Einstein famously mused, doing the same thing over and over again and expecting a different result was the definition of insanity.
When it comes to central bank edicts? The once absurd just gets renamed, reformulated, then re-implemented. Yet, the results are always the same. e.g., failure.
The only question to now be asked (from those still believing in 1+1=2 math) is whether this is just a doubling-down of efforts into the insanity? Or, an exponential progression?
Count me in on the latter.
Back in April of 2016 I wrote an article commenting on the absurd prognostications and proposed lunatic programs into the absurd being proposed by former Chair Ben Bernanke. My basis for it was Mr. Bernanke’s own words and hypothesis. i.e., he appeared to believe what he was saying. And if he did? That I concluded was even more dangerous than what he was proposing to begin with.
As far as I was concerned, he was arguing for why the Fed. should provide a warehouse of matches and lighter-fluid to a proven arsonist (i.e., Congress) as if this would be a good thing, because they would only use it when necessary. And if they proved to be reckless, they could just pull the “matches” away. Sounds perfectly logical when put that way, no?
Hint: When has the Fed been able to unwind as they proposed any free money policy? Sorry, trick question, see: QE1, QE2, QE3, Operation Twist, Re-investment, Quantitative Tightening, “autopilot” or “watching paint dry” for clues.
There’s another one going on now, but it doesn’t have its own moniker – yet. But I’m sure that’ll change soon. For what’s a Fed program without its own moniker, right? Right?
“What is that?” you ask. Great question.
Remember when Operation Twist was enacted, because the Fed wanted (or needed) to target the long-end (maturity) of bonds? Well that so distorted everything that now they’re employing a strategy of allowing the rolling-off of other securities and buying shorter dated.
Just don’t call it a “new program.” At least, not yet.
Let’s just call it “an adjustment” to prior policy for now, shall we? Yeah, that sounds better already, doesn’t it?
Suddenly the commentary along with trial balloons coming out from one Fed official after another appears to fall under the same pretense I assigned to Mr. Bernanke back in 2016. i.e., I don’t think it’s just CYA (cover your derriere) material any longer – I think they really believe what they’re saying!
Fed speakers are now commenting on how they may need to go into the public in some form of Town Hall scenario and “talk to the people.”
Hint: What do you think will be the first reaction when a central banker gets milkshake’d?
Think they won’t?
All I’ll say is: welcome to the political discourse of the day that many (especially the most radical of the populace) believe the Fed is directly responsible for. Think about it.
However, if observation means anything – I don’t think they have. Ivory Towers and political appointment will do that. In other words – they have no idea of what the real world currently thinks of them. And – It – Shows.
Mr. Powell is now arguing that maybe terms or programs relegated (along with what they denote) to such definitions such as “emergency” or “unconventional” should be moved into the “everyday tool box” of goodies. This way they’ll not imply that something should only be used sparingly or with an end. i.e., If you thought Ben could print? You ain’t seen nothing yet, watch!!
Again, all I can say is: more inequality anyone?
So without further ado, here is said article in its entirety. I think it is more relevant today than it was then once you calculate in not just what the Fed has done since, but floating what else they’d like to.
Too me? It’s all become pure, unadulterated – lunacy. Period. Full stop.
Absurdity: When The Con Believes The Con
There are many infamous con games that have been foisted upon the public for millennia. Probably none more enduring than that of Charles Ponzi which bears his name as its moniker. Yet, there’s also been another who was also just as “daring” when it came to finding ways as to extract monetary gains by ill-gotten means: Victor Lustig.
Lustig is best known as “The man who sold the Eiffel Tower.” However, it was one of his other cons that came to mind as I was thinking about the current state of monetary policy we now find ourselves in.
Lustig’s other con was a device he slated would print $100 bills. But it had a problem.
Unbeknown to his mark, this problem was also part of the deception. The problem was (as stated by Lustig) – it could only print 1 bill every 6 hours. The genius was; located within the machine it contained two genuine $100 bills. After that – blanks. You could be long gone, and quite far with that kind of head start back then. Yet, it’s once the con, ruse, or scam is finally exposed one thing is certain: You don’t want to still be around or found.
As with any con game the perpetrator knows it’s all a con. In other words, “Duh!” Yet, if you listen closely to both past as well as present Fed. members you can’t help but notice by way of their current arguments, as well as, proposals for future monetary policy. The one’s who’ve truly bought into “the con” is: themselves!
Nowhere has this been on display more than the current public writings and musings of former Fed. Chair Ben Bernanke.
If you read his latest (which I’ve tried but can’t bear that much comedy in one sitting) he lays out what he thinks (or believes) should now take place involving Congress, the Administration, and the Fed. His great idea? Create and “fill” some arbitrary account which only the Fed. or its appointed designates have control of as to “empty” or “fill” as “Congress and Administration” see fit. But here’s the punchline, ready?
“Importantly, the Congress and Administration would have the option to leave the funds unspent. If the funds were not used within a specified time, the Fed would be empowered to withdraw them.” (Insert laugh track here)
Remember, this is coming not only from the former Chair, but also, one who is quite possibly the most emblematic of current thought residing throughout central bank policy makers with an additional caveat: He’s no longer bound by the position where his thoughts need to be guarded as a voting member of such policy lunacy. In other words: he can now speak his mind openly. To which I’ll muse – that’s no laughing matter when you consider how prevalent Keynesian economics now dominate.
The latest from Bernanke exposes just how far down this “rabbit hole” central bankers have gone. So far I’ll contend – its frightful. e.g., They actually believe this subterfuge.
When I’m giving a talk, or engaged in conversation, I often use the term “con game” when describing current monetary policy and its effect on business and more. Often the term “con” at first seems to put people on the defensive as if I’m using hyperbole, or trying to make a point by using over the top styled rhetoric.
The problem is (I’ll explain) it is exactly that. e.g., Many forget “con” stands for confidence in con-game. And now that the $Dollar along with just about every other currency is all fiat based: confidence is the only variable that supports it in a fiat system. Period. And once it’s lost just as with any “con” – it ends with blinding speed and consequences.”
This is the current danger now inherent after years of QE, NIRP, ZIRP, and every other acronym that represents some form or another of central bank intervention within the markets. So adulterated have the markets now become with central bank meddling; describing them without using quotes such as “markets” seems reckless. For these are far from the markets once thought to represent free market capitalism. Today they are “markets” in name only. For just like currencies – they’re no longer backed by anything once considered tangible like gold or actual net profits via 1+1=2 accounting.
At some point printing ad infinitum, as well as, companies reporting (ad infinitum!) losses of Billions in sales and revenue while declaring “We’re killing it!” via Non-GAAP accounting will make even the most ardent supporter of Keynesian thinking question this new reality. The absurdity can only go on for so long, because, to keep up the ruse (just like suckers) more absurdity is needed. We may be reaching that end point after all these years. And the latest clue might be in the absurd recommendations emanating from central bankers themselves. For it’s becoming clearer by the day if one reads Bernanke’s latest: they think this all makes perfect sense. Talk about absurdity.
Let me pose this question: Does anyone for a moment think China would (or will) allow the Federal Reserve along with the U.S. government carte blanche as to create “piggy banks” that can be used to help bolster its position without calling into attention the absurdity of it? Especially as it holds $TRILLIONS of U.S. debt on its own books? Imagine all this while not only the U.S. but the world of central bankers and other governments push, or brow beat Chinese current policies? Or, question their numbers for authenticity? How about Russia? Or Brazil? Or __________(fill in the blank.) Think they’ll all just stand idly by as their economies teeter on the brink of insolvency as the West just prints and points fingers?
If you listen to the musings emanating from many of the central bankers today whether currently holding an active position, or one which has returned to the “private” sector. One would have to construe that they believe exactly that. i.e., Don’t worry – they’ll buy it because that’s what we want them too. And that absurdity is a glaring warning sign from my viewpoint.
This shows just how far down this absurdity “rabbit hole” we’ve gone. And it can be directly contrasted with the con games of old. For it was always a given: for the ruse to work for the benefit of the perpetrator – one must have both the sense as well as alertness to “get outta Dodge” and not to be seen again as the game blows up. Today?
So enamored with the ruse they now fall all over themselves whether on TV, radio, or print, professing what absurdity should take place next to any and all that will listen. Again, even Lustig knew printing money ex nihilo was a con. Yet today, central bankers regard that as: prudent monetary policy. The difference for a contrast in the absurdity?
Before; it landed you a session in jail. Today? It lands you a speaking gig for $250K a session.
© 2016 Mark St.Cyr