To Unleash or Not to Unleash, That is the Question…

LOVINGSTON, VIRGINIA –  Corporate earnings have been going down for nearly three years. They are now about 10% below the level set in the late summer of 2014. Why should stocks be so expensive?

 

Example of something that one should better not unleash. The probability that a win-lose proposition will develop upon meeting it seems high. It wins, because it gets to eat…

Image credit: Urs Hagen

 

Oh, yes… because the Trump Team is going to light a fire under Wall Street. But they must be wondering about that, too. Raising up stock prices – as we’ve seen over the last eight years – is not the same as restoring economic growth and family incomes.

And as each day passes, the list of odds against either seems to be getting longer and longer. As the petty fights, silly squabbles, and tweet storms increase, the less ammunition the administration has available to fight a real battle with Congress or the Deep State.

Still – “Goldman Stock Hits Record on Bets Trump Will Unleash Wall Street,” reads a Bloomberg headline. Goldman Sachs is a pillar of the Establishment, with its man, Steve Mnuchin, heading the Department of the Treasury. So a win for Goldman is not necessarily a win for us.

“Unleashing” suggests a win-win deal, as in allowing the financial industry to get on with its business. But there are different kinds of “unleashings.” Some things – like Dobermans – are kept on a leash for a good reason. Unleashing the mob… or a war… might not be a good idea, either.

Untying Wall Street from bureaucratic rules is at least heading in the right direction. But it will only benefit the Main Street economy if Wall Street is doing business honestly, facilitating win-win deals by matching real capital up with worthy projects.

 

A chart of the median price/revenue ratio of S&P 500 Index components recently shown by John Hussman. We conclude that Wall Street was “unleashed” long before Mr. Trump appeared on the political scene. But why this should be considered bad? Haven’t those riding this market to such absurd levels of overvaluation made out like bandits? Why not be happy for them and leave it at that? Unfortunately, it is not that simple. Let us  consider just two problems. 1. Titles to capital only become extremely overvalued when the money supply and interest rates have been tampered with. These valuations are a symptom of extreme shifts in relative prices in the economy – they prove ipso facto that large amounts of scarce capital have been and continue to be malinvested. All of society will pay a price for this. 2. From the perspective of all market participants, whether investing is their job, or whether they are only indirectly exposed to the market through e.g. a pension fund, there will be no winners once the music stops. When an investor takes a profit, someone else must buy from him. Regardless of the trend in prices, there are no “unowned” stocks floating about in the ether. There is no way the class of investors as a whole can escape the eventual losses. Even worse, when prices retreat, the debt that has been incurred on the way up – from margin debt to the debt companies have taken up to buy back overpriced stocks – is not going to shrink with them – click to enlarge.

 

Deep State Industry

That, of course, is what it is NOT doing. It is a Deep State industry aided and abetted by the Fed’s fake money. The “capital” (really, money out of thin air) it helps allocate is fraudulent – provided to the elite at preferential rates by the Fed banking cartel.

That leads to a whole host of fraudulent transactions, losing propositions, and win-lose deals. The public has to borrow money at twice the interest rates of the elite in business, finance, and government. Why? The risk is lower.

If Goldman or GM gets into financial trouble – even with their favored lending rates – the feds bail them out. If the man in the street is unable to pay his mortgage, he loses his house.

This unfairness is at the heart of today’s economic system. It’s also the source of the discontent felt – but maybe not fully understood – by the masses and the current administration.

 

Dr. Fed explains to J6P how it works.

Cartoon by Rick McKee

 

Fraudulent System

The typical household has less earned income today than when the century began. It should have been the biggest, most successful period in human history.

Why are American wages sagging?

After all, the number of patents has exploded. So has the pace of technological innovation. The number of people with advanced college degrees, too.

Meanwhile, the feds have pumped $37 trillion in excess credit – above and beyond the traditional relationship between debt and GDP – into the system over the last 30 years. And corporations are more flushed with cash than ever before…

So, how come an economy with more technology than ever before, with more trained workers than ever before, with more “capital” available than ever before –

lowers household incomes, grows at only roughly half the rate of the 1960s and 1970s and registers the weakest “recovery” in history? How come?

 

As noted above, some things should better not be unleashed… Nixon probably didn’t even realize what he had let loose when he defaulted on the gold exchange standard. But that’s precisely the problem, whether it’s politicians or bureaucrats, every time they tinker with the monetary system in grand style, they have actually no idea what they are doing. One thing is clear beyond doubt though – a system characterized by constant inflation of money and credit benefits a small group to the detriment of everybody else – click to enlarge.

 

Globalization, Mexico, regulation, China, automation, inequality, financialization – they all have been blamed. But you know the real answer: because the money system is counterfeit.

It benefits the elite of Washington and Wall Street, but not the rest of us. And “unleashing” Wall Street – without a return to honest money – means allowing this Deep State beast to prey even more on average Americans.

 

Charts by John Hussman, St. Louis Federal Reserve Research

 

Chart and image captions by PT

 

The above article originally appeared as “Should Trump “Unleash” Wall Street?at the Diary of a Rogue Economist, written for Bonner & Partners. Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets.

 


 

Emigrate While You Can... Learn More

 


 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • Japan: It isn’t What the Media Tell You
      Known for Being Terrible For the past few decades, Japan has been known for its stagnant economy, falling stock market, and most importantly its terrible demographics.     A chart of Japan's much-bewailed demographic horror-show. Most people consider a declining population to be a bad thing due to the implications for assorted state-run pay-as-you-go Ponzi schemes, primarily those related to retirement. It is hard to be sympathetic, since it would have been possible to...
  • Bitcoin Facts
      A Useful Infographic When we last wrote more extensively about Bitcoin (see Parabolic Coin – evidently, it has become a lot more “parabolic” since then), we said we would soon return to the subject of Bitcoin and monetary theory in these pages. This long planned article was delayed for a number of reasons, one of which was that we realized that Keith Weiner's series on the topic would give us a good opportunity to address some of the objections to Bitcoin's fitness as a medium of...
  • Inflation and Gold - Precious Metals Supply and Demand
      Reasons to Buy Gold The price of gold went up $19, and the price of silver 42 cents. The price action occurred on Monday, Wednesday and Friday though so far, only the first two price jumps reversed. We promise to take a look at the intraday action on Friday.   File under “reasons to buy gold”: A famous photograph by Henri Cartier-Bresson of a rather unruly queue in front of a bank in Shanghai in 1949 in the final days of Kuomintang rule. When it dawned on people that the...
  • An Update on Polly: She May be Coming Back to Life
      A Twitch of a Toe In our recent update on credit spreads we proposed to use the seemingly deceased  Monty Python parrot Polly as a stand-in for the suspicion of creditors in today's markets.  The question was whether Polly was indeed dead or merely in a deep coma. Depending on this, one should be able to gauge how powerful a miracle will be required to resurrect her.   Meet Polly. Is she alive?   In the first half of November there was actually a small sign that...
  • The Complete Idiot’s Guide to Being an Idiot
      Style Over Substance There are many things that could be said about the GOP tax bill.  But one thing is certain.  It has been a great show. Obviously, the time for real solutions to the debt problem that’s ailing the United States came and went many decades ago.  Instead of addressing the Country’s mounting insolvency, lawmakers chose expediency without exception.  They kicked the can from yesterday to today.   The empty chairs meeting – this is slightly...
  • Lessons from Squanto
      Standing In Your Way Governments across the planet will go to any length to meddle in the lives and private affairs of their citizens.  This is what our experiences and observations have shown.  What gives? For one, politicians have an aversion to freedom and liberty.  They want to control your behavior, choices, and decisions.  What’s more, they want to use your money to do so.   As this by now famous cartoon implies, the State is essentially a gang of criminals...
  • Precious Metals Supply and Demand – Thanksgiving Week
      Grain of Salt Required The price of gold fell $7, and that of silver 24 cents. This was a holiday shortened week, due to Thanksgiving on Thursday in the US (and likely thin trading and poor liquidity on Wednesday and Friday). So take the numbers this week, including the basis, with a grain of that once-monetary commodity, salt. We will keep the market action commentary brief.   Relatively modern examples of salt money which was widely used in African countries until the...
  • The Precious Metals Bears' Fear of Fridays
      Peculiar Behavior In the last issue of Seasonal Insights I have shown that the gold price behaves quite peculiarly in the course of the trading week. On average, prices rise almost exclusively on Friday. It is as though investors in this market were mired in deep sleep for most of the week.   The title of this blog post is a play of words on the title of an early Wim Wender movie, The Goalkeeper's Fear of the Penalty, which in turn is based on a famous novel by Peter Handke...
  • What’s the Point? Precious Metals Supply and Demand Report
      Questions and Answers A reader emailed us, to ask a few pointed questions. Paraphrasing, they are:   Who cares if dollars are calculated in gold or gold is calculated in dollars? People care only if their purchasing power has grown. What is the basis good for? Is it just mathematical play for gold theorists? How does knowing the basis help your readers? Is it just a theoretical explanation of what has already happened? Prove that if someone has known the basis...
  • The Zealous Pursuit of State-Sponsored Collapse
      When Bakers Go Fishing Government intervention into a nation’s economy is as foolish as attempting to control the sun’s rise and fall by law or force.  But that doesn’t mean governments don’t meddle each and every day with the best – and worst – of intentions.  The United States government is no exception.   From the “When the government helps the economy” collection: Breaking a few eggs while baking the bridge to nowhere omelet. [PT]   Over the...
  • The Party of Spend More vs. the Party of Tax Less
      Eternal Spendathon The Senate just passed a 500-page tax reform bill. Assuming it lives up to its promise, it will cut taxes on corporations and individuals. Predictably, the Left hates it and the Right loves it. I am writing to argue why the Right should hate it (no, not for the reason the Left does, a desire to get the rich).   The Federal debtberg has grown beyond all measure since Nixon's gold default. So has the money supply and the amount of private debt. No-one...
  • The Santa Claus Rally is Especially Pronounced in the DAX
      The Gift that Keeps on Giving Every year a certain stock market phenomenon is said to recur, anticipated with excitement by investors: the Santa Claus rally. It is held that stock prices typically rise quite frequently and particularly strongly just before the turn of the year.   Unbeknown to many, Santa Claus paid a high price for enriching investors [PT]   I want to show you the Santa Claus rally in the German DAX Index as an example. Price moves are often...

Support Acting Man

Top10BestPro
j9TJzzN

Austrian Theory and Investment

Archive

350x200

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com