Plume Economics

Central banking, dishonest money, and big bank bailouts.  Earlier this week we referred to these as a trifecta of depravity.  We also noted how through the Fed’s mechanism of mass money creation financial assets – overwhelmingly owned by the wealthy – are floated up on a sea of debt.

The general public has been well aware for some time now that the Federal Reserve borrows money into existence and loans it to the Treasury.  That secret’s been out of the bag for a while.  What’s more, it’s espoused as an integral monetary policy.  Manipulating interest rates down is supposed to stimulate demand and boost the economy…its actual effect has been to boost asset prices.

But if you were still under the supposition that the stock market is a last bastion of free market capitalism, unhindered and unfettered by central bank intervention, we must apologize.  For we must forever end your bliss.  You see, central banks the world over are creating money from nothing and using it to buy stocks.

“A cluster of central banking investors has become major players on world equity markets,” says a report published this week by the Official Monetary and Financial Institutions Forum (OMFIF), a central bank research and advisory group.

“Central banks’ actions aimed at stimulating economies, including quantitative easing, have deliberately sought to push investors into riskier assets, and share prices have risen sharply since 2009.”

Why the Stock Market Goes Up

“In the aftermath of the financial crisis, different forms of ‘state capitalism’ have come to the fore, the report says: ‘Whether or not this trend is a good thing may be open to question.  What is incontestable is that it has happened.’”

What gives?

Over the last several years we’ve wondered many times…just how is it the stock market is soaring to such dizzying heights?  Surely it’s not being driven by robust economic growth?  Certainly, it’s not an expectation of dramatic increases in future earnings?

You know what we’re talking about.  A glimpse around town, a scan of the headlines, or a review of Fed minutes…DOW 17,000…S&P 500 2,000.  Things never seem to add up.

On the one hand there’s rising asset prices and massive wealth ballooning of the top 1 percent.  On the other hand there’s the vanishing of decent paying jobs and the vise of debt clamping down on the middle class…crushing the life out of them.

We should have known all along.  Central banks are directly intervening in stock markets and pumping them up to unsubstantiated altitudes.  The effects are self-evident…but more so in hindsight…

Plume Economics

“While most have assumed that this is likely,” explains GlobalResearch, “the recent exuberance in stocks has largely been laid at the foot of another irrational un-economic actor – the corporate buyback machine.  However, as The FT reports, what we have speculated as fact for many years now (given the death cross of irrationality, plunging volumes, lack of engagement, and of course dwindling credibility of central planners)… is now fact…

“Central banks around the world, including China’s, have shifted decisively into investing in equities.”  What to make of it?

This is the rudimentary and deceitful world we live in.  Where an honest day’s work for an honest day’s pay has all but been obliterated.  In return, we have bogus financial markets flush with bogus money underpinning a global economy that’s becoming more unstable with each turn of the sun.

We assume that, like us, you get to it each day to earn your daily bread.  Maybe you skimp.  Maybe you save.  Perhaps your boss has you work late and your clients crap all over you. All the while, digital monetary units are being emitted into bond and stock markets like dirty smokestack plumes from a coal fired power plant.

How this all ends – or when – is yet unknown.  But we’re certain something wicked is bearing down upon us like an El Nino storm.  Cataclysm and destruction are the natural consequence of uncontrolled deception.

Sincerely,

MN Gordon
for Economic Prism

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