Michael Krieger

Geithner seems to abhor austerity and sacrifice, preferring any strategy which keeps debt growing to fund the investment banking, security, prisons and war industries on which the American economy now depends for so much of its GDP.

– From “London Banker” Blog, link to full piece is here: http://londonbanker.blogspot.com/2011/09/deficit-attention-disorder.html

It takes a PhD in economics not to be able to understand the obvious.

– Irving Kristol

Financial Warfare

Unfortunately, I spend a good portion of my day trying to get into the mind of a deranged, academic, conflicted and panicked central planner.  In other words, I spend most of my day in the Bernank’s head.  August 2011 was an extraordinarily important month in the history of the financial world.  It is when I believe the “system” blew up for good.  The sovereign rating of the United States was downgraded by Standard & Poors and although treasuries have rallied ever since, it was 100% the equivalent of someone yelling the “emperor has no clothes” and the world indeed noticed.  It was also at this time that the European banking system and in reality the entire Euro project started to blow up.  Equities plunged and gold soared.  It was the worst of all scenarios for the Central Planner in Chief, the Bernank.

As all of you know, I think it is nearly impossible to make money in this market (if you want to call it that) unless you assume all things are gamed and manipulated.  I think that if you are under the assumption that there is a free market and that there are rules when it comes to the government, the banks (Central and TBTF) then you can’t succeed because you are operating on an entirely false macro assumption.  August absolutely scared the living daylights of the central planners and all of us in the “fight the Fed” camp knew that they would have to pull something together to exact revenge on those that are betting against them.  One of the other things that happened in August that scared the living daylights out of the central planners was the massive flow of fiat money into what was perceived to be a “hard” fiat currency – the Swiss Franc.  This provided these guys with the perfect opportunity to launch a massive counteroffensive in what has clearly become a gigantic Financial War.  In what was an extremely well planned and aggressive move, the cabal of Western Central bankers convinced the Swiss to make the incredible announcement that they would print unlimited Francs to peg the currency at 1.20 to the dying euro.

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It can be difficult for non-Europeans to un­derstand the various dynamics that coexist in the densely-populated housing estate that is Eu­rope, but by way of a beginners’ guide, I’ll place my tongue loosely in my cheek and attempt to explain it to our American and Asian friends through the application of the normally toxic combination of British humour and sweeping generalization. Here goes:

The Dutch hate the Germans.

The Greeks hate the Germans.

The Germans hate the French, the Dutch, the Poles and the British.

The British hate everybody.

The French hate the Germans.

The Spanish hate the French.

The Italians don’t really hate anybody.

The Belgians hate the Dutch and the French but nobody cares.

The Greeks hate the fact that the rest of Europe doesn’t REALLY consider them European.

…and the Swiss, are neutral.

– Grant Williams of “Things that Make You Go Hmm”

My Message to Europe
I really don’t like having to write back-to-back emails about Europe but you must go to where the battle is being fought and so therefore I am compelled to do so.  We are right now engaged in a major conflict between TPTB and the rest of humanity (99.9%) of us and the key battleground right now is on the Continent.  As we all know by now the elites want a neo-feudalism on a global scale run by a global central bank that issues a global fiat currency that they control the creation and distribution of.  In other words, complete and total power on a global scale.  This is what these control freaks want and their playbook is “problem, reaction, solution” or to quote Rahm Emmanuel “you don’t ever want a crisis to go to waste; it’s an opportunity to do important things that you would otherwise avoid.”  The crisis is Europe is seen as a HUGE opportunity to further consolidate control over Europe by TPTB via a “fiscal union” in which democratic sovereign states would be eliminated in the name of the “general welfare” or to avoid “another Great Depression.”  This is why they are so panicked about the idea of the Euro breaking apart.  If that was to happen then their entire plans for the consolidation of Europe on the path to “global governance” would evaporate.  As we can see by the events transpiring today, the Euro system has already given too much authority to the ECB and Brussels (which by the way doesn’t seem to be a stable country in itself at the moment and could be on the verge of a political breakdown as the caretaker Prime Minister appears to be on the way out).  There are for now restrictions on what the ECB can or will do and the whole point of the current crisis is to create so much confusion and pain that the governments of the Eurozone capitulate and give even more power to the undemocratic dictators in Brussels.  We must never forget the quote by Mayer Rothschild: “give me control of a nation’s money and I care not who makes it’s laws.”  This is as true today as it was in his days and in all the days back throughout recorded history.  There is a very good reason that gold and silver came into use as money.  They give control to the producers of goods and the productive in society and away from the parasitic bankers and politicians.  The ultimate power resides in the ability to create fiat money at will.  Dictators and power hungry control freaks have known this throughout history and they know it today.  We must NEVER allow them to achieve this on a global basis as we can see the damage they have done when they simply have that ability at the national level.

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There are two ways to conquer and enslave a nation.  One is by the sword. The other is by debt.
– John Adams

What lies behind us and what lies before us are tiny matters compared to what lies within us.
– Ralph Waldo Emerson

The Euro is Finished

To regular readers of my pieces over the last several years this may not seem like a particularly poignant statement.  After all, I have referred to the Euro and the U.S. dollar both as worthless political toilet paper for years.  The reason I bring it up right now is not to state the obvious long-term macro conclusion that the Euro is a foolish, unnatural creation that only political types twiddling their thumbs in a room could come up with.  No, rather the reason I say it now is because I believe the Sword of Damocles is now hovering right over it.

The only question in my mind at the moment regards the specifics of how it will end.  I would say that the majority of those that think there is a strong likelihood that the euro falls apart envision the PIIGS countries leaving or being thrown out.  While I certainly think this is a possibility, especially if Greece just calls it quits and then successfully transitions to its own highly devalued currency since this would for sure start the ball rolling and before long many of the other financially weak nations would also bail.  In such an event, I suppose what is left of the euro could be comprised of stronger Northern European nations and in that case what is left of the common currency could in fact strengthen materially versus other fiat currencies for which no such “restructuring” has occurred.  However, I am not convinced this is what happens.  The reason I am not convinced is because I don’t believe that the desired austerity measures will ever really go into effect in these nations and even if they did it would merely collapse those economies and the problem would not be solved.  As many have stated over and over (including myself) there is no conventional solution to this crisis.  There is far too much debt and there is no way real GDP growth can grow fast enough to counter this.  The debt will be defaulted on via restructuring/default or a dramatic destruction of the purchasing power of fiat currencies.  Nevertheless, the bureaucrats in Europe have such a deep love affair with their preposterous experiment they will turn a blind eye to all the transgressions of the PIIGS and continue to just pretend they have solved something with every new bailout scheme.

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This really bothers me. You have to love that Warren Buffett, the richest man in the world, has deemed himself representative and ambassador for those making $250,000 and more…”People like myself” he says. People that take home $250,000 a year before taxes are somehow in the same category as the richest man in the world? I would say there is a fairly large gap between a $250,000 annual income and a $45 billion empire. And how did the powers that be arrive at this arbitrary yet significant figure of $250,000 as the line for dividing rich and poor?  Warren, why not donate your money to the government that you feel so strongly should be funded with more money from the “rich” that you have appointed yourself representative of?  I am beyond disgusted by these righteous “do as I say, not as I do folks that have already made a fortune and yet are lobbying for higher taxes as though they are elected representatives for the government’s definition of “rich”, meanwhile by and large their wealth has already been made and tax policy is immaterial to their incremental future wealth. If he feels so strongly about what people like him should be paying, WHAT’S STOPPING HIM? Pay more then, Warren, if it means so much to you. Nobody is stopping you and the government will gladly accept a larger check from you on April 15th. Meanwhile stop meddling in the business of people that are eons and light years away from you in wealth and are still working daily to achieve their own financial success and stability. And I’m not against paying more in taxes…I’m just against higher taxes as long as it’s being funneled to the reckless careless idiots in Washington DC currently in charge of spending it…but that’s subject for another conversation altogether.

– Written by a friend of mine last November

A Wolf in Sheep’s Clothing

Anyone that has read these pieces for a while knows where I stand on Warren Buffett.  Namely I can’t stand him.  It has nothing to do with the fact that he has so much money.  I am not an envious person and moreover I think having wealth anywhere near his is more of a curse than a blessing.  The reason I can’t stand him is because he is a fraud.  While he may have been a great investor at one point, he is more of a great actor than anything else.  Here is one of the richest people in the world.  He sits there in Nebraska, chuckling, drinking his cherry coke and eating hamburgers in this pathetically obvious attempt to convince the masses he is “just like us.”  The term wolf in sheep’s clothing was invented for guys like this.  Like most people out there I don’t like bad guys.  The trick; however, is that the most dangerous bad guys don’t come out and tell you they are bad guys and how they are going to fleece you.  What they do is pretend they are the good guys.  Pretend that they are on the side of the little guy or working for the “collective good,” which is a preposterous statement because there is no such thing.  Human desires and notions of what is a good life are as varied as the stars in the sky.  Once we start allowing officials or rich people to define “collective good” you can be sure we are finished.

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Oh the time will come up
When the winds will stop
And the breeze will cease to be breathin’
Like the stillness in the wind
Before the hurricane begins
The hour that the ship comes in.

And the sea will split
And the ships will hit
And the sands on the shoreline will be shaking
Then the tide will sound
And the waves will pound
And the morning will be breaking…
Oh the foes will rise
With the sleep still in their eyes
And they’ll jerk from their beds and think they’re dreamin’
But they’ll pinch themselves and squeal
And they’ll know that it’s for real
The hour that the ship comes in.
Then they’ll raise their hands
Sayin’ we’ll meet all your demands
But we’ll shout from the bow your days are numbered

– Bob Dylan, “When the Ship Comes In”

They’re selling postcards of the hanging
They’re painting the passports brown
The beauty parlor is filled with sailors
The circus is in town
Here comes the blind commissioner
They’ve got him in a trance
One hand is tied to the tight-rope walker
The other is in his pants
And the riot squad they’re restless
They need somewhere to go
As Lady and I look out tonight
From Desolation Row…

Now at midnight all the agents
And the superhuman crew
Come out and round up everyone
That knows more than they do
Then they bring them to the factory
Where the heart-attack machine
Is strapped across their shoulders
And then the kerosene
Is brought down from the castles
By insurance men who go
Check to see that nobody is escaping
To Desolation Row

Praise be to Nero’s Neptune
The Titanic sails at dawn
And everybody’s shouting
“Which Side Are You On?”

– Bob Dylan, “Desolation Row”

Whatever it Takes

Of the many lamentable things to have emerged from the financial crisis and the subsequent rape of the American public by Wall Street and their employees in Washington D.C. has been the emergence of catchy phrases used by the criminal elite class to sell us on our own servitude.  We know all about that horrid “Too Big To Fail” gimmick, the entire concept of which is anti-freedom and anti-capitalism but right up there on the list of irritating and dangerous statements is the constant use by central planners like The Bernank and Tiny Timmy Geithner that they would do “whatever it takes.”  Ah, but what does this mean.  Whatever it takes.  Let’s think about this for a second.  Whatever it takes to achieve what exactly?  They say to boost the economy but in reality when you look at what they really mean is “whatever it takes” to PRESERVE THE STATUS QUO.  A status quo that has not worked for the vast majority of Americans for decades and will not work for 99.9% of us going forward.  Key to preserving the status quo is the preservation of the financial and monetary system as it exists today.  During 2008, traitors like Hank Paulson were able to con most of us by saying that we risked a destruction of the financial system as an excuse to give the banksters and their allies a blank check.  The con wasn’t in the notion that the financial system risked implosion as I believe that statement was most likely true.  The con was that since most Americans don’t have a clue how the financial system works they merely became scared and reflexively agreed in their own minds that “well of course the financial system must be saved.”  I on the other hand argue that the financial system is a ponzi scheme that enriches only the three enshrined parasite classes that dominate America today.  The TBTF Wall Street banks, the military industrial complex and the politicians and lobbyists in D.C. that line their pockets.  Everyone else gets sucked dry.  I have spent the last three years of my life writing about this so that people understand when the next major crisis happens who is to blame and more importantly I want to instill in people the courage to look outside of this immoral money system to something that can move us forward when this one gets dismantled.  I do not claim to have the answers I am just trying to get people to ask the right questions and get educated on how things operate.  We the People must own the debate or it will own us.

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It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way – in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.

– The Opening Paragraph from Charles Dickens’, A Tale of Two Cities

Bubbles, Bubbles Everywhere…

Without the ability to identify bubbles I’d pretty much be useless in this business.  I live, breathe and eat macro news and trends.  It is what I am inherently good at and I leverage that talent to the best of my ability.  On the other hand put me in front of a financial model and I want to blow my brains out within 20 minutes.  I am not exaggerating.  I worked in equity research for five years.  I learned a lot actually and I am very lucky to have had the experience but it was like taking a fish out of the water, tossing it in the air and telling it to fly.  It just wasn’t natural.  I have always said that people screw up when they don’t figure out what they are naturally good at and then stick to that, but rather attempt to be a jack of all trades.  I make a living off of people that don’t get that.  I love it when people engage in my world when they have no business doing so, but the best types, the types that make people like me salivate are those that are ignorant of the macro world but also suffer from the deadly (to them) combination of large bank accounts and equally large egos.

So I haven’t written about many “bubbles” since 2008.  Back then I was at Bernstein and I was hardly capable of writing a word without  saying commodities were a bubble ready to crater.  I also hammered home the point of the “fert.coms,” which included POT and MOS.  The main reason I haven’t written about similar bubbles is because I have been 100% focused on what is likely the biggest bubble in the history of mankind.  The fiat U.S. dollar and all income streams related to it.  Of course, the inverse to this monumental bubble are gold and silver and the commodities necessary to everyday life (food and energy) and as such I have been wildly bullish on those particular items.  This is the most amazingly easy trade I have ever stumbled upon because it takes some serious macro thinking and a grasp of financial history to understand the precious metals markets.  These are two things Wall Street is not very good at.  Even better, Wall Street is full of ego maniacs with lots of money.  So all a lot of these clowns do is look at the price charts of gold and silver and the childish thought “bubble” pops into their clouded heads.  Of course it’s very tempting to just look at the charts and think this if you don’t understand what is really driving their ascent.  The popping of the largest bubble in human history.  The fiat, counterfeit, and immoral U.S. dollar standard.

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Whenever the economic life of a nation becomes pre­carious, the central government is forced to assume additional responsibilities for the general welfare.  It must work out elaborate plans for dealing with a criti­cal situation; it must impose ever greater restrictions upon the activities of its subjects; and if, as is very likely, worsening economic conditions result in polit­ical unrest, or open rebellion, the central government must intervene to preserve public order and its own authority. More and more power is thus concentrated in the hands of the executives and their bureaucratic managers. But the nature of power is such that even those who have not sought it, but have had it forced upon them, tend to acquire a taste for more. “Lead us not into temptation,” we pray — and with good reason; for when human beings are tempted too enticingly or too long, they generally yield. A democratic constitu­tion is a device for preventing the local rulers from yielding to those particularly dangerous temptations that arise when too much power is concentrated in too few hands.

– Aldus Huxley, Brave New World Revisited

A nation can survive its fools, and even the ambitious. But it cannot survive treason from within. An enemy at the gates is less formidable, for he is known and carries his banner openly. But the traitor moves amongst those within the gate freely, his sly whispers rustling through all the alleys, heard in the very halls of government itself. …He rots the soul of a nation, he works secretly and unknown in the night to undermine the pillars of the city, he infects the body politic so that it can no longer resist.

– Marcus Tullius Cicero (106 BC—43 BC)

 
QE3:  It Will Merely Keep the Lights On

This is a piece that has been festering in my head for quite some time now and I was waiting for the right moment to pen it.  That time is now.  In some ways The Bernank made a huge mistake by not launching QE3 right away when he had the chance.  Now don’t get me wrong, I am not in favor of any of this nonsense and I think The Bernank’s profession needs to go the way of the dodo bird, but I mean from the perspective of a Central Banker I think he made a big mistake by taking a breather from at least the printing and manipulations that they admit to.  The reason I say this is because up until the last month or so The Fed had been essentially telling the American sheeple that all was under control and that since The Bernank had studied the Great Depression and Japan he could save us from all the mistakes that were made back in those less enlightened times.  The Fed was saying that they could pull off the equivalent of preventing a serious hangover for someone that chugged an entire bottle of tequila.  They basically claimed to have found a way to break the laws of the universe.

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Right now, thanks in large part to Federal Reserve policy, Uncle Sam can borrow at an average cost of just 2.5 percent. The average borrowing cost over the last three decades was 5.7 percent. Our debt is now $14 trillion and scheduled to grow to $25 trillion by the end of the decade. If interest rates normalize over that period the added interest costs in 2021 alone will be $800 billion—more than 20 times the mere $37 billion in budget cuts that tore up Congress in March. It would take virtually all of the cuts in the Ryan budget just to cover that added interest, much less to start bringing down the national debt. Unfortunately, the Fed is now in a fiscal box. A normalization of interest rates would break the Treasury. Hence, a normalization of rates really can’t happen—we’re stuck in a world in which the Fed must keep rates artificially low in order to prevent a budget disaster.

– Lawrence Lindsey writing in the Weekly Standard June 13, 2001 (and you think we won’t print more!!!)

QUESTION: During the Japanese lost decade in the 1990s, you strongly criticized Japan’s (inaudible)policies . Recently, Larry Summers suggested in his column that the U.S.is in the middle of its own lost decade. Based on those points, with Q.E. II ending, what do you think of Japan’s experience and the reality facing the U.S.? Are there any historical lessons that we should be reminded about?  Thank you.

BERNANKE: Well, I’m a little bit more sympathetic to central bankers now than I was 10 years ago.

– Q&A During The Bernank’s Second Press Conference Yesterday

The Bernank Flop:  Part Deux

That’s two press conferences laden with softball questions from “the press” and two epic flops by The Bernank.  Two extremely important things that came out of the disaster that was this event yesterday.  First, I want to point your attention to the quote I pasted at the top.  In response to the question of where The Bernank stood on monetary policy in light of his prior arrogant and cocksure statements a decade earlier about how the Japanese were being too passive in their methods he stated “Well, I’m a little bit more sympathetic to central bankers now than I was 10 years ago.”  BINGO.  That was far and away the most important thing he said the whole press conference.  Why?  Well, for several reasons.  First, it was pretty much the only spontaneous unscripted thing he said the whole time.  Second, because this is him basically admitting that sitting in an ivory tower telling others how to save the free world via monetary policy was a naive and idiotic thing to do (why people still believe in central banking, I mean planning, is beyond me).  Talk is cheap and The Bernank now has had time to test his sad statist theories and guess what happened?  He failed miserably in front of the entire world.  By saying that he is “more sympathetic to central bankers” he is saying that theories are one thing and he now realizes that.  This is HUGE.  The Bernank has no clothes.

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All quotes below are taken from a Bernank paper written in 1999 titled “Japanese Monetary Policy: A Case of Self-Induced Paralysis?”

Although it is not essential to the arguments I want to make—-which concern what monetary policy should do now, not what it has done in the past—-I tend to agree with the conventional wisdom that attributes much of Japan’s current dilemma to exceptionally poor monetary policy-making over the past fifteen years.

Indeed, as I will discuss, I believe that a policy of aggressive depreciation of the yen would by itself probably suffice to get the Japanese economy moving again.

On the issue of announcement effects, theory and practice suggest that “cheap talk” can in fact sometimes affect expectations, particularly when there is no conflict between what a “player” announces and that player’s incentives.

Suppose that the yen depreciation strategy is tried but fails to raise aggregate demand and prices sufficiently, perhaps because at some point Japan’s trading partners do object to further falls in the yen. An alternative strategy, which does not rely at all on trade diversion, is money-financed transfers to domestic households—-the real-life equivalent of that hoary thought experiment, the “helicopter drop” of newly printed money.

Franklin D. Roosevelt was elected President of the United States in 1932 with the mandate to get the country out of the Depression. In the end, the most effective actions he took were the same that Japan needs to take—-namely, rehabilitation of the banking system and devaluation of the currency to promote monetary easing. But Roosevelt’s specific policy actions were, I think, less important than his willingness to be aggressive and to experiment—-in short, to do whatever was necessary to get the country moving again. Many of his policies did not work as intended, but in the end FDR deserves great credit for having the courage to abandon failed paradigms and to do what needed to be done.

What Did You do Tuesday Night?

Well you probably had a lot more fun than I did.  I spent part of the later hours of the evening reading a paper written by The Bernank in 1999 titled “Japanese Monetary Policy: A Case of Self-Induced Paralysis?”  While I have never doubted for a second that this man will print the dollar into oblivion, I have been shocked by the amount of players in the market that have fallen for what I like to call the “Bernank Bluff,” which simply is my view that he needs cover to print more and therefore will tell the market he is going to stop while QE2 is still in action so that he can push undesirable asset price inflation down (commodities) while continuing to print!  I went and read this paper to confirm what I already knew about this man.  Namely, that he is an extremely dangerous psychopath who believes proper monetary policy can save the world from all ills and he is the superman that will implement the appropriate policies for the first time in history.  This is how he sees himself.  In reality, he is nothing more than a parlor magician brainwashed by his own bullshit and who is doing nothing novel, but rather the same thing all bankrupt governments have done since the beginning of time.  He is merely printing money and causing devastating inflation, yet he seems to think he is the first person to come up with this idea!

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