“11/30”: Something Damned Strange Is Going To Happen In New York (And the Eurozone) On November 30th
“But there are also unknown unknowns- there are things we do not know we don’t know.” (Donald Rumsfeld)
Summary:
· Beware the ides of 11/30/2022.
· Williams’ whinging for more Fed power confirms that Stagflation has become Stabflation.
· Jefferson’s Lead Balloon does not comply with the 13th Amendment.
· Susan Collins’s brave attempt to redefine the full employment mandate is Constitutionally Compliant.
· Bullard and Williams are in the Rumsfeld Quadrant, of the entrenched inflation Unknown Unknown, indirectly asking a partisan Congress for a commensurate new mandate that will not be given.
· The risk of a volatile Fed pivot, through dissonant guidance, has been reduced by the fact that the pivoters are now Incrementalists.
· In the EU’s Rumsfeld Quadrant, German Economic Blitzkrieg has occurred in Spain’s recent down-round capital raising event.
· G20 is incrementally calibrating not strategically cooperating.
· China and the USA are pretending to have an armistice.
· RIP Philip Lane, long live the Tweet-Show replacement.
· Germany has queue-jumped the EU and the USA, in armistice negotiations with China which may lead to an Axis of the Resource Poor/Manufacturing Rich Two.
· The French Maginot Line is extended on three fronts.
· Kubla Khan wants to divide and conquer the Western Alliance and the EU.
· Europe is now the greatest headline inflation, financial instability, and growth threat to the global economy.
· Villeroy accepts and apologizes on behalf of the ECB for triggering the next financial crisis and prays that the Fed will be in pivoting mode by then.
· The “Villeroy and the Bosch” model of Eurozone integration is broken, but the process is still on.
· The process of deeper Eurozone integration will be noisy, ugly, and potentially impossible to achieve in practice.
· De Guindos conflates financial instability with his economic performance outlook.
· The ECB’s latest financial stability report is a synopsis of an impending financial crisis.
· Britain is not the least significant developed nation in the world but it is in the bottom one.
· The Bank of England is the biggest fiscal drag on the UK economy followed by the inept kleptocracy of the Government.
· Britons will become even more ungovernable for at least the next three years.
· The Crypto Crisis is approaching its “Lehman Moment”.
· The SNB is jibbing its commercial banks, money laundering its losses, and debasing the Swiss Franc.
Tomorrow’s Damned Fish and Chip Wrapper ….
After a financial crisis occurs, investigators, often, look back for things that could have been clues. In the near future, people may be looking back at the recent G20 Summit, at which things appeared to have gone so well, for these said clues.
Perhaps the same investigators should be looking forward to the DealBook Summit to be held on November 30th hosted by the New York Times. The Times appears to have an uncanny ability to pick what can loosely be called the accursed, in the vernacular, as speakers.
Some of the speakers have already been cursed, big time, thereby, creating the impression that the other speakers are also cursed and doomed, by their contagious association, to fail in their work. If all of them lose, this could well be the end of civilization as we know it.
The Times also has an uncanny sense of timing. It is as if the almighty has selected this newspaper, and this upcoming event, to be the oracle that foretells global disaster.
Fortunately, or not, depending on your viewpoint, no central bankers will be attending the summit. They will, therefore, be unscathed, by the cataclysm, portended at the event, and, thereby, will be fully capable of dealing with the crisis that unfolds.
This author suspects that the real crisis will occur in the Eurozone around the auspicious date of the New York Summit.
Some central bankers are already having apocryphal visions of their own.
John be nimble, John be quick ….
It’s going to hit the fan, and the Fed doesn’t like it.
This author has already explained, in detail, how the Fed has reached the point, of its own insolvency, at which Stagflation has become Stabflation. At this point, the Congressional dual mandate is out the window and an exclusive financial stability policy mandate is applied, by the Fed, until its balance sheet is back in the black.
New York Fed president John Williams has recently informed that the Fed had reached this financial stability tipping point, allegedly, through no fault of its own. In fact, according to him, it’s Congress’s fault for giving the Fed a mandate that obliges it to be a “Jack of all Trades” and a master of none.
This author would contend that the Fed does itself no favors, by being inert and then massively overreactive when it does act. One should, therefore, not shed any tears for Williams.
Williams is, indirectly, asking for Congress to give the Fed a new mandate. He sells this request as the need to widen the Fed’s powers to build deeper financial resilience. What he is, in fact, saying is that the Fed would like the authority to go, nuclear, with an exclusive financial stability-driven policy that will, ultimately, subdue the vicissitudes of volatility in the credit markets and the real economy. The intended outcome is financial stability and low inflation.
Had the Fed never gone nuclear, before, with QE and then ignored the inflation problem, in March 2021, Williams would not now be asking to be given carte blanche and more power. Despite its good intentions, the Fed’s track record shows that it is not to be trusted.
· Free-Loading Chairman Powell’s position is untenable, ideally, he should be replaced, by Esther George, but this probably won’t happen.
· If the “Front-Loaders” finally listen to, and follow, Esther George’s incremental rate hike proposal, they may still be able to Soft Land the economy and avoid having to aggressively money launder the Fed’s balance sheet losses.
(Source: the Author)
This author would trust Kansas City Fed president Esther George with such a mandate as Williams desires. If George were to be trusted, and followed, Williams would not be making his plaintive whinging. Sadly, George is retiring. George calls it the way she sees it, which is most often the way it is. Ominously, she now sees inflation expectations as so entrenched that only a recession will shift them.
Fortunately, the state of the US polity, is so partisan, that it will be impossible to negotiate a new mandate and more power for the Fed. This is, arguably, the best thing to come out of the Mid-Terms. The Fed must now comply, with the Constitution, rather than try to bend it.
Comply with me ….
The last report discussed the Fed’s imperative to be “Constitutionally Compliant” in the heightened environment of partisanship coming out of the Mid-Terms.
The Mid-Terms result reflects a delicate partisan balance of power, that neither side can aggressively exploit to their overwhelming advantage.
The KCF is Constitutionally Compliant with the tighter partisan US political environment and thereby independent from it.
(Source: the Author)
With the partisan lawmakers keen to fiscally stimulate, their own political agendas, and dogmas, in order to accrue political capital, running towards the Presidential election, the Fed will find its balance sheet pushed and pulled by the dialectic. As the dialectic, and resulting political friction becomes heated each side will seek a legal resolution for their positions. The Constitution is going to have to weather this partisan storm. It is, therefore, also, imperative that the Fed complies with the Constitution.
The one thing that the Fed may be able to bridge the partisan divide is “Friend-Shoring”. There is, allegedly, bipartisan support for “Friend-Shoring”, ostensibly, to confront and defeat China. “Friend-Shoring” is, hence, logically, the next economic stimulus, some of which will be deficit funded.
As noted, in the last report, and latterly in the public domain, the Fed will be coming under partisan pressure to “bipartisanly” support the various “Friend-Shoring” deficit-funded initiatives proffered on each side of the partisan divide. This support will be demanded in terms of lower borrowing costs and the location, of said cheap borrowing, on the Fed’s balance sheet. In terms of monetary policy settings, the Republicans are all for Democrat-weakening rate hikes and the Democrats are all for ending rate hikes.
The Fed will need to maintain “Constitutional Compliance” to remain independent and politically uncompromised. If “Constitutional Compliance” means that the “Friend-Shoring” stimulus should be enabled, by the Fed, then so be it.
President Biden has put the Fed on notice to be “Constitutionally Compliant” and “Friend-Shoring” Friendly with his promise that there will be more infrastructure spending in the immediate future. In response, Mitch McConnell has made partisan noises about agreeing to a debt ceiling. It’s going to get ugly.
Incrementally Independent ….
· The Fed dreams that it can officially prorogue financial instability risk for another six months.
(Source: the Author)
The last report discussed how Fed’s “Constitutional Compliance”, and independence, would be enhanced by adopting Incrementalism. Fed Governor Christopher Waller has recently ticked this box. Incrementalism, for him, at this point, does not mean lowering the target rate for tightening. His view is that the target rate should be reached, later, by a smaller series of incremental interest rate hikes.
Waller has been supported by Fed Vice Chair Lael Brainard, in the incremental smaller-for-longer approach to tightening monetary policy.
· John Williams tries to anchor the pivot in the Rumsfeld Quadrant by making it appear to be in the Known Known Quadrant.
(Source: the Author)
The risk posed, by this smaller-for-longer approach. is that it, unintendedly, de-anchors long-term inflation expectations. New York Fed President John Williams has been striving, manfully, to keep these inflation expectations low so that he can pivot in his own way. If they are not careful, with their guidance, and pivoting, Brainard and Waller will steepen the yield curve, into the face of Williams, and nudge long-term yields, higher, to levels that cause a recession.
· John Williams tries to anchor the pivot in the Rumsfeld Quadrant by making it appear to be in the Known Known Quadrant.
(Source: the Author)
Currently marooned, in the Rumsfeld Quadrant, Williams has, belatedly, just run into another obstacle to balance sheet shrinkage that, arguably, he should have been aware of before balance sheet shrinkage began. It’s one of those Unknown Unknown things, again.
Williams’ staffers have recently opined that the Federal Reserve Banking system’s liquidity is, materially, less liquid than the central bank has assumed to be the case. The process of reducing bank reserves, obviously, becomes more onerous, for the private credit creation process, under these conditions. Thus, the Fed’s current tightening is more of a lagged headwind than was assumed when the central bank, belatedly, embarked on tightening. Food for thought. This author does not believe that Williams was unaware of this problem until now. Williams may now have indigestion from this food for thought.
Philadelphia Fed President Patrick Harker has, recently, pivoted a little further than all his colleagues, and openly discusses the risk of tightening too far. Evidently, Harker is aware of the obstacle in Williams’s path.
· (Lorrie) Logan’s Run leads to nowhere other than to more monetary policy easing.
(Source: the Author)
The last report observed the newbie mistake by Dallas Fed President Laurie Logan, of rightly calling inflation an economic headwind and, then, wrongly saying that a further headwind of monetary policy tightening was the appropriate thing to do to a weakening US economy. Logan’s rookie mistake has been followed with one by newbie Fed Governor Lisa Cook. Cook is a demanding fantasist who appears to believe that the Fed can aggressively fight inflation, and have a stronger jobs market, too, at the same time.
Atlanta Fed President Raphael Bostic has fundamental resistance to the pivot that throws a bigger spanner into the works. Currently, Bostic sees no sign of any improvement in inflation. What he is implying is that he does not see the hallmark recession that would convince him that inflation has been defeated. Bostic’s position is also adopted by Minneapolis Fed president Neel “Ex Culpa” Kashkari from his comfort zone.
What can, hence, from all the above guidance, be seen is a dissonant pivot. Since this dissonance is now incremental, the risk of volatile shifts in the yield curve has been reduced. In theory, therefore, all the pivoters can step on each other's toes without doing any collateral damage to the US real economy.
Symptomatic of the dissonance is San Francisco Fed president Mary Daly’s confidence limits around the target terminal rate. Daly estimates the range to be between 4.75% and 5.25%, thereby, giving herself as much flexibility, as possible, to deal with the economic uncertainty surrounding inflation and growth.
The dissonance is only going to get worse when it becomes clear that many Fed members are not in compliance with the 13th Amendment.
Collins does not fly in Jefferson’s Lead Balloon ….
· The Fed Listens initiative does not make the Fed compliant with the 13th Amendment.
(Source: the Author)
This author was initially amazed at how many Fed presidents and Governors, from ethnic minority backgrounds, are ignorant of the Fed’s non-compliance with the 13th Amendment. QE completely missed out ethnic minorities, because they don’t have financial assets, or own their own homes, generally speaking. The inflation, wrought by the Fed, then destroyed these ethnic minority communities. Because inflation runs beyond their salaries, assuming they have jobs, they are forced to borrow, to live, at racially-abusive usurious rates of interest. Hiking interest rates has, hence, just killed them off. Rather than supervise and govern, the racially-abusive capital markets, the Fed is just happy to move the benchmarks rather than the usurious credit spreads and credit scoring processes.
Where there should be honesty, about the subject, there is disingenuous procrastination.
Newbie Fed Governor Philip Jefferson is the latest color-blind procrastinator. In a contrite apology, for the Fed, Jefferson recently opined that low inflation is in the interest of all Americans. Apparently, low inflation is broadly inclusive. He isn’t lying. Neither is he exactly speaking the truth, in a detailed economic context, about the ethnic minority cohort of the great American family.
In partisan times, such as these, Jefferson and those like him will be found out and found wanting.
· Now would be a good time for the Fed to start some thought leadership on a new definition of full employment.
(Source: the Author)
Boston Fed president Susan Collins is clearly not to be found wanting. This author apologizes, profusely, and unreservedly, to Collins, for suspecting that she could be non-compliant with the 13th Amendment.
Collins recently demonstrated that the alleged tightness in the labor market is attributable to attrition during the COVID pandemic. Those without skills have been lost from the labor pool, until such time as they get re-skilled for what is needed. As they re-skill, they will encounter intense competition from productivity strategies and the technology employed in these solutions.
Collins’s hunch, and inference, are that the labor market is permanently scarred. A tight labor market and wage inflation are, therefore, symptoms of this scarring. Setting a monetary policy for the skilled minority of workers may, therefore, miss the body of the dual mandate elephant.
Collins is alluding to the need for supply-side solutions to the inflation problem. She is also alluding to her own inclination not to kill these solutions by engineering a recession with inappropriate demand-side monetary policy tightening.
There is hope for Collins. This author hopes that she continues with her line of thinking and policymaking. If she continues, in this way, perhaps a real discussion of what the Fed’s full employment mandate really means, these days, will occur. This author believes that this discussion is well overdue. Continued failure, to redefine full employment, almost guarantees that the Fed will create a recession by following the outdated definition.
Jimmy (and Jack) In the (Rumsfeld) Zone ….
· The Fed is pretending to be in Rumsfeld’s Quadrant of Financial Instability by accident.
· John Williams tries to anchor the pivot in the Rumsfeld Quadrant by making it appear to be in the Known Known Quadrant.
(Source: the Author)
In the last report, the author discussed the Fed’s location in the Rumsfeld Quadrant of Unknown Unknowns. John Williams was observed, there, pretending that he was in the Known Known Quadrant.
St Louis Fed president James Bullard has just alluded to the fact that he is also spiritually in the Rumsfeld Quadrant.
· Inflation dynamics may have become structurally unhinged from their historically benign trend in October 2021.
(Source: the Author)
Bullard has just posited what this author believes is a high probability that inflation will not fall meaningfully back to target, for some time, despite headline improvement. In effect, inflation has become entrenched and only numerically appears to fall because of improving base effects.
Bullard openly addresses the problem of what to do under these circumstances. Clearly, even the biggest Doves would have to accept rate hikes way above 5%. The Fed’s balance sheet insolvency, and related financial instability, as John Williams has remarked, would be out of control were this to occur.
In this author’s opinion, Bullard is stating the obvious, about the elephant in the room, in order to invite constructive debate and market preparation for this epiphany. He may also be asking for that elusive new mandate that the partisan Congress is incapable of delivering.
Wisely, after admitting his own “Transient Inflation” mistakes, of the past, Bullard has now said that it’s Chairman Powell’s call on how to deal with the entrenched inflation Rumsfeld’s Quadrant scenario.
Whilst partisan America wrestles with its dialectic, an interesting partisan dialectic is building in the Eurozone. There are notable casualties and martyrs along the way.
“Philip Lane … You’ll Never Walk Again”, sang the Kop End ….
It is with great sadness that this author notes the sad demise of Terrace Legend, and Dovish consensus enforcer, Philip Lane the ECB’s Chief Economist. Lane appears to be the fall guy in the turf war between Christine Lagarde and the Hawks on the Governing Council.
Lane had, hitherto, been able to frame policymaking inputs, in a Dovish light, and, thereby, the output from the Governing Council meetings in terms of decisions and guidance. Lane had become quite adept at making a Dovish consensus majority opinion, in words, appear in the accounts of the council meetings, where, in fact, none had occurred. Lane’s position had become untenable with the continued inflation spike. Now, his position is purely ceremonial out of respect for Lagarde. His credibility is gone and, thereby, his influence.
With more time on his hands and Euros in his pocket, Lane can spend more time watching his beloved “Bin-Dipping” Liverpool FC. What a pity that the club has also, recently, experienced a dip in form. Perhaps Lane’s demise is correlated with the club’s fortunes. We wish them both well.
Lane may be gone, but his influence remains.
In place of the Liver Bird, with a swag bag, there will now be a Tweet Bird, with a magnifying glass, at the interface of important ECB signals and the audience.
Never one to take a defeat lying down, Christine Lagarde has launched a new research initiative to replace the sad figure of the discredited Lane. This new research venture is a Tweet-Show rather than the traditional prosaic form of communication. It will be interesting to see if it Tweets like a Dove, or a Hawk, going forward.
The ECB’s new research initiative has arrived, just in time, for an outbreak of partisan hostilities in the Eurozone.
Crouching Asian Armistice, Hidden Explosive Consolidated Prussian Militarism ….
East finally got to meet West, in person, at G20, but the priorities appear to have changed since COVID and the Ukraine War diversions appeared on the scene. This scrambling of priorities may conceal a strategic realigning of priorities. This concealment may, in fact, hide a global realignment. It most certainly indicates a few detours and diversions on China’s Belt and Road. Perhaps there have been a few over-takings and crashes along the way, too.
The only thing that the G20 members appear to be able to agree about calibrating is their central banks’ monetary policy tightening. This implies a broad acceptance of Incrementalism rather than coordination. Apart from that, the floor is open, to all kinds of strategic permutations, going forward.
Without his COVID mask, President Xi Jinping is a ringer for Kubla Khan in more ways than one.
The first meeting, between President Biden and President Xi Jinping, was framed as a fragile verbal armistice in the Asian time zone. To demonstrate goodwill, Chinese Premier Li Keqiang opined some hollow rhetoric criticizing Russian threats to escalate the Ukraine conflict to the nuclear level. Thus, the immediate global focus has shifted away from Taiwan to Eurasia. The spotlight should be shifted towards the Eurozone in this author’s view.
· The Ukraine war is a wargame for the Taiwan war.
(Source: the Author)
The fragile armistice should be framed in the recent context provided by Chairman of the Joint Chiefs of Staff General Mark Milley. According to General Milley, China has currently shelved plans to imminently invade Taiwan. This author would argue that the proxy wargame, in Ukraine, has prompted this alleged shift by China. Had President Putin successfully annexed Ukraine, a Chinese invasion of Taiwan would have been a much higher probability.
Readers should note that German Chancellor Olaf Scholz had anticipated the Biden-Xi meeting by several days. Germany, therefore, by default, had presented its own armistice terms, outside of the EU and NATO frameworks, before America had set the ground rules of engagement.
Scholz, in effect, broke with the Second World War precedent that America sets the Western Alliance’s global agenda. Scholz did not even act as an EU or NATO nuncio. Instead, Scholz projected German power, and thereby, intentions and capabilities. These intentions and capabilities may, or may not, reflect the broader EU and NATO agendas.
The Chinese G20 concession, to rebuke Russia’s nuclear escalation, was, therefore, as much a response to Germany as it was to the USA. China, ostensibly, wishes to cut American influence out of Europe. Germany has responded with alacrity.
This is not the first time that this author has noted German queue jumping. This author also observed, with interest, what happened to President Macron when he tried to cut out American influence by aligning with Russia. A German alignment, with China, outside of the EU and NATO guardrails would not go well for Germany.
The fundamental weakness of the German economy has been exposed by the Ukraine war. Southern and Eastern Europe have the edge in energy terms since they have less energy-intensive economies that are located within easy reach of potential energy imports.
(Source: the Author)
Evidently, there is a Russian endgame, in sight, and the main protagonists are positioning for the inevitable chaos and opportunities that will open up. Germany is specifically motivated because of its natural resource paucity, something that its shares with China. Hence, one may conclude that Germany and China are jointly cooperating in relation to Russia’s natural resource base.
The two global manufacturing giants are, thus, trying to avoid unnecessary conflict, with each other, over natural resources. They may even be forming a strategic Axis, in this regard, as Germany once did with Japan before and during World War II. There is further historical precedent to be found on the Bund in Shanghai.
· History is rhyming again in Germany’s Rumsfeld Quadrant of the Eurozone’s next down-round capital raising event.
· German Economic Blitzkrieg may be found in the EU’s Rumsfeld Quadrant.
(Source: the Author)
The last report ruffled a few fine Europhile feathers with the explosive warning to beware of the rise of Prussian Militarism, and economic consolidation, around the Teutonic Core in the Eurozone.
These pacific Europhilic feathers should no longer be in denial of the latest facts. For the record, this consolidated militarism is a demonstrable fact to be accepted rather than a thesis to be debated. The latest incendiary demonstration has just been explosively demonstrated by Rheinmetall’s consolidation of the Spanish explosives manufacturer Expal.
Also, for the record, Germany’s top banking regulator Mark Branson has put his troops on alert to raise their capital buffers, for an imminent Eurozone consolidation campaign, as the ECB triggers a period of financial instability and economic weakness.
German militarism has obvious implications for France.
France must also take into account President Macron’s strategic failure to cement a Russian alliance that would neutralize American influence in Europe. Clearly aware, of his strategic misstep, Macron is rapidly trying to recover. Suddenly, after being a mugged-off Russophile Macron has become a potentially mugged-off Sinophile.
Justin Trudeau, in comparison, is nobody’s mug, least of all Xi Jinping’s, much to the latter’s obvious annoyance.
Macron seems to identify himself as Marco Polo acting as the emissary of the EU to Kubla Khan. President Xi, the putative Great Khan, appears to view Macron as both a messenger boy and a puppet.
Will Macron never learn that disporting himself publicly, in this way, just makes him a puppet of the leaders that he embraces? Statesmanship still appears to elude Macron, so he will always be an also-ran.
MI5 is not taken in by any of the Great Khan’s subtle diplomatic G20 softening of rhetoric. According to the DG, China is “playing the long game”. This view would seem to be consistent with Xi’s current behavior. Macron should pay attention, to the DGMI5, and make sure that he does not get played.
With these strategic constraints in place, it was no surprise, for this author, to see that France is having a strategic military review of its own. This review should be seen as confirmation of the author’s explosive assertion about Prussian Militarism.
Along Belt and Road did Kubla Khan a stately divide erect ….
It should be noted that President Macron had to wait, in line, at G20, at the court of Kubla Khan, before he became the third occidental leader to be granted an audience with the Oriental Emperor. France is in third place. Unsurprisingly, France has a tripartite strategy to deal with its lowly predicament.
Unsurprisingly, the Great Khan wants France to pursue its third-placed independence further. Who knows, he may even wish to re-sponsor Macron’s great vision of an alliance with Russia, again, on Chinese terms.
No doubt, the Great Khan had similar words of encouragement for Kaiser Scholz, when he met him, before meeting Biden and Macron.
Back in the day, this was known as a divide-and-conquer strategy.
China is interfering, in European politics, by playing on all sides of the Ukraine War. With hindsight and further research, analysts, and historians, may conclude that the probability, that Kubla Khan encouraged Tzar Vladimir, to originally embark on his Ukrainian misadventure, is the highest of all the potential rational explanations.
To be sure, to be sure, to be sure ….
The French strategic military review follows closely from the recent redrafting of the US National Security Strategy by President Biden. The French review also follows up, closely, on recent German attempts to address its strategic energy insecurity.
The French strategic review, therefore, by default, has three drivers.
The first driver is national sovereignty. This will, allegedly, be guaranteed by a robust nuclear deterrent.
The Franco-German driver will be accommodated through an enhanced French commitment to defend all European interests.
· American Democracy repelled the January 6th, 2021 attack only to surrender, quietly, to the Gang of Two, on October 12th, 2022.
· The US Gang of Two now faces the Chinese and Russian Gangs of One.
· It is not obvious if US National Security Strategy has been redrafted by global events or has prescribed them.
· America has officially had a Wartime President since October 12th, 2022.
(Source: the Author)
The Franco-American driver will be addressed through a robust commitment to NATO, going forward. In this author’s view, the relationship with America will be complicated by a consolidation of military authority into the hands of the American Gang of Two in the White House.
Thus, France has covered its obligations, and potential threats, from true enemies and former allies, turned enemies. The French strategic review, therefore, identifies a changing world of significantly higher risk.
There’s no fire without some smoke and mirrors ….
When the President of the Bundesbank and the Governor of the Banque de France co-author a panegyric, to Franco-German solidarity, in each other's most famous daily newspapers, one instinctively knows that there is trouble at’Mill in the Franco-German Alliance. What the two are not saying is what they are really saying.
What the two top central bankers were not saying was that, what this author has affectionately called, the Villeroy and the Bosch model of the Eurozone economy is deceased, because the love of the betrothed is seemingly unrequited.
· Christine Lagarde has anticipated the bicameral Villeroy and the Bosch Eurozone integration strategy with a tweak to the monetary policy framework at the ECB.
· The Villeroy and the Bosch strategy achieves economic union through the destabilizing of national democracies with EU sanctioned fiscal irresponsibility and central bank moral hazard.
· Villeroy’s New Multipolar World Order (NMWO) seeks to share Liberty, Equality, Fraternity, and the American Exorbitant Privilege to finance fiscal irresponsibility.
(Source: the Author)
The Villeroy and the Bosch model previously discussed, by this author, envisioned a meeting of French and German minds, and hands, to jointly consolidate the Eurozone. Seemingly, this joint acquisition would have been deficit-financed. Seemingly, also, Germany does not want to pick up the debts, of the acquired nations, at the current face value of their expanded fiscal deficits.
Germany now wants to make its consolidation targets insolvent and, then, acquire them on the cheap. This is one notch above invading nations, and taking their resources by force, so one must give the Germans some credit for having advanced as a civilization since 1939. That being said, the whole attitude of the Germans is less than European. Presumably, this is the making of the Eurozone, more German, that Germany intended, all along, when it originally signed up for the single currency.
The two central banking apologists, for the unacknowledged divorce, would have their audience believe that its business as usual; and that Eurozone banking union, followed by an economic union is a foregone conclusion. It may be, but not as each apologist sees it.
Whereas there was, once, a joint version, now, there is a French version and a German version of Eurozone integration. Both are mutually conflicted. The central banker co-authored discourse does, however, confirm that a Eurozone financial crisis is brewing, which may, ultimately, lead to a banking and economic union of some kind.
· If the ECB and the EU intend to trigger deeper banking sector and economic integration, with QT, Grexit proves otherwise.
· The EU is choosing deeper economic union to avoid fragmentation and ECB insolvency.
(Source: the Author)
As noted, in the above discussions, it would appear that some media focus has shifted to Europe.
· The ECB’s, alleged, soon to be shrinking, balance sheet is in conflict with the expanding balance sheets of the Eurozone national central banks, which comprise it, which will lead to a financial stability crisis.
(Source: the Author)
As noted previously, this European focus should be put into the context of the cunning German plan to consolidate ownership and control of the European economy.
This author also hopes that Mr. Market will discover wider German ambitions in the process.
· The ECB has signalled that its inflation mandate is making it insolvent.
(Source: the Author)
As predicted, by the author, the ECB’s balance sheet and Eurozone national central bank balance sheets are diverging in opposite directions. Since the ECB, by design, must hike interest rates, as inflation rises, the conflicting central bank balance sheet problem has a high probability of being an almost crisis-triggering certainty in the immediate future.
· Global central banks have been insolvent for, a lot, longer than people think.
· Global central banks will have to start easing a lot sooner than they and people think.
(Source: the Author)
Bank of France Governor Francois Villeroy de Galhau recently accepted the receipt of the baton, of responsibility, for the next financial crisis, from the Fed. Villeroy recently opined that the Fed is ahead of the curve. This is amusing since the Fed has been behind the inflation curve since at least March 2021.
Villeroy is saying that the ECB is so far behind, the inflation curve, that when it automatically responds, as per its single inflation mandate, chaos will ensue. Villeroy is also praying that the Fed is so far ahead that it will actually consider easing when the ECB blows itself, the Eurozone, and the global economy up.
Signs of the imminent crisis are already evident in the safest part of the capital structure in the corporate bond market.
Signs of an ECB anticipation, of financial instability, are already evident from the ECB Vice President Luis de Guindos. His latest speech now has financial stability conflated with the Eurozone economic outlook.
De Guindos’s speech was an introduction to the ECB’s latest Financial Stability Review. The review basically begs the question of what is going to happen, to the Eurozone economy, when rising inflation forces the ECB to make itself, governments, businesses, and consumers more insolvent, than they already are, with further interest rate hikes. In this respect, it is a script portending a financial crisis hiding in plain sight.
The Fed is currently in the process of looking for reasons to ease prematurely in relation to high inflation. A Eurozone financial crisis would be a nice reason. So would a cryptocurrency crisis. Both would be a blessing. Both would seem to be happening.
· Britons are the useful idiots that US home flippers were, in the GFC, to enable the next global credit expansion.
(Source: the Author)
Britain’s potential as a catalyst, for a global economic stimulus, has already been discussed. The only thing counter-thesis is that Britain is insignificant. China certainly seems to think so.
The Little Corner Shop of Horrors ….
There are other things besides, and more important than, the World Cup going on right now. None of these things seem to be anything to celebrate in the UK.
The growing aversion, to the UK economy, now puts it at the bottom of the Global Alpha League.
On the Xi Jinping Meeting Index, Team UK Head Coach Rishi Sunak is not the least important leader in the world, but he is in the bottom one. Whereas “Our Lizzo” had once squared up to Kubla Khan, the UK’s Head Butler has recently groveled in obeisance. This groveling, however, was still not enough to be granted an audience. Basically, Kubla Khan wants Sunak to give Joe Biden the finger before he will entertain his advances.
· Le Bromance makes Le Butler cater exclusively to Western Alliance VIPs.
(Source: the Author)
Actions speak louder than words, to Kubla Khan. Sunak has been forced to unwind a sale of sensitive semiconductor fabrication IP to China, by the Western Alliance.
This original sale of IP, to China, occurred on his watch, as Chancellor when he was basically running his ministerial office as an investment bank for oriental investors. Sunak has been compromised. No doubt, the DG MI5 has advised on the unwinding of the sale.
It would, thus, seem that UK foreign policy is now being made exclusively by the Western Alliance. This is quite the strategic change from policy being made by friends and extended family of cabinet ministers. It should also free up said cabinet ministers to actually do what they were elected to do before they decided to enrich themselves and family and friends instead.
· The UK will become an austere economy with an ungovernable polity.
(Source: the Author)
The decline and fall of Britain, into austere ungovernability, has reached a nadir on the high street as well as with China. Shoppers’ salaries are running lower than the rate of inflation, hence, they are finding other ways and means of supplementing their consumption. Shopworkers, meanwhile, literally, have to suffer the slings and arrows of the consumers’ misfortunes.
Shopworkers in Britain, now face the most hostile working environment that they have experienced since before the pandemic. This is alarming, as there was virtual rebellion when goods were being rationed at the height of the pandemic.
Now that goods are available, nobody can afford to buy them. By default, this means that the economic situation of the customers and the purveyors, ergo the UK economy, has, in fact, fallen below its pandemic depths in real terms. Salaries do not compensate the workers for the unaffordable goods which they attempt to purvey. In addition, the customers are hostile to the purveyors and their unaffordable prices.
It is highly likely that the aggressively larcenous attitudes, spill over, from the retail environment to all aspects of British life. Mrs. Thatcher once proudly stated that social interaction should be replaced by price discovery. Price discovery has now reduced what stands, in place of society, to virtual anarchy. This situation does not bode well for what this author affectionately refers to as the Corner Shop on Downing Street.
Clinical symptoms of the decline and fall are overwhelming the fiscally constrained NHS’s ability to cope.
· “Weimar-on-Thames” style with an English accent UK economic policymaking seeks to nationalize the Bank of England “Kremlin-on-Thames” style with the same English accent.
(Source: the Author)
There would appear to be a corresponding decline, in social morality, directly correlated with the rising cost of prophylactic mitigation devices and personal hygiene products. These symptoms and statistics paint a picture similar to the Weimar Period of debauchery in interwar Germany.
The UK “Butler” has catered to the exclusive political, and financial, needs of a global elite. This report is specifically concerned with the “R”, the “I”, and “C”, in the “BRIC” nomenclature, of the said global elite, that the UK is “Butlering” for.
(Source: the Author)
The debauchery was also indulged in, by the government, during what was euphemistically referred to as the “Lockdown Party” period. This abuse of high office extended to the practices of governance in what came to be known as the “Butler Model” and the VIP Lane. One of the debauchers now disports this behavior, as he seeks cult celebrity status, in another kind of jungle. Apparently, the debauched still have no shame and will do anything for money.
The tab for the debauched nepotism is currently estimated at £14 billion, based on what the financial sleuths, at the Civil Service, have been able to uncover. This haul is not too shabby when compared to the total £ 55 billion black hole in the UK’s finances that the Chancellor confesses to.
The PM, allegedly, wishes to see more criminals locked up in the UK. He should be careful what he wishes for based on the performance of his government whilst in office.
Fat contracts were awarded to Serco and Mears, amongst others, for the logistic outsourcing of UK immigration policy to the private sector. Local authorities, and associated slum landlords, prospered. Labour local councils in the regions, selected for targeting, received much-needed cash injections as part of this outsourcing process.
(Source: the Author)
No doubt, the PM is just looking to hand out some more big contracts to Serco, Mears, and related businesses, as he did with the privatized asylum seeker imprisonment strategy that his government is running.
Cynically, the “Levelling Up” budget is now being diverted to build prisons rather than to build much-needed regional infrastructure. Hitherto, this budget was diverted to incarcerate asylum seekers, in situ, and in prison, who were then made into scapegoats to promote the Brexit vote. Presumably, when the Brexit-voting “Red Wall” catches on, to the fact that it has been mugged off, and, then, revolts, the Revolting Reds will be locked up and denied a vote. The loss of civil liberties and the right to peacefully protest runs confluent with the cynical abuse that invites peaceful protest.
The rapacious Conservative strategy of privatizing law and order, and even national security is, evidently, boundless. Maybe, one day, the separated Judicial Powers, will, similarly, end up in the private hands of friends and family. It never hurts to be on good terms with one’s jailers, in the event that one is caught stealing!
The PM is tarnished, and compromised, by his ministerial oversight of this period, of cynical abuse, although his teetotalling may have saved him from the more lurid “Lockdown Party” exposes. It is, therefore, inconceivable to believe that anything has radically changed. More likely, things are being concealed.
In this author’s view, the Corner Shop on Downing Street is a façade that purveys future GDP to related friends and family, of the shopkeeper, under the broad label of fiscal austerity. This purveyance of GDP, into friendly private hands, is a preparation for, and a prelude to, a life in exile as the opposition party.
To add to the government’s litany of problems there is growing evidence that the strategy of “Levelling Up”, which this author terms “Dishevelling Up”, has been found to be a big lie. The Red Revolt may therefore begin before the PM has built his news prisons for Serco and Mears to run.
· UK ex ante Dishevelling Up has been revealed as a deliberate policy U-Turn on Levelling Up immediately ex post facto the Brexit-driven election victory.
(Source: the Author)
Having been found wanting, on all counts, of economic stewardship, the UK government faced a dilemma with the Autumn Statement. Should the Chancellor try and buy political capital, or should he continue to reward friends and family in preparation for a life in opposition?
The Autumn Statement was less ruthless, than expected, to those at the lower end of the payroll and those not even on the payroll. For the rest, of those still gainfully employed, it was a case of robbing Peter to pay Paul, in the short-term, and then robbing Paul to pay Peter back over the medium to long term. If this mugging off is tolerated, over the next three months, an election will be called swiftly, to capitalize on the “Rishi Bounce”, before the ensuing depression occurs. Rising inflation, rising taxes, and rising interest rates do not end well.
The clever thing is that whoever wins the next election is pre-committed to this rolling fiscal austerity policy, of rising taxes and falling public spending, for at least the next three years. Thus, even if Labour wins, the next election, they will soon become very unpopular as Tory friends, and extended family, line up to buy the cheap assets that they couldn’t privatize in office. Britons are, hence, going to become even more ungovernable for at least the next three years.
This author noted, with some amusement, in the Autumn Statement pantomime, that the Chancellor did not explain where most of the higher taxes will go.
Most of the higher taxes will actually go into recapitalizing the insolvent Bank of England.
The next government must explain, to the taxpayers, why they must bail out the insolvent Bank of England, to the tune of £133 Billion, when all the central bank ostensibly did was to create inflation and its own insolvency. It seems like a criminally insane waste of money.
Taxpayers were led to believe that the Bank of England was easing their pain. Now they have to pay higher borrowing costs and higher taxes in consideration for this pain easing. Something doesn’t add up. An ungovernable taxpayer will, with such provocation, become even more ungovernable. Better build those prisons quickly.
· Central Bank insolvency is aligning with fiscal insolvency at a rapid pace in the global economy.
· The UK has turned Japanese in 2022 instead of 2023 as originally predicted by the Bank of England.
· Despite alleged conflicted interest the Bank of England and the UK Treasury have aligned interest in financial stability policy by nature of their insolvency problems.
· Kishidanomics i.e. Abenomics II is the globally acceptable face of UK Kwasinomics.
· The Bank of England is the first adopter of the next round of Modern Monetary Monopsony Theory (MMMT).
(Source: the Author)
Nationalizing the Bank of England, officially, to make this taxpayer-funded bail-out politically acceptable may be easier than just covering the central bank’s losses. Rather than nationalize the Bank of England, officially, or unofficially, by the taxpayer-funded bailout, the UK Government is more likely to borrow the recapitalization funds. With a commitment to fiscal austerity, this means that borrowing, to fund the Bank of England, will have to cannibalize borrowing for other economic stimulus opportunities. The Bank of England is thus a big fiscal drag, that is crowding out other economic growth opportunities in the UK.
And then there is that festering proverbial matter of Brexit. Brexit was sold, and consumed by a slight majority, as the UK’s Final Solution. This Final Solution now needs a final resolution.
After Le Bromance, with President Macron, the UKPM has been informed, by the EU, that the Brexit issue has not been resolved. Le Bro Macron just stiffed him. President Biden could, and may, have told the PM that this would happen.
· Britons are the useful idiots that US home flippers were, in the GFC, to enable the next global credit expansion.
(Source: the Author)
“Lizzo”, to her credit, understood all this, hence, she went for growth. She was prevented from seeing it through because England had to be seen to fail, in order to mobilize the big developed economy fiscal stimulus that is just around the corner.
Britain must now wait for the next domino to fall, in the Eurozone, for pro-growth fiscal recklessness to prevail.
The Crypto Domino is already falling into place nicely.
A Rumcoin Romcom….
The Crypto Crisis is allegedly approaching GFC levels. A “Lehman Shock” has been anticipated.
· Crypto is in the Rumsfeld Quadrant and policymakers and central bankers are happy.
(Source: the Author)
The last report discussed the acceleration of cryptocurrency contagion to global pandemic status. It would seem that the Fed has now decided to escalate the risk level onto its financial stability policy threat matrix.
· The Fed is pretending to be in Rumsfeld’s Quadrant of Financial Instability by accident.
· The Fed has deliberately understated financial instability risk because to correctly address it would mean immediately easing monetary policy.
· The Fed dreams that it can officially prorogue financial instability risk for another six months.
(Source: the Author)
Following up on what this author described, candidly, as a snow job, Fed Governor Michael S Barr recently faced up to questions, from Senate lawmakers, about the Fed’s recently published Financial Stability Report. In the spirit of the report, Barr was evasive and deflected attention away from the real issues, which the Fed is trying to deny, in order to prorogue the current tightening phase a while longer. Barr’s view was endorsed by Vice Chair Brainard.
Barr’s deflection was in the direction of liquidity threats, especially those presented by cryptocurrencies. His prescription is a regulatory turf grab, for the Fed, to gain full strategic oversight over cryptocurrency markets.
Barr is not yet ready to call for an easing of monetary policy conditions until the Fed has grabbed the cryptocurrency regulation land.
Some central banks can’t wait for the Fed to come to the rescue.
To pay is to fail: Even Maechler’s a Jibber ….
The insolvency problem-child, of the SNB, has, apparently, been gestating for nine months. This is considerably longer than expected by the markets. The recent birth, of the problem- child, in the public domain, thus, hints that monetary policy tightening will have to end much sooner than anticipated by the SNB and the markets.
(Source: the Author)
This author had previously given credit, where it was due, to the Swiss National Bank (SNB) for fessing up about the level and duration of its insolvency.
The author is now less than impressed but not surprised about what the SNB is up to. The only good thing to say is that, at least, the SNB is being honest about its dishonesty.
SNB Board Member Adrea Maechler recently admitted that the central bank is jibbing its commercial banks, and also using them to launder money, of its own creation, in order to recapitalize itself.
One Jib, involving Reserve Tiering, pays less interest, on reserves, from the SNB to the commercial banks.
To absorb excess reserves, we use open market operations. Specifically, we use term repos and SNB Bills, the latter being marketable debt claims on the SNB.
(Source: Andrea Maechler, Author’s emphasis)
The SNB also issues short-term bills (IOUs) that pay interest. Ostensibly, these bills are supposed to mop up the inflation threat from liquidity. In practice, the bills allow the SNB to borrow, from the banks, at a lower rate of interest than it pays, to them, on their tiered reserves, and, hence, it is stealing.
The best Jib, however, comes, in the end, as the SNB Bills mature. The SNB simply credits the repayment, of principal proceeds, back to the commercial banks, on a book entry basis. The SNB has, hence, just created Swiss Francs out, of its own IOUs, without troubling the Swiss government to officially create a new unit of currency. The SNB is, hence, printing money and then layering it, via an accepted money laundering technique, into the banking system.
If anybody thinks that the Swiss Franc is a hard currency, after reading this, and then checking the facts, this author has a nice Alpine bridge that he would like to sell them.
What this, of course, means, is that the great global debasement of currency is, once again, underway in Switzerland. Since SNB Bills are short-term instruments, that mature quickly, this debasement is proceeding at quite a pace in Switzerland.
When all the world is debasing, all of its currencies, equities always look more attractive than bonds.