Less than Zero
I think they [central bankers] did become overconfident in recent years, and, frankly, if you have a sort of magic wand that can levitate trillions of dollars of wealth out of nothing, perhaps any of us would become a tad bit hubristic...
Lakshman Achuthan of ECRI - Bad Moon Rising: Where Are We in the Cycle? Another very good podcast from George Noble. Achuthan rightly points out that everyone is now paying the price for the Fed’s shift a couple years ago to aggressively pro-inflation policies.
Once again, unelected clueless Fed-lifer apparatchiks are experimenting with lives of 330 million Americans, and billions of others, with no oversight or accountability at all. Unforgivable.
I like to say that we injected cocaine and heroin into the system, and now we're maintaining it on Ritalin. How's that? - former Dallas Fed President Dick Fisher in 2016 (now at Barclays)
Bunny had a talk with Mr. Irving, who told him that it was the Federal Reserve system at work; a device of the big Wall Street banks, a supposed-to-be government board, but really just a committee of bankers, who had the power to create unlimited new paper money in times of crisis. This money was turned over to the big banks, and in turn loaned by them to the big industries whose securities they held and must protect. So, whenever a panic came, the big fellows were saved, while the little fellows went to the wall.
- Upton Sinclair, Oil! (1926)
Under the Federal Reserve Act, the vast power of the thirty thousand American banks is concentrated in the hands of a little club with headquarters in Wall Street. This club holds in its hands the power to make or to destroy any businessman in the United States ; the power to make or wreck financial institutions and inaugurate panics ; the power to issue credit, even money. The bankers at the center of the financial web are endowed with the power of government. The right to issue money is, as I have said, fundamental. This right is exercised by the New York Bankers' Club, thinly disguised as the Federal Reserve Board.
- Richard Pettigrew, Triumphant Plutocracy (1922)
QT Update 😊
Treasuries were down $11.6B for the week, but up $360B from a year ago, when official CPI WAS ALREADY 5.25%.
MBS were UP $1.9B for the week...and UP $259B from a year ago, when housing price inflation was up 20% YOY. Insane.
Forget what they say - look at the results…
Ignore the mainstream Fed narrative. Check the results.
And then there’s this: Corporate equities and mutual fund shares by wealth percentile group
Nearly 70% of homes for sale in Boise, ID, had a price drop in July, the highest share of the 97 metros in this analysis. Next come Denver, where 58% of homes for sale had a price drop, Salt Lake City (56.4%) and Tacoma, WA (54.8%)…More than 15% of home sellers dropped their asking price in every major U.S. metro
“the California-based company reported a massive loss in the second quarter. After posting a $73.5 million loss in the first quarter, Blend upped that to a $478.4 million loss in the second quarter…Blend reported $31.9 million in revenue during the second quarter, down from $38.7 million in the previous quarter…The digital lending platform was founded in 2012 and went public last July, sporting a valuation of $4 billion.”
This sort of non-disclosure is typical throughout our abysmal financial media. For example, if you know CNBC’s Robert Frank - he’s sort of a male Marie Antoinette figure - guess who he’s married to? Guess!
One of the most powerful women in finance, Rebecca Patterson, a leader of investor research at Ray Dalio’s Bridgewater, and her husband, CNBC’s Robert Frank, have just plunked down $11.5 million for a sprawling residence at 1021 Park Ave. in an off market deal, according to city property records.
Remember back in the day when Dennis Gartman was on CNBC every 10 minutes? Makes sense once you know this:
Gartman’s daughter, Courtney Gartman, a 2006 Longwood graduate who is senior line producer for CNBC’s "Fast Money”…
Oh yeah. There is no Nobel Prize for Economics.
There's a "Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel." I just awarded myself the "World's Best Substack Account Award in Memory of John Heisman" (commonly known as “The Hesiman Trophy.”)
XI "is gonna stomp out residential & real estate speculation...and if you're a western bondholder, what you're going to get in return rhymes with 'hero' - you're not gonna get paid anything, and that's what you're gonna deserve for investing in a regime like that." - Kyle Bass
Gimme Gimme Shock Treatment
Through the late summer and fall of 1991, as the Soviet state fell apart, Harvard Professor Jeffrey Sachs and other Western economists participated in meetings at a dacha outside Moscow where young, pro-Yeltsin reformers planned Russia's economic and political future. Sachs teamed up with Yegor Gaidar, Yeltsin's first architect of economic reform, to promote a plan of "shock therapy" to swiftly eliminate most of the price controls and subsidies that had underpinned life for Soviet citizens for decades. Shock therapy produced more shock--not least, hyperinflation that hit 2,500 percent--than therapy. One result was the evaporation of much potential investment capital: the substantial savings of Russians. - The Harvard Boys Do Russia (1998)
Unintended Consequences, Again…
Putin didn’t create his oligarchy on his own. The wealth that this circle of men was awarded (control of assets such as oil, gas, and aluminum after the collapse of the Soviet Union) was partly made possible by the well-meaning arrogance of economists such as Jeffrey Sachs and Larry Summers, as well as Robert Rubin, who was Treasury secretary under Bill Clinton.
In the Clinton administration, they were in an Ivy League clown car of advisers who prodded Boris Yeltsin to apply “shock therapy” to the post-Soviet economy and turbocharge it into a free-market system.
…Sachs, now at Columbia University, has moved onto bigger issues; notably, a plan to end extreme poverty worldwide by 2025 (ticktock). He still gets tetchy when people ask about Russia. He crossly told a biographer, Nina Munk, that he took a “ridiculous” amount of blame for Russia’s economic malfunction. He says there was nothing wrong with the policy, but notes that others, including Larry Summers, who was a high-level Treasury Department official under Rubin, were far more at fault than he.
It’s important to remember that Putin wasn’t elected; he was appointed acting president by Yeltsin a year after the ruble collapse of 1998, at a moment of deep disillusionment and fear. For years, even some of my most liberal Russian friends felt that democratic freedom was a fantasy, and that putting up with Putin was a small price to pay for economic stability. - The View From Here (2022)
And Now Liesman Does The Same Thing Every Day On CNBC…
What is most astonishing is not how badly Liesman and the Journal misreported one of the most tragic economic stories of the decade as it was happening. The amazing thing is that they won a Pulitzer Prize for their reporting of the Russian crisis after the country had gone down in flames…
Liesman's Russia coverage was a case study in the kind of narrow colonialism and provincialism that is increasingly pervasive in American foreign news reportage. Until the crisis struck, Western reporters based in Moscow focused almost exclusively on the Russia story in terms of its relevance to Western businessmen--and as long as the stock market was doing well, and companies like British Petroleum were still proudly announcing mergers with Russian partners, much of the corruption that eventually sank the Russian economy was ignored.
…until the crisis forced them to change their tune, Western reporters like Liesman seemed to distrust reports of widespread public despair over the Yeltsin regime's criminal policies, preferring instead to rely upon the stock market, the pronouncements of the IMF and the results of Russian state-produced macroeconomic reports to tell them how the Russian economy was doing…
Liesman, 36, a bombastic, balding New Yorker whose amateur blues band played a few coolly received gigs in Moscow clubs in his early years here, is still well known in the Moscow press corps as a sort of caricature of a typical Moscow-based US correspondent--a loud presence at press conferences and a knee-jerk anti-Communist. Despite having lived in Russia since 1992, when he came to work for the English-language Moscow Times, Liesman was still using a translator in 1998, the year he left…
Like many of the more linguistically challenged members of the foreign press corps in Moscow, Liesman fell into the classic trap of making one small group of English-speaking Russian politicians his most trusted source of information…
Liesman's unwillingness to report any negative news associated with the St. Petersburg Mafia first became glaringly obvious in early 1996, when he called privatization "the most successful and important of Russia's reforms." Part of the privatization effort that Liesman praised, the notorious "loans-for-shares" auctions, had just created a national scandal due to their overt criminality; it had forced loans-for-shares architect Chubais out of government. In these auctions of huge stakes in key Russian enterprises, Kremlin insiders decided the winners in advance, often helping out by padding their bids with government funds. These auctions instantly created a super-rich clique of monopolist "robber barons" - The Journal's Russia Scandal (1999)
Billion Dollar Whale: The Man Who Fooled Wall Street, Hollywood, and the World
My theory is that Malaysian prime minister Najib put Jho Low in charge of looting a sovereign wealth fund, with the expectation that JL would make legitimate investments that would be politically helpful, give Najib and his wife kickbacks, and take a little for himself - but JL took far more than expected. In fact the fund borrowed multiples of its assets so he looted more than 100% of it. That may be a first.
The biggest purchase was a $300 million yacht, followed by big ticket NY and CA real estate, but a lot of it was blown at nightclubs, gambling, and on jewelry and presents for women. When you see people making over the top purchases like these, you have to suspect that they are made with stolen money. The looting was pretty simple - there were no internal controls, so JL just wired the money where he wanted it to go. (See the Fraud Casebook from Q2 reviews.)
The big four auditors and investment banks like Goldman did not ask many questions. (Theme from 2018 reviews - no one is looking out for you.) The whole thing was incredibly clumsy and low IQ. Najib could have steered the money towards investments of supporters in Malaysia and generated valuable favors for himself, probably perfectly legally. Jho Low could have done the same. However, they both exhibited total lack of future orientation.
Najib's wife acquired "12,000 pieces of jewelry, 567 handbags, and 423 watches" so she is obviously some kind of bizarre hoarder and a liability that he should have cut loose. JL should have managed the fund legitimately - a big opportunity at such a young age.
No doubt the heroic remedy for this tragic misunderstanding is that both armies should shoot their officers and go home to gather in their harvests in the villages and make a revolution in the towns - George Bernard Shaw, Common Sense About the War (November 1914)
No one does it better than Rudy
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