My favorite part of the Jimmy McMillan ouevre is the gloves.
And while I completely agree with McMillan that the rent is too damn high when it comes to urban apartments, I’m not talking about housing rents in this Zeitgeist note. I’m talking about the rental price of money. I’m talking about interest rates.
The problem with money is that the rent is too damn low.
Fed Repo Action Oversubscribed in Clamor for Year-End Funds [Bloomberg]
“The Federal Reserve Bank of New York’s operation to inject cash into the financial system over the end of the year was oversubscribed on Monday, indicating a thirst for year-end funding.”
“Market participants submitted $49.05 billion in bids for the Fed’s 42-day term repo operation, which matures Jan. 6, 2020. That was more than the $25 billion on offer. This was the first of three term operations to provide funding past the year-end period. The others will be held in the coming weeks.”
“Even with the Fed’s commitment to continue providing liquidity to the financial system around year-end, the market is still showing concerns. This is due to banks’ year-end balance-sheet constraints related to capital surcharges and other regulatory requirements.“
This $25 billion in term loans is in addition to the overnight repo facility, btw, which clocked in at something like $60 billion or thereabouts.
But, hey, it’s all good, people!
“This is due to banks’ year-end balance-sheet constraints related to capital surcharges and other regulatory requirements.“
WHY are the Fed repo operations a never-ending garbage fire? WHY is the Fed facing an apparently insatiable demand for cash and very short-term liquidity?
Because the banks are over-regulated, that’s why.
Jamie Dimon wants you to know that if only our Too Big To Fail banking institutions were “unleashed” from those awful post-GFC capital requirements, why then, by golly, JP Morgan and all the other primary dealers would be only too happy to step into the breach and provide more short-term liquidity from their reserves. They’d be doing that right now if not for those pesky capital requirements!
Look, you can’t blame Jamie Dimon for taking advantage of the Fed’s impossible position in order to push for rolling back capital requirements and freeing up more cash to “return to shareholders”. You can’t blame Jamie Dimon for his Jamie Dimon-ness. It’s his nature.
After all, Jamie Dimon is the rake.
No, I can’t blame Jamie Dimon for trying the ole “awkshually, the problem is too much government regulation” line. But I can sure blame everyone else for parroting it.
It’s just another variation on the trickle-down economics song, that if only you’d use government policy to improve the heaping portion of profitability on a giant private enterprise’s plate, then enough crumbs will fall off that plate so that everyone eats a little better.
Yep, this is “capitalism” in the Long Now, where a government agency makes the money and sets the price of money and then sells it to a government-selected banking oligopoly that resells it for a profit. And then complains about their cut.
Money is a completely rent-controlled market. It’s Jimmy McMillan’s dream world, where the rents are never too damn high but are always so damn low.
And just like all rent-controlled markets, it’s the rich and the well-connected who make out like bandits.
But everyone who would throw an unholy temper tantrum at – gasp! – rent-controlled apartments is just fine with the manager of that banking oligopoly being a billionaire and his chief lieutenant managers being centimillionaires and a gazillion of his sub-lieutenant managers being decamillionaires.
Everyone is just fine with the manager of that government agency being a centimillionaire and his predecessors being decamillionaires.
Everyone is just fine with the current President being a billionaire and his predecessor doing everything in his power to become a billionaire and now two more billionaires deciding to run for President.
What’s the problem for the Fed and its repo operations?
The rent-controlled price of money is too damn low.
What’s the problem for American citizens and our democracy?
We sold our birthright for a mess of pottage, and we don’t even see that we were taken.
I have a hard time understanding how all of these academics and professors serving (?) on the Fed become multi millionaires. I guess it is no different than a community organizer buying a pad in Martha’s Vineyard. I live in Costa Rica where the Inter American Development Bank estimates that only 1.16 Billion dollars disappear annually by the political class. Not bad for a country that can be traversed from Pacific to Caribbean in less than a day. Here the locals call it chorizo and everyone accepts it as natural, just part of Pura Vida, the good life. I still struggle with the idea that all of this is ok.
Here’s how Fed governors become millionaires…
“In 2006 Mishkin co-authored a report called Financial Stability in Iceland. The report maintained that Iceland’s economic fundamentals were strong. The report was commissioned by the Icelandic Chamber of Commerce in response to critical coverage of the Icelandic economy and certain Icelandic companies in the international business media. Mishkin was paid $124,000 to co-author the report. Two and a half years later, Iceland experienced a spectacular financial collapse.”
Perhaps it is that when the facts do not fit the tbeory, scientists change their minds, politicians change their economist. Maybe this creates a buoyant market.
Well said, sir.
“Don’t like what’s being said? Change the conversation.”
Hard lessons learned only last for a few generations. The Depression was a long time ago. With democracy, the people end up with the government they deserve. Everyone loves a free lunch. Add it up and here we are. Very sad but the game is on and there is no stopping it.
Excellent commentary on the slow motion train wreck. The motion is so slow I am afraid it will dominate what is left of my life. Epsilon Theory is helping me to reset my expectations. Thank you for that. I’m still trying to wrap my head around your inflation forecast though…
It’s called ‘pre-bribery’. Paying policy makers directly for services while in office is a no-no, so instead the organizations looking for special accommodations pay whoever just left the office. Usually it’s something along the lines of a $200,000/yr salary for "strategic advice’ that oddly never involves actual work.
When you’re the office holder, and the organization that paid the last 5 office holders a quarter mil per year for the rest of their lives asks you for a favor, that sort of history might just be relevant to your choices.
The experiment with fiat currency since 1971 will fail; it is just a matter of how and when. The best solution would be hard money, but I doubt that will be the first “solution” implemented.
Continue the discussion at the Epsilon Theory Forum