The Mess That Greenspan Made - Part 10

The Rubes Are On to the Rig

David Stockman details The End Game Of Bubble Finance – Political Revolt:

By the eve of the great financial crisis, the GOP was actually controlled by the racketeers of the Beltway and the Wall Street gamblers, not the red state voters who had elected it.

In fact, Goldman’s Sach’s plenipotentiary to Washington, Hank Paulson, was in complete command of the elected side of government. At the same time, the Bush White House had populated the central banking branch of the state with proponents of monetary activism, who were more than ready to authorize “heroic” measures to reflate the bubble.

Needless to say, the leader of the pack, Ben Bernanke, had been groomed for the role of chief bailster by none other than Milton Freidman. The latter, in turn, had led Nixon astray at Camp David 37 year earlier when he persuaded Tricky Dick to default on the dollar’s link to gold, thereby opening the door to fiat money, massive credit expansion and the modern era of Bubble Finance.

There is a straight line of linkage from that great historical inflection point to Friday’s Brexit uprising. Namely, Nixon’s abandonment of the Bretton Woods gold exchange standard, as deficient as it had been, was also a profoundly political act.

It resulted in the abdication of economic and financial policy to an unelected elite and their eventual capture by Wall Street and the forces of speculation and financialization unleashed by unanchored central bank money and credit.

Nixon’s destruction of Bretton Woods was the enabling event. It turned central bankers and financial officialdom loose to operate a dictatorship of bailouts, bubbles and financialization of economic life. And to spread this baleful regime to Europe, Japan and the rest of the world, too.

One of the big things being missed in all the Brexit blather is that, as with Trump in the U.S., voters are not so much voting FOR Brexit as they are voting AGAINST the status quo.

People don’t really understand what’s gone wrong (and are increasingly distrustful of policy makers who claim they do understand) – but they know that something has definitely gone wrong and see no reason to continue down the same path.

Tuesday Morning Links

Draghi Urges Coordinated Central Bank Policy – WSJ
UK loses triple-A credit rating after Brexit vote – Guardian
Why the Public Has Stopped Paying Attention to Economists – Fiscal Times
‘Brexit’ Is Locking In the Forces That Already Haunt the Global Economy – NY Times
Brexit and Trump: When Fear Triumphs Over Evidence – Scientific American
I walked from Liverpool to London. Brexit was no surprise – Guardian
The End Game Of Bubble Finance——Political Revolt – Contra Corner
Why Hillary Clinton Should Worry About Brexit – National Journal
Farage: Obama behaved ‘disgracefully’ in campaign against Brexit – Politico
Brexit’s Cautionary Tale for Trump Supporters – Washington Post
Where the Trump-Brexit comparisons break down – The Week
Hensarling’s wrecking ball to financial regulation – The Hill
The Gun Fight in Congress – New Yorker

Breather after Brexit: U.S. stocks to rise – CNN/Money
Market pressure eases after Brexit rout – BBC
Brexit vote, UK political confusion keep world markets on edge – Reuters
U.K. Stocks Rise With Global Markets as Barclays, Lloyds Rebound – Bloomberg
Oil Caps Biggest Two-Day Loss Since February on Brexit Fallout – Bloomberg
China’s Li won’t allow ‘rollercoaster’ markets after Brexit – Reuters
Brexit Means Much Less Joy for Global Investors – RCM
Gold slips as investors cash in post-Brexit vote gains – Reuters
This Will Push The Gold Market Over The Edge – SRSrocco Report
Hedge funds held record bullish gold price bets before Brexit –

Would a Work-Free World Be So Bad? – The Atlantic
How Vulnerable is the Shaky US Economy to Brexit Fallout – Wolf Street
Brexit is almost certain to push Hong Kong into recession in 2016 – Quartz
Quebec is using theatre to stop its teens from joining the Islamic State – Vice News
These countries have the deadliest air pollution. (Surprisingly, Georgia is No. 1.) – Vox
Quicken Loans encourages low-risk speculation in real estate – OC Housing News
The Fed and Bernanke Are Wrong About the Natural Interest Rate – Mises
Are central banks ‘powerless’ to handle Brexit fallout? – CNN/Money
Fed Once Again Overtaken By Events – Fed Watch


The Ascendancy of Populism

Handelsblatt’s Gabor Steingart had some thoughts about how they’re handling the British exit from the European Union in Brussels where, apparently, they still don’t seem to get the whole “lower- and middle-class angst under the thumb of the ruling elite” thing.

To wit:

We shouldn’t bash the outraged electorate who brought this upon us – they are like passengers in an aircraft locked in a tailspin, panicking as the pilot slumps in the cockpit. No, they shouldn’t be allowed to take over the controls, but the pilot needs to wake up.

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Monday Morning Links

Thank You, Great Britain! – Handelsblatt
Who Voted for the Brexit? – The Atlantic
Why did Britain vote to leave the EU? – Vox
Osborne seeks to calm Brexit turmoil – BBC
British EU vote unnerves world leaders and markets – Reuters
The UK’s Magna Carta 2.0: Good for freedom, good for growth – CNBC
Brexit is just the beginning of a popular revolt against elites – MarketWatch
I cannot stress too much that Britain is part of Europe – Johnson, Telegraph
Brexit: The Powerless Press Their Thumb in the Eye of the Power Elite – of two minds
Scotland is so pissed about the Brexit it might break up with the UK – Vice News
Financial Times Reader Comment Sums Up Disappointed Brits’ Feelings – NBC News
Secessionist supporters in Texas derive hope from Britain, cry ‘Texit!’ – Independent
Brexit is Trumpism without Trump — and voters liked it – Vox
George Will leaves the GOP – Politico

U.S. stocks: Uncertainty after Brexit – CNN/Money
Brexit and the Bubble in Search of A Pin – Hussman Funds
European stocks drop to 4-month low as Brexit fallout continues – MarketWatch
Pound Slumps, Banks Tumble on Brexit Fallout; Bonds Extend Gains – Bloomberg
What Does Brexit Mean for Individual Investors? – Stock Market Blueprint
The $100 Trillion Bond Market’s Got Bigger Concerns Than Brexit – Bloomberg
Gold continues to gain as investors seek refuge after Brexit vote – Reuters
London-based gold seller says ‘phones are ringing off the hook’ –
Why gold may hit $1,500 by year’s end—and it’s not just about Brexit – MarketWatch

Economic consequences of Brexit – Econbrowser
U.K. economy will take a hit from Brexit – CNN/Money
Goldman sees post-Brexit UK recession; cuts EU, U.S. growth – Reuters
Brexit provides fodder for China’s communist propaganda machine – Quartz
Writing China: The Compromise of China’s Millennials – WSJ
New Jersey’s Most Expensive Home Back on Market for $49M – Forbes
Fed rate hike off the table for 2016; now 12% chance of a CUT – CNBC
ECB Blows €400bn on “Brexit Black Friday” Bank Bailouts – Wolf Street
The Fed’s interest rate dilemma – The Week


Trump in Japan

What is, as best that I’m able to discern, one of the many unintended consequences of years of unconventional monetary policy in Japan.

… or maybe not.

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