Tuesday, March 14, 2023

Why? Because It's Really Important

(Note: SPX will be covered in the next update, later today.)

Before I start, I'd like to clarify something about Monday's update:  When I said that SVB's collapse can be laid at the feet of the Fed, I didn't mean to imply (by omission) that SVB management is entirely blameless.  Of course SVB's missteps also played a role.  I felt that was self-evident, so my point was that when the Fed fills a room with gasoline, you don't solely blame the guy who struck the match when the whole place goes up in flames.

You blame them both.  Because both parties acted irresponsibly.  And, in this case (and most cases that are still to come) you can't have one party blow up without the other party setting the stage.

Before we forget... the stage, as set by our leaders, was:

  • The Fed kept rates too low for too long, which created numerous asset bubbles
  • The Fed pumped $8 trillion of QE into the market, which created numerous asset bubbles
  • The Fed and Federal Government flooded the economy with stimulus, thereby diluting the value of existing dollars and contributing to inflation
  • Both the Fed and the government failed to even foresee the looming inflation (remember "it's just transitory"?)
  • They failed to foresee it because they operate from a flawed philosophy (Keynesianism)
  • They then had to abruptly stop the free money party and reverse course.

Five years ago, I warned about all this.  Warned that the Fed was distorting the market and sending false signals to the economy, which would naturally drive businesses into unsustainable excesses (often through no fault of their own), which in turn meant that when the Fed finally stopped, collapses would be inevitableFive years ago, I argued that.  As I wrote then:

And through all that, we've learned this: The problems never seem to come while the Fed is running the pumps; the problems come afterwards. Everything booms when the cheap money is flowing -- but this "false boom" is, in fact, exactly what plants the seeds for the future bust. It seems to be an endless cycle of the current Keynesian economic policies.

So no, it wasn't "deregulation" (as some are now claiming) that set the stage -- otherwise, how could I have seen it coming before that deregulation even happened?  The stage is much more complex than that.  In fact, the complexity of the environment is exactly what makes simplistic one-word narratives ("deregulation!" etc.) so appealing for our leaders to deploy against a population that doesn't have the time to dig deeper.

For Monday's piece, I chose to focus on the role of the Fed/gov't instead of SVB because (in theory, anyway) we're supposed to be able to course-correct our own government.  (Though many of us feel this is an increasingly futile effort.)

I wanted to clarify that -- but please bear with me a moment longer, because I believe this is important.

Last update predicted:

So ultimately, [SVB] is yet another collapse that can be laid at the doorstep of the core Keynesian philosophy (top-down central "management" of the economy) that has long captivated and motivated the leaders of our institutions. As the trouble snowballs, you'd better believe they will not want to take the blame for any of it -- so the history-rewrites and propaganda will start any minute, if they haven't already.

That prediction has, unfortunately, since come to pass.  Because luckily for America, the Fed and the government have never ever made mistakes or mismanaged the economy, and thus not one single problem has ever been their fault.  Quite the opposite, as it turns out!  The fault, we're always told, is actually that those entities were given too little control.

Kind of a win-win for the powers that be, when you think about it.  Even when they monumentally screw things up, they simply point the finger elsewhere and claim it's because what they really needed was even more power to screw things up.

You may be under the impression that I'm beating a dead horse here -- I am not.  I was around before, during, and after the 2008 crash.  In 2008, I diagnosed the problems before the crash happened (as did many others), then carefully observed those problems catastrophically unwind in real-time... and then watched the Fed and our government tap-dance right out of taking any significant blame for the bubbles and problems they themselves created.

And this is exactly why we're doing it all over again.  

Because no real accountability ever occurred, since most of the public remained blissfully unaware, and hence no lessons were ever learned, and no core changes were ever made.  And that was only possible because the general public was effectively duped into believing it was 100% the fault of everyone BUT the Fed/gov't.  So, when the 2008 crash was all over, we passed banking laws that addressed the symptoms but completely ignored the disease.

I'm going to try to do my part to help keep people from falling for it again this time around.  If we want to have any hope of rebuilding on solid ground, then we'd damn well better learn the real, and painful, lessons this time.  Not the false "lessons" they spoon-feed us.

Speaking of, let's quickly glance at a few "charts," to see how Monday's prediction of "immediate blame-shifting propaganda incoming" fared:

And that's just a smattering of the propaganda that's been rolled out since I published on Monday.  I could have posted a dozen more.  

So why did I say this was "important"?

Well, given that we seem to be going down this road for the second time in only 15 years, as I see it: We cannot afford to fall for the false narratives again, or this path will be repeated forever.  

Of course, that's assuming we even make it back this time.  And I'm not 100% certain we will.

Trade safe.

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