Thursday, May 11, 2017

The Fed Is Setting Up The Crash

Imploding over-leveraged borrowers at the end of the cycle is a Fed tradition. Why change now?

ZH: Betting Against A Rate Hike, Something Is Going On

According to today's gamblers, Central Banksters have a "dual mandate" to maintain stable prices, and keep the casino levitated at all time highs...unfortunately, that means they've thrown the real economy under the bus. Apparently they don't understand that in a debt-laden economy, the marginal household cost is the interest rate...

It will take a crash to wake the Fed and their gambling acolytes up from their blindered stupor, and needless to say, they don't see it coming:

"The last two rate hikes had no sustained tightening impact, in fact financial conditions are the loosest they have been in almost three years"

To the de facto Idiocracy, this (below) is a loosening of financial conditions. At least we now know where the disconnect is coming from - casino conditions versus economic conditions:

Imploding borrowers at the end of the cycle, is the new "easing"...

Fake reflation = higher yields = deflation:

China really wants to implode the global economy...

In a nutshell, Central Banks are attempting to normalize interest rates, while still providing adequate liquidity to facilitate the banking system. It won't work, but not for any of the reasons offered in the above article. It won't work because financial conditions are tightening for the real economy while easing for the casino. Once again, it's a tale of two cities...

The operating fantasy is this one:
"The Fed’s room to tighten is being underappreciated by the markets"

No it's not, the Fed's inability to tighten is what is being unappreciated by the Fed itself. Police Squad, aka. the Fed is focusing on markets and ignoring the economy. Their economic data is all backwards looking, hence they don't see the freight train of deflation coming down the tracks. Why anyone would think that raising interest rates eases economic conditions for real people is the asinine question of the day. Who gives a fuck what interest rate banks use to send money back and forth? Or what margin rate casino gamblers use to buy Netflix, leveraged 3x...

Here comes the freight train of economic deflation, compliments of the Fed:

Deflation with bank stocks:

Deflation with cyclical stocks

Deflation with oil

Deflation with commodities

Deflation and retail

Repeat after me: "No zombie saw it coming. Again..."