'It’s unethical to impose years of negative real returns upon savers, coercing them into the securities markets. Having a small group of central bankers manipulating market yields is the antithesis of free market capitalism. And the longer zero rates and artificially low market yields are imposed, the more extreme the underlying market, financial and economic maladjustment. Injecting Trillions of new “money” directly into the securities markets is pernicious inflationism and a deleterious redistribution of wealth. Yet, to the markets, none of that matters. What matters tremendously is that the Federal Reserve sticks with policies to inflate stock, bond and home prices.''Late-eighties “decade of greed” excesses were incredible – until they were completely overshadowed by the “roaring nineties”. I thought 1999 was a once-in-a-career experience. The 2008 mortgage finance Bubble collapse destroyed the myth that Washington had everything under control. Yet we’re now into the 13th year of the global government finance Bubble. Especially since the pandemic crisis response, manic excess has gone off the rails. The world should be panicky. Instead, it’s all business as usual, with near absolute faith in the power of central bank QE.
It’s unethical to impose years of negative real returns upon savers, coercing them into the securities markets. Having a small group of central bankers manipulating market yields is the antithesis of free market capitalism. And the longer zero rates and artificially low market yields are imposed, the more extreme the underlying market, financial and economic maladjustment. Injecting Trillions of new “money” directly into the securities markets is pernicious inflationism and a deleterious redistribution of wealth. Yet, to the markets, none of that matters. What matters tremendously is that the Federal Reserve sticks with policies to inflate stock, bond and home prices.
I have posited that the great vulnerability of contemporary finance is that it doesn’t work in reverse. It appears miraculous, so long as finance is expanding and asset prices are inflating. Markets are these days content to disregard myriad risks because of confidence in the Fed’s willingness and capacity to sustain the monetary boom. Non-crisis, open-ended QE changed everything.
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Meanwhile, there’s global climate change. Similar to other major risks, markets today instinctively view climate change as one more development that guarantees the Fed and global central bankers will sustain monetary stimulus indefinitely.
August 11 – Associated Press (Nicholas K. Geranios): “The wheat harvest on Marci Green’s farm doesn’t usually begin until late August, but a severe drought stunted this year’s crop and her crews finished harvesting last week because she didn’t want what had grown so far to shrivel and die in the heat. It’s the same story across the wheat country of eastern Washington state, a vast expanse of seemingly endless stretches of flatlands with rolling hills along its edges that produces the nation’s fourth largest wheat crop. It’s been devastated by a drought the National Weather Service has classified as ‘exceptional’ and the worst since 1977. ‘This is definitely the worst crop year we have had since we started farming 35 years ago,’ said Green, whose family is the sixth generation on the same farming land just south of the city of Spokane.”The stunted wheat crop in Washington is but one example. California farmers pulling out almond trees. Farmers in California, Oregon, Utah and elsewhere are being hit with water restrictions, as half the country suffers drought conditions. Reservoirs are running dry. From New York to California, there are calls to conserve electricity.
A Friday Reuters headline: “’Once in 100 Years’ Drought Seen Affecting Argentine Grains Exports Into 2022.” Last week from Bloomberg: “The Argentine River That Carries Soybeans to World Is Drying Up.” And this week: “Sugar Soars as Crops in World’s Top Producer Brazil Hit by Frosts.” And today from CNN: “Get Used to Surging Food Prices: Extreme Weather is Here to Stay.”
The “inflation is transitory” assertion completely disregards the possibility that climate change could wreak havoc on food production, harvesting and transportation. It will impact production, supply chains and inventory management. Prepare for myriad disruptions in key facets of economic development. Life as we’ve known it could change profoundly, with inconceivable effects on many prices and market structures. Of course, manic markets will ignore such risks until they get hit over the head by them. This long, hot summer makes it seem as if that day is approaching.'
- Doug Noland,
Uncertainty, August 14
Context(August, 2021) - '..we’ve reached the most extreme valuations in the history of the U.S. financial markets..'(Climate Change) - '..Crop yields from Texas north to Nebraska could fall by up to 90 percent by as soon as 2040..''..if we can cut global emissions in half by 2030 and reach net zero by the middle of this century, we can halt and possibly reverse the rise in temperatures.'(Banking Reform - English/Dutch) '..a truly stable financial and monetary system for the twenty-first century..'