As far as we are concerned, it is no great secret nor any great surprise that our faith in fiat money (in general) and the central bankers who have debased it (in particular) and precipitated the death of capitalism is anything but robust.
To the contrary, our astonishment with the open mismanagement of global currencies as a whole, and the world reserve currency (i.e., the USD in particular), grows daily.
In fact, to fully un-pack the long series of comical errors and the failed experiment of politicized central bankers seeking to solve a debt crisis ($300T and rising) with more debt, which is then monetized by mouse-click money, would take an entire book rather than single article to address.
But just because central bankers are desperate, political, fork-tongued, and directly responsible for pushing global currencies, markets and rigged banking systems toward (and eventually over) an historically unprecedented debt-cliff, this does not mean central bankers aren’t otherwise “clever.”
That is, they’ll do “whatever it takes” in the near-term to postpone the fatal fall which they alone have pre-determined for the global financial system.
As per usual, the central bank playbook is about artificial and centralized controls rather than natural supply and demand forces or honest, free-market price discovery.
After all, who needs honest capitalism when we have heralded its death with rigged banking systems and mouse-click money?
Everything Politicized –Including the USD
The comical politicization of science which we saw in relation to the COVID hysteria (debacle), is no different than the inexcusable politicization (i.e., “weaponization”) of finance which we’ve recently seen in the post-Ukraine sanction debacle.
It will thus come as no further surprise that central banks are anything but “independent” and are themselves nothing more than political petri dishes spreading increased “command-control” contamination into global markets as well as global politics and lives.
The road from/between central banking to centralized politics is short and rotten, as confirmed by Mario Draghi’s short skip from heading the ECB to becoming Italy’s Prime Minister, or Janet Yellen’s equally small step from Fed Chair to U.S. Treasury Secretary.
Here in France, it’s equally no coincidence that Christine Lagarde has moved from directing the IMF to presiding over the ECB.
In short: Everything, including money, is politically-self-serving rather than economically free-market. Capitalism is dead. The folks in office to “save you” are mostly interested in saving their positions and guarding their power.
No shocker there.
Yellen: Bold or Just Demented?
And as for Yellen, well…she is certainly a political beast and a fearless devotee of Keynesians gone wild, but she’s also a clever fox guarding the henhouse of that once trusted currency known as the USD and that once respected IOU known as the UST.
Unfortunately, even foxes get trapped.
Inviting Foreign Capital into a Burning Market
As extreme over-valuation in risk assets (i.e., stocks, bonds and property) have become so openly undeniable, and as faith in an increasingly expanded (i.e., debased/discredited) USD has become openly weaker, the folks behind the USD (i.e., Janet Yellen) are trapped.
They will now use all their political tricks and centralized powers to buy more time and postpone the debt, currency, social and political crisis which they alone spawned many years before COVID or Putin became the scapegoats de jour for their own monetary and fiscal exigence.
Toward this rigged end, Yellen’s latest (and desperate) trick is now a deliberate attempt (via rate hikes) to force the USD index (DXY) up to 110 (or above) in a centralized attempt to bring more foreign (i.e., debased) money into the dangerous arms of an already grotesquely bloated, over-valued, volatile and risk-saturated US stock bubble.
In short, in order to “avoid” a U.S. stock market crash (triggered by a Fed tapering into a debt-soaked/crippled market), this former Fed Chair’s solution is to coax more foreign money into a burning U.S. theater with fewer and fewer exit doors (i.e., liquidity).
How’s that for clever? How’s that for desperate?
Yellen is effectively politicizing the USD in order to force/cajole/entice foreign capital into crappy US securities (and out of safer global commodities) in order to provisionally save Uncle Sam’s market bubble from an inevitable implosion at the expense of other people’s money.
When will central bankers realize that they can’t keep a market bubble alive forever to save their political rear-ends?
And folks, compared to the dot.com disaster of 2000 or the sub-prime GFC of 2008, does this current market not look like a bit of a (Fed-engineered) bubble to you?
Desperate Not Stupid?
But again, politicized central bankers may be corrupt, dishonest, and desperate, but that doesn’t make them stupid.
In a world or self-interest, Yellen, who likely smiled as the Yen tanked in recent weeks, knows that an artificially strong USD can still be perceived as the best horse in the global glue factory.
That is, the Greenback can still attract foreign money into US markets with no better place left to hide, right?
Well, not really.
Yellen’s History of Getting It Wrong
In fact, Yellen has a long history of getting the macros dead wrong in an effort to look momentarily and politically effective.
Throughout 2017, for example, as the Fed was announcing QT for 2018, I was warning investors of a $1.8T bond wave and a late 2018 tantrum in risk assets, which hit the shores right on cue by Christmas.
Yellen, however, said QT in 2018 would be like “watching paint dry.”
By Christmas, however, the paint was as wet as the tears on investor portfolios suffering daily swings of 10%.
In June of 2017, Yellen was also bold (blind?) enough to publicly declare that “we may never see another financial crisis in our lifetimes.”
But by March of 2020, the markets lost greater than 30% and would have fallen twice as much had not the Fed printed more money in 1 year than in the past decade+ combined.
How’s that for QE steroids?
But as of 2022, Yellen is now running out of intellectual, monetary and policy bullets.
If she thinks she can bribe foreign money into the S&P by manipulating the USD or DXY (temporarily bad for gold), she might be suffering from a disease which is apparently now common in DC, namely: open dementia.