Fed Up With The Fed

Submitted by Tyler Durden on 05/19/2016 13:07 -0400
Zerohedge.com
Submitted by Charles Hugh-Smith of OfTwoMinds blog, Destroying our ability to discover the real cost of assets, credit and risk has not just crippled the markets--it's crippled the entire economy.
Is anyone else fed up with the Federal Reserve? To paraphrase Irving Fisher's famous quote about the stock market just before it crashed in 1929, we've reached a permanently high plateau of Fed mismanagement, Fed worship and Fed failure.

The only legitimate role for a central bank is to provide emergency liquidity in financial panics to creditworthy borrowers. Once the bad debt (credit extended to failed enterprises and uncreditworthy borrowers) is written off, the system resets as asset valuations adjust to reality--how ever unpleasant that might be for the credulous participants who believed the ever-present permanently high plateau shuck and jive.
Just to state the obvious: Fed policies are not just insane, they're destructive:
-- Bringing future sales/demand forward by lowering interest rates to zero just digs a gigantic hole in future sales/demand. Funny thing, the future eventually becomes the present, and instead of a brief recession of low demand we get an extended recession of weak demand and over-indebted households and enterprises.
-- Enabling massive systemic speculation by those closest to the Fed's money spigot is insane and destructive, as capital is no longer allocated on productive returns and risk but on the speculative gains to be reaped with the Fed's free money for financiers
-- Buying assets to artificially prop up markets completely distorts the markets' ability to price assets based on real returns and real risk.
Manipulating interest rates creates a hall of mirrors economy in which nobody can possibly discover the real price and risk of borrowing money. What would mortgage rates be without the Fed and the federal housing agencies (Freddie and Fannie Mac and the FHA) pumping trillions of dollars of federally backed mortgages into the housing market?
Nobody knows, because the mortgage market in America has been effectively taken over by the central bank and state.
The Fed's entire policy boils down to obscuring the real price of assets, credit and risk with a tsunami of debt. The Fed's "solution" to the economy's structural ills is: don't worry about risk, valuation or costs--just borrow more money for whatever you want: new houses, vehicles, stock buy-backs, Brazilian bonds, worthless college degrees, it doesn't matter: there's plenty of credit for everything.
The only thing that matters is your proximity to the Fed money spigot. If you're a poor student, you get a high-cost student loan from the Fed's flood of credit. If you're a corporation or financier, well, the sky's the limit: how many billions do you want to borrow or skim for stock buybacks or speculative carry trades?
The Fed's control of the machinery of obfuscating price and risk has made us all members of the Keynesian Cargo Cult. Now we all dance around the Fed's idols, beseeching the Fed the save us from our financial sins. We study the tea leaves of the Fed's announcements, and hold our breath lest the worst happen--gasp--the Fed might push interest rates up a quarter of a percent.
This is of course totally insane.
Destroying our ability to discover the real cost of assets, credit and risk has not just crippled the markets--it's crippled the entire economy. Wake up, America, and stop worshiping the false gods of the Fed. The sooner we smash the Fed's idols and strip away their power to enrich the few at the expense of the many, the better off we'll be.

"We're In The Eye Of The Storm" Rothschild Fears "Daunting Litany" Of Problems Ahead

Submitted by Tyler Durden on 03/06/2016 22:15 -0500
http://www.zerohedge.com/news/2016-03-06/were-eye-storm-rothschild-fears-daunting-litany-problems-ahead
As central bank policy-makers' forecasts have become more pessimistic (i.e. more realistic), Lord Rothschild is unsurprised at the current malaise: "not surprisingly, market conditions have deteriorated further...So much so that the wind is certainly not behind us; indeed we may well be in the eye of a storm." On this basis, Rothschild highlights a "daunting litany of problems," warning those who are optimistically sanguine about the US economy that "2016 is likely to turn out to be more difficult than the second half of 2015."
Lord Rothschild Letter to Investors (via RIT Capital):

In my half-yearly statement I sounded a note of caution, ending up by writing that “the climate is one where the wind may well not be behind us”; indeed we became increasingly concerned about global equity markets during the last quarter of 2015, reducing our exposure to equities as the economic outlook darkened and many companies reported disappointing earnings. Meanwhile central banks’ policy makers became more pessimistic in their economic forecasts for, despite unprecedented monetary stimulus, growth remained anaemic.

Not surprisingly, market conditions have deteriorated further. So much so that the wind is certainly not behind us; indeed we may well be in the eye of a storm.

The litany of problems which confronts investors is daunting:

• The QE tap is in the course of being turned off and in any event its impact in stimulating asset prices is coming to an end.
• There’s the slowing down to an unknown extent in China.
• The situation in the Middle East is likely to be unresolvable at least for some time ahead.
• Progress of the US and European economies is disappointing.
• The Greek situation remains fraught with the country now having to cope with the challenge of unprecedented immigration.
• Over the last few years we have witnessed an explosion in debt, much of it repayable in revalued dollars by emerging market countries at the time of a collapse in commodity prices. Countries like Brazil, Russia, Nigeria, Ukraine and Kazakhstan are, as a result, deeply troubled.
• In the UK we have an unsettled political situation as we attempt to deal with the possibility of Brexit in the coming months.

The risks that confront investors are clearly considerable at a time when stock market valuations remain relatively high.

There are, however, some influential and thoughtful investment managers who remain sanguine about markets in 2016 on the grounds that the US economy is in decent shape – outside of manufacturing – while they feel that economic conditions may be improving. To them, the decline in these markets may have more to do with sentiment than substance. Others are less optimistic but feel that the odds remain against these potential difficulties materialising in a form which would undermine global equity markets. However our view is that 2016 is likely to turn out to be more difficult than the second half of 2015. Our policy will be towards a greater emphasis on seeking absolute returns. We will remain highly selective when considering public and private investment opportunities. Reflecting this policy, our quoted equity exposure has been reduced to 43% of net asset value.

There’s an old saying that in difficult times the return of capital takes precedence over the return on capital. Our principle will therefore be to exercise caution in all things in the current year, while remaining agile where opportunities present themselves. Problems have a habit of creating opportunities and I remain confident of our ability to identify and profit from them during 2016.

Perhaps Lord Rothschild is on to something...
Fundamentally...

Source: @DonDraperClone
Of course, even The Fed is forced to admit that recession probabilities are rising fast...  


And technically, we are indeed in the "eye of the storm"


However, we have seen this pattern on a bigger scale before... and it did not end well.
What happens next?


Eye of the Storm? Or Storm In A Teacup?

POPE FRANCIS: ‘WHY DO THE WICKED PROSPER?’

Tony Gentile/Pool via AP

by THOMAS D. WILLIAMS, PH.D.8 Oct 2015  http://www.breitbart.com/national-security/2015/10/08/pope-francis-wicked-prosper/

In his morning Mass Thursday, Pope Francis reflected on the apparent worldly success of the godless while those who try to do what is right seem to fare poorly.

How often we see this reality, Francis said: “people who do evil and yet everything seems to go well for them in life.” He added, “They are happy. They have everything they want. They lack nothing.”

Hence the question, “Why Lord?” Yes, the Pope said, “this is one of many whys: why does this insolent person, who doesn’t care about God or others, who is unjust and wicked, have everything go his way in life, have everything he wants while we who try to do good have so many problems?”

The Pope reflected on the Bible readings of the day, which seem to show the wicked prospering, while the God-fearing toil amidst affliction.

Exasperated, they say, “It is vain to serve God. And what do we profit by keeping His command?”

“Rather, must we call the proud blessed; for indeed, evildoers prosper and even tempt God with impunity,” they say.

Francis said that he receives many letters from people who suffer and ask these very questions. He spoke of a young mother facing the drama of cancer and a forlorn elderly widow whose son had been murdered by the Mafia. They both wrote to the Pope asking why the wicked seem to prosper while things go so badly for the righteous.

Yet, Francis said, God never abandons those who trust in Him. Citing the first chapter of the book of Psalms, he said, “Happy is the man who trusts in the Lord.”

Our “whys” become a prayer, Francis said, and God hears and answers.

“Blessed is the man who follows not the counsel of the wicked, nor walks in the way of sinners, nor sits in the company of the insolent, but delights in the law of the LORD and meditates on his law day and night,” he said.

Often, Francis said, “we do not see the fruits of these suffering people, these people carrying the cross,” just as on “Good Friday and Holy Saturday one could not see the fruit of the suffering of the crucified Son of God.”

This is not the case for the wicked and evildoers, Francis said. Though they think all is well, their days are numbered. The Psalmist continues, “Not so the wicked, not so; they are like chaff which the wind drives away. For the LORD watches over the way of the just, but the way of the wicked vanishes.”

In short, Francis said, “You’re all right today. You have everything. You do not care for God. You do not care about others. You exploit them. You are unjust and think only of yourself and not others.”

And yet, where are all those people now? Francis asked. We do not remember their names.

Indeed, “in the book of God’s memory, the wicked have no name: ‘He is an evildoer. He is a con man. He is an exploiter.’” These are people, he said, who “do not have names; they just have adjectives.”

“All who try to walk in the way of the Lord will be with His ​​son, who has a name: Jesus the Savior,” Francis contrasted.

The Pope ended his homily urging his hearers to have confidence in God’s faithfulness. “Even though you have to suffer,” he said, “hope in the Lord.”

Ask the Lord to even give us “that which we dare not hope for,” he said.