The Professional Traders Opinion
May 29, 2014
Dazed and Confused: Part Two
What has Changed?
"War huh yeah, what is it good for? Absolutely nothing"! The 1960's epic song about America's involvement in Viet Nam by Edwin Starr has circled back with a rather poignant meaning when discussing the economic environment we are comparing to a scant five years ago. We will begin our discussion about "What has Changed" by focusing on the later part of Edwin Starr's opening verse … Absolutely Nothing! After we carefully examine the pathology of our economic malaise, we will delve into the current "war" that most Americans know nothing about, could care less about, should care most about, and yet are comfortably numb although perhaps showing signs of being dazed and confused.
The collision path between what's left of capitalism and central planning is rapidly approaching the zero hour; western banking and fiat currencies are nearing a failsafe point but there appears to be no one sane left at the controls. Mad scientists disguised with sheepskins from the halls of academia solely operate the joysticks to this game of monetary brinksmanship based on the escalation of theories previously unthinkable even to the Dark Force leader, Lord Keynes. Adding a tonic here, mixing a potion there, pushing on a string, snipping a wire under the luminosity of candlelight and hoping … hoping the whole damn thing doesn't implode if they touch the wrong button or utter the wrong phrase. To say the central bankers are wishing upon a twinkling star or believing that fairy dust will sprinkle sustainable economic growth to their Lands of Make Believe would be unforgivably impious to all we believe, from Mother Goose to Dr. Seuss. A child would have done less harm than these highbrow pseudo-scientists of economics, who really have but one grand theory ironically made possible by a blacksmith named Johannes Gutenberg.
Absolutely nothing has changed structurally from the onset of the Great Recession in 2008. Not a thing, not in one single western economy has the tensile strength of their economic infrastructures been altered with anything but more weight, more stress and fewer support beams to keep it all standing. There is more debt now with evermore grandiose regulation imposed upon a less diverse base; in other words, an extreme centralization of risk. Central planning empowered and enabled by the central bankers primarily from the U.S. Federal Reserve, the European Central Bank and the Bank of Japan are leading us to the edge of the abyss in what F.A. Hayek called the "Fatal Conceit" of socialism.
The incredibly rejuvenating powers of a free market's ability to seek and embrace creative destruction has been euphemistically purged from capitalism and replaced with a socialistic enjoinder of alphabet soup bailouts and stimulus concealed as a tax unto an unsuspecting populace. Sold like snake oil, the massive tax is hidden to the sheeple because the hucksters selling it promise you'll feel better quickly while masking the fuse leading to your discontent in the form of a severe adjustment to ones standard of living caused from the inevitable depreciation of buying power for the holders of that domicile's fiat currency.
Just a scant five years ago, the central bankers and planners bailed out banks in the name of preserving the financial system; they bailed out companies in the name of preserving jobs and vital industry; they bailed out highly leveraged bets by gangster gamblers operating under the veil of custodians of the peoples private monies; they bailed out insurance companies who scoffed at the concept of owning insurance on their own house; they spent billions of taxpayers' money on flim-flam industries and unproven technologies that would never see the light of day while extinguishing the power from rock solid companies with proven science that were stalwarts of commerce; they have rewarded a menacing cronyism and penalized creative entrepreneurism; they have collapsed hope to a narrow stock market index; they have stolen from the savers in favor of a consumer; they have robbed savings and retirements with the enticement of debt that can't be paid for freedoms that will be conceded; they have manipulated markets to the point where value is an illusion of multi-entry accounting where prices have deteriorated to a numerical mirage through the sheer force of momentum yet having zero inertia; they have manipulated markets with dexterity that would embarrass Carlo Ponzi, yet they scold copycats as irreverent scoundrels affronting their Temples of David; they have paved the road to serfdom with the blood and toil of all who succumb to the belief that the chariots are occupied by benefactors of We the People.
The bailout progression is a geometric algorithm; first the savings and loans, then technology followed by real estate which lead to banks that had imperiled large companies that have crippled States and geographic regions which have been saved by central banks. The question is who will bail out the central banks? The answer once again is "We the People" … except the bailout currency will be freedom through a confiscation of our standard of living.
Please stay tuned for Part Three of the four part Dazed and Confused series. The upcoming Part Three will explore "Parallel Universes" as we attempt to predict the outcome of two probable trajectories of the central bankers and central planners monetary experiments. We may even include a road less traveled having an outcome with significantly lower probability but with equal potential impact from macroeconomic and social economic viewpoints. The "Parallel Universes" in Part three of the Dazed and Confused four part series will explore radically divergent conclusions and aftermaths as we take you on a trip to two separate galaxies.
Galaxy Invigora, a world of depreciated currencies, expanding debt, inflation and possibly hyper-inflation as the central bankers continuing pushing on a string with their printing presses running full speed ahead.
Galaxy Supernova is the parallel galaxy whose outcome predicates on the worst nightmares of central bankers; a debt implosion causing a death spiral of a different magnitude and order.
The road less traveled has nary a bump in the road with the GPS deadlocked on cherry sunsets and bright horizons … we sadly feel the odds that this roadmap has a chance of guiding us is equal to the probability of finding a winning lotto ticket in a debtors prison.
The Professional Traders Opinion
Ronald M. George
William J. Taylor