There’s A Black Hole (At Jackson Hole) In Speaker Pelosi’s Bottom
“In space no one can hear you scream; and in a black hole, no one can see you disappear.”(Professor Stephen Hawking) “In Jackson Hole, central bank balance sheet assets cannot disappear.” (the Author)
Summary:
· There’s a Jackson Hole in “Speaker Pelosi’s Bottom”.
· Dimon’s Hurrikraine is downgraded to Soft Landing force.
· It is “Speaker Pelosi’s Squeaky Bottom Time” for the FOMC.
· Monetary Policy tightening is ending because the Fed has reached the technical “unrealized” insolvency event horizon.
· The Fed’s expanding balance sheet is a black hole that is pulling the central bank towards exclusive Financial Stability Policymaking to the exclusion of Monetary Policymaking.
· Jackson Hole should probably be renamed Central Bank Black Hole.
· Congress plants the Stars and Stripes in “Speaker Pelosi’s Bottom” on COVID-Zero Hill.
· The Cheka snatches IP.
· The Cheka’s IP snatch will widen the Sino-US gap.
· It’s time for India to get off the BRIC fence.
· The UK is beginning to shit BRICs.
· Rational exuberance is replacing irrational exuberance about “Speaker Pelosi’s Bottom”.
· “Speaker Pelosi’s Bottom” modestly hides the “Softly-Softly Landing” embarrassment.
There’s a Hole in my bottom Dear Nancy, Dear Nancy ….
There are allegedly 51 Fun Things to do in Jackson Hole. “Speaker Pelosi’s Bottom” may be one of them. We will soon find out if it is. Or perhaps not, if there is a black hole in Jackson Hole from which fun things cannot escape.
It is, perhaps, fitting that Jackson Hole will soon be the focal point, and the context, for “Speaker Pelosi’s Bottom”. The upcoming central bankers’ conclave is the next opportunity for this fraternity/sorority to update Mr. Market on the various global economic landing scenarios’ trajectories, ranging from hard to soft, and the monetary policy settings required to land.
Unfortunately, the American elected executive branch has stolen the Fed’s thunder, in advance of Jackson Hole, this year. Some would say, with some justification, that a certain front-running elected executive has stolen the P&L too.
Perhaps Jackson Hole should be renamed “Speaker Pelosi’s Bottom”, just for the duration of the summit, in recognition of these facts. Renaming it “Speaker Pelosi’s Hole”, for the duration, is, frankly, too rude to contemplate, even if it is more apposite.
Coming in, to land, the economic landing conditions reported from the tower appeared to have changed. The windsock is still “Darn Commie-Red”, in color, as opposed to Stars and Bars-striped. The headwinds have changed, though, according to some flight deck captains.
Hurrikraine Alert Downgrade ….
Like Keynes, when the facts change, JP Morgan CEO Jamie Dimon changes his mind.
“Dimon’s Hurrikraine” warning has recently been lowered, despite global tensions rising. One suspects that the said global tensions are now viewed, by Dimon, as increasingly recessionary and less inflationary. The JP Morgan CEO appears to be setting out his stall for the Soft Landing.
Less eloquently, and more dissonantly, the FOMC is also approaching the Soft-Landing Zone.
It’s “Speaker Pelosi’s Squeaky Bottom Time” ….
The recently released minutes, of the latest FOMC meeting, contained the dissonant syntax, of a thinly held consensus, from which the Soft Landing will be attempted.
A significant number of members feared over-tightening, while others saw unacceptably high, and entrenched inflation expectations. The resolution of these conflicting monetary policy forces, however, was an emerging consensus to dial back the size of future interest rate hikes.
The dissonant dialectic is epitomized by the current George vs Bullard debate.
· Esther George’s sound monetary policy compass will be sorely missed when she retires.
(Source: the Author)
Kansas City Fed president Esther George is the doyenne of central bankers, in this author’s opinion. Her credible commitment is immense in comparison with that of her domestic and global central banking peer group.
This author has noted that George did not panic, and ease too much, during the height of the COVID-19 pandemic. On the contrary, she urged caution and warned about inflation. When inflation, inevitably, spiked George, once again, cautioned against aggressive tightening. This is a Fed president who understands and follows her dual mandate. This is also a central banker who understands exactly what the job entails. The job entails consistent central bank behavior so that politicians and economic agents, can go about their business with confidence in the signals that they receive from prices. Consistent, as ever, George recently argued eloquently for smaller and persistent rate hikes, in view of the looming recession risk.
· James Bullard no longer has credibility.
(Source: the Author)
Contrast George with St Louis Fed president James Bullard. Then, contrast consistency with inconsistency.
To be fair, Bullard began the pandemic well. He even had his acronym (NPAP) adopted as the Federal response, aka National Pandemic Adjustment Period. This blunt trauma response was to send everyone home and then throw Federal funding at them. With nobody working and everybody spending, their “free” money, what happened next should not have been a surprise. The biggest surprise is that the likes of Bullard did nothing about, the ensuing inflation spike until the economy began to slow down again. Instead of responding, to the immediate growth threat, the FOMC has decided to fight last year’s inflationary war instead.
Bullard’s credible commitment star fell, precipitously, with his failed response to address rampant inflation until it was too late. Now, he is stuck with his inflation-fighting anachronism. This star has wobbled around, its nadir, as Bullard has, since, vacillated between big rate hikes and smaller rate hikes. Currently, his dimming star is in the big rate hike ascendancy.
· Mary Daly’s Long Duration trade thesis/guidance puts the Chateau Greenspan ’94 Bull Flattening vintage on ice in “Speaker Pelosi’s Bottom”.
(Source: the Author)
San Francisco Fed president Mary Daly, at this point in the debate, remains agnostic towards a 50 or 75-Basis points rate hike at the next FOMC meeting. She is clear, however, that there will be a hike and that it will not be followed by an easing.
· Neel “Ex Culpa” Kashkari has lost his credibility.
(Source: the Author)
Minneapolis Fed president Neel “Ex Culpa” Kashkari has become a sad, “binary”, figure as he lives up to his sobriquet. Gone is the confidence and eagerness to impart his wisdom to an enthralled audience. These losses have been replaced with a perma-Hawk’s fatalistic acceptance that a recession is the best cure for inflation. Kashkari’s policymaking function is binary in terms of recession versus inflation outcomes. There is no Soft Landing in sight for him.
Richmond Fed president Thomas Barkin intends to wait as long as possible before deciding on whether to vote for a 50 or 75-Basis points rate hike at the September FOMC meeting. He hopes that this time will provide enough relevant data to base his vote on.
Barkin’s play for time illustrates how finely balanced the economic environment is becoming, and, hence, just how difficult the next FOMC meeting decision will be.
The FOMC’s job has also been made harder by the elected executive, and associated insider dealers.
Jackson Hole should, probably, be renamed Central Bank Black Hole ….
· The Fed will stop tightening, and then expand bank reserves “Just in Time”, and “Just in Case”, there is a recession.
(Source: the Author)
As this author previously discussed, all this Quantitative Tightening debate is a sideshow.
A central bank’s liabilities are (1) its reserves, (2) the currency in circulation, and (3) its obligation to pay any profits, on its monetary policy market operations, back to the government.
The central bank’s assets are the securities on its balance sheet.
The assets and liabilities must always balance.
(Source: the Author)
The Fed is a bank, first and foremost. Its balance sheet must therefore balance, in order for it to remain technically solvent and, hence, operable in the monetary policymaking business.
Currently, the Fed faces technical “unrealized” insolvency because the self-inflicted, spike in yields has created a large unrealized loss in its balance sheet holdings. Since its assets are impaired, the Fed cannot, therefore, create liabilities, with reserves, in the banking system. With impaired liabilities, in the banking system, the credit creation process, similarly, becomes impaired. As the credit creation process becomes impaired the economic headwind gets stronger. This growing headwind then reduces the tax revenues, which underly the assets on the Fed’s balance sheet. The headwind then blows from the balance sheet assets, to the liability reserves, in the banking system. And so on, and so forth, until there is a financial crisis.
The reader should, therefore, understand that a central bank will at some stage always have to abandon monetary policy tightening even if inflation remains undefeated. Central bankers then talk, with brio, about the supply-side nature of inflation, and the need for supply-side fiscal stimulus with structural reforms. If one listens, carefully, this is what, in essence, is being said right now.
(Source: the Author)
Hence, as concluded by this author, the Fed doesn’t really care two hoots about its inflation mandate when it is facing technical “unrealized” insolvency.
Furthermore, the larger the Fed’s balance sheet gets, the less it will care about inflation and the more it will care about growth. In effect, technical “unrealized” insolvency mitigation becomes the Fed’s sole mandate as a function of the constantly expanding balance sheet.
The Fed’s holistic drift, closer towards Financial Stability Policymaking, to the exclusion of monetary policymaking, with each successive financial crisis, is evidence of this expansive sole mandate.
The Fed appears to have crossed the technical “unrealized” insolvency event horizon back in the GFC. The COVID-19 response is at the center of the black hole in the Fed’s balance sheet that is sucking in assets. The BOJ and the ECB have similar black holes. The gravitational forces, from all of these black holes, will merge at Jackson Hole soon.
Maybe Jackson Hole should be renamed Central Bank Black Hole, from now on.
The framing of the latest FOMC minutes has signaled that the Fed’s staffers have informed the FOMC that the central bank is at the technical “unrealized” insolvency event horizon. Hence, it’s game over, for Quantitative Tightening, whether the Hawks like it or not.
Going forward, the Fed must resuscitate the value of the assets on its balance sheet as a matter of extreme urgency. This is especially the case if the balance sheet is going to be inundated with new assets, from which to create new reserves, in support of the Biden fiscal agenda, as looks to be the case.
· 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 predicted that the Fed would get caught out in tightening mode. This compromising position was anticipated to be a combination of (1) balance sheet losses and (2) the demands of the elected executive for low-interest rates to sustain a fiscal stimulus.
Speaker Pelosi “loves” Microsoft and Apple call options. Madam Speaker’s recent eyebrow-raising leveraged bottom fishing has raised more than a few eyebrows.
(Source: the Author)
The Fed’s compromising position has been made worse by the actions of Speaker Pelosi, in front-running the fiscal stimulus and also creating casus belli, with China, in order to accelerate the stimulus.
Unfortunately, for the Fed, those who dived into what this author calls “Speaker’s Pelosi’s Bottom” (including Madam Speaker herself), and the shorts getting squeezed therein, are creating price action that is consistent with scenarios that the Fed is losing control of.
· A confluence of tipping points is pointing toward the next Hypergrowth phase inflection point.
(Source: the Author)
There are those who are discounting Hard Landing induced rate cuts. There are also those discounting a shallow Soft Landing and the beginning of a new credit cycle and business cycle. Hence, the price action is consistent with the “Hypergrowth Phase”, anticipated by this author.
Thus, the Fed, once again, has lost control of the narrative.
FOMC members, like Bullard, would like to re-assert their authority with large interest rate hikes, thereby, risking recession. Bullard understands that his conjecture is a pure bluff because he is also shooting potentially big holes, in the Fed’s balance sheet value, with his rate hikes. His hope is that Mr. Market will buy US Treasuries and sell stocks.
More sensible speakers, like Esther George, prefer persistence, with smaller rate hikes, over risky aggression.
The Soft Landing is, essentially, the investment thesis behind “Speaker Pelosi’s Bottom”. Its namesake is also doing her bit for the thesis, and American foreign policy, although not necessarily in this order.
Madam Speaker also has her little helpers, in the elected executive, digging away in her bottom.
Planting the Flag in “Speaker Pelosi’s Bottom” on COVID-Zero Hill ….
“Speaker Pelosi’s Bottom” has become star-spangled since her recent Gulf of Taiwan Incident. What this author calls, “COVID-Zero Hill” looks set to be the new mound of honor and valor in American military historiography.
This hill is different, and more significant, though, because it also exists in the virtual world. It may, thus, be the first combat of its kind in the 21st Century. It is, thus, unprecedented, hence, its outcome is more uncertain.
· PCPC hates “Speaker Pelosi’s Bottom”.
(Source: the Author)
The fearless, Madam Speaker has blazed a glorious trail into battle, on a diplomatic beachhead, in Taiwan, that her Congressional expeditionary force is now consolidating as the level of hostilities rises.
A breakout, from the beachhead, is scheduled to occur in the Fall. This breakout will take the form of trade negotiations leading to a formalized trade deal with Taiwan.
· America and China are currently engaged in a “Techno-Economic War” to, allegedly, obviate the need for a real war in 2026.
(Source: the Author)
As discussed in the last report, America and China have settled upon a “Techno-Economic war”, for now, rather than a lethally kinetic one.
Singapore’s “next,” Premier Wong thinks that this mutually acceptable choice risks placing the nations on a course that will end in a lethally kinetic conflict.
In line, with the mutually accepted, current, rules of engagement, China’s response to the American landing on Taiwan has, therefore, been a virtual one.
Snatched, not Downloaded: Your algorithms or your life ….
· Xi Jinping’s “Sputnik Moment” is a Chekist response to perceptions that he is losing his grip.
· “COVID-Zero” has become the Cheka.
(Source: the Author)
China’s Cheka, as identified by this author, does not only confiscate wealth. It now confiscates intellectual property.
China’s technology and social media companies must now share their IP and source codes with the State. Under these conditions, there is no way that these companies will be allowed to operate on American fiber and Wifi networks, and so the clean break continues.
The Chinese response has also been virtuous, in addition to virtual.
They shall not pass ….
· Hong Kong may become a “Trojan Horse” in the global economy.
(Source: the Author)
This author has been suspicious of the role of Hong Kong in the global economy since it was recently annexed by China. His view is that Hong Kong may effectively become a “Trojan Horse”, in the global economy, if unwary host nations drop their vigilance.
The UK is apparently vigilant and ready to act.
UK Business Secretary Kwasi Kwarteng recently blocked a takeover of a Bristol-based electronics design firm, by a Hong Kong incorporated, but Shanghai-owned firm, on the grounds that it was “necessary and proportionate to mitigate the risk to national security.” The risk goes both ways. Intellectual property is lost, whilst the foreign agency can play a malign role from within the UK host.
· The Special Relationship has its very own “Sputnik Moment” celebrated with cold French dessert and the shitting of BRICs.
(Source: the Author)
This author recently discussed the previous UK affiliation with UK-based agents of the Chinese government. Evidently, since Boris Johnson has been tinned, UK foreign policy has U-Turned to re-align with American foreign policy.
The Chinese response has also been virtuous, in addition to virtual.
Seize the day and the virtuous moral high ground ….
· The enforcement of compliance with “Xi Jinping Thought” is a direct assault on Western Capitalism.
(Source: the Author)
This author has previously discussed how companies operating on the Chinese mainland are now required to have an embedded PCPC compliance team, as a control function, in their operations. The author’s assumption was that the intention was to enforce this compliance regime globally, in order, to assert global control.
Obviously, it logically follows, that the PCPC will try and enforce the recent IP compliance regulation/appropriation rules onto the global operations of Chinese companies and global companies that operate in China. American companies will exit China, as a consequence. America will, then, embargo and preclude any global company, that signs up for the Chinese global IP and compliance protocols, from operating in American jurisdictions. This embargo will be extended to G7 and NATO allies with extreme prejudice.
When America extends its embargo to the BRICs, the outcome will be interesting.
The BRICs vs The Triad ….
· China has switched its global economic strategy from working through G20 to working through the BRICs.
(Source: the Author)
This author has previously discussed the role of the BRICs in undermining American global hegemony. China is putting this thesis to the test.
India has been approached, by China, to affirm the “One Nation” policy in relation to Taiwan. Presumably, China will reciprocate by ceding regional hegemony, in the case of Sri Lanka, to India. This common approach may have much more than Sri Lankan as the lowest common denominator, however.
China and India have a common fear of all things Islam and all things Buddhist. These common fears may be stronger than their mutual mistrust of each other. This lowest common-denominational fear may, thus, be the common ground on which the IC configuration, of the BRICs, now fundamentally stands. China clearly thinks so and is putting this assertion to the test.
It is, hence, no surprise that America, allegedly, drew a line under its involvement in Afghanistan, recently, thereby, putting the Sino-Indian relationship into subjective context. America is, therefore, not truly disengaged. It is remotely engaged but not embedded.
· 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)
India has already infuriated the West with Ukraine sanctions-breaking on Russian oil and gas exports. Were India to affirm Chinese claims to Taiwan, this may become the final straw that breaks the camel’s back of occidental tolerance. The Indian economy would then find itself in the occidental cross-hairs along with China’s and Russia’s. This would leave Brazil as the only member of the BRICs not under economic attack.
It is time for India to get off the BRIC fence. Prime Minister Modi intends for India to reach developed economy status in twenty-five years’ time. India will certainly be more populous than China by then. There is a great deal of common ground for the two neighbors to discuss and cooperate on. Like it or not, they will find America at the table remotely and otherwise.
As China, and India, seek to occupy the moral high ground, America assaults the moral heights.
· “COVID-Zero” is a strategic policy tool, which suggests that COVID-19 is a strategic weapon.
(Source: the Author)
This author has previously discussed how China’s “COVID-Zero” strategy is a means of social control.
The exposure of “COVID-Zero”, for what it actually is, is now occurring in the western media. This media assault on COVID-Zero Hill has exposed the insidious side of the alleged Chinese healthcare protocols.
· Speaker Pelosi is a “Triad”-operative.
(Source: the Author)
This media assault also highlights the role of the new “Triad” doctrine of the American “Techno-Economic War” strategy.
Ignoring the abuse, of its own ethnic minorities, America will apparently seek to lecture China and India about their abuse of their own minorities. Presumably, the lecturer who occupies the most social media high ground wins this virtual skirmish in the “Techno-Economic War”. Since all involved are disconnecting from each other’s social media networks, the future of the moral high ground will be dissonant, to say the least. It will certainly be subjective.
“Triad” hates INFY, ergo, the UK Shits BRICs ….
· 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.
· The rekindling of the symbiotic Special Relationship is also pending the syncretic bicameral Anglo-Saxon political cleansing simultaneously occurring on either side of the Atlantic.
(Source: the Author)
Attempts to salvage the Special Relationship, thereby aligning Britain and the USA, more closely, will fall heavily under the aegis of the “Triad”. It is reasonable to assume that the “Triad” had a hand in the recent blocking, of the attempted Shanghai-based, Hong Kong takeover, of a UK-based technology company, by Business Secretary Kwarteng.
UK PM-wannabe Rishi Sunak will find that his conflicted aspirations are heavily circumscribed by the “Triad”. This will especially be the case if his family’s native India embraces China’s “One Nation” stance towards Taiwan with brio.
· 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)
Were Sunak to become UK PM, with the intention to survive, UK foreign policy towards the BRICs would have to change in such a way that his MO would have to comply with the “Triad’s” rules. Rather than lobby for his extended family, and the land of his forefathers, Sunak would have to lobby for his Trans-Atlantic constituency. Liz Truss seems to be far less conflicted and far more willing to do the Trans-Atlantic lobbying.
· The Special Relationship has its very own “Sputnik Moment” celebrated with cold French dessert and the shitting of BRICs.
(Source: the Author)
A recent report observed UK national security strategy and policy aligning with the EU, with a nudge from France, to the detriment of India.
The latest streamlining, with the “Triad”, is further evidence that the UK is coming in from the Cold as some of the “Oxford Apostles” in the Conservative party are thrown out in the cold.
The UK PM recently had his Eddie Temple Facts of Life moment at the hands of Speaker Pelosi. Madame Speaker politely informed the PM of which layer of the New Multipolar World Order (NMWO) layer cake he and Britain are in. It’s not near the top. Also, it’s a far cry from the far pavilions that the PM fondly imagines still exist in some corner of a foreign field that is forever England.
(Source: the Author)
Readers may remember how Speaker Pelosi set the ball rolling when she gave the then UK PM Boris Johnson the Eddie Temple Facts of Life speech about his foreign policy and Britain’s position in the world.
Speaker Pelosi is still calling the shots. Boris Johnson has been shot. Others will get shot.
“Speaker Pelosi’s Bottom” is rationally exuberant ….
· Macklem Doctrine ticks all the “friend-shoring” boxes.
· US “friend-shoring” will be achieved with “Build Back Better” and “Make More In America” fiscal drivers.
(Source: the Author)
This author has been following the various U.S. fiscal stimulus programs scheduled for passage, through both Houses, into Federal legislation. The passing of said packages, combined with the “Friend Shoring” imperative is expected to lead to a domestic Hypergrowth Phase.
· The Soft economic landing zone portends a domestic Hypergrowth Phase inflection point, for the US economy, that will be stronger than for its global competitors and trade partners.
(Source: the Author)
Evidently, the US Treasury Department wishes to derive a significant tax yield, from the Hypergrowth Phase, in order, to mitigate the upward pressure on interest rates. Consequently, Treasury Secretary Yellen is throwing $ 80 billion of stimulus, at the Internal Revenue Service (IRS), with the strategic objective of making the agency fit for, the purpose of, tax harvesting commensurate with the scale and scope of the fiscal stimulus seeds being planted.
Hitherto, outgunned and under-resourced, the IRS has had rings run around it by carried interest, and other tax-optimizing lobbies, with greater firepower and access to elected policymakers. Consequently, every major fiscal stimulus has yielded egregiously low tax returns. Each fiscal stimulus has, hence, been less sustainable, so that, America’s global position has been consistently undermined.
Evidently, President Biden and Secretary Yellen have decided that it is time for Uncle Sam to get the maximum bang for his buck. The intention and capability are to put America on a sustainable fiscal footing, to capitalize upon its “Friend Shoring” initiative over its global rivals.
In view of Yellen’s IRS strategy, this author would say that Mr. Market may begin to discount a successful outcome in advance of the execution. Such an outcome would create a fiscally sustainable Hypergrowth Phase, in which the rising tax yield also mitigated the inflation potential of the fiscal stimulus. A fiscally sustainable economic expansion is one of combined economic strength and duration. This is something that does not end with a bang. It ends with a countercyclical fiscal surplus buffer to deploy, against the ensuing slowdown, at the end of the expansion phase.
The risk premiums, and earnings multiples, from such a Goldilocks economy, if combined with real productivity gains, from the technology sector, would be something beautiful to behold in P&L terms.
Also, in view of this structural fiscal change, do not be in a hurry to sell the US Dollar. Mr. Market has, yet, to discount this brave new world into foreign exchange rates.
One can, almost, hear the words “rational exuberance” replacing “irrational exuberance”, in the minds of Fed speakers and pundits. One can, almost, see President Biden and Janet Yellen pulling the strings and playing the music. One can, certainly, see Speaker Pelosi dancing to this tune.
Unfortunately, one Fed speaker is unwilling, or unable, to acknowledge one of the main drivers of the sustainable Hypergrowth Phase. This is ironic since she is one of the said main drivers.
The Softly-Softly Landing ….
This author has noted the facts that women are (1) underpaid, and (2) finally returning to the labor market are two of the principal drivers of disinflationary economic growth going forward in America.
· The Soft Landing on American women will inform the new full employment definition.
(Source: the Author)
Fed Governor Michelle Bowman recently failed to recognize, these salient points, as she recognized the salient points that her gender got cheaper, to employ, and more numerous during the pandemic. Economic desperation is, apparently, disinflationary.
Go figure!
Perhaps Governor Bowman is following the Fed’s internal gender-biased code and waiting for Chairman Powell to comment first, thereby, leading to a new definition of full employment that uses the gender discrimination issue to monetary policymaking advantage.
Perhaps, as a Trump-Card carrying Republican, Bowman knows her place.
The latent solution to tight labor markets is hiding in plain sight. But, to avoid the solution becoming inflationary, it must continue to be relatively underpaid. The true productivity miracle is that the solution remains happy to be exploited. That this can occur with a Democratic administration, in the White House, is even more of a miracle.
If the Fed increases fractional reserve requirements, would that create enough deflation to keep them solvent?