Tag Archives: intervention

  • Blog

    Upon The Next Crisis, The Rules Will Suddenly Change

    For the benefit of the elites; not the rest of us
    by charleshughsmith

    Saturday, September 30, 2017, 12:02 AM

    16

    We can add a third certainty to the two standard ones (death and taxes): The rules will suddenly change when a financial crisis strikes.

    Why is this a certainty? Human nature, politics and the structure of societies/economies ruled by centralized states (governments).

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  • Blog
    Audy39/Shutterstock

    Where There’s Smoke…

    ...There’s central bank manipulation
    by Chris Martenson

    Saturday, April 22, 2017, 12:26 AM

    1

    Many questions surround the elevated financial asset prices we are faced with today.

    I'm talking not just about the sky-high prices of stocks and bonds, but also of the trillions of dollars’ worth of derivatives that are linked to them.  All are intricately linked together. For instance, stocks are elevated, in part, because bond yields are so low. 

    These questions are important to consider because — if central banks have been too involved and gotten themselves mixed up in trying to ‘wag the dog’ by using elevated financial asset prices as a means to drive economic expansion — then the risk is a big implosion in financial asset prices if their efforts fail.

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  • Insider
    © Alain Lacroix | Dreamstime.com

    The Forces That Will Reverse Housing’s Recent Gains

    Get ready for the "poverty effect"
    by charleshughsmith

    Monday, February 25, 2013, 9:56 PM

    29

    Executive Summary

    • Intervention in the housing market by central planners is experiencing diminishing returns
    • The four major trend reversals most likely to depress housing prices in the coming future
    • The power deflationary force of reversion to (or perhaps below?) the mean
    • Why demographics do not support rising prices

    If you have not yet read Part I: The Unsafe Foundation of Our Housing 'Recovery', available free to all readers, please click here to read it first.

    In Part I, we sketched out the larger context of the housing market: the dramatic rise of mortgage debt, the stagnation of income for 90% of households and the unprecedented scope of Central Planning intervention in the housing and mortgage markets.

    In Part II, examine what will likely cause this nascent rise in housing prices to reverse, and to resume the decline Central Planning halted in 2009.

    Intervention Has Only One Way to Go: Diminishing Returns

    As noted in Part I, every Central Planning support of the mortgage and housing markets has already been pushed to the maximum, so there is nowhere left to go. Interest rates are already negative, over 90% of the mortgage market is backed by Federal agencies, the Fed has already pledged to buy trillions of dollars in mortgages, etc.

    Four years of this massive intervention has stripped the mortgage and housing markets of the ability to price risk, capital, and assets. This has created a culture of supreme complacency, as participants have come to believe interest rates will stay near-zero for the foreseeable future and Central Planning intervention is permanent.

    But nothing is permanent in life. And the current extremes of intervention and complacency have set the stage for some important reversals:

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  • Blog

    Are We Heading for Another 2008?

    by charleshughsmith

    Wednesday, April 11, 2012, 4:44 PM

    0

    We all know that central banks and governments have been actively intervening in markets since the 2007 subprime mortgage meltdown destabilized the leveraged-debt-dependent global economy. We also know that unprecedented intervention is now the de facto institutionalized policy of central banks and governments. In some cases, the financial authorities have explicitly stated their intention to “stabilize markets” (translation: reinflate credit-driven speculative bubbles) by whatever means are necessary, while in others the interventions are performed by proxies so the policy remains implicit. 

    All through the waning months of 2007 and the first two quarters of 2008, the market gyrated as the Federal Reserve and other central banks issued reassurances that the subprime mortgage meltdown was “contained” and posed no threat to the global economy. The equity market turned to its standard-issue reassurance: “Don’t fight the Fed,” a maxim that elevated the Federal Reserve’s power to goose markets to godlike status.

    But alas, the global financial meltdown of late 2008 showed that hubris should not be confused with godlike power. Despite the “impossibility” of the market disobeying the Fed’s commands (“Away with thee, oh tides, for we are the Federal Reserve!”) and the “sure-fire” cycle of stocks always rising in an election year, global markets imploded as the usual bag of central bank and Sovereign State tricks failed in spectacular fashion.

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