EXCLUSIVE: A building picture that proves the market bulls are wrong


Now that the élite has decided we aren’t going to have any more bourse crashes (just orderly corrections) it falls upon the rest of us with more reality and a different agenda to point out why this is another dollop of IABATO (It’s all bollocks & that’s official).

To this end, The Slog has exclusively obtained the greatly sought-after services of Man of Markets Mystery, The Matador. Having speared more bulls that what you’ve ‘ad ‘ot dinners, squire, he is the man to read at this seminal moment in socio-economic history.

Observing the ‘old’ media – and remembering that we can no longer trust any of them – there are clearly two defensive thinking processes under way:

  • We must have as few people in the media as possible questioning The New Normal, because let’s face it guys, this is all about confidence
  • We must ensure that all those commentators “on our side” start believing their own propaganda.

There are in turn several assumptions in play among passive acceptors of what’s going on:

  • All the data is kosher
  • Nobody is manipulating the ‘natural’ markets
  • Everyone puts the economy before any other consideration
  • They have every potential event on the radar
  • There’s no doubt, things are turning round at last.

Taking the media Talking Heads first, one striking feature of the coverage since last week’s correction of the correction has been that, in every round table on air now, if there is a naysayer to be found, it’s almost always a woman. This is interesting in that of course they don’t have all that testosterone blasting round their bodies 24/7. It’s also because confident women in general have less fear of ridicule: they’ve been subject to a lot of it over the years, and so they’re sort of inurred to the aggressive sneering.

By and large, it is the fat, bald and finger-pointy men who pull rank with “I know better”; there was one idiot a week ago on CNBC who kept on saying “Bad kharma, bad kharma” every time anyone counselled caution. It was as if he believed the entire global financial system to be 100% dependent on mind over matter.

Those of us knocking on a bit know that, first of all, the “experts” don’t know what they’re talking about most of the time, because what they say most of the time is that there’s nothing to worry about. While on the one hand we have the Goforits constantly forecasting sunshine “otherwise it’ll rain” says Chicken Licken, on the other we have the Fed Chairs treating the financing of economics as if it were a finely honed scientific instrument up there with the Voyager spacecraft.

The reality has historically been between the two – overreaction to information causing ups and downs while, on the whole, slowly scaling the mountain; but now it is a very different place we’re in. For starters, the big movers are no longer investors: they are pc-derived algorhythms, large corporations, central banks and geopolitically aggressive Sovereigns. There is nothing “natural” in it, and very little that is open.

This creates an alternative belief system among most specialist journalists, because few if any of their editors and proprietors are interested in the scam being exposed. They justify falling into line (thence to become defenders of the system) by believing the propaganda they’ve helped to circulate.

Liam Halligan is a very thoughtful and decent man, but his column last week lacked balance. He referenced growth here and falling unemployment there and rising wages in the US as “evidence” that things are on the mend. He did point at the odd cloud here and there, but he failed to say, “none of this adds up”.

There is also, beyond the élite controllers, the mainstream columnist’s readership on his or her mind. These are the passive acceptors who see no real alternative to current strategy. They’re busy, comfortably off, conservative by temperament, inclined to see naysayers as communists or conspiracy nutjobs, and on the whole not bright or motivated enough to delve into the real state of affairs behind the statistics.

Thus, “the data is firm and to be trusted, nothing is rigged, it all reflects the economic situation, they have it under control, and things are on the mend”. It represents hopeless denialism, but I’m bound to observe that – certainly in the UK, and probably also in France – the antics of the Left strengthen their belief in the Establishment right or wrong. Again, it is a form of psychological self defence.

We are in what is largely a massive amateur talent show with a new song every two years. The only way to prepare The White Hat folks for what lies ahead is to produce naysayer evidence that offers little or no wriggle-room for the Happy Days are Here Again quartet. That having been done, they will of course go off and create a new set of lyrics. So those in turn must be deconstructed. And so on, ad nauseam, until the harmonies add up to a grating cacophony.

So for starters, let’s see how they do with this opening selection from The Matador….

Chaos in Italy

Italy’s Northern League Party is now ahead in the forthcoming election there. Its policy is to withdraw Italy from the EU. The NLP is unlikely to win anything near a majority, but it means yet further standoff in a country whose economy is stagnant, and where EU popularity has plummeted in recent years. The situation has been exacerbated by the cost and violence involved in the massive landings of African migrants in the country.


Just under a year ago, the Agricultural Bank of China reported ‘disposing of’ 73 billion yuan in loans via some  3-card trick accounting. This remains a troubling trend, whereby banks are doing a Gordon-Brown PFI act. The Bulls refer to the current situation as “improving”, which I would characterise as ‘lenient but fair’. But by last December, Alicia Garcia Herrero, chief economist Asia-Pacific at Natixis, said that Chinese banks’ problems with liquidity, solvency and profitability were all deteriorating.

This is turning into a major problem for mid tier and smaller Chinese lenders that do not have access to the vast deposit bases of their larger competitors. In February this year, the ever-positive FT opined that “China’s banks are back in vogue again”; for myself I fail to see real evidence of that….rather, I remain concerned about the crazily low capital ratios in its banking system, and debt standing at nearly 300 percent of gross domestic product.

Of course, standard can-kicking means that the banking firms have come up with packaged approaches like debt-equity swaps, but like so much of financialised capitalism, this is to spray the problem with short-life tartan paint: The BIS observes:

‘…New and more complex ‘structured’ shadow credit intermediation has emerged and quickly reached a large scale. This is driven by banks trying to alleviate regulatory burdens through a reclassification of existing bank assets into investment receivables….’

Aka, cheating….fiddling the numbers to pass the test.

Spend a few hours trawling through some of the sheer madness and scale of all this….and remember, there are many smaller business and banking institutions using them as stays of execution. But in brutal shadow banking, sentences don’t get commuted.

China today is like the US in 2006….but without the element of caution. Stick that in your pipe and smoke it, Jim O’Neill.

The Catch 22 global ‘recovery’.

This is where I think the Normalisers start to look like a self-generated stampede towards the crevasse of their own publicity. At this basic level, two facts are irrefutable:

  1. The natural markets have not “rebalanced themselves”: the key institutions behind them have been given free liquidity by printing Fiat QE “money”. In the US, even the official figure admits a spend between 2008-2015 of $11.6 trillion. In the eurozone, the sum admitted to is €3.2 trillion; but with remaining tapers and some obvious signs of direct Bond support during the ClubMed spikes, the real figure is almost certainly over €5 trillion. Some sources (including both the UN and the CIA) have estimated the sum total invested in QE at in excess of $24 trillion worldwide when the actions of the UK, China and Japan are added in.
  2. Side by side with that, the Zero Interest Rate Policy (ZIRP) was launched with the aim of encouraging more consumption via credit costs at the lowest in real terms in the modern era….defined by CNBC as ‘in the last 5,000 years’. If people are job-anxious, they will curtail spending whatever the credit rate – growth rates in the First World never topped 2% from 2008-16 – but even so, one cannot dismiss an eight-year Jubilee on credit costs as “Normal”.

In summary, the Room/Elephant madnesw here is that, given a global gdp by 2016 of $76 trillion, the growth in any one year at average 1.3% delivers a total sum over the eight years 2008-16 at roughly $14.6 trillion. So we “lost” on the deal to the tune of $9.4 trillion.

The discrepancy, of course, is easily accounted for by the equally obvious fact that QE and Zirp were introduced to save the banking system: any effect on the economy was a happy side-effect.

Now (and the real degree of QE tapering is still overstated) interest rates are starting to rise, and what do we see? Um, two corrections in 22 months. But the élites have the audacity to call those “the markets regulating themselves in good order”.

Since the introduction of these easing measures, we have predictably created huge asset bubbles around the world. With rates now rising, are we to believe that there will be no consequences for the idiots who over-borrowed at 0.3% having to manage rates at nearer 3%?

Are we seriously suggesting that Third World Dollar denominated debt can be as easily managed in a “normal” interest rate world? Rates today are still at one-fifth of any kind of normal average over the last 70 years, but already the pips are beginning to squeak in South America.

The US Fed is like the bloke in the pub who reacts to the last thing every loudmouth says. In just three weeks thus far in 2018, the Fed was going to have four rate rises, then three, then two and now it’s four again. This is what happens when a fiscal oligarchy briefs a media oligarchy about what to say….and then believes the column that emerges.

Unfounded faith in the historical data

The stated decline in wages – and falling rate of inflation – in the developed World have been conclusively deconstructed and held up to ridicule in recent years. In turn, every major finance minister has produced statistical models of unemployment based on job type and hours that grossly misstate the real situation on the ground.

Bizarre definitions of shopping baskets, income value and jobs have been adopted by said ministers with the sole intention of proving a political efficacy that is a blatant lie.

Yet leading MSM hacks continue to refer to these utterly discredited sources as if they were sacrosanct. Thus, the oligarchy briefs the journalists, the journalists spew that unreality forth, and use the unreal information to defend the oligarchy members. Calling this relationship incestuous is, I would suggest, less than fair to the practice of incest.

Unrest in the rigging

In 2017, the price of crude oil averaged $54 a barrel. In 2018 so far, it stands at $69. That is an increase in price of 21.8%…at the start of a year in which global gdp growth is forecast to be 3.9%. Ergo, oil is overbought….but then it was for much of 2017 anyway, when GDP growth was 3.7%, but the crude price doubled during that period.

The price of oil as a commodity is, at present, ridiculously high compared to real demand. In effect, the price is what it needs to be to stop the oil economies from spiralling into bankruptcy.

The price is rigged.

The value of the euro against, for example, the Pound Sterling, bears no relation to the euro’s real level, which any Forex dealer will tell you is hugely overbought. My problem is, I ask the same question over and over to people involved as they cross my path, as in “Are you long and getting longer in the euro?” to which they say no, because it’s overbought.

That doesn’t really compute, does it?

The euro has been covertly supported by the ECB since reaching a historic low in January 2017. Hedge Funds looking at the genuine fundamentals missed the trick until they finally sensed Draghi Determination was in play, at which point they piled in during the summer. In July alone it jumped 2.3% against the Dollar….just when Brexit negotiations were getting sticky. Some players believe that the Commission leaned on Mario to give a show of strength designed to persuade the passive and the ignorant that the EU is in great shape – and its survival immutable.

Leaked EC memos to other member States have since shown that, behind the screen, Brussels knows perfectly well what a disaster Brexit is for them. But still the single currency price is high. In normal times, I would be shorting it; the last time I tried such a thing, Bernanke stepped in and screwed my pension. Draghi is just as likely to do the same thing.

The price is rigged.

Now look at the paper price of Gold. Throughout 2008-2011, it sky-rocketed as the seriousness of the Crash dawned on the markets globally. The headlong rush into the metal was a contributory factor to the lumbering performance of stocks. Soon after Bernanke began manipulating all stock prices upwards with QE, gold plummeted in the middle of the worst recession for 23 years by 33% in price during just seven months.

Both stocks and gold prices were rigged, and the ordinary investor got screwed.

I leave you with this excerpt from a Paul Krugman piece written in September 2009 about What Went Wrong during 2007-08. See if you recognise any of the delusional ideas he describes in contemporary balm:

‘Until the Great Depression, most economists clung to a vision of capitalism as a perfect or nearly perfect system. That vision wasn’t sustainable in the face of mass unemployment, but as memories of the Depression faded, economists fell back in love with the old, idealized vision of an economy in which rational individuals interact in perfect markets, this time gussied up with fancy equations…..this romanticized and sanitized vision of the economy led most economists to ignore all the things that can go wrong. They turned a blind eye to the limitations of human rationality that often lead to bubbles and busts; to the problems of institutions that run amok; to the imperfections of markets — especially financial markets — that can cause the economy’s operating system to undergo sudden, unpredictable crashes; and to the dangers created when regulators don’t believe in regulation……Monetarists asserted, however, that a very limited, circumscribed form of government intervention — namely, instructing central banks to keep the nation’s money supply, the sum of cash in circulation and bank deposits, growing on a steady path — is all that’s required to prevent depressions.’

Krugman hoped that ideologically constipated monetary economics would give way to a more open minded and flexible form of advice to policy makers. The exact opposite has happened.

Today, the Great God is algorhythms. But algorhythms can only ever work for the élite directionalisers…they have nothing to offer the Real World economy.

A massive crash is coming because, as in this particular dimension of Groupthink so brilliantly described by Paul, not only have the underlying problems been neglected, they have become worse….often due to the wilful behaviour of the 3%.


More rapier thrusts from The Matador will follow in due course