Thursday, October 16, 2014

2008 Redux?

2008 Redux?

by Stephen Lendman

Headlines aren't reassuring. They're unnerving. Today's Wall Street Journal headlined "Stocks Swoon in Frenzied Trading."

"Dow Slides More than 450 Points Before Climbing; Treasury Yields Touch 16-Month Low." Doing so shows low growth expectations. Maybe heading for decline.

Economist John Williams calls GDP guesstimates "the most worthless of economic series." They over-estimate growth. They show it in times of decline.

On Thursday, the Financial Times headlined "US and European stocks resume slide." Wednesday's Dow "had its biggest intraday fall for three years." 

The headlined story was rewritten after Thursday volatility helped stocks rebound. Things can turn on a dime and head valuations lower.

Sentiment is weak. Thursday's Dow opened down 175 points. Volatility defines things. At times extreme.

E-minis are futures contracts. They represent a portion of standard futures values.

Their liquidity is virtually zero. Massive selling soaked up what remained. Huge volume soaked up the "entire S&P e-mini liquidity stack," said Zero Hedge.

"No liquidity means whiplash galore…If you thought the last several days were volatile in the market, you ain't seen nothing yet."

E-mini S&P future contract (ES) levels are "zero, zilch, nada liquidity…" If yesterday's huge volume spills into today, it's up against market forces with "virtually no order book buffer…"

"(I)f you always wanted to topple the rigged house of cards with a handful of e-minis, today may be your chance."

Or perhaps Friday or Monday next week. According to market analyst Sebastien Galy:

"The liquidity crisis many had waited for is unfolding. Theoretically it is an absence of speculators willing to absorb risk."

The New York Times headlined "Volatility Hits European and Asian Stocks After Frenzy on Wall Street." Other broadsheet headlines were similar.

According to equity analyst Keith Bowman:

"What we’ve seen over the last couple of days shows the level of nervousness that has been around for some time."

Lots of questions remain about global economic conditions, he added.

Naked Capitalism's Yves Smith said "(t)he 'Fed can fix everything' premium has left the market."

Panic replaced it. For how long remains to be seen. Labor market conditions are too weak to sustain growth. Pessimism replaced optimism. Perhaps for some time.

QE kept markets levitating way above fair value. What can't go on forever, won't. Push eventually meets shove. Reckoning day eventually arrives.

"This is what happens, Janet, when you take the punchbowl away," said Zero Hedge.

QE is supposed to end this month. Whether so remains to be seen. On Thursday, St. Louis Fed president James Bullard said bond-buying should continue until America's economic outlook clarifies.

Bullard believes ending QE is data dependent. San Francisco Fed president John Williams supports "additional asset purchases" under deflationary conditions.

"If we really get a sustained, disinflationary forecast...then I think moving back to additional asset purchases in a situation like that should be something we should seriously consider," he said.

Currently about $15 billion in Treasuries are being bought monthly. Perhaps Fed governors intend keeping the punch bowl for now.

Zero Hedge disagrees. It believes QE will end "because 'the economy is recovering' narrative is failing (as the world wakes up to the fact that The Fed is being forced to exit due to having broken the markets)."

In September. Yellen said asset purchases will end in October. According to Zero Hedge:

"Deficits are shrinking and the Fed has less and less room for its buying."

"Under the surface, various non-mainstream technicalities are breaking in the markets due to the size of the Fed's position (repo markets, bond specialness, and fail-to-delivers among them)."

"Sentiment is critical. If the public believes...that the central bank is monetizing the government's debt (which it clearly is), then the game accelerates away from them very quickly - and we suspect they fear we are close to that tipping point."

"The rest of the world is not happy. As Canada noted early in the year, and US monetary policy was discussed at the G-20."

Fed governors are concerned. They're "cornered," said Zero Hedge. They need to end QE entirely. No matter what data show.

QE works when properly used. For Main Street to combat protracted Depression conditions. 

For badly needed growth and job creation. Not for bankers for greater enrichment. For speculation, big salaries and bonuses.

Financial war rages. America and other societies are affected. Ordinary people are hurt most. Hard times keep getting harder.

Multiple QE rounds reflected open-ended money-grabbing. Nearly free for bankers and investors. 

At the expense of helping ordinary people. Forcing millions to live from paycheck to paycheck. One missed one away from homelessness, hunger and despair.

QE can't create jobs or stimulate growth by handing it to bankers and other financial interests. Enriching them at the expense of ordinary people and real economies alone is accomplished.

It remains to be seen what happens going forward. For now, expect volatility to stay.

What's ahead if markets crater? If another banking crisis occurs? Perhaps worse than 2008. Earlier articles addressed it.

Prepare now while there's time. Forewarned is forearmed. Finance is a new form of warfare. It's more powerful than standing armies. 

Banking giants run things. Money power has final say. Bank accounts aren't safe. Depositor theft is coming.

Doing so is called "bail-ins." It's code language for grand theft. Instead of breaking up, nationalizing, or closing down failed banks, depositor funds will keep them operating.

Enormous amounts are there for the taking. They're low-hanging fruit. It's a treasure trove begging to be looted. Legislative shenanigans legitimize it.

Proposed FDIC legislation lets it "take control of banks it deems systematically important and write down your savings (and other bank accounts) as part of the bail-in."

Depositor haircuts are the new normal. Banks legally own your funds. In return for IOUs or promises to pay.

Banks once repaid depositors on demand. A joint December 10, 2012 FDIC-Bank of England (BOE) paper changed things. Plans to loot customer accounts were made earlier. 

The Bank for International Settlements originated them. It's the privately owned central bank for central bankers. Major ones have final say. 

Looting depositor accounts is official policy. Cyprus wasn't a one-off. FDIC insurance doesn't matter. Funds in too-big-to-fail banks and others important to save are up for grabs.

They have our money. We get IOUs in bank stock. Ready cash on demand is gone. Take the money and run replaced it.

Depositors anywhere may be hung out to dry. Gold, silver and other valuables in safety deposit boxes aren't safe. 

Homeland Security informed banks in writing. It may inspect their contents on demand. 

Under Patriot Act provisions, it may seize them with no warrant. It can do it anywhere. Banco de Mattress isn't safe.  

Your money is theirs if they want it. Insured bank accounts no longer matter. Funds in them are up for grabs on demand.

If banking crisis conditions erupt. The late Bob Chapman said it's just a matter of time. Much worse than 2008, he believed.

Reckless bank policies assure it, he said. Ellen Brown cited Michael Snyder's article titled "5 U.S. Banks Each Have More Than 40 Trillion Dollars In Exposure To Derivatives."

They're hugely vulnerable. They're heading for trouble. When the outsized derivatives bubble bursts. Shock waves will rock global economies.

Too-big-to-fail banks are 37% larger than in 2008, Brown explains. "Five banks now account for 42% of all US loans…"

Six major ones "control 67% of all banking assets." Monster-sized too-big-to-fail banks shouldn't be allowed to exist.

They're crime families, not banks. They make make money the old-fashioned way.

Through fraud, grand theft, market manipulation, front-running,  pumping and dumping, scamming investors, buying politicians, bailouts with taxpayer money, and going forward stealing it outright from depositor accounts.

Outsized derivatives gambling compounds their recklessness. Chapman was right. Another financial crisis is inevitable.

Ordinary people will suffer most like last time. They never recovered from 2008. 

They'll be worse off than ever next time. Stripped of their meager savings. 

Millions left unemployed. With eroding social protections. Force-fed neoliberal harshness. Monied interests alone served.

Race to the bottom conditions exist. Bipartisan complicity supports it. Ordinary people are increasingly on their own out of luck.

Inequality is institutionalized. Expect harder than ever hard times when things crater. It's not a matter of if, but when. 

How bad will things get? Likely worse than Great Depression harshness. With social justice targeted for elimination.

With ordinary people hung out to dry. It bears repeating. On their own. Out of luck. 

Today's America is the United States of I Don't Care. Growing poverty, homelessness and hunger don't matter. 

It's the new normal. Expect worse ahead. Expect less help when most needed. 

Policymakers don't give a damn. For sure not now.

Stephen Lendman lives in Chicago. He can be reached at 

His new book as editor and contributor is titled "Flashpoint in Ukraine: US Drive for Hegemony Risks WW III."

Visit his blog site at 

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