by Tom Luongo, Tom Luongo:
Lenin famously said there are years where nothing happens and weeks where years happen. That was last week, especially in geopolitics. Let’s start small with an article from Zerohedge discussing the latest H.4.1 data from the Fed’s balance sheet.
TRUTH LIVES on at https://sgtreport.tv/
The editors at Zerohedge continue to balk at the script that is playing out in front of them: the Fed of Greenspan/Bernanke/Yellen years is not the Powell Fed. They took a small thing about the Fed’s balance sheet and blew it up to be the headline. I get click-bait titling, but this is something deeper than that
While Zerohedge is naturally and predictably skeptical about that change, there comes a point where you have to throw in the towel when confronted with the evidence.
The End of the End of History
Zerohedge’s mission early on was to explain markets in ways no one else was.
They did (and still do) a fantastic job calling bullshit on the promises of central planners. Zerohedge made their bones during the ZIRP years, educating an entire generation on the intersection of Austrian Economic-style critical thinking, the plumbing of capital markets, and central banking.
It was truly disruptive in ways we’ll never fully quantify.
And on this front no one can have asked for a more noble mission from a bunch of Wall St. exiles. That said, no one is perfect and no one is immune to their own success.
This is as much a warning to myself as anyone else.
One must be willing to constantly as Ayn Rand put it, “Check your premises.” That means, ultimately, constantly re-evaluating the incentives of those who have the power and capacity to move capital markets.
Politics and markets today are inextricably linked in ways that are too complicated for anyone to map. Martin Armstrong tries to do this by farming out the cross-market analysis to his AI algorithm, Socrates.
But even there his work is based on mathematical models constantly shifting with new data inputs. He’s forever trying to hit moving targets, and gods bless him for trying.
It reminds me a lot of Hari Seldon’s Psychohistory from Issac Asimov’s “Foundation” books.
Strauss and Howe’s Fourth Turning models attempt this same predictive macro analysis from a purely historical perspective, no Greek letters in evidence. Both have their limitations because once humans know they are being observed in this way, they alter their behavior to avoid or lean into these predictions.
Marty’s even commented on how WEF High Klingon Klaus Schwab is using his 2032 predictions to force Schwab’s vision onto it.
But, that said, there is something unarguably interesting about these attempts at understanding the flow of history.
It’s hard to ignore them, honestly. Not because they are purely predictive…. they aren’t. But because they spur us to think about events differently as they unfold. They give us new frameworks for looking into the future.
The Powell Turning
For me, both Armstrong and Strauss/Howe were bouncing around in my head in 2021 when Jerome Powell went off the reservation and began what I called ‘stealth tightening’ by raising the Reverse Repo Rate 5 basis points above the Fed Funds Rate.
I had a choice in that moment, stick with my reflexively ‘anti-Fed’ personal opinion or consider the discordant nature of what Powell had just done.
At the time one could argue that he did this to stave off the 30-day T-bill nominal rate going negative. There was so much demand for short-term US paper that Powell had to do something lest the specter of negative yields coming to the dollar would undermine its global reserve currency status.
But he could have also understood this was the one lever he could pull to begin draining the world of Yellen’s horror show and the ravages of the COVID monster.
The result was a massive inflow into RRP, draining the world of more than $1 trillion in base money net of treasury spending. This was a global event. You can argue it was done out of desperation or you could argue it was strategic given the political realities of the day.
