiration on Friday, and a Comex metals option expiration next week.

We are the hollow men.  We learn nothing.

Have a pleasant evening.