Blind Flight To Safety (At Netscape Velocity): Softly Landing Central Bank Insolvency Becomes Hard
“Central bank profits and losses matter . . . but only when they matter.” (Seth Carpenter)
Summary:
· Softly landing central bank insolvency has become hard.
· Curve steepening will not make the central bank landing softer.
· Speaking from the financial wreckage, POTUS confirms that his Slam Dunk of 2022 was shot down, somewhere over South Carolina, by a surface-to-air inflation-guided missile.
· The Pentagon’s mobilization, in response to the SVB collapse, implies that the event is a national security threat that also requires Patriotic Monetary Policymaking by the Fed.
· The SVB collapse means that the Fed can no longer pretend that it is not in the Rumsfeld Quadrant.
· On the one hand, the Fed needs to tighten to restore independent credible commitment.
· On the other hand, the Fed needs to ease in order to avoid a financial crisis that will undermine its independent credible commitment.
· The SVB collapse confirms that the safest US$ asset is the liability of an insolvent US Central Bank.
· The Fed has Qualitatively Eased circa $ 2 Trillion, in credit risk, in response to the Quantitative Tightening that is simultaneously shrinking its balance sheet.
· The absurd combination of Qualitative Easing and Conventional Tightening is the final politically-hammered moral hazard nail, in the coffin of Fed credible commitment, that some call MMT.
· Qualitative Easing is the balance sheet gateway to further Quantitative Easing.
· The majority of US public opinion, which still believes in no return to pre-Pandemic conditions, contrasts with the Fed’s view (and behavior) that this will ultimately occur.
· The Tyranny of Teutonic Democracy threatens the survival of the European Project in its current historical iteration.
· Xi Jinping’s loss of credible commitment, through COVID-Zero, is a significant obstacle to the strategic transition to a technological command economy on the back of the Chinese consumer.
· Chinese consumer cynicism and fiscal constraints infer greater reliance on monetary policy to do the heavy lifting.
· The Ungovernable Kingdom’s (UK’s) economic and political stance is framed in election terms that the Labour Party will frame in Class War terms.
· The Ungovernable Kingdom’s (UK’s) fiscally constrained, tangential, foreign policy will lead to greater divergence in the Special Relationship.
· The Ungovernable Kingdom’s (UK’s) new Buy Now Pay Later (BNPL) budget seeks to buy back votes, lost to Brexit and totalitarian style drift, with domestic cheques that the next government cannot honor.
· The Ungovernable Kingdom’s (UK’s) economic and political dialectic exacerbates the nation’s “Submerging Market” fundamentals.
· Chancellor Hunt’s fiscally regressive bondage of the UK’s Taxpaying Slaves, to SWFs, structurally enforces the “Submerging Market” fundamentals, in the Ungovernable Kingdom (UK), that will cause Populist rebellion against perceived “Foreign Capital” and the government that enables it.
· The latest Governing Council move confirms that the ECB is highly likely to trigger a hard-landing approach to banking sector consolidation and deeper economic integration.
· “Armageddon Time” has now been reached, at which the ECB’s delivery of disinflation, and consolidation, actually risks splitting up the Eurozone.
Into the (Silicon) Valley of the Rumsfeld Quadrant ….
The Biden Slam Dunk of 2022 recently got shot down, somewhere over South Carolina, by a surface-to-air inflation-guided missile.
(Source: the Author)
The Biden Slam Dunk of 2022 has just crash-landed.
· The ECB is highly likely to trigger a hard-landing approach to banking sector consolidation and deeper economic integration.
(Source: the Author)
The ECB’s deflating/consolidating/integrating hard landing is still being attempted despite the financial stability crisis that has anticipated the central bank.
ECB VP Luis de Guindos seems to want to nudge the consolidation process along a little faster.
· The ECB is delivering on its promise to provide disinflation to the Eurozone Project whilst, simultaneously, triggering the financial stability crisis required for deeper Eurozone consolidation.
· Philip Lane implies that it’s Armageddon Time, in the Eurozone, with the next ECB tightening.
(Source: the Author)
De Guindos is nudging the Eurozone towards “Armageddon Time”.
· The “Submerging Market” fundamentals in the Ungovernable Kingdom (UK) will cause Populist rebellion against perceived “Foreign Capital” and the government that enables it.
(Source: the Author)