If you haven’t noticed in recent weeks, there is some “backlash” or social “force” forming from within many societies around the world, and for good reason.
Over time, there have been many a thesis shared as to why all humans have to suffer in one way or another, so we’ll just say this:
The new is actually old so one should be careful what one wishes for!!!
The current societal backlash to a couple of decades of economic mismanagement is inevitable, when viewed from an economic perspective.
Income and Asset inequality is now so perversely obvious that it’s almost like some groups prefer to stir up “distractions”, a redirect from this central bank created economic reality.
But examples of “free money” abuse in the last 20 years are too many to mention so we’ll start with one.
Like, corporate executives approving raising money through a high yield (JUNK) bond issuance for the benefit of the company they represent. The purpose of the money is to buy shares in the same company they are “employed” by.
So, shares in the same company are purchased (share buyback) and the stock goes up. The already incredibly well remunerated executive bonuses are now turbo charged through highly leveraged stock options.
The result, a tens of million cash out, for some.
Said company may then go to “shit”, thanks to mismanagement or other external forces (all no one’s fault).
Then a Central Bank alphabet soup purchase program steps up and purchases said Junk Bonds, through an SPV, set up to buy an ETF that contains said “bonds”, both facilitated through a Wall Street type like, say, Blackrock!!
It’s a kind of Black Magic, but for the greater good.
Except now, post Covid, central banks are feeling a real “need” to do even more.
The next chart below didn’t sink in the first time we saw it. This being: change in central bank assets since 2004.
Even more amazing than the overall coordination is the fact that the Japanese and Europeans have both added a further trillion, EACH, IN THE LAST TWO WEEKS, since this chart was published.
It’s simply astonishing. If the last two weeks were included, how ridiculous would this chart look? We’ll try and get a follow up.
But hey, stock markets are up, right? Nothing to see, all good. Someone needs re-election.
Even after the events of the last 4 months, “investors”, with a central bank wind at their back have pushed valuations to almost ALL TIME HIGHS!!
As part of this global stimuli ass, look at this below!! Btw, Australia falls into the 10% range, for now! Other than that, it’s more than ever, except for those pesky Russians.
And now, the garden of Eden we call home, Australia, is calling for 0 and negative interest rates, daily, through various mouthpieces.
For Australian interest rates, isn’t it wonderful to be slightly behind the Europeans and Japanese but in sync with the US?
We hope you are more concerned with the desperate signal this sends as to the real “e” state of play in a broader economic context, than the pittance you’ll now receive on your savings.
Again, it’s not a new story.
This below was originally published in the Chicago Tribune in 1934:
And finally, to ground it all home, we thought this single page of commentary from IceCap Asset Management worth sharing.
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