And then the obvious question is – “Where do the central bankers get all this money?”
Only a few people think about that, and half of the people thinking about it don’t care that this “money” comes from nowhere. All they care about is the next quarter, the next day, the next tick, whatever helps them through their withdrawal.
“Just give me another fix Ms. Yellen. You know me. I need it. Don’t leave me out here all alone. I have beach house payments to make!”
It’s been said many times that this market is on drugs. That it can’t survive without periodic shots of monetary cocaine. (Not unlike a good many bankers, who prefer real cocaine.) But this most recent swoon and bend back upward should convince the last few holdouts. There is no real market. There is only a managed market (like a dealer manages an addict) which works primarily for the connected and the already rich. The stock market has always been a rich man’s game of course, but now it’s even more so, and now it’s obviously rigged.
This is corporate socialism. This is crony capitalism. This is a mistake. And it is a tragedy.
But does this mean that the true market mechanism in the stock market has been abolished? Oh no. Markets are like gravity. Even if they are twisted, and manipulated, dammed up, or otherwise managed there is a constant pull toward equilibrium. That doesn’t go away.
The problem is that after all the market distortion, when reality does come calling the economic dislocation is dramatic and far worse than what would have happened if the market had been just left to do its thing in the first place.
Such a disruption then naturally creates calls from bankers, governments, and everyday people for central banks to “do something.” This invariably means more intervention and more distortion in the effort to save the world from another economic downturn. And the cycle continues.
We are a coked out zombie economy. We’re alive but our eyes are vacant and our cheeks hollow.
Just whatever you do Ms. Yellen don’t stop that sweet sweet QE.
By estimating that zero stimulus would be consistent with a 10 percent quarterly drop in equities, they calculate it takes around $200 billion from central banks each quarter to keep markets from selling off.
With the Fed and counterparts peeling back their net liquidity injections from almost $1 trillion in 2012 toward that magic marker, King’s team said “a negative reaction in markets was long overdue.”
“We think the markets’ weakness owes more to an almost belated reaction to a temporary lull in central bank stimulus than it does to any reduction in the effect of that stimulus in propping up asset prices,” they said in an Oct. 17 report to clients.