Commentary on Political Economy

Thursday 3 March 2022

The Terry McCrann article  ought to be read word for word. I was going to write a similar piece for my blog, but I have neither the time nor the inclination - or it's the lack of inclination that prevents the employment of my spare time. The West is now so far down the road to self-destruction that one can't beat to watch the blazing spectacle.


It is of course impossible to overstate the collective and individual greed that both drives and thrives on Wall St.

It is similarly impossible to overstate the sheer, basic, stupidity of all those ‘smartest guys (mostly, still, gender specific) in the room’, who infest middle and lower Manhattan and spread their spiritual and ethical virus to the eastern end of Long Island on weekends.

Combine the greed and the stupidity and you have a non-wonder to behold. We saw it again in the 600-point surge in the Dow overnight Wednesday.

Why the surge?

Because Fed head Jerome Powell said explicitly he would raise the Fed’s policy interest rate by only 25 points at its mid-March meeting; and then ‘go easy’ on future rate hikes.

Forget about Ukraine, already a catastrophe and with the potential to get worse, much worse.

Forget about surging oil, gas and coal prices – hmm, quite a lot of people outside Australia want to keep their lights on.

Forget about surging global inflation, whether old style raging boom and bust, or the stagflation variety we first saw in the 1970s.

Forget all that; the Fed will – not even a wink-wink, nudge-nudge, but an explicit public promise – ‘look after us’.

The Fed will put Wall St first, as it always does, on the spurious claim that financial instability – read: bonuses cut to the hundreds of thousands not the millions that are theirs ‘of right’ – would be so, so damaging to the real US economy and real (the other 325m or so) Americans.

US Federal Reserve Board Chair Jerome Powell. Picture:Win McNamee/Getty Images/AFP
US Federal Reserve Board Chair Jerome Powell. Picture:Win McNamee/Getty Images/AFP

So, the Fed promises to keep the 150-proof monetary hooch pouring into the proverbial punchbowl, as it has done continuously since the GFC in 2008.

OK, so the greed – and the exuberance - is obvious; what do I mean by the stupidity?

Surely, it’s reasonable for the Fed to step cautiously in the context of the at least uncertainty and potential economic catastrophes– to say nothing of the human – that grow more likely and potentially much worse as each day passes from the Russian invasion?

The stupidity is two-fold.

First, that a 25-point hike in two weeks rather than the 50-point hike the Fed was going to deliver up until Wednesday last week, will make the slightest difference to anything.

It’s neither going to offset all the negatives that are flowing out from the Ukraine disaster, far less actually stop them happening. Oh, the Fed’s only hiking by 25 points; I, Vladimir, will call the invasion off.

Yet those smartest (sic) guys embraced it as if it would.

It’s as if – strictly first class only, of course – passengers on the Titanic, offered free caviar and champagne, rushed gleefully to the restaurants and saloons rather than to the life boats.

The Ukrainian disaster is going to play out in its own seriously negative way across financial markets and the world economy.

The consequences will be negative; even if, as I discussed earlier in the week, it proves a (short-term) bonanza to a country like Australia which is long coal and gas and wheat exports.

Quite separately is the looming implosion in especially the US but generally in the world from the inflation as a consequence of the trillions of dollars that have been so irresponsibly printed by the major central banks.

For the last year, as inflation erupted under the Fed’s nose, there have been two ‘exits’.

The Fed bites the bullet and hikes rates – probably sending the Dow below 20,000.

The Fed grabs any excuse to delay; and as history tells us, we end up with an even bigger disaster.

And now we’ve got two disasters building together; one in eastern Europe, and the one made worse by Powell’s spinelessness and own stupidity, along the Washington-Manhattan corridor.


 It is of course impossible to overstate the collective and individual greed that both drives and thrives on Wall St.

It is similarly impossible to overstate the sheer, basic, stupidity of all those ‘smartest guys (mostly, still, gender specific) in the room’, who infest middle and lower Manhattan and spread their spiritual and ethical virus to the eastern end of Long Island on weekends.

Combine the greed and the stupidity and you have a non-wonder to behold. We saw it again in the 600-point surge in the Dow overnight Wednesday.

Why the surge?

Because Fed head Jerome Powell said explicitly he would raise the Fed’s policy interest rate by only 25 points at its mid-March meeting; and then ‘go easy’ on future rate hikes.

Forget about Ukraine, already a catastrophe and with the potential to get worse, much worse.

Forget about surging oil, gas and coal prices – hmm, quite a lot of people outside Australia want to keep their lights on.

Forget about surging global inflation, whether old style raging boom and bust, or the stagflation variety we first saw in the 1970s.

Forget all that; the Fed will – not even a wink-wink, nudge-nudge, but an explicit public promise – ‘look after us’.

The Fed will put Wall St first, as it always does, on the spurious claim that financial instability – read: bonuses cut to the hundreds of thousands not the millions that are theirs ‘of right’ – would be so, so damaging to the real US economy and real (the other 325m or so) Americans.

US Federal Reserve Board Chair Jerome Powell. Picture:Win McNamee/Getty Images/AFP
US Federal Reserve Board Chair Jerome Powell. Picture:Win McNamee/Getty Images/AFP

So, the Fed promises to keep the 150-proof monetary hooch pouring into the proverbial punchbowl, as it has done continuously since the GFC in 2008.

OK, so the greed – and the exuberance - is obvious; what do I mean by the stupidity?

Surely, it’s reasonable for the Fed to step cautiously in the context of the at least uncertainty and potential economic catastrophes– to say nothing of the human – that grow more likely and potentially much worse as each day passes from the Russian invasion?

The stupidity is two-fold.

First, that a 25-point hike in two weeks rather than the 50-point hike the Fed was going to deliver up until Wednesday last week, will make the slightest difference to anything.

It’s neither going to offset all the negatives that are flowing out from the Ukraine disaster, far less actually stop them happening. Oh, the Fed’s only hiking by 25 points; I, Vladimir, will call the invasion off.

Yet those smartest (sic) guys embraced it as if it would.

It’s as if – strictly first class only, of course – passengers on the Titanic, offered free caviar and champagne, rushed gleefully to the restaurants and saloons rather than to the life boats.

The Ukrainian disaster is going to play out in its own seriously negative way across financial markets and the world economy.

The consequences will be negative; even if, as I discussed earlier in the week, it proves a (short-term) bonanza to a country like Australia which is long coal and gas and wheat exports.

Quite separately is the looming implosion in especially the US but generally in the world from the inflation as a consequence of the trillions of dollars that have been so irresponsibly printed by the major central banks.

For the last year, as inflation erupted under the Fed’s nose, there have been two ‘exits’.

The Fed bites the bullet and hikes rates – probably sending the Dow below 20,000.

The Fed grabs any excuse to delay; and as history tells us, we end up with an even bigger disaster.

And now we’ve got two disasters building together; one in eastern Europe, and the one made worse by Powell’s spinelessness and own stupidity, along the Washington-Manhattan corridor.

No comments:

Post a Comment