The Hunger Games: Silently Mocking Jay Powell
“I will also argue that constraints continue to bind policy, with a focus on the balance sheet and efforts to significantly reduce it from its current elevated level.” (Esther George)
Summary:
· The Fugly global economy needs a disinflationary facelift but is expecting a depressing botched surgery from inept practitioners.
· 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.
· The not independent Fed has been obliged to officially execute Patriotic Monetary Policymaking decisions taken by the Wartime President since October 12th, 2022.
· The US Corporate Purge has started with the CFO class.
· Corporate survival depends on cost-cutting, and credit risk, liquidity risk, and FX risk reduction.
· The Yen Carry Trade is intended to reflate the global economy, in a commodity-disinflationary way, and mark the BOJ’s balance sheet back into profit.
· The RBA confirms the commodity disinflation thesis, of the strong US Dollar trend, but now says that this is a Soft-Landing scenario tailwind Down Under.
· Dickensian Britain is following the scripts of Hard Times, Great Expectations, and The Old Curiosity Shop.
· The new UK PM’s solution is part of the original problem.
· Judas, the first Cuckoo of the UK Winter (of Discontent), has made a space for the Head Butler to return, to the family Corner Shop, via the VIP Lane, and for the ensuing asset stripping, and bargain hunting, by friends and extended family, to be blamed on the IMF.
· The UK Economy is a Poundland Developed Economy with a Corner Shop on Downing Street.
· The UK’s Poundland Curiosity Corner Shop is an “Off-Licence” that is “Off-Shoring”, to its global patrons, again, as opposed to the advertised domestic policy of “Levelling Up”.
· The UK “Off-Licence” is net present valuing UK GDP, and intellectual property, cheaply, at high rates of interest, and then giving them away, in weak Pounds Sterling, whilst boosting unemployment.
· The UK’s current Poundland Re-opened is the former Brideshead Revisited.
· Quilp’s Progress may wreck The Old Curiosity Shop unless a blind eye is turned to his shoplifting.
· The Gilt Market barcode signals that UK Submerging Market status has been achieved.
· Britain’s balanced books will be a one-pager with no future economic growth episodes.
· The ECB has chosen insolvency via financial instability because it is not allowed to choose inflation.
· The tactics adopted in trying to remain solvent, whilst following its inflation mandate, mean that the ECB is triggering a banking crisis that will lead to a recession and then more QE.
· 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.
Fugly is Fed Ugly ….
This year’s Nobel Prize awards panel appears to have an epic sense of timing, in addition to an equally epic sense of humor. This year’s economics prizes go to an ugly trio of caricatures, including Benjamin S. Bernanke, for their research on banks and financial crises. If a new financial crisis were to, suddenly, appear, these three would look like heroes and the panel would look like savants. What a coincidence!
(Source: the Author)
It’s getting ugly out there, and not just for Nobel Laureates. Americans are economizing, on cosmetic personal maintenance, because prices are too high. The ugly truth about Americans and their inflation is out. The ugly truth about the Fed is also hiding in plain sight.
The global economy needs a disinflationary facelift. Sadly, the global economy expects a depressing, botched, cosmetic surgical procedure from an inept team of economic practitioners. They’ve botched it before, so, most likely, they will botch it again.
Unfortunately, the global economy cannot sue for malpractice. It can only opine. Unfortunately, misguided, violent individuals who do not value freedom of speech, and a free(ish) press, take the law into their own hands, thereby, breaking the law and undermining everything that the Founding Fathers have bequeathed to everyone. The actions of the few, thus, deprive the majority, of their hard-earned liberty, when the legislative and executive branches respond to the violence.
Just as the legislature and elected policymaking branches overreact, so does the economic policymaking branch.
The, currently held market consensus is that the Fed will overdo it and cause a recession. An increasingly conciliatory-sounding Larry Summers says, that we should not mock Jay Powell, and his team, by second-guessing the monetary policy easing that will swiftly follow the recession. Clearly, there is very little room for error in monetary policymaking, globally, right now. Summers’, earlier curse, has, thus, become a warning not to fulfill his prophecy.
Anticipating smaller incremental rate hikes after the next large one is, apparently, according to Summers, still perfectly acceptable. This anticipation should discount a 5% Fed Funds target and, then, stay there until Larry deems it appropriate to call the next move. This is not so much a test of Larry Summers’ prescience as a test of the Fed’s credible commitment.
Since the Fed failed to intercede when the US economy was swiftly recovering, and inflation was running hot, back in March 2021, it is overly presumptuous, for the Fed, or Summers, to assume that the markets will trust their judgment now. It is far more likely that the markets will test their judgment.
So, thanks for that Larry, but, I’ll take my chances, in the real world, with everybody else.
In the real world, the silent period, before the next FOMC meeting, devoid of the irritating Fed guidance, that seeks to frame perceptions, and warp perspectives is full of ugly reality.
This ugly, silent, reality, not only mocks Jay Powell but constrains him. He was warned about these constraints, by Kansas City Fed president Esther George, back at Jackson Hole earlier this year. His refusal to listen, and learn, on that occasion, has tightened the growing constraints as monetary policy has tightened.
Back in March 2021, the Fed, and its balance sheet, had willingly been taken prisoner by the US Treasury. Now, the balance sheet is in the red, because the Fed has overreacted to the inflation that it let escape during the willing incarceration.
The Fed now must save itself by re-interring itself, and its balance sheet, as US Treasury prisoners. This return, to jail, is the point at which a new creation of Federal Government fiat currency is created, which will serve as the basis for private domestic and global credit creation to follow.
President Biden has a “Friend Shoring” narrative, and a couple of global conflicts, to act as collateral for this new credit creation process. Britain has, also, disingenuously, agreed to act as a catalyst for the global stimulus, by having a developed economic meltdown.
Hitherto, the stimulus collateral was COVID-19. It will be interesting to see if the new “Friend Shoring” narrative begets a fiscal and monetary policy stimulus larger than COVID did. It will also be interesting to see if the strong US Dollar narrative, and the disinflation, that it allegedly creates, will endure for as long as the next economic stimulus.
· The US economy is “Friend Shoring,” the Fed’s current US Dollar global easing as, a US domestic economic tailwind that is a global economic headwind.
(Source: the Author)
The lesson, from COVID, for America, is that a strong US Dollar is the best way to aim for a disinflationary, soft economic landing, after a massive economic stimulus. This lesson appears to have been well learned, with ugly consequences for those who don’t have enough US Dollars.
· The latest Fed Listens event is the precursor to the Fed’s embrace of a new New Normal that enables and facilitates Biden’s supply side “Friend Shoring Slam Dunk.”
(Source: the Author)
The ugly reality is that Chairman Powell is being politically constrained, again. He was bullied into submission, by Secretary Yellen back in March 2021, when he let the inflation genie out of the bottle. With Mid Terms approaching, he is being bullied, again, to ease off the tightening brakes.
The partisan nature of the political constraints is, also, getting violently out of hand again as elections approach. This violence now seems to be a permanent fixture of the democratic process.
I don’t know but I’ve been told ….
· Speaker Pelosi’s Bottom is now called Squeaker Pelosi’s Bottom.
(Source: the Author)
“Squeaker Pelosi’s” husband has been identified, by a misguided soul, as fair game, by nature of the fact that he and his wife appear to play an insider game, of self-enrichment, through policy information arbitrage. They have the information advantage and appear to personally apply it.
· Free-Loading Chairman Powell’s position is untenable, ideally, he should be replaced, by Esther George, but this probably won’t happen.
(Source: the Author)
Fed Presidents, and Governors, may, also, wish to tighten personal security, because their own performance has been less than spectacular in this regard.
Democracy appears to be violently under attack, by thugs, once again, just as it appears to be under insidious attack, by the policymaking executive, from within.
People thought that American democracy was under attack on January 6th, 2021. They seem to have missed the fact that it, recently, surrendered quietly to the President on October 12th, 2022. Maybe this oversight is helped by the fact that Americans are being directed to look at China, and Russia rather than in the mirror.
Whilst President Xi Jinping was, infamously, concentrating power, in his hands, recently, nobody realized that he was, just, in fact, playing catch up to President Biden. The penny has not yet dropped, and President Biden has not seen fit to inform the American public that he is the closest thing, to Caesar, that they have, yet, seen since the Constitution was written. It may come as a surprise when they do realize it. Let us hope, and pray, that this epiphany is not a violent one.
The confirmation of the White House bloodless Constitutional coup d’etat came from the US Commander in Chief and his second in command. It is, possibly, the most audacious victory without the firing of a shot in history.
The word processor is, truly, mightier than the sword. Violent demonstrators and thugs should take note.
The US National Security Strategy (NSS) document has been undergoing a contemporary, redrafting in light of the COVID pandemic, the perennial Chinese menace, and the recent Russian invasion of Ukraine. The new unclassified version was released on October 12th. The new version is nothing short of a land grab, by the White House, in the realm of national security and economic policymaking. The land has been grabbed by President Biden and VP Harris, the ostensible authors of the redrafted national security strategy document.
In this land grab, economic policymaking, to deal with “inflation and other economic security crises” is now owned by the Commander In Chief, rather than the Fed.
The land has been grabbed by, a gang of two, that is, President Biden and Vice President Harris.
The territory grabbed, by the gang of two, was previously occupied by an “independent” Federal Reserve, formerly, answerable to Congress. Even though the President needs to ask Congress for permission, to go to war, he can now wage economic war, thanks to the new strategy document, without the same said permission.
In reality, the gang of two has been redrafting/making up the document, on the fly, in real-time, as events have unfolded on the ground. It is, thus, impossible to tell if the document is responding to events or prescribing them.
Monetary policymaking, and financial stability policymaking, have been weaponized in the new National Security Strategy document. Combined with the President’s power to nominate Fed Governors, including the Chairman and Vice Chairman, this concentration of power is approaching the Xi Jinping Zone of megalomania.
· “Cold Amazon” Vice Chair Brainard reminds that Fed monetary policymaking will always put patriotism before the dual mandate.
(Source: the Author)
This weaponization, and recent mobilization, of economic policy, is, thus, de facto, and de jure. The Fed has been weaponized, and captured, by the elected executive gang of two. This author has referred to this process, before, as Patriotic Monetary Policymaking (PMP). The release of the redrafted National Security Strategy document makes Patriotic Monetary Policymaking official and doctrinaire.
It is highly unlikely, that a Republican President would ever concede this policymaking turf, that the gang of two has grabbed.
It is also highly unlikely that any Republican presidential nominee will talk about this Un-Constitutional concentration of power.
Henceforth, unshackled, by Constitutional checks and balances, with a captive money-printing central bank, the President of the United States really will be the most powerful man on the planet.
The FOMC no longer calls the shots and Chairman Powell no longer has a casting vote. All now take their marching orders from the gang of two.
Unfortunately, the Constitutional checks and balances, on the President, seem to be unbalanced/non-existent. By default, the US President is now a Wartime President. The implication and inference are that America is always structurally and systemically at war with whoever. All the President must do is fall out, with some foreigners, which shouldn’t be hard to do, going forward to preserve the status quo.
Contrary to chauvinist, mainly Republican, beliefs VPOTUS ain’t a Powerpuff Girl. On the contrary, she is an Oakland Girl who packs a mighty punch. Some of this power comes from the kryptonite that comes with her position as Chair of the National Space Council.
(Source: the Author)
Furthermore, if one casts one’s mind back to the Reagan-Bush, and Bush-Cheney gangs of two, of the past, one cannot fail to assume that the real fighting will be done, in secret, away from Congressional oversight, by Vice President Harris. This author has already seen this demonstrated, by Harris, in relation to the “Techno-Economic War” with China. On this occasion, the techno-economic war-making being done, by Harris, was nonchalant, to the point of appearing insignificant, whilst packing a potentially lethal punch.
This author calls this putative coup d’etat, by the gang of two, the “Slam Dunk.”
The National Security Strategy document was, also, supposed to enshrine the concept of “Integrated Deterrence.” This concept embeds the Department of Defence (DOD), within each department of the executive, to holistically create a seamless threat, and promise, to make it extremely costly to challenge the United States about anything of interest to the Federal Government’s agencies. The deterrence is economic and lethal. If anyone thinks that this is a style drift, towards totalitarianism, this author empathizes but notes that this is a global wave. The wave was given amplitude by COVID. To not play the game is to weaken one’s country ceteris paribus. No Commander In Chief would do this, even though it may totally conflict with his/her democratic nature.
In the new national security document, the DOD is not embedded. It stands isolated awaiting its orders, exclusively, from the executive gang of two. Since POTUS has abrogated power, for himself, and Kamala, the DOD is their policymaking tool rather than exclusively Congress’s. A bit like in Britain, the military has allegiance to the monarch and not the people. This is okay in a monarchy, but America is supposed to be a Republic.
The same presidential allegiance, by default of being in a perennial state of war, applies to the Fed.
Mocking Jay Powell ….
· The Macklem Doctrine of America’s global imperative may make bigger fools out of the FOMC than the incoming inflation data.
· The Fed may embrace Macklem Doctrine when it sees the unrealized losses on its balance sheet from the recent spike in yields.
(Source: the Author)
This author has said that the “Friend Shoring” imperative, and the Fed’s self-inflicted insolvency will enable the embarrassing pivot, toward monetary policy expansion, with a little help from the President.
The global editorial is cautiously relaying the reasoning behind the need to pivot. Currently, this is being passed off as the need for taxpayers to fund the gaps on central bank balance sheets. The markets are cool with this, they just want something to trade up or down. The US taxpayers have not yet voiced their opinion, although they will soon have the Mid Term opportunity to do so.
Taxpayers and voters may be somewhat more circumspect, especially if economies slow down whilst inflation and taxes remain high and rising.
Traditionally, taxpayers and voters would be looking for the central bank to step in and bail them out. The fact that both they and the central bank are insolvent does not yet compute.
When it does compute, this author suspects that the US Treasury and the Fed will combine to boost the global reserves of US Dollars from where global insolvency is reliquefied. In these partisan times, of populist demagogues, fiscal and monetary policy stimulus are incumbent responses of democracies.
· The Bank of England is the first insolvent central bank to get bailed out by the insolvent government that it was bailing out.
(Source: the Author)
Britain is currently living through the nightmare, realization, of the combined central bank and taxpayer insolvency. The country is being used as a tool to enable the Fed to ease globally and domestically.
Whilst there is ignorance, of the recent coup d’etat, by the gang of two, there is, also, genuine surprise at the Fed’s signal that it is pivoting from Front-Loading to Incrementalism. The writing has been on the Fed’s wall for some time, though.
This writing, on the Fed’s wall, is also connected to the unofficial rewriting of the Constitution to regify President Biden. Donald Trump must be fuming, because Biden has gone much further, down the road to absolute power, than the former President could have dreamed of. Stealth and guile, seemingly “trump” bombast and violence.
At Jackson Hole, host Esther George warned her guests not to get comfortable Front-Loading because there are constraints on their behavior.
On October 12th, 2022, the gang of two formally constrained the Fed’s behavior. Just to remind Chairman Powell, of who constrains him, Senator Sherrod Brown (D) wrote the constrained Fed Chairman, a constrained missive, reminding him that he had a full employment mandate, in case he had forgotten. The upcoming Mid-Terms are constraining the Democrat’s Senate majority, so the proverbial constraint flows downhill onto Chairman Powell by default.
The rest, as they say, is history.
It is now time for American economic history to sacrifice those domestic patriots who are required, as the collateral damage, for the next economic stimulus to go with the new (tyrannical) White House definition of Liberty and the shedding of foreign tyrants’ blood.
The Purge ….
Is it a turkey?
Is it a plane?
No, it’s a dead CFO.
T’is the season, to be worried if you’re a US CFO. Traditionally, this is the CFO hunting season. This year, however, the body count is much higher than usual.
To survive, the annual cull ritual, new survival skills, and instincts are required this year. American corporate financial survivalists are learning the skills of labor force, and non-labor force cost-cutting. They are also learning not to take credit, liquidity, and foreign exchange risk.
As discussed, in the last report, the US Dollar is a scarcely seen, and seldom sold monarch of the currency glens. This elusive nobility is the case domestically and, especially, globally. Globally, Yen and Sterling are poor relatives. Their demise is linked. The reasons behind their demise are didactic.
· The failure of Kwasi’s Keanonomics is the enabler of the next leg, of the global reflation, via the Yen Carry Trade.
(Source: the Author)
Sterling’s demise is the catalytic global cause, for concern, that requires the demise of the Yen to fix.
Carry On, Carry Trading ….
· The Yen Carry Trade is disinflationary unless you’re Japanese, but the Kishida Put will cover your bills if you are.
(Source: the Author)
The Yen Carry Trade is the great global enabler of a commodity disinflationary reflation of the global economy. Japan, allegedly, also, needs a little bit of inflation so its wins all around. Secretary Yellen, recently, confirmed that the Yen Carry Trade remains on when she, shut both eyes and, said that she could not see any intervention to prevent the Yen’s slide.
The lazy global editorial line is now embracing and broadcasting, the Yen Carry Trade global, and Japanese, reflation thesis with brio.
This author notes, with a note of cynicism, that the global editorial is singing from a sheet that will put the BOJ’s massive balance sheet ETF holdings back into profit. Hence, assuming that the BOJ continues to suppress JGB yields, the Yen Carry Trade, and weak Yen, will ultimately make the BOJ appear solvent again. So, it really is wins all around for the global central banking community.
· Central Bank insolvency is aligning with fiscal insolvency at a rapid pace in the global economy.
· The alignment of central bank and fiscal insolvency promotes the exclusive interest in financial stability policy.
(Source: the Author)
As anticipated, global central banks have, exclusively, adopted financial stability policymaking objectives; to the exclusion of their inflation mandates, even though inflation is not yet defeated.
This author notes, with less cynicism, and some empathy, that the Japanese consumer is very unhappy about rising inflation. He also notes his own thesis that central bankers, always, abandon their inflation mandates to save themselves, from insolvency, when market push comes to mandate shove.
This Japanese Kabuki performance is being similarly choreographed, with local economic idiosyncrasies, in Australia.
There’s a Soft Landing Down Under, Sheila!
· The US economy is “Friend Shoring”, the Fed’s current US Dollar global easing as, a US domestic economic tailwind that is a global economic headwind.
(Source: the Author)
The last report discussed the global threats, and opportunities, of the Strong US Dollar thesis. The threats come from capital flight, higher interest rates, and recession in the countries where US Dollars are scarce. The main opportunities are in the weak commodity prices, which are the corollary of the strong US Dollar. These weak commodity prices are disinflationary. All well, and good, if you’re a commodity importer.
If you’re a commodity exporter it’s time to get creative, by exporting words instead of commodities.
Australia is specifically at risk because it is a major commodity exporter. To compound the misery, Australia used to be able to rely on China as its main importer of commodities, until, America declared a “Techno-Economic War” on Xi Jinping. To make matters even worse, China is having an economic slowdown of its own too.
· It’s Squeaky Bum Time Down Under.
· The RBA is the latest “insolvent” developed central bank to call for assets, from a fiscal stimulus, in order, to monetize away its balance sheet’s unrealized losses and associated negative cash flows.
(Source: the Author)
The Reserve Bank of Australia was also seen as one of the first global movers, into self-inflicted insolvency, of balance sheet losses from rising interest rates.
It’s Squeaky Bum Time Down Under, Misheila!
The Jolly Swagman is not so jolly.
If any commercial entity had negative equity, assets would be insufficient to meet liabilities and therefore the company would not be a going concern. But central banks are not like commercial entities. Unlike a normal business, there are no going concern issues with a central bank in a country like Australia. Under the Reserve Bank Act, the government provides a guarantee against the liabilities of the Reserve Bank. Furthermore, since it has the ability to create money, the Bank can continue to meet its obligations as they become due and so it is not insolvent. The negative equity position will, therefore, not affect the ability of the Reserve Bank to do its job.
(Source: RBA Deputy Governor Michele Bullock)
Post Jackson Hole, back in September, the Reserve Bank of Australia was seen as an early mover in the developed central banking communities’ pivot, from Front-Loading to Incrementalism. This early pivot is born out of the specific fundamentals of the Australian economy.
Recently, the domestic economic fundamentals have shown a swift deterioration from the specific confluence of Australian risks discussed above.
RBA Assistant Governor (Financial Markets) Christopher Kent is at the focal point of these global-macro threats and the capital markets. His latest guidance demonstrates the fine incremental line, that RBA monetary policy settings must walk going forward.
The RBA can’t kill the economy, with monetary policy tightening, yet, it also has to fight capital flight into the US Dollar safety, of attractive US yields and US “Friend Shoring” growth prospects. Kent’s latest guidance has, thus, confirmed that the disinflationary Strong US Dollar is a threat, yet, one that is manageable.
What this author finds ingenious, in Kent’s guidance, is that he says that the developing weak global inflation fundamentals are an economic tailwind now. Previously, Australia was just a mining colony, dependent on China. Now, allegedly, the Chinese-inspired mining bubble has deflated, so the risks of a headwind from commodity disinflation have gone. Hence, commodity disinflation is now a domestic demand tailwind. Now that is genius talking.
Seemingly, Assistant Governor Kent could sell ice cubes, to an Eskimo, even if he can no longer sell commodities to a Chinese importer. He should be in politics. Actually, since the insolvent RBA is being bailed out, by the equally insolvent Australian taxpayer, one could say that Kent is already in politics.
If it’s madness and lies Down Under, it must feel even worse back in the Old Country.
What the Dickens is going on in Britain?
Charles Dickens always had his finger on the economic pulse, and the soul, of the nation. It may still be so.
It’s Hard Times in Britain right now. The nation, and government, are reaping what they have sown, although the best crops still seem to have gone to the latter.
As in the book, we shall begin the contemporary narrative with education.
· The UK will become an austere economy with an ungovernable polity.
(Source: the Author)
Future generations of ungovernable Britons are now in the pipeline. The Association of Head Teachers has recently informed HMG that nine out of ten schools will be insolvent by next year.
The seeds of secular decline are now being sown in the form of a potential uneducated lumpenproletariat lacking in the skills required to compete in the global economy of the 21st Century. Well, presumably, they would all vote Labour, anyway, so why should the Conservatives fund them?
Now, the funding will have to go to the law enforcement arm, of HMG, in order, to apprehend and incarcerate the youthfully energetic criminals, and deal with the unrest, that this uneducated generation-next will unleash in lieu of gainful employment.
So much, for Hard Times, and education, therefore.
Now it’s time to read another, apposite, Dickens classic.
But first, a Tarantino interlude.
Britons have recently been led to believe that there is a Hindu Messiah, with a panacea, to avert the looming economic and political disaster. This happily-ever-after ending does not sound like Dickens. That is because this ending is fiction, concocted for gullible voters.
· All the current favorites to replace the UK PM are unfit for purpose, they just haven’t been caught in flagrante delicto …. Yet.
(Source: the Author)
The truth is a calumny that serves as a morality tale. Pilgrim’s Progress it is not.
Neither is it, Slumdog Millionaire, as fondly quipped by some wags who are stepping on the comedian Trevor Noah’s toes.
The new morality tale, that belies the fiction, in essence, is also pure Dickens.
· UK economic policy seeks to play the balance of power, by pivoting away from domestic Levelling Up, and the EU-USA NMWO, back towards a cocktail of good old Thatcherite austerity with a splash of Johnsonian Sleasez-Faire aka Ripping Off.
(Source: the Author)
There are Great Expectations for a new political order. Sadly, the government that will, allegedly, build this New Jerusalem is made up of the same miscreants who turned Tory Sleaze into a title worthy of a Dickens novel. They don’t build, they steal. It does not augur well, but it will be a good read.
Lizz Truss is not Louisa and Rishi Sunak is not Thomas, from Hard Times, because we are now reading Great Expectations.
If Liz Truss is the mercurial Estella from Dickens's Great Expectations, then surely Rishi Sunak is Master Pip.
Master Pip, like Sunak, came from humble origins, with great expectations, and didn’t get to where he was without criminal support, along with, some epic social climbing, of his own, thrown in. Nowadays, in politically correct multi-cultural Britain, epic social climbing, on the Sunak scale, once disdainfully referred to as brown-nosing, is now politely applauded as networking. Needless to say, Sunak has some dubious pecuniary acquaintances and some influential sponsors who need rewards for their support.
It is not a crime to be rich, assuming that you didn’t steal your wealth. As President Trump has demonstrated, with aplomb, the high office is a perfect place to legislate personal wealth into existence, whilst appearing to be at arm’s length from it.
Rishi Sunak is Britain’s richest sitting PM so far. The likes of Cameron, and Blair, who are in the top three, at least had the good grace, and common sense, to wait, until they left Number 10, to start accumulating their, allegedly, ill-gotten, wealth. What they may have lacked, in morality, and integrity, they controlled, professionally, whilst in office, with stoic discipline, to avoid the obvious, and illegal, conflicts of interest.
Sunak’s lines on political integrity, and conflicts of interest, appear to be grey, wobbly, and contiguous rather than, rigorously, defined in black and white.
As the French social commentator, through literature, Balzac observed “behind great fortune, lies a crime.” Sunak didn’t ascend, to this wealthy height, by simply marrying into it, although it has helped. Not paying taxes has also helped. In no specific order, dubiously wealthy benefactors and sponsors have been rewarded along the way. Now it would appear to be time to double down and consolidate all the respective massive, comingled, economic fortunes of those involved.
In his PM acceptance speech, Sunak promised to run a tight financial ship and administer good governance. This author notes that it is the antithesis of these pledges that got Sunak to where he is today. It is, therefore, highly likely that this hidden antithesis will be at work, behind the cheesy, hallmark, smiles, and straplines, as the great fortune is geometrically expanded and consolidated. Indeed, an economic policy aimed, solely, at preserving the great fortune will be deployed under cover of steadying the ship of state.
The best way to geometrically compound the fortune is with acquisitions, in cheap Pounds, followed by interest rate cuts. This sounds, unremarkably, like Conservative economic policy.
Looks will be deceptive. What appears to be the familiar corner shop, that British voters can fondly relate to, will sell them out whilst rewarding the proprietors and selected patrons.
This shop is very curious, indeed. To understand the purveyors and what they are peddling, it’s time to read another Dickens classic.
The Old Corner Shop of Curiosities is open (to some) for business ….
It’s time to read The Old Curiosity Shop, and then, to pay a visit to the one that has recently opened at Number 10 Downing Street.
First, the reader should get to know the main characters.
If Lizz Truss is Nell, then Jeremy Hunt is a Dick Swiveller and Rishi Sunak should be called Rishi Frederick. If the reader is capable, of making this literary leap, he/she should read on.
It should be an easy step, to make, because Nell Truss thinks that she is Margaret Thatcher’s second coming. Thatcher, herself, grew up in a curiosity shop, in the town of Grantham, where she got her first lesson in domestic economics. The student was indoctrinated, at Oxford, and groomed, in early political office, by Sir Keith Joseph. Consequently, when she became PM, her cabinet was certainly a curiosity shop, full of some real dick swivellers and the like.
And, just like Dickens’s Nell, Thatcher was betrayed by the said dick swivellers and Fredericks of her day.
What goes around comes around, if you are a Tory.
There are always, and also, some of Dickens’s Daniel Quilps to go with the Dick Swivellers, and Fredericks, of the world.
All of this narrative model would, also, make Boris Johnson the grotesquely devious cretin, named Daniel Quilp, in the book, so perhaps it’s only a small leap after all. The dangerous cretin is still lurking out there with evil intent. Sunak, therefore, is not safe. It is probably his idea to keep his enemy closer. Sadly, for Britain, Boris Quilp is not done, with the country, either, and would have his revenge on all those who turned against him, including the voters.
The modern would-be protagonists Swiveller, Frederick, and Quilp recently got together to divide and conquer and plot the demise of Nell Truss.
Just like his antecedent character, Boris Quilp knows, that there are no spoils, because the shop, hence the country, is bankrupt. But, because he is a misanthropist, and possibly a misogynist, by nature, who just enjoys other peoples’ misery, especially, when it advances his own interest, he’s all in on the latest bloodless coup. Latest is the operative word because there will be many more.
Like Dick Swiveller, the Judas, Chancellor Hunt, the first Cuckoo, of the Winter of Discontent, endorsed Rishi Sunak as Conservative Party leader. No doubt there will be forty pieces of silver, in it, for this Dick Swiveller, as consideration for his betrayal, of “Lizzo”, because he won’t accept payment in worthless Sterling.
Chancellor Hunt, thereby, confirmed his sobriquet and, thereby, played the signature note of treachery, in the anthem of Tory Sleaze, which has been their sotto voce war cry whilst in office. They must have learned to sing and dance, to this tune, at the Oxford Union Ball, when they were honing their political skills and expanding their networks.
Sajid Javid, the sagacious, and critical, former UK Chancellor, was excluded from the cabal that ousted Truss. Javid warned, as far back as COVID, of the dangers of the Tory Kleptocracy, and the associated, selective, fiscal targeting of aligned interests that proliferated during this fin de siècle of Tory Sleaze. He was ostracised, gagged, and excluded. The return of Sunak is a carefully orchestrated strategy of the interests that were disinterested in Javid’s candid opinions.
Javid, to his immense credit, is busy trying to defuse Muslim versus Hindu tensions, in the UK, which has become inflamed as the struggle over economic resources intensifies across ethnic lines. Sadly, his good interfaith work vitiates his moral obligation to call out Kleptocracy, and the abuse of power, when they are evident.
To be fair to Javid, he did call it out before Partygate was exposed. He is, however, conflicted. Javid’s interfaith calling, currently, runs higher than his obligation, to all Britons, when they are being ripped off by those in high office.
Evidently, Sunak’s US Green Card re-application has been put on hold by wifey, the in-laws, and other related Sub-Continental interests. There’s money to be made, in the UK, so the Green Card will just have to wait. The Green Card can be played, later, when the money has been made and the Tories are banished into opposition.
· The UK is aggressively 1980s rebooting, Submerging Markets style, whilst its European trade partners reboot in a more peaceful fashion, and America tries to reboot 1990s style.
(Source: the Author)
There is, in fact, literally, no Green Card, at all, because the new PM has downgraded the UK’s commitment to Climate Change. This will not endear the PM to President Biden and President Macron. Clean energy gets fiscal stimulus in the EU and the USA. In Britain, it is being closed down. There is no intention and capability, in Sunak, to rejoin the global economic leadership just yet. In fact, there is a demonstrable intention and capability to continue to diverge from it. This divergence infers an implicit acceptance of a period of domestic, and global, political opposition. It also puts Britain, and the ensuing government, post-general election, in a divergent position by default from day one.
The chances of Britain making it back to, a seat, at the big table of global policymaking, therefore, look slim from the outset. As an example, of just how insignificant the UK has become, President Biden doesn’t even know the new PM’s name. Biden appears to think that the PM’s a shady Al Qaeda operative called “Rasheed Sanook”! Maybe that’s the way the PM is viewed by the White House.
· Without American-sponsored global trading club memberships “Cuckoonomics” is still “Voodoonomics”.
(Source: the Author)
Britain is still out of sync with the main developed economies’ global agenda. A trade deal with any of them, of any significance, is, hence, as far away as it was with “Lizzo” as PM. Since Britain left the EU, and Russia invaded Ukraine, the application for memberships of the union has mushroomed. As these applications mushroom, Britain’s chances of significant trade deals shrink, globally.
Thus, without trade, Britain will become a casino once the corner shop has sold anything of economic value. City casino operators and gamblers are rubbing their hands.
The first Winter Cuckoo, also, confirmed that Cuckoonomics is the same as Kwasi-Keanonomics. The application, of this dismal science, has an ulterior motive. Under the guise of IMF-prescribed austerity, assets will be privatized. This should be second nature to the PM since he comes from a retailing family and has worked in private equity. Cheap Sterling makes these assets even more attractive, to the foreign interests, which will prop up Rishi Sunak’s extended empire.
The former UK Chancellor, it would seem, already, had some impeccable “Butlering” credentials of his own, in the Subcontinent.
Hence, it was business as usual, for him, to indirectly dole out economic assistance to his other homeland. Further assistance is currently being demanded, with menaces, rather than via encrypted chat, by the Tata dynasty. UK taxpayer funding is being demanded, or else the dynasty’s Welsh steel interests will be closed. Unfortunately, the replacement Chancellor’s other homeland is in the Arab World so the funds may not be forthcoming for the Tata dynasty.
(Source: the Author)
Sunak’s appointment, as party leader, and UK PM has already aged like milk bought from a corner shop. This is because shoppers have shopped there before and understand what is being peddled. This time the goods are cheaper, in foreign currency terms, and more expensive in domestic price terms. This relative pricing differential doesn’t matter, however, since the goods’ shelf life, like that of the corner shop owner, is very limited. The relative pricing differential, presumably, will not be missed by the hedge funds and speculators, currently, sharpening their knives.
Lazy journalism, the scourge of any civilized democracy, has, once again, failed at the first hurdle of the new UK Prime Minister. Readers are encouraged to believe that the new PM is going to clean up a mess that he did not create. In fact, he created the preceding mess that led to the latest mess. His solution is, hence, part of the problem.
Thus, the shoppers’ fast-track VIP Lane will now be re-opened, and the Butler Model will be re-activated to offer Butler Services, with impeccable manners and tasteful discretion. It’s a Butler Model, with a corner shop thrown in, at Poundland prices.
Cheap deals, on privatizations, will be offered to friends and extended family, many of whom are, former colonials. If Sunak’s performance, as Chancellor, is any guide, due process and the UK Civil Service Mandarin gatekeepers will be removed, from the national corner shopfront, as the Great Winter Sales begin.
Hunt and/or Sunak will, in fact, erode the Civil Service as per the IMF’s prescribed austerity measures. Traditional Labour Party-aligned cadres, within the public sector, will also be starved of franchise funding and/or privatized. Austerity has a political, in addition, to an economic objective.
The UK Gilt market signals that Sub-Emerging Market i.e. Submerging Market status has now been achieved. Time, therefore, to put the Submerging Market barcode on the for-sale items.
As per the political objective, Britain will not be sold to the highest bidder, it will be sold to trusted friends and family. This is, however, not just grand larceny. As per the Butler Model and VIP Lane, there may also be a continuous, strong hint of cronyism, and nepotism, in relation to whom gets the cheap spoils.
Indian PM Modi is clearly overjoyed that, it’s business as usual and, that, business is business, once again, at the corner shop on Downing Street. And well he should be.
But it’s not just about adding value to Subcontinental patrons’ family franchises, there is a domestic political agenda too.
· Kwasinomics becomes Keanononimcs in the form of a Kleptocracy to build a war chest for the guerrilla warfare, in opposition, of the Tories in Balkanised Britain.
(Source: the Author)
The domestic political objective, of the exercise, is to build a war chest for a lengthy war of attrition in opposition. This objective also leaves no public assets, of any significant rent/tax-yielding value, for the following government.
The author has dubbed the civil war economic environment under construction as Balkanised Britain.
The author notes, with interest, that a war zone, and combatants, are now envisaged by the editorial in the public domain.
Facing imminent eviction, the Tories have decided to have one last roll of the dice and run around the Monopoly board of the UK economy. This is not greed. It is preparation for the fun and games to come.
It is, hence, time to jib all the property on the board and get ready to rinse those who land in the wrong places when it kicks off in the near future.
(Source: the Author)
The hollowing-out process, of the UK economy, is simply a transfer of wealth and ownership. It will also result in a transfer of skilled jobs and intellectual property to the acquirers, who they may then offshore after cheap acquisition. This is what happened in the, 1970s and 1980s, when some emerging markets economies, boot-strapped their emergence by buying Britain into submergence. There’s many an Asian Tiger that started life as a euthanized British Bulldog. Britain is not “Friend Shoring” it is “Off-Shoring” again. As long as the beneficiaries continue to patronize, the other corner shop casino, which is called the City, the Tories don’t care how much IP and jobs are lost.
The Tory commitment to “Levelling Up” should be viewed as foreign development policy rather than domestic policy. Recipients, of the “Off-Shored” companies, have been “Levelled Up”. Thus, when Rishi Sunak proudly states that he is freezing foreign development aid, for the next two years, what he is saying is that the recipients will now have to pay for it, but will get it on the cheap.
Henceforth, Britain’s improving capital account will come at the expense of the current account and future economic growth. Rishi will balance the books, but the balanced book will be a trivial one-pager instead of a richly-rewarding read with future episodes.
· Keanonomics will fail because Britain has no trading counterparties to go with its cheap currency.
(Source: the Author)
The ultimate irony is that the weak Pound should have made Britain the epicenter of global production. But since Britain is disbarred from the major, hard currency-based, global trading bloc clubs, because of Brexit, this weak currency edge cannot be translated into UK GDP. Instead, the weak Pound will be translated into the loss of GDP, and economic security, through fire sales of intellectual property, and the loss of employment opportunities, for Britons, to foreign competitors.
The UK is now a Poundland Developed Economy. The Poundland Prime Minister’s offshoring corner shop can be thought of as an “Off Licence” selling cheap UK GDP and IP to global patrons. The pricing policy is curious. The local patrons, being unemployed, and receiving meager social welfare, cannot afford to shop there. A similar model is already in operation, on the UK High Street. and Amazon is thinking of taking it online.
This more subversive transfer, that is to say, the export, of wealth, in Fredrick Sunak’s curious little corner shop, is better disguised than “Lizzo’s” overt attempt that got her fired. The strategy, with curious intent, can be plausibly denied, and blamed on the IMF when accusing fingers and fists are pointed during the melee and rising unemployment that ensues. The corner shop owner can retort, eloquently, that he was forced to adopt this strategy because of IMF and foreign creditor conditions. He will argue that his policy was aimed at Britain’s manumission from debt slavery. What he will not say is that future UK GDP has been present valued, by high UK interest rates, and a weak Pound, at giveaway prices, and then given away to friends and family.
This author suspects that when Britons, finally, understand, that they have been sold out, the corner shop owner will have taken his oath, and opened up the family shop, as a citizen of America or another “Off-Shore” beneficiary jurisdiction. Readers, should hold back on the accusations, of Xenophobia, and watch this story develop. Thus far, it is following the thesis laid out.
The Tories are preparing for exile, in opposition, intending to fill their pockets, thereby, leaving behind a scorched earth for the Labour Party to inherit. Sunak is unelectable in a national election. His return, to lead the Tories, can, therefore, only be for some ulterior purpose.
The next UK government will inherit a bankrupt economy in a state of anarchy. It’s a good general election to lose.
At times like this, there will be those who reach for their own, and Margaret Thatcher’s, beloved, copies of Hayek.
If small is good, the Hayek Fanboys and Fangirls rationalize, then, high unemployment, to the point of an inability to pay taxes, to fund the government, must be even better. Then, with hindsight, they may see that this better is already being given away, to corner shop patrons by the current proprietor. So, what is Britain left with/as? A small nothing.
What is it about corner shop owners and Hayek? What is it about corner shop owners and Oxford? What is it about corner shop owners, Oxford, Hayek, and the Tory Party? There is something causal in these coincidences.
The causal affinity can be easily explained, in a way that Occam would approve of. The explanation is more of a narrative, like Brideshead Revisited than Poundland Re-opened, although the titles are interchangeable.
Margaret Thatcher was a corner shop girl and a Hayek devotee. Admittedly, she was groomed, by hubby Dennis, and his golfing chum Sir Keith Joseph. Her current political epigoni are also devoted to her and her economic idol. The current PM is a corner shop poster boy, in more ways than one, too.
This author suspects that it is all down to the classical education that this petite bourgeoisie, from diverse backgrounds, have had. They all went to the same Uni. It is a common theme, running through them and their party. Most of them are Oxford men and women. They have, therefore, been indoctrinated by the process of intellectual osmosis. Hayek just oozes through the college cloisters. This economic doctrine has become enshrined in Conservative Party doctrine, also, thanks to Sir Keith Joseph. This author calls this cabal, and its economic Sanhedrin, the “Oxford Apostles.”
Down the economic road, at Cambridge, Keynes is oozing through the cloisters with Isaac Newton’s equal and opposite osmotic force. Currently, Keynes is back in the global ascendancy because big government and big deficits, and big central bank balance sheets are becoming fashionable again. Keynes was admired by JFK and worshipped by Barack Obama, and Joe Biden, so the reader can see where this is going.
· The rekindling of the symbiotic Special Relationship is pending the tall New World Order of the permanent sacking/resignation of the Butler, the conviction of the Oxford Apostles, the UK re-joining the EU, the closure of the VIP Lane, and India leaving the BRICs.
(Source: the Author)
The “Oxford Apostles” and their corner shop are not subscribed to, or patronized, respectively, by President Biden. Neither are they members of the growing EU. Regime change, in the UK, therefore, beckons.
Then it will be game on for the Britain Project, with its 1990s Tony Blair DNA. This game is already happening in the high street shops that are selling out of 1990s fashion.
(Source: the Author)
Tony Blair is assumed, by many, to be the odd man out, because he went to Oxford but led a Keynesian political party. But he didn’t lead a Keynesian party, he made it more “Corner Shop”, so there is the author’s proof. The Keynesian goods were nostalgic artifacts put on the shelves by Gordon Brown. The good stuff got sold off cheap, all the same.
Keeping in mind that Blair is, currently, working on the solution to England’s problem and it is QED.
One former top UK central banker, well versed in Keynes, from his time at MIT, must have been reading Hayek, recently.
Former Bank of England Governor Mervyn King has tried to break the bad news, gently, to the anarchic UK electorate. In so doing, he is playing into the hands of the asset strippers. King has opined that to sustain the current level of public services, the average Briton will have to pay crippling higher taxes.
· The Bank of England is the first insolvent central bank to get bailed out by the insolvent government that it was bailing out.
(Source: the Author)
What King is saying is that the Bank of England has lost its ability to fund the fiscal deficit, at low interest rates, because the central bank and the government are both insolvent.
King’s observation appears to conflict what Dick Swiveller has to say. According to the Swivelmeister, the Bank of England remains independent.
King’s bad news, is, however, the carpet-bagging patrons of Sunak’s Old Curiosity Shop’s good news. Based on King’s objective analysis the patrons will, subjectively, offer the solution of privatizations, and smaller government, for the shopkeeper to avoid paying higher taxes. It may even become an election pledge. Objectively, what King suggests makes economic sense. Politically, and ideologically it plays into the hands, of the carpet-baggers and their extensive list of friends and their extended family interests.
If Britain looks chaotic, the Eurozone looks hysterical.
Un-Able (to lend) I was ere I saw Eibor ….
The ECB has a palindromically conflicted way of dealing with inflation, and its insolvency, in that order. The harder it fights inflation, equally, the more insolvent the central bank becomes.
The outcome, of the palindrome, is bad news for the Eurozone banks, and the economy in the Eurozone in general.
· The ECB has signalled that its inflation mandate is making it insolvent.
(Source: the Author)
As noted previously, since the ECB is legally bound to fight inflation, by tightening monetary policy, by default, it is also legally bound to make itself insolvent in the process.
Thus, with inflation way above the 2% target, and bursting through 10%, in Germany, of all places, the ECB had to hike another 75-Basis points, and promise to do more hiking going forward. Consequently, the central bank’s balance sheet is even more in the red.
The ECB’s insolvency mitigation strategy is in two parts, both of which remove liquidity from the Eurozone banking sector. One part involves paying less interest on bank reserves. The second part involves demanding higher interest rates on emergency funding operations. Wealth has, thus, been confiscated, from the banks, and transferred to the ECB’s balance sheet. Wealth has not been, passed on, to sovereign nations’ shareholders in the ECB. The potential for Eurozone private wealth creation, through commercial bank lending, has also been confiscated. National governments don’t get dividends from the ECB and neither will they get tax receipts from the creation of economic growth through commercial lending to private enterprises.
As in Britain, future economic growth has been sacrificed for the appearance of central bank solvency.
The Eurozone commercial banks have been hit from both sides. Their funding liability costs are rising and their risk-free asset returns are falling. Under these circumstances, it is highly unlikely that they will go out there, and make risky loans, at higher rates of interest. It will also be impossible for them to raise cheap capital, to weather a storm, and asset write-downs, in a recession. That storm is coming. The clouds appeared, on the horizon, in the form of the Eurozone GDP data, the day after the latest Governing Council meeting.
Bank deposits have swelled because interest rates are now positive, and there is a recession unfolding across the Eurozone. Increased liquidity preference is, thus, a product of recession fear and rising interest rates. Cash is King if you like.
Depositors are letting governments pick up their energy bills, and are keeping their savings in the bank, rather than under the mattress as they did when interest rates were negative. With the latest rate hike, deposits will increase in number and in volume. So, the Eurozone banks must pay higher interest, on a larger volume of deposits, whilst, simultaneously, receiving lower interest on shrinking reserves at the ECB.
Hence, it can be seen that the ECB has just killed bank profitability and, thereby, lending in general. This contraction, in private credit creation, will then lead to an economic slowdown. When the depositors sense this, there will be bank runs.
Eurozone sovereign nations have also been hit from both sides. The ECB won’t pay them a dividend, since it is holding onto the wealth, that it confiscated from the commercial banks, to cover its balance sheet losses. Tax receipts also take a hit since there is less/no bank lending driving the economy.
The ECB may think that its credit position has improved. But since the credit position of the Eurozone banks, and sovereign nations, has taken a corresponding hit, the ECB’s credit position is no better. In fact, it is reasonable to say that the ECB’s credit position has been dragged down by the weaker economic fundamentals, it has just created, through its selfish actions to become solvent. Monetarists would, of course, argue that this is much better than having a credit downgrade because inflation is out of control. This author would respond that inflation was doing a very good job, of tightening monetary policy, without the ECB deciding to “help” by making itself insolvent.
At the end of the day, one must choose inflation or financial instability. The ECB has chosen financial instability because, by law, it is not allowed to choose inflation. Other central banks can fudge this choice, so their economies won’t be as badly hurt. One can be an aggressive inflation fighter, as a central bank, until unemployment blows up. So far, fear of Populism has made Eurozone governments pay to keep people employed in jobs that commercial banks wouldn’t lend against.
In this author’s opinion, the ECB did not intend to fight inflation in this perverse way. The way it is fighting inflation is the unintended accident of trying to remain solvent. A banking crisis is coming because the ECB is trying to address its own insolvency crisis. The ECB will, of course, say that capital adequacy is strong, in the banking sector and, therefore, a crisis will not occur. This is, of course, incorrect.
Almost as an afterthought, the ECB has also communicated that Quantitative Tightening will be delayed. Well of course it will if it means realizing losses when the balance sheet is shrunk. More likely, the balance sheet will need to be expanded, in order, to mitigate the credit crunch that the ECB has catalyzed with its attempt to become solvent without a capital injection.
This author suspects that the Northern European members, of the Eurozone, actually, intend to trigger a banking crisis in order to consolidate the sector by swallowing the weaker periphery banks. No doubt they intend to use this consolidation as a foundation for deeper economic integration. It’s all a bit Grexit déjà vu.
This author also notes that, in the past, even in the case of Greece, a banking crisis never resulted in banking consolidation. Neither did it result in deeper economic integration. It did, however, result in more Eurozone sovereign debt on aggregate. COVID-19 and the Ukraine war have multiplied these debts, and still not yielded any tangible signs of banking consolidation or deeper economic integration.
This author also notes that Germany is not the virile Black Zero economy, that it once was, and neither are its banks. The Germans are, therefore, dreaming, in color, if they think that they can swallow up the rest of the Eurozone economy on the cheap. On the contrary, a big discussion/fight about massive joint Eurozone borrowing awaits. The ECB’s balance sheet also awaits the outcome of these joint borrowing negotiations. The cash flows, from these new joint bonds, can go towards making the ECB solvent again. Inflation is, by now, almost, an abstraction.
The EU is already discussing ways and means to achieve a more flexible, meaningless, slap on the wrist, approach to fiscal probity. It is, hence, clear that fiscal deficits will expand unchecked. This delta will push yields higher, thereby, making the net present value of the ECB’s balance sheet even more negative. Consequently, to prevent insolvency, the ECB will have to start buying bonds to cap yields.
This author suspects that this new flexible approach, to fiscal probity, is nothing more than a little wriggle to enable joint Eurozone bond issuance. Joint Eurobonds are an enabler of fiscal and economic union. Nations will find that borrowing jointly is cheaper, in yield terms, than pushing their national yields higher with further individual borrowing. The ECB will find that by capping the yield, for joint bonds, with targeted Joint-QE, the hunt for yield, in a unified Eurozone, will drive the old convergence trade that squeezes yield spreads tighter.
What do you think about Yellen's recent idea of buying 20yr UST and selling the short-term? Treasury trying to usurp the Fed? I have no idea how this would get funded.