President Trump: The NEW one and only politics thread

Dow Futures were poised to open up 1,000 points down tonight. ... and the Fed panicked, and wasn't about to make the same mistake as last week with a 50 basis point cut that got a yawn. So they just used the full 100 basis points they had left unless they are willing to go to negative rates, and they announced asset purchases -- $700 billion of treasuries and mortgage-backed securities, along with enhanced global swap lines. And of course Trump comes out for his press conference and all he is talking about how wonderful a thing is, how the stock market is going to love it.

What a moron.

First, in a run of the mill recession, the Fed has typically needed 450 to 600 basis points of cuts. But they wasted all of that slack to essentially prop up a stock market bubble for a few years. So, any mitigation that their manipulation might have brought on is not going to be there.

I wish more people understood how destructive this is to all of us. They are all in on doing MORE of what caused the problems we are now having. So that asset buying, IF it even works this time, will just blow up our debt levels even farther and make every dollar each of us earns worth a good chunk less in purchasing power. People should be rioting. ...

Once again. ... the arsonist rides in on the fire truck to 'put out the fire.' But it's all they know how to do. They put our economy in a decade-long coma, created all kinds of wealth disparity and have weighed down all aspects of society with way more debt than the annual income of what we produce. And now they are in an absolute panic, because they have lost control. They ran up the debt levels to a much higher place than they were during the financial crisis rather than acting like adults and allowing a deleveraging to happen (being HONEST with people about the mess they had made and what the price was going to be), and now it is going to take way more radical measures for them to price fix the market and keep that debt load propped up longer -- they absolutely destroyed our debt markets.

Any other time in history the kind of insane monetary manipulation they announced tonight would be like giving a heroin junkie an unlimited supply of smack. The stock market would have been up double digit percentage gains and gone euphoric on this kind of news. Maybe you get a muscle memory response tomorrow, but I will be interested to see how long it lasts.

On top of it, there is no commercial paper facility in what the announced, which is odd (and betrays their bullshit -- they have ZERO to do with managing the economy, which is something they have no power to do anyhow. ... it's all about propping up asset bubbles that they created) -- why they were doing their repo operations in the first place, which were supposed to be temporary and then became permanent, of course -- and those problems still exist. So despite them basically promising to print an insane amount of money to debase the dollar and inflate away all of our problems just now, you have to wonder if there is still going to be a massive dollar funding squeeze anyhow coming up. You all are watching the end of modern day central banks as we know them. We are going to get another monetary reset off of all of this -- there will be some kind of Breton Woods, a la 1971, but this time the U.S. is not as powerful as it was then and what comes out of it isn't going to give the dollar reserve status. China is going to play a much larger role in whatever kind of special drawing rights system they create and the dollar is going to be a much smaller piece. Aside from that piece of history, which is coming, unfortunately we are going to see massive credit defaults, starting in a cascade pretty soon probably, and it makes me so fucking angry, because while they were creating the pile of tinder for which the virus turned out to be the match, there were plenty of people who saw what the end game was and really tried to put a stop to it sooner rather than later to minimize the damage they were doing. But people are so myopic. It sucks.

 

The thing is, they can only TRY to manipulate the Dow now. ... Central banks are all powerful. ... don't fight the Fed. Blah blah blah.

I know a lot of people on here don't understand what the Fed does and the currency carry trades they in effect create that turns various risk asset markets into rigged casinos (up, up, up). ... But when you cut through it, they have left trillions of dollars of mispiced debt, zombie companies that can't service their debt from their earnings so they need to borrow more and more, etc. You want the reason for a trillion plus dollars of student debt? It's the Fed.

The problem is that the higher the debt levels go, the harder it is to suppress interest rates and inject more and more liquidity in. It takes MORE of what they were doing. And there is a limit. They are running up against that limit. The fact that they got this far has astounded me.

Don't believe me? They just annouced an insane amount of action -- including hundreds of billions of dollars asset purchases that 20 years ago would have made people's heads explode -- that in any time in our history would have sent stock prices through the roof on traders being able to front run the "free money." But when the futures just opened. ... stocks were down. They can't even juice the stock market anymore, which is all they have done for the last 5 to 10 years.

To understand my posts, though. ... This isn't about a stock market bubble. Stock ownership is much lower since the financial crisis. What is it about, always has been about for me, are the credit defaults and how devastating it is going to be for our economy. It's peoples jobs, it's about us having sold out years of our future to live a very inefficient fantasy for a long time, so we didn't even get full value for those years of the future we gave away for the stupidity.

 

Monetary policy is never of any use for the ECONOMY. Unless your idea is that you are going to use price controls to keep the price of money way too cheap so that lenders can't calibrate risk and they will create trillions upon trillions of dollars of credit that would never have existed in a FREE MARKET, and then you are going to call all of the inefficient spending on the back of that debt binge, "the economy."

But you are right. $700 billion of creating money out of thin air and buying treasuries so that our banks are flooded with free money to release so everyone will buy stocks makes zero sense here. Without them having created a bunch of asset bubbles, if our markets were FREE, the stock market would be a discounting mechanism and you'd be able to track its performance based on *gasp* earnings. ... Earnings have gone nowhere in real terms since about 2013, and between 2008 and 2013 those earnings grew anemically after they fell off a cliff in 2008 / 09. And during that time? The stock market went balistic on the back of the debt bubble they created that put the margin and leverage into the stock market.

Right now, the stock market is back to remembering what earnings are. ... and all of the debasement of the dollar, all of the "free money" is still not going to make people get on an airplane or go to a restaurant or go to a concert right now, and worse, with a lot of jobs in jeopardy, they aren't going to be buing $30,000 cars they can't afford even with the ridiculously artificial rates. The game is over.