Financial Fire Hoses and Helicopters

The U.S. government has a technology, called a printing press (or today, its
electronic equivalent), that allows it to produce as many U.S. dollars as it wishes
at no cost. Ben Bernanke
Modern finance ultimately comes down to managing serious crises and transitions
in a way that is profitable for policy makers and elite. The inevitable chaos, like
the death of a fiat currency and the return to a real market price equilibrium, is
much more dramatic.
History will only report the extremes. But we are now living through in-between
times, watching it all unfold amid the bungling of sociopath leaders. Economic
theory and practice is borrowed extensively from the future.
When we enter a state of economic emergency, the need to keep funding the
present eclipses completely any hope for a future.
In this pregnant moment we have colossal debt forcing its own absurd kind of
austerity. Consumers stop spending not out of prudence, but because they
simply cannot.
The irony is painful.
The system breeds massive debt allocation from the top, where low interest rates
make it foolish not to take on more debt, where it trickles down to the gadgetaddicted and largely brainwashed mainstream consumer feeding off the constant
bread and circus after circus.
Money is sent back to the financial service debt, instead of flowing in to the real
economy. At the end of the day, it is worse than a Ponzi. Its a scam that artificially
inflates the asset at the top of the basic hierarchy of needs the home
Whether rented or owned.
Again, it is the gradual revelations we see before us, stacking up to create an
avalanche like nothing seen before.
The fact is the financial system, like the shark, must be constantly flowing to
survive. If the machine begins to stall, all of the peripheral mechanisms begin
shutting down.
No one understands the complexity.

Even the regulators, if they werent already totally captured, could not unravel
the issues.
When we freeze again, we will be politically positioned to unleash all that we
understand, such as:

Interest rate reduction.

More outright balance sheet expansions.

Incentives that either step in to assist or indirectly force banks to lend to the consumer.

We thought QE was large; just wait until it grows exponentially.

Nationalization will look benign in comparison.
Dollar reserve currency status
The U.S. dollar reserve is slowly being painted as a pariah. A statement which is
meant as a preparation.
A way of talking down the dollar as Europe implodes and safe haven money flows
bid treasuries.
Its nothing new that calls for the end of dollar hegemony have been ubiquitous,
here are a few headlines from the recent past:
Nothing Lasts Forever; World Bank Ex-Chief Economist Calls For End To Dollar
As Reserve Currency
Russia Holds De-Dollarization Meeting: China, Iran Willing To Drop USD From
Bilateral Trade
Chinas Official Press Agency Calls For New Reserve Currency, And New World
Order
Canadian Billionaire Predicts The End Of The Dollar As Reserve Currency; Warns
Its Likely To Get Ugly
And the real kicker is this one:
Obamas Former Chief Economist Calls For An End To U.S. Dollar Reserve
Status (Originally posted as an Op-Ed at The NY Times of all the carefully
concocted places.)
.new research reveals that what was once a privilege is now a burden,
undermining job growth, pumping up budget and trade deficits and inflating

financial bubbles. To get the American economy on track, the government needs
to drop its commitment to maintaining the dollars reserve-currency status.
If that were not enoughtry this one on for size and consider how far we've come
since 2014 with this:
It begins: Central Banks Should Hand Consumers Cash Directly
Governments must do better. Rather than trying to spur private-sector spending
through asset purchases or interest-rate changes, central banks, such as the Fed,
should hand consumers cash directly. In practice, this policy could take the form
of giving central banks the ability to hand their countries tax-paying households
a certain amount of money. The government could distribute cash equally to all
households or, even better, aim for the bottom 80 percent of households in terms
of income. Targeting those who earn the least would have two primary benefits.
For one thing, lower-income households are more prone to consume, so they
would provide a greater boost to spending. For another, the policy would offset
rising
income
inequality.
And so here come the helicopters.
However, even nearly three years ago, the problems with Helicopters and adding
liquidity were obviously apparent.
From "A Printer And A Prayer" - The Three Problems With The Fed "Liquidity
Coverage Ratio" Plan:
http://www.zerohedge.com/news/2014-09-03/printer-and-prayer-threeproblems-fed-liquidity-coverage-ratio-plan
..this whole macroprudential scheme crashes under the weight of its own
illogic, is when one considers that the source of the funding of any one banks
debt issuance proceeds are other banks and financial intermediaries, all part of
the same group of chain-linked counterparties, which hold on their shoulders over
$200 trillion in notional derivatives, and where even one collateral chain breach
means net becomes gross and the derivative exposure collapse into the
singularity of the next bailout. Basically stated, bank X will be selling debt to bank
Y in exchange for cash, thus boosting bank X capital line item, while depleting
bank Ys. And when the moment comes to rescue the liquidity depleted bank Y,
what
then?
In other words, not only is this latest window dressing too little to make a dent,
or that there simply isnt enough of the high quality liquid collateral needed to
pre-fund a disaster fund, but at the end of the day, all that is happening is a
circular pickpocketing where liquidity is simply rotated in a circle without any
exogenous funds entering or leaving the banking sector. And as everyone knows,

it isnt any one bank that is insolvent: it is the entire banking sector in total,
confirmed quickly when one recalls that Hank Paulson forced all the banks to
accept TARP funding to restore confidence in the U.S. banking system: not a
piecemeal bailout.
Fast forward to today. Here we are, skating across the thin ice without a
(collective) care in the world. This is also the reason the financiers eventually
must turn to government to continue spending.
No real spending constraints apply to government. And politically acceptable by
the majority increase in spending which will put more pressure on the velocity
of money the transfer mechanism being the government.
Officials are preparing, paving the way for the eventual storm. They are making
these official statements, while the market looks the other way.
But the market cant look the other way forever. How long is anyones guess.
Its like waiting for the next big earthquake.
1. To receive early notification for new articles, click here.
2. Or to view all of our products and services, click here.
3. Or...support the cause, and buy me a cold one!