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The Cost Of Easy Money Is Now Coming Due

The Cost Of Easy Money Is Now Coming Due

Via SchiffGold.com,

Since 2008, we have been in an era of unprecedented money printing and interest…

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5 months ago

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The Cost Of Easy Money Is Now Coming Due

Via SchiffGold.com,

Since 2008, we have been in an era of unprecedented money printing and interest rate suppression. Now the cost of all of that easy money is coming due.

We’ve been paying for it through price inflation, and now we’re paying for it through a deflating bubble economy as the Fed tries to undo its malfeasance.

In the wake of the financial crisis, the Federal Reserve pushed interest rates to zero and held them there for years. It also ran three rounds of quantitative easing, pumping trillions of dollars of freshly printed money into the economy. The Fed tried to “normalize” monetary policy by raising rates and shrinking its balance sheet in 2018, but it ended up aborting that attempt when the bubbles blown up by a decade of easy money started leaking air.

The pandemic gave the Fed cover to double cut rates again and double down on QE. In less than two years, the central bank expanded its balance sheet by nearly $5 trillion and flooded the economy with more money created out of thin air.

The bubbles blown up after 2008 got even bigger.

Now the Fed is trying to fight the inevitable price inflation.

WolfStreet perfectly summed up what has happened over the last 15 years.

The era of money-printing and interest-rate repression in the United States, which started in 2008, gave rise to all kinds of stuff, and the easy money kept going and kept going, and all this money needed to find a place to go, and then money-printing went hog-wild in 2020 and 2021. And the stuff it gave rise to just got bigger and bigger, and crazier and crazier. And much of this stuff is now in the process of coming apart, I mean falling apart, or getting taken apart in a controlled manner, and some stuff has already imploded in a messy way.”

In a nutshell, what the Fed giveth, the Fed taketh away.

The unraveling is easiest to see in the real estate market since it is one of the most interest rate-sensitive segments of the economy. In some markets during the Fed-induced boom, home prices spiked by 50% and 60%. That was on top of a huge price surge before the pandemic. But now the air is coming out of the bubble. Existing home sales have dropped for 10 straight months. Year-on-year, existing home sales have plummeted by 35.4%.

Home prices are beginning to fall as well, especially in the biggest bubble markets. In November, the median price of a house in San Francisco was down by 21% compared to a year ago, and down by 27% from May’s peak.

As WolfStreet put it, “There has been a sea-change in the real estate market. And it’s not pretty. But the bubble was so huge, and so magnificent, fueled by money-printing and interest rate repression, that the deflation of this bubble must by definition get messy.”

Easy money also helped blow up a cryptocurrency bubble. That bubble has popped.

A year ago, market capitalization in the crypto sector reached $3 trillion. But since then, the sector has been in a freefall. When the Fed started raising rates and shrinking its balance sheet, the whole thing just blows up.

The price of bitcoin has plunged by around 73%. Many of the hundreds of cryptocurrencies created during the mania have gone to zero and have been left for dead. Big companies built around crypto are going under.

“Crypto was one of the places where liquidity from money-printing went to,” WolfStreet said, “And now that the liquidity is being drained ever so slowly, the whole space started to collapse,”

The most visible bubble blew up in the stock market. Over the last decade-plus, we’ve seen a rash of crazy IPOs. Stocks for money-losing companies shot to the moon. All of the major stock market indices surged to record levels. The “fundamentals” in this stock market boom were easy money and speculative mania.

Now that the Fed has gone to a tighter monetary policy, the air is coming out of the stock market. Some of the most speculative stocks have collapsed by 70, 80, or even 90 percent. The tech-heavy NASDAQ has dropped over 34% from its highs. As WolfStreet accurately points out, the huge surge in the stock market that really started back in 2009 was fueled by money printing and artificially low interest rates.

And now we have QT and surging interest rates, and the whole circus is coming apart. Lots of these startups that became highfliers will end up in bankruptcy. Some already have. But it will drag out for a few years because there is still so much money floating around, and people are still dip-buying, and they’re still picking up these now penny stocks to try to make 100% in three days or whatever, it’s just like crypto trading.”

As WolfStreet notes, “There’s other crazy stuff that came out of the money-printing and interest rate repression era.” There are other bubbles. And they are all deflating.

Some have already imploded like a thousand US stocks and a gazillion cryptos and crypto companies. These 13 years of free money have turned out to be very costly afterwards.”

The only way to pump the bubbles back up is to go back to easy money. But that means more price inflation.

That puts the Federal Reserve in a no-win situation. It can stand firm in its inflation fights and let all of the bubbles deflate – which means a deep, painful recession. Or it can reverse course and try to rescue the bubble economy with more inflation

Tyler Durden Wed, 12/28/2022 - 12:09

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“What’s More Tragic Is Capitalism”: BLM Faces Bankruptcy As Founder Cullors Is Cut By Warner Bros

"What’s More Tragic Is Capitalism": BLM Faces Bankruptcy As Founder Cullors Is Cut By Warner Bros

Authored by Jonathan Turley,

Two years…

Published

12 hours ago

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May 28, 2023

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"What's More Tragic Is Capitalism": BLM Faces Bankruptcy As Founder Cullors Is Cut By Warner Bros

Authored by Jonathan Turley,

Two years ago, I wrote columns about companies pouring money into Black Lives Matter to establish their bona fides as “antiracist” corporations. The money continued to flow despite serious questions raised about BLM’s management and accounting. Democratic prosecutors like New York Attorney General Letitia James showed little interest in these allegations even as James sought to disband the National Rifle Association (NRA) over similar allegations. At the same time, Black Lives Matter co-founder Patrisse Cullors cashed in with companies like Warner Bros. eager to give her massive contracts to signal their own reformed status. It now appears that BLM is facing bankruptcy after burning through tens of millions and Warner Bros. cut ties with Cullors after the contract produced no — zero — new programming.

Some states belatedly investigated BLM as founders like Cullors seemed to scatter to the winds.

Gone are tens of millions of dollars, including millions spent on luxury mansions and windfalls for close associates of BLM leaders.

The usual suspects gathered around the activists like former Clinton campaign general counsel Marc Elias, who later removed himself from his “key role” as the scandals grew.

When questions were raised about the lack of accounting and questionable spending, BLM attacked critics as “white supremacists.”

Warner Bros. was one of the companies eager to grab its own piece of Cullors to signal its own anti-racist virtues.  It gave Cullors a lucrative contract to guide the company in the creation of both scripted and non-scripted content, focusing on reparations and other forms of social justice. It launched a publicity campaign for everyone to know that it established a “wide-ranging content partnership” with Cullors who would now help guide the massive corporation’s new programming. Calling Cullors “one of the most influential thought leaders in American public life,” Warner Bros. announced that she was going to create a wide array of new programming, including “but not limited to live-action scripted drama and comedy series; longform/event series; unscripted docuseries; animated programming for co-viewing among kids, young adults and families; and original digital content.”

Some are now wondering if Warner Bros. ever intended for this contract to produce anything other than a public relations pitch or whether Cullors took the money and ran without producing even a trailer for an actual product. Indeed, both explanations may be true.

Paying money to Cullors was likely viewed as a type of insurance to protect the company from accusations of racial insensitive. After all, the company was giving creative powers to a person who had no prior experience or demonstrated talent in the area. Yet, Cullors would be developing programming for one of the largest media and entertainment companies in the world.

One can hardly blame Cullors despite criticizism by some on the left for going on a buying spree of luxury properties.

After all, Cullors was previously open about her lack of interest in working with “capitalist” elements. Nevertheless, BLM was run like a Trotskyite study group as the media and corporations poured in support and revenue.

It was glaringly ironic to see companies like Warner Bros. falling over each other to grab their own front person as the group continued boycotts of white-owned businesses. Indeed, if you did not want to be on the wrong end of one of those boycotts, you needed to get Cullors on your payroll.

Much has now changed as companies like Bud Light have been rocked by boycotts over what some view as heavy handed virtue signaling campaigns.

It was quite a change for Cullors and her BLM co-founder, who previously proclaimed “[we] are trained Marxists. We are super versed on, sort of, ideological theories.” She denounced capitalism as worse than COVID-19. Yet, companies like Lululemon rushed to find their own “social justice warrior” while selling leggings for $120 apiece.

When some began to raise questions about Cullors buying luxury homes, Facebook and Twitter censored them.

With increasing concerns over the loss of millions, Cullors eventually stepped down as executive director of the Black Lives Matter Global Network Foundation, as others resigned.  At the same time, the New York Post was revealing that BLM Global Network transferred $6.3 million to Cullors’ spouse, Janaya Khan, and other Canadian activists to purchase a mansion in Toronto in 2021.

According to The Washington Examiner, BLM PAC and a Los Angeles-based jail reform group paid Cullors $20,000 a month. It also spent nearly $26,000 on meetings at a luxury Malibu beach resort in 2019. Reform LA Jails, chaired by Cullors, received $1.4 million, of which $205,000 went to the consulting firm owned by Cullors and her spouse, according to New York magazine.

Once again, while figures like James have spent huge amounts of money and effort to disband the NRA over such accounting and spending controversies, there has been only limited efforts directed against BLM in New York and most states.

Cullors once declared that “while the COVID-19 illness is tragic, what’s more tragic is capitalism.” These companies seem to be trying to prove her point. Yet, at least for Cullors, Warner Bros. fulfilled its slogan that this is all “The stuff that dreams are made of.”

Tyler Durden Sun, 05/28/2023 - 16:00

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Biden reaches ‘tentative’ US debt ceiling deal: Report

United States President Joe Biden has urged the United States Congress to “pass the agreement right away.“
Amid growing concerns…

Published

22 hours ago

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May 28, 2023

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United States President Joe Biden has urged the United States Congress to “pass the agreement right away.“

Amid growing concerns of a potential default by early June, United States President Joe Biden and House majority leader Representative Kevin McCarthy have reportedly reached an “agreement in principle” to raise the federal government’s multitrillion-dollar debt ceiling.

According to a May 28 report from Reuters citing two sources familiar with the negotiations, the “tentative” agreement to raise the $31.4 trillion debt ceiling was reached after a 90-minute phone call between Biden and McCarthy on May 27.

Since publication time, Biden has confirmed via Twitter the existence of an “agreement in principle," explaining that it will prevent the U.S. from facing a “catastrophic default.“

Biden noted that “over the next day,” the agreement would go to the U.S. House of Representatives and Senate. He urged both chambers to “pass the agreement right away.“

Meanwhile, McCarthy also took to Twitter to confirm the agreement in principle, alleging that Biden “wasted time and refused to negotiate for months.“

Reuters reported that while “the exact details of the deal were not immediately available,” an agreement has been made to limit the U.S. government’s spending for the next two years, excluding expenses related to national security.

“Negotiators have agreed to cap non-defense discretionary spending at 2023 levels for one year and increase it by 1% in 2025,” a source familiar with the deal said.

Related: Debt ceiling crisis: Best practices to navigate this market

This comes only weeks after U.S. Treasury Secretary Janet Yellen warned of a default risk as soon as June 1 if the debt limit isn’t suspended or raised, urging Congress to “act as soon as possible.“

Additionally, The U.S. Congressional Budget Office published a report on May 12, emphasizing that if the debt limit remains unchanged, there is a significant risk “that at some point in the first two weeks of June, the government will no longer be able to pay all of its obligations.“

In recent times, several analysts have shared a similar view that raising the debt ceiling could see more capital inflow into Bitcoin (BTC).

On May 17, MacroJack, a former Wall Street trader, warned his followers in a tweet that the U.S. debt ceiling talks are “all show.“

He emphasized how important it is to own hard assets as the dollar will be “printed into oblivion,” while stating that Bitcoin is the “fastest horse in the race.“

Meanwhile, Jesse Myers, chief operating officer of investment firm Onramp, reminded his 50,100 Twitter followers of what happened during the COVID-19 pandemic, stating that “Bitcoin was the winner during the last round of stimulus.“

He proposed the idea that history might repeat itself if the debt ceiling were to be raised, as it would prompt the Federal Reserve to print more money.

Update on May 28, 2023, at 03:15: This article has been updated to include United States President Joe Biden's tweet.

Magazine: Visa stablecoin plan, debt ceiling’s effect on Bitcoin price: Hodler’s Digest, April 23-29

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Biden reaches ‘tentative’ US debt ceiling deal: Report

United States President Joe Biden has urged both the United States House and Senate to "pass the agreement right away."
Amid growing…

Published

1 day ago

on

May 28, 2023

By

United States President Joe Biden has urged both the United States House and Senate to "pass the agreement right away."

Amid growing concerns of a potential default by early June, the United States President Joe Biden and Republican Kevin McCarthy have reportedly reached an "agreement in principle" to raise the federal government's multi-trillion dollar debt ceiling.

According to a May 28 report from Reuters, citing two sources familiar with the negotiations, the "tentative" agreement to raise the $31.4 trillion debt ceiling was reached after a 90-minute phone call between Biden and McCarthy on May 27.

Following the publication of this article, Biden has since confirmed via Twitter the existence of an "agreement in principle," explaining that it will prevent the U.S. facing a "catostrophic default."

Biden noted that "over the next day," the agreement will go the U.S. House and Senate. He urged both chambers to "pass the agreement right away."

Meanwhile, McCarthy also took to Twitter to confirm the agreement in principle, alleging that Biden "wasted time and refused to negiotate for months."

Reuters reported that while "the exact details of the deal were not immediately available," an agreement has been made to limit the U.S. government's spending for the next two years, excluding expenses related to national security. 

"Negotiators have agreed to cap non-defense discretionary spending at 2023 levels for one year and increase it by 1% in 2025" a source familiar with the deal said.

Related: Debt ceiling crisis: Best practices to navigate this market

This comes only weeks after U.S. Treasury Secretary Janet Yellen warned of a default risk as soon as June 1 if the debt limit isn't suspended or raised, urging Congress to "act as soon as possible."

Additionally, The U.S. Congressional Budget Office (CBO) published a report on May 12, emphasizing that if the debt limit remains unchanged, there is a significant risk "that at some point in the first two weeks of June, the government will no longer be able to pay all of its obligations."

In recent times, several analysts have shared a similiar view that raising the debt ceiling could see more capital inflow into Bitcoin (BTC)

MacroJack, a former Wall Street trader, warned his followers in a tweet on May 17 that the U.S. debt ceiling talks are "all show."

He emphasized how important it is to own hard assets as the dollar will be "printed into oblivion," while stating that Bitcoin is the "fastest horse in the race."

Meanwhile, Jesse Myers, chief operating officer of investment firm Onramp reminded his 50,100 Twitter followers of what happened during the Covid-19 Pandemic, stating that "Bitcoin was the winner during the last round of stimulus."

He proposed the idea that history might repeat itself if the debt ceiling were to be raised, as it would prompt the Federal Reserve to print more money.

Update on May 28, 2023, at 03:15: This article has been updated to include United States President Joe Biden's tweet.

Magazine: Visa stablecoin plan, debt ceiling’s effect on Bitcoin price: Hodler’s Digest, April 23-29

Read More

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