Western economies were already tipping over in q4 of 2019, with the financial system showing signs of serious stress, see after the jump, but governments and central banks were faced with an almost impossible task.
First up, Rabo via ZeroHedge Jun 08, 2021:
By Michael Every of Rabobank
Yesterday’s Daily concluded with the question: “Is this a piece of your brain?” Sadly, I feel the need to start today’s with the same question. What else can one ask when our financial press are filling pages telling us Jeff Bezos is going into space? “Multi-billionaire does something expensive and irrelevant” might as well be the headline; or, I would settle for a Muppets-like “Bezos in Spaaaaaace”, which at least has the appropriate lack of gravity.
Meanwhile, we need to be talking more about uncomfortable “I” words:
“Inflation”, obviously. There is a lot of market discussion about it, and if it is really back or not; and some even address formerly-taboo issues like labor vs. capital. However, those who have been brave enough to take that big leap have only landed on a narrow pillar sticking up from a deep intellectual divide, not the other side. The next, more difficult jump is to admit one cannot address the labor issue without also addressing the free movement of goods, services, and capital (let alone people) - and the global supply chains built on their back. Until then, you are intellectually stuck between the solid ground of neoliberal “because markets” --with low inflation, high inequality, and “Bezos in Spaaaaaace!”-- and Bretton Woods / national- conservatism / mercantilism / or international Marxism on the other side - which means higher inflation, lower inequality, less globalization, and very different supply chains. And that pillar in the middle is wobbly and won’t hold for long. (For our own take on an inflation framework, not model, and which tries to encompass these factors and more, please see here.)
“Interest rates”, just as obviously. US Treasury Secretary Yellen says she backs slightly higher rates, which would apparently be healthy for the US economy. How many times has she forgotten this is not her job anymore? Could Mr Powell say he prefers a slightly lower fiscal stimulus, for example? The media seem indulgent of these repeated snafus removing the clear red line between Fed and fiscal. Meanwhile, market chatter is that Jackson Hole in late summer is too soon for the Fed to flag any tapering. Given the extended unemployment checkes won’t have run out at that point, US jobs growth will still be below expectations, so requiring said stimulus: there is some logic if you think about it. And months more of $120bn QE a pop for markets.
“Invermectin”, which is a cheap, safe, effective medicine for treating parasitic infections and inflammation. Repeated on-the-ground medical studies claim the drug is an equally cheap, safe, and effective part of a cocktail Covid-19 treatment that could help ensure a far faster global recovery from this pandemic. The fact that none of you have probably heard of it; that academics at the UK’s leading virus-research universities aren’t looking at it; that Twitter has frozen the accounts of some advocating for it; and that India just dropped it as a recommended treatment, all suggests either the data from the studies are flawed, or how we make decisions about such important matters is. (I am no doctor or scientist: but Bret Weinstein has firm views on which of the two is more likely.)
Of course, a faster *global* recovery from Covid would mean we wouldn’t need as much fiscal and monetary stimulus in the first place. Yet even so, perhaps we aren’t having the well-rounded “have we tried this?” discussions about the realities of the best ways to treat either inflation or inflammation......
....MORE
And a very important repost, originally linked on October 8, 2021:
Money, Money, Money: "A Self-Fulfilling Prophecy: Systemic Collapse and Pandemic Simulation"
Is this why we had lockdowns?
From The Philosophical Salon, where they don't sing songs from the O'Jays, August 16:
A year and a half after the arrival of Virus, some may have started wondering why the usually unscrupulous ruling elites decided to freeze the global profit-making machine in the face of a pathogen that targets almost exclusively the unproductive (over 80s). Why all the humanitarian zeal? Cui bono? Only those who are unfamiliar with the wondrous adventures of GloboCap can delude themselves into thinking that the system chose to shut down out of compassion. Let us be clear from the start: the big predators of oil, arms, and vaccines could not care less about humanity.
Follow the moneyIn pre-Covid times, the world economy was on the verge of another colossal meltdown. Here is a brief chronicle of how the pressure was building up:June 2019: In its Annual Economic Report, the Swiss-based Bank of International Settlements (BIS), the ‘Central Bank of all central banks’, sets the international alarm bells ringing. The document highlights “overheating […] in the leveraged loan market”, where “credit standards have been deteriorating” and “collateralized loan obligations (CLOs) have surged – reminiscent of the steep rise in collateralized debt obligations [CDOs] that amplified the subprime crisis [in 2008].” Simply stated, the belly of the financial industry is once again full of junk.
9 August 2019: The BIS issues a working paper calling for “unconventional monetary policy measures” to “insulate the real economy from further deterioration in financial conditions”. The paper indicates that, by offering “direct credit to the economy” during a crisis, central bank lending “can replace commercial banks in providing loans to firms.”
15 August 2019: Blackrock Inc., the world’s most powerful investment fund (managing around $7 trillion in stock and bond funds), issues a white paper titled Dealing with the next downturn. Essentially, the paper instructs the US Federal Reserve to inject liquidity directly into the financial system to prevent “a dramatic downturn.” Again, the message is unequivocal: “An unprecedented response is needed when monetary policy is exhausted and fiscal policy alone is not enough. That response will likely involve ‘going direct’”: “finding ways to get central bank money directly in the hands of public and private sector spenders” while avoiding “hyperinflation. Examples include the Weimar Republic in the 1920s as well as Argentina and Zimbabwe more recently.”
22-24 August 2019: G7 central bankers meet in Jackson Hole, Wyoming, to discuss BlackRock’s paper along with urgent measures to prevent the looming meltdown. In the prescient words of James Bullard, President of the St Louis Federal Reserve: “We just have to stop thinking that next year things are going to be normal.”
15-16 September 2019: The downturn is officially inaugurated by a sudden spike in the repo rates (from 2% to 10.5%). ‘Repo’ is shorthand for ‘repurchase agreement’, a contract where investment funds lend money against collateral assets (normally Treasury securities). At the time of the exchange, financial operators (banks) undertake to buy back the assets at a higher price, typically overnight. In brief, repos are short-term collateralized loans. They are the main source of funding for traders in most markets, especially the derivatives galaxy. A lack of liquidity in the repo market can have a devastating domino effect on all major financial sectors.
17 September 2019: The Fed begins the emergency monetary programme, pumping hundreds of billions of dollars per week into Wall Street, effectively executing BlackRock’s “going direct” plan. (Unsurprisingly, in March 2020 the Fed will hire BlackRock to manage the bailout package in response to the ‘COVID-19 crisis’).
19 September 2019: Donald Trump signs Executive Order 13887, establishing a National Influenza Vaccine Task Force whose aim is to develop a “5-year national plan (Plan) to promote the use of more agile and scalable vaccine manufacturing technologies and to accelerate development of vaccines that protect against many or all influenza viruses.” This is to counteract “an influenza pandemic”, which, “unlike seasonal influenza […] has the potential to spread rapidly around the globe, infect higher numbers of people, and cause high rates of illness and death in populations that lack prior immunity”. As someone guessed, the pandemic was imminent, while in Europe too preparations were underway (see here and here).
18 October 2019: In New York, a global zoonotic pandemic is simulated during Event 201, a strategic exercise coordinated by the Johns Hopkins Biosecurity Center and the Bill and Melinda Gates Foundation.
21-24 January 2020: The World Economic Forum’s annual meeting takes place in Davos, Switzerland, where both the economy and vaccinations are discussed.
23 January 2020: China puts Wuhan and other cities of the Hubei province in lockdown.
11 March 2020: The WHO’s director general calls Covid-19 a pandemic. The rest is history.
Joining the dots is a simple enough exercise. If we do so, we might see a well-defined narrative outline emerge, whose succinct summary reads as follows: lockdowns and the global suspension of economic transactions were intended to 1) Allow the Fed to flood the ailing financial markets with freshly printed money while deferring hyperinflation; and 2) Introduce mass vaccination programmes and health passports as pillars of a neo-feudal regime of capitalist accumulation. As we shall see, the two aims merge into one.
In 2019, world economy was plagued by the same sickness that had caused the 2008 credit crunch. It was suffocating under an unsustainable mountain of debt. Many public companies could not generate enough profit to cover interest payments on their own debts and were staying afloat only by taking on new loans. ‘Zombie companies’ (with year-on-year low profitability, falling turnover, squeezed margins, limited cashflow, and highly leveraged balance sheet) were rising everywhere. The repo market meltdown of September 2019 must be placed within this fragile economic context.
When the air is saturated with flammable materials, any spark can cause the explosion. And in the magical world of finance, tout se tient: one flap of a butterfly’s wings in a certain sector can send the whole house of cards tumbling down. In financial markets powered by cheap loans, any increase in interest rates is potentially cataclysmic for banks, hedge funds, pension funds and the entire government bond market, because the cost of borrowing increases and liquidity dries up. This is what happened with the ‘repocalypse’ of September 2019: interest rates spiked to 10.5% in a matter of hours, panic broke out affecting futures, options, currencies, and other markets where traders bet by borrowing from repos. The only way to defuse the contagion was by throwing as much liquidity as necessary into the system – like helicopters dropping thousands of gallons of water on a wildfire. Between September 2019 and March 2020, the Fed injected more than $9 trillion into the banking system, equivalent to more than 40% of US GDP.
The mainstream narrative should therefore be reversed: the stock market did not collapse (in March 2020) because lockdowns had to be imposed; rather, lockdowns had to be imposed because financial markets were collapsing. With lockdowns came the suspension of business transactions, which drained the demand for credit and stopped the contagion. In other words, restructuring the financial architecture through extraordinary monetary policy was contingent on the economy’s engine being turned off. Had the enormous mass of liquidity pumped into the financial sector reached transactions on the ground, a monetary tsunami with catastrophic consequences would have been unleashed.
As claimed by economist Ellen Brown, it was “another bailout”, but this time “under cover of a virus.” Similarly, John Titus and Catherine Austin Fitts noted that the Covid-19 “magic wand” allowed the Fed to execute BlackRock’s “going direct” plan, literally: it carried out an unprecedented purchase of government bonds, while, on an infinitesimally smaller scale, also issuing government backed ‘COVID loans’ to businesses. In brief, only an induced economic coma would provide the Fed with the room to defuse the time-bomb ticking away in the financial sector. Screened by mass-hysteria, the US central bank plugged the holes in the interbank lending market, dodging hyperinflation as well as the ‘Financial Stability Oversight Council’ (the federal agency for monitoring financial risk created after the 2008 collapse), as discussed here. However, the “going direct” blueprint should also be framed as a desperate measure, for it can only prolong the agony of a global economy increasingly hostage to money printing and the artificial inflation of financial assets....
....MUCH MORE
"Lockdowns,” the mass quarantine of both sick and healthy people, have never before been used for disease mitigation in the modern Western world. Previously, the strategy had been systematically ruled out by the pandemic plans of the World Health Organization (WHO) and by health experts of every developed nation. So how did we get here?....And:
Keep that in mind, quarantines of healthy people as a public health measure was almost unheard of in all of human history prior to the early months of 2020. More to come
