After the US stock market highs of 2018, the US is set for the worst December fall since the Great Depression in 1931.
The market was alarmed by the revelation that over the weekend the US Treasury Secretary Steven Mnuchin took the unusual step of calling the chief executives of America’s six largest banks to ensure that they had enough liquidity for the immediate future and on Monday he publicised the fact. This led to rapid selling with record falls today.
News media and economists rush to explain the phenomenon with reference to political and economic events. It is a waste of breath. If they can explain it, why did they not warn investors in good time? Because they cannot explain it.
The answer is simple. There are buyers and sellers, and people like to make money and hate losing money. Most competent technical analysists understand why markets fall after new highs, but only a few understand the Black Swan phenomenon and even fewer the Black Swan theory behind it. So news media and analysts will not explain this to the public and they will choose the easy and simplistic narrative that blames politicians, such as Donald Trump or Brexit, the latest corporate failure and the incompetent financiers inevitably exposed by their inability to read markets.
Thus it is encouraging to see US President Donald Trump questioning the ability of the Federal Reserve, which has controlled the American economy since 1913, exactly 105 years ago yesterday. He compared it to a bad golfer, who has no touch because he cannot putt, a simple metaphor for a complex problem.
The mystery that is the Federal Reserve needs to be exposed to scrutiny. The fact that even the US President does not have the authority to fire the chairman of the Fed does not trouble most people as long as times are good. It appears that it is only in bad times that people will consider a change.
The structure of banking, finance and money creation needs serious reappraisal for the 21st century. Anti-capitalist forces are growing in strength and relevancy so that governments need to use the good times to instigate reform and to educate those at the bottom of the pile how to participate in global wealth.
Just as God shines His Sun upon the good and the evil, and rains on the righteous and unrighteous Mat 5:45, there is enough energy to go round, enough food for the world population and enough money to improve everybody’s life. Ungodly human beings are getting in the way.
When will the secular world let the Christians show them the way?
In His ‘Sermon on the Mount’ the Lord Jesus Christ observed that “God makes His Sun rise on the evil and on the good, and He sends rain on the just and on the unjust. For if you love them who love you, what reward do you have? do not even the tax collectors the same?”Matthew 5:45-46.
23 Apr 2015: banking reform.
11 May 2016: Mervyn King, former Governor of the Bank of England during the banking crisis, in an interview about his recently published book The End of Alchemy used the SCP leader’s phrase that the banks are “too big to manage” and his medical illustration of diagnosing in order to treat. See update 25 Oct 2022 below.
25 Dec 2018: Japan continued the global slide, the Nikkei closing down 5% on Tuesday, its worst finish since April 2017. Indexes in Shanghai, Bangkok and Taiwan also fell. The BBC reported: “Investors have been concerned about President Trump’s dispute with the US central bank chief and another government shutdown.” No, they are not. They are concerned about losing money and this is why they sell, very sensibly when a market is overheated. If it was not Donald Trump, it would be something else. Once the big investors begin to lose money, they sell. They make money on the way up and on the way down. It is time to educate the public properly. Meanwhile, it is a stick with which to beat Donald Trump, although all markets are falling at present, for the same reason, to save and to make money. Those who do not understand this will lose money.
27 Dec 2018: video illustration.
2 Jan 2019: markets continue their slump in the New Year, with the usual journalistic comments and ‘explanations’. Apple has fallen 8% in the last hour of trading today, matching the 7% collapse on 1 Nov 2018.
16 Jan 2019: so, contrary to expectations, the pound had gone up after the unprecedented and historic vote rejecting Theresa May’s Withdrawal Agreement negotiated with a surprised EU. Mark Carney, the Governor of the Bank of England, has ‘explained’ the rise in the pound as a belief that Brexit might be delayed! It was well-known what the outcome of the vote would be, so why was this not predicted beforehand? The spinning continues.
23 May 2019: on BBC’s This Week tonight, Nomi Prins, author of Collusion: How Central Bankers Rigged the World, put across the same concerns as I did about Quantitative Easing being used to re-capitalise the banks instead of supporting small businesses, but no-one presented the solution to the 2008 credit crisis. Michael Portillo said he was a politician rather than an economist, and Andrew Neil reminded him that he had been Chief Secretary to the Treasury! Portillo conceded the point, but he could have saved face by pointing out it is a political appointment. Alan Johnson recalled the ‘too big to fail’ mantra, but no-one is picking up my ‘too big to manage’ mantra. The main point Prins made was that banks have not learned the lesson, but the main point is that politicians have not learned that the nation need to develop Positive Money so that the profits from money creation goes into the nation’s bank rather than private banks, which helps to fund the nation’s financial needs better than taxation. This subject has been highlighted in the Financial Times by Martin Wolf, one of its editors, who says: “Strip private banks of their power to create money.”
1 Aug 2019: the BBC 6 p.m. news reported that the British pound was at its lowest for two years “because of Brexit”. Why did it not report that the euro was at its lowest against the dollar for two years also? Or that the Australian dollar was at its lowest for ten years? Is Brexit affecting Australia? These commentators don’t know how markets move and are misleading the public, repeating the mantras quoted to them by Project Fear. BBC blaming Brexit.
2 Aug 2019: the BBC reported that the Royal Bank of Scotland made £2 billion profit in the first half of the year compared to £880m last year, its biggest profit since 2008. As the largest shareholder, the taxpayer will receive £1 billion. The share price promptly fell 6%. Why? How will the BBC financial pundit explain this? Surely not Brexit? No – this is how markets move.
17 Sep 2019: UK overtakes USA in global derivatives and Foreign Exchange turnover after trailing the USA in 2016, despite Brexit ‘risks’.
20 May 2022: the Federal Reserve has a reactionary attitude; it is not a pro-active agency – they just keep going until they are forced to change, and rising interest rates is one example of this. Jerome Powell waited until he was renominated to his role as Chair of the Federal Reserve on 22 Nov 2021 before he “retired” the word “transitory” from his comments about inflation and began the Fed’s radical change of direction from quantitative easing to quantitative tightening. He blamed the coronavirus pandemic instead of the Fed’s tardiness to read and pro-actively act. Russia acted long before the Fed.
29 Sep 2022: Jordan Peterson on the 2008 mantra “too big to fail” explains that “it was so big you will certainly fail”, which amounts to my mantra “too big to manage”.
1 Oct 2022: the UK is bankrupt financially, morally and spiritually; but it is not alone.
14 Oct 2022: learning the power of markets; the UK Chancellor of the Exchequer is sacked.
15 Oct 2022: explaining that UK interest rates are not the result of Brexit.
25 Oct 2022: Mervyn King, see above at 11 May 2016, returns to the fray. Mervyn King: “Markets are not in charge. Governments and central banks are. Markets respond to the announcements made by Governments and central banks. Central banks have lost control of inflation. Governments lost control of the public finance. It is not surprising that markets respond to that.” “All central banks in the west interestingly made the same mistake.” I remind my readers that Jerome Powell of the American Federal Reserve failed in 2021 to see hyperinflation coming and reacted too late.
27 Oct 2022: The Spectator podcast:more readiness to acknowledge central bank failures.