Monetary Madness and Rabbit Consumption
Monetary Madness and Rabbit Consumption Author MN Gordon – Acting-Man
Down the Rabbit Hole
“The hurrier I go, the behinder I get,” is oft attributed to the White Rabbit from Lewis Carroll’s, Alice in Wonderland. Where this axiom appears within the text of the story is a mystery. But we suspect the White Rabbit must utter it about the time Alice follows him down the rabbit hole.
Pick a rabbit to follow…
No doubt, today’s wage earner knows what it means to work harder, faster, and better, while slip sliding behind. However, for many wage earners the reasons why may be somewhat mysterious. At first glance, they may look around and quickly scapegoat foreigners for their economic woes.
Yet like Wonderland, things are often not as they first appear. When it comes to today’s financial markets, there is hardly a connection to the real economy at all. Stock markets are just off record highs, yet 6 in 10 Americans don’t have $500 to cover an unexpected bill.
A curious fellow may look around and find more questions than answers. Where is the money coming from? Where is it going?
Before he knows it, he’s gone down the rabbit hole where he observes the darnedest things. He may even discover that the Federal Reserve, with its fiat money, has created and perpetuated insane and incomprehensible levels of debt. And that this, in turn, has blown the economy up into a massive financial bubble.
What bubble? It is perfectly normal for large cap stocks to rise six-fold in a little over eight years. As you can see from the insert, it’s a real thinking man’s market. That means, it is a market that is giving men time to think about other things than the market. After all, it only goes up… a market for passivists, so to speak, for peaceful Prozac junkies and Valium zombies. When asked “What do you say to Fed officials who worry about potential bubbles in asset prices?” former FOMC member Narayana Havenstein recently noted: “I am not convinced that these are major risks to the economy.” See? Nothing to worry about! Nothing can go wrong… Ommm… – click to enlarge.
On top of that, if he follows the money, he will see that the Fed’s endeavors have resulted in extreme the concentration of wealth in the hands of the few while looting the many. Hence, he’s discerned a more accurate reason why the wage earner must run faster and faster while falling further and further behind.
Obviously, such a mad system can’t go on forever. But it can go on much longer than any honest person would dream possible. The experience since Tricky Dick Nixon closed the gold window nearly 46-years ago bears this out.
Moreover, the experience over the last 8-years, attempting to normalize from ZIRP and QE, confirms the unique ability for madness to persist. In short, monetary policy has gone mad as a hatter.
Its reasons don’t rhyme and its rhymes don’t reason. Just this week for instance, Fed Chair Janet Yellen raised the price of credit in the face of a deflating economy. Doesn’t this go contrary to the Fed’s standard operating procedures? Are they just providing cover for the next great market bust?
Is the evil rabbit getting ready to disturb the peace? The annual growth rate of the true US money supply TMS-2 has now declined to its lowest level since September of 2008, and commercial &industrial lending seems close to crossing the zero line the wrong way (in preparation of falling off the chart, presumably). The last time business credit grew at such a slow pace was on the way up in April 2011, a very different situation. Total bank lending growth (including mortgage loans and other loans to consumites) is at a new low for the move as well (4.31% y/y). Obviously, we have no problem with that… but it is a bit bizarre to read Fed missives about “balance sheet normalization” under these circumstances. We have to wonder what the planers are looking at (it can’t be this chart, that much is certain). Is the Fed about to voluntarily and deliberately shrink the money supply and precipitate a stock market crash? That is really hard to believe… more likely they are mesmerized by a mandate-driven false sense of security – click to enlarge.
To be frank, to carry out the dirty deed of price fixing credit markets one must possess credentials from a prestigious university, have worked under a lengthy and trusted tutelage, and proven to be of elite pedigree.