Next year, in the summer, strange things will start to happen.
Some confusion will appear in the way benchmark interest rates are quoted and disputes will openly surface between respected sources as to what is being referred to as the key indicator rate; this will be framed as more a 'lease rate' of bank capital under regulated management, and not the interest rate on interbank money borrowed. And that is because someone will know that this capital is meant to drop in value, in other words be discounted.
As said recently by Mannfmm this is an epic bear market.
The market will neither stabilise nor appear to stabilise, experiencing continued large swings in both ways - but the overall trend will be markedly down. No stable move up can occur until reported earnings underpin P/E's for more than one quarter BEYOND at least one and more likely two or three quarters after the December quarter. That is only an obvious thing, not an insider's knowledge.
The UK interest rate action is tied to a desire not to drag the money flows from extremely low US interest deposits towards a higher UK deposit environment.
The principle motivation of central banks is not the health of the stockmarket, but the preservation of the currency.
And this is where things are getting interesting.
The currency system has been destabilised by the financial assets ratio to Money Supply via the equitisation of a previously 'not financialised' asset - real estate. The bubble value of real estate is so large that it is in fact incalculably large and bears no resemblance to the amount of money issued. THIS and the reason for it - the lack of bank reserves to debt through errosion of these bank rules - has produced the so-called credit crisis which has been 'solved' by GIVING private banks capital from the public government's Treasury... There is a hidden meaning to this mechanism; it ADDS to the numerical currency issuance, and moves towards the incalculable size of the financial asset figure. If, as is expected by central banks, the underlying real estate retreats substantially in value - say by about 40% - the amount of money on issue reaches more reasonably towards the financial assets number and therein, a complete freeze in financial circulations is avoided.
And some stage in that process it is FULLY EXPECTED that the government securities donated to banks will be heavily discounted AND THIS IS THE ONLY PROCESS WHEREBY THE MARKET CAN DERIVE MARKET CREDIT SOURCES TO ONCE AGAIN PRODUCE THE BENCHMARK INDICATOR RATE THAT LEADS MARKET LENDING AND ANOTHER PHASE OF GROWTH.
The injection by say, the Saudi Government, of huge direct cash and capital, IS NOT GROWTH - it is either theft, or bribery or extortion or at best misdirection and seduction and diversion of somebody else's growth. But it is in no way 'economic growth' of the US or the UK economy.
Buying bank equity is not in itself a means of supplying new circulating credit lines to the general market - it only becomes that if the new equity is discounted to the next holder. Circulation can only occur when there is an expectation of a low risk profit in the creation of a credit - otherwise, the holder of the capital will simply not lend (interbank freeze). There is no expectation of a low risk profit when interest rates are too low combined with the clear knowledge that assets are in a bubble condition. Even when assets are no longer in an obvious bubble position, the low interest provides inadequate reward and money still does not circulate in ways that permit government to draw tax and re-finance the substance of its currency.
There is no reason for 'banks' to lend to companies. Exxon can lend to companies via circulated transferable private credit notes and maintain the entire US economy on a growth path single-handed if it wished and if companies represented a rational economic risk - but since they mostly don't, the idea of 'lending to companies' is a political pursuit by government seeking to maintain the monopoly on credit-based dollarisation.
Hyperstagflation - a fact of modern life already in existence, and a word either coined by Mannfm or Bulldog or Ras - cannot be obviously seen because of the gap between Joe the Plumber's lifestyle and Suzanne Klatten's lifestyle.
With interest rates at zero, Joe the Plumber can as little afford the real estate that Suzanne Klatten resides in as
he could have when he thought property always went up and when GE Money lent him money he never intended to pay back other than by borrowing more on his never-ending equity rises.
If you can sell products to Suzanne Klatten, you will most certainly comprehend that her companies' increased revenues in China even today are not a reason to cut your prices to her because Fox told you there was a 'severe credit crisis...'
If you can sell products to Fox, you will not be confused by the massive increase in media spend for the Presidential election - what are they referring to when they say 'recession?' Certainly not political advertising budgets that's for sure!
Thus the epic bear market must go on for Joe the Plumber.
For only the Treasury may print actual money and it is unwilling at this point to let the market determine the price thereof - until of course it falls from its throne as the official financial mediator of, what is it - the ideals and principles of Democracy, and Liberty... ...and Hope.
The Pope just now referred to Peace, and the Grand Mufti of Bosnia said Peace and Justice...
They are all correct, because Joe the Plumber lives on illusion and cannot handle Truth, Substance and Delivery.
Today, Truth, Substance and Delivery comes through a slim handheld Samsung device.
A plastic credit card is in all events, a most passe piece of style. Hope is debt to the now, and Delivery is money freehold and substance now. You are cheating yourself if you trade money for hope.
You can discount Hope today for some delivered cash, but you will not discount Delivery today for Hope.
Suzanne Klatten wants delivery today. Joe the Plumber is drunk and can afford to wait until tomorrow.
Voltaire said that Democracy propagates the idiocy of the masses.
Money can be used by idiots, but it is seldom saved by them and never stored anywhere near them.
Only a lunatic believes money is cheap to borrow. If it is cheap to borrow, it is not really money and cannot produce delivery of anything valuable. Lunatics and idiots however, believe things to be valuable, that are not, and that is what makes cleverer people money.
It is not possible to create a permanently low interest rate environment without risking someone come along and push you off the hill using substance he purchased cheaply whether you have installed clever regulations and laws to prevent it or not! Clever people are more inventive than that. The dispute among serious economists today is about whether deflation runs right across all asset classes and whether or not there is any single thing at all that holds permanent trade value at non price deflationary numbers.
It does not. Run across all asset classes.
Moreover, if you knew today what will go up fifty times in the next two years, you will have something to value and to manage as capital, rather than hope about.
I wonder whether you all think the USA is going to invest in Germany or Israel, or China - or somewhere else given the new President? What do you think? I think somewhere else.
And yes, there most certainly is an Illuminati Elite. It casts its plans well into the future, and it is patient and organised and powerful. It thrives on poverty and crime rate. Wherever you see poverty and crime rate, read profit. Of course I remember someone rubbishing me about this before... ...before you elected an African.
The day you see Samsung promote a digital device as thin as a credit card, know that the defining moment has arrived. There is no money, like new money. All Treasurers have Judas as a patron. Jesus, on the other hand, was a teknoi. Which is not a carpenter by the way.
Calvin J. Bear
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