Explosive: Ny Fed Bails Out Wall Street Firm In Liquidity Disaster As US Mulls Remake Of 2007

by John Ward

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We who are not worthy must not be told who the banking firm was (of course not) and as usual the MSM is not pushing things too hard to find out. But the signs of Big Trouble are there, the Fed is shorting gold, MMT isn’t working and the bankers have run out of ideas. Elective governance is facing more than an econo-fiscal crisis: it’s decision time – do we reverse Nixon or not? It’s a rock and a hard place for Trump.

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Yesterday, Jerome Powell announced the US Fed’s decision to cut rates for the second time this year at a news conference in Washington….further evidence to support The Slog’s contention that rate “normalisation” is a fantasy.

What Jay Powell didn’t mention is that the day before, the New York Fed piled in with an eye-popping $33 billion to save a major Wall Street banking institution from a Lehman lack of liquidity moment.

I’m still trying to ferret out who the bank was, but don’t bother looking on Google Chrome: the incident has become an Unevent. Taking this as a context, I just love the way Fed Chair Powell began his address to the media with these words:

“My colleagues at the Federal Reserve and I are dedicated to serving the American people”

Probably he meant to say “servicing”.

Meanwhile, with the Saudi refinery attacks signalling massive increases in oil-related energy and raw material costs, the safe haven of gold is down by 0.5% so far today. If you believe that is a markets-deciding reaction, you are almost certainly a member of the British Illiberal Demagogues Party, or a bond trader with Goldman Sachs. Nope, the Fed Reserve has been shorting gold yet again in an attempt to stave off the awful moment of Dow collapse. It’s a tennis game they can’t win, but it’s going to be white-knuckle fun watching it unfold. Or maybe unravel is a better verb.

Oh what fun the Great American George Carlin would have had with all this. However, as the ever-loquacious Mark Twain remarked 140 years ago, “History doesn’t repeat, but it does rhyme”. Here’s a little rhyming thing to give you all goose-bumps.

Since last year, real GDP growth in the U.S. has been slowing. The chair of the Federal Reserve has been signaling that while growth is slowing, there is no recession risk and the Fed is forecasting continued positive growth. Yesterday, September 18th, the Fed cut rates for the second time.

This is exactly the same as the U.S. economy and stock market of September 2007. Even the rate cut day – September 18th – was the same. The market hit a new high….and then crashed the following year.

This time, however, we have new elements. A crisis in Europe as Britain and Brussels fight over Brexit and Italy heads towards further chaos; and the attack on Saudi oil installations.

Now we have Netanyahu fighting for his political life in Israel.

This is what Bernanke said in November 2007: “The economy does not appear headed for recession. Our assessment is for slower growth, but positive growth, going into next year”.

What to do, what to do?

We are in a bit of a Jackson Hole here. Mark Carney, the ever interfering ‘nana at the Bank of England, admitted in a speech last week that the central banker guns were all empty. Mario Draghi proved it last week by reverting to the policy that didn’t work last time. Philipp Hildebrand, former head of the Swiss National Bank, actually told the boys at Bloombust in a TV interview, “There really is no ammunition left”.

Three technocrats at Black Rock have written a paper calling for “more explicit coordination between central banks and governments when economies are in a recession so that monetary and fiscal policy can better work in synergy.” Neat little phrase, that “explicit coordination”. As in, “taking over, and we know what to do, so shut up” perhaps?

That’s what these MoU’s always say, until they take a wrong turning and mow everyone down.

The job to be done here is not making sure that “monetary and fiscal policy can work better in synergy”. Those policies work for the 3% – and bugger everyone and everything else. This will just be the Alt State getting bigger and more open than it already is….by being so catastrophically wrong, we have to rely on them to get us out of the doodoo.

Except that such has always been a myth. We do not need arrogant technocrats, we need basic common sense and something designed to help the 97% losing out over neoliberal and MMT claptrap. Oh how they laughed in 2009 when I wrote, ‘let the banks fail and raise interest rates. That way Silvers’ spending will rise, and house prices will return to something the young can afford. Screw globalist growth and focus instead and getting back to reality….we need to reform the way capital is raised – away from stock markets with far more use of mutual funds and ownership structures. We don’t need socialism, but we don’t need Bank Aid either’.

Bank Aid, eh? That young man showed promise. (The term didn’t catch on)

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So in the midst of all this, there’s a bloke in the White House with quite a bit on his plate. Next year he needs to get himself reelected. That is, persuade an increasingly doubting nation that credit debt, wobbly markets and slowing global growth don’t mean disaster, and then somehow avoid the Saudi oil installation attack damage from doubling the price of gas for the all-important American motorist. (It is a fact that no incumbent President has ever won when gas prices were rising.)

Then in his spare time, The Donald needs to keep in shape wrestling the the giant anaconda, Anguis PentaTexasBankerStateDepartam. Anguish doesn’t even begin to describe the process.

Up until the turn of the year, my money was firmly on Trump. Among many other reasons for this view were first, the Democrats had wasted two years moaning about losing and trying to get the result in some way reversed; second, their candidate list left everything to be desired; third, they had no 2020 Vision. Instead of a young, vital bloke from a religious minority offering a New Frontier for Space Age, there was Joe Biden offering to make Trump look New Age, and perhaps less of a sex pest than him. Finally, I didn’t see the mammories-skywards moment breaking until 2022.

But then there were signs that the Dick Nixon fiat age was running out of road: some of the signs were technical, others were storm clouds one couldn’t resist: credit debt across the West, the Italian mess, Brexit nerves, Chinese corruption problems, hugely unresolved Middle East issues, and India’s Modi getting designs (with CIA encouragement) on Kashmir. It was an emotional hunch that made me decide in early February to take a big position in gold. Since then, things have been looking darker and darker for real capitalism and real liberal democracy.

Only one thing has improved for the Democrats: although Biden the fixer is still Numero Uno, Elizabeth Warren is now in the race and on the same ratings as Bernie Sanders. If the entire American econo-banking system is in tatters by (say) May next year, Sanders will be competing solely with Biden: the safe pair of hands (fnar fnar) versus the proto-socialist Jew advocating root-and-branch reform.

If, however, America’s problems are deemed to be centred largely on Wall Street and Banker greed, there’s a fair chance Warren will get the nomination. She more than any other single American has never shied away from condemning the Wall Street sheisters, and this can only be of benefit to her. I can’t abide a lot of her pc politics, but I do admire her guts. I freely admit, I’d vote for her. All I lack is the US passport.

The point remains, this is no longer a breeze for the President. With an Israel in political turmoil and every media site trashing him based on persistently pernicious Alt State briefings to supposedly ‘liberal’ news organisations, he may well face an even bigger uphill climb than 2016.

But never write the guy off. His electoral franchise is still the alienated, traditional Americans. If instead of abstaining, next time Black voters turn out for him, he will win. If they don’t, it’ll be a close-run thing.

 

 

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