The Irresistible Power of Funny Money

Dow still eked outWith the tech stocks in a funk, and the shares of biggies like Microsoft and GOOGL getting shellacked on Friday, the Dow Industrials still managed to eke out a small gain. This attests to the irresistible power of funny money and its role in keeping the bull market alive no matter how menacing the underlying problems.  A week earlier, the broad averages similarly flouted economic reality, rising toward record highs even though earnings reported by the biggest banks were scary-bad. It wasn’t just that the banksters had had a bad quarter, but that their future prospects look as bad or worse.

Only The Government Wins

This is the direct consequence of a yield curve so flat that there’s no longer a profit in playing long-term maturities against short. The most bizarre aspect of it is that there are still investors willing to accept returns as low as 0.5% on bonds that mature 40 years from now. Leave it to the eggheads and their lazy, ignorant lackeys in the press to find a silver lining. Yes, Big Government is saving a mountain of money on interest payments. But even an Econ 101 student could produce a list of many who are getting cheated — including, ultimately, themselves.

  • Bydesignovertime April 26, 2016, 11:41 am

    Well course they are Jason, this is a chaos created by design–and implemented over time.

    The $300 Trillion dollar debt can never be repaid so what are the options? Think it through.

    Buy everything “real, as in hard assets” with phony monopoly dollars and then let it crash –blame it on the Ruskies or the Chinese.

    You are confusing rationality and illusion.

  • John Jay April 25, 2016, 10:18 am

    Taking a Macro-Economic view, I think the fact that the Japanese CB is buying more and more stocks/ETFs means our future is now inevitable.
    The Government will own everything that the Oligarchs don’t.

    So we can look forward to a system that is half Feudal, half Bolshevik.
    And that process is well underway all over the United States.
    Government spending will need to be cut in half.
    Trust me, the Oligarchs are going to come out on top.

    Hasta la Vista, Middle Class!

  • Jason S April 25, 2016, 9:55 am

    I don’t understand why more people are not shouting from the rooftops the threat this engineered low interest rate environment has on the insurance industry globally. It operates on a fractional reserve system but when you count the amount of wealth protected by a handful of reinsurance companies the systemic risk is huge.

    And if every insurance model ever created is based on a stable long-term interest rate of 3.5%-4% their foundation is being struck by massive pile drivers.

    Think about the chaos that would ensue if every type of insurance that is in use came into question.

    This doesn’t take into account pensions which rely on the same model.

    Our purveyors of social stability are sowing the seeds of chaos like Johnny Appleseed using modern farm equipment.