Will The Dollar Reset Coming In 2020? The State of the World and the Coming Crisis 2020 - financialanalysis

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Thursday, January 2, 2020

Will The Dollar Reset Coming In 2020? The State of the World and the Coming Crisis 2020

Congress Still Covering for the Fed’s Bailouts.Wall Street owns Washington DC – figuratively speaking. In literal terms, the largest banks in the nation own the Federal Reserve. They also bought and paid for a great number of DC politicians as evidenced by campaign contributions, Congressional voting records and sham oversight.
This was on full display at last week’s Committee on Financial Services hearing. “The Honorable Randal Quarles,” Vice Chairman of Supervision at the Fed, was among three people called to report for purposes of “oversight.” A memo outlining the topics of discussion was published by the committee.
The discussion ranged from a proposed rule change which would allow individuals with “certain minor criminal offenses” to get a job at a bank to foster “Diversity in Banking.” Virtue signaling Congresspeople would arbitrarily like to see more women and minorities running banks.
They should worry more about the overrepresentation of sociopaths in boardrooms and executive suites. Among other things, they should ask the “Honorable” Mr. Quarles exactly why the Fed is once again shoveling hundreds of billions of dollars into banks via the repo market. This latest swindle isn’t anywhere on the committee’s agenda.
Committee members should be embarrassed, but we doubt they are. The financial press isn’t really covering the story, and most Americans don’t mind.
Americans are left to guess about the purpose of the program. Fed officials were lying when they characterized the program as very temporary and designed to address a routine cash crunch at the end of the third quarter.
Congress isn’t asking any hard questions, even though “who is borrowing all this cash?” and “why?” are the biggest mysteries in the financial markets right now.
The repo market giveaway smells an awful lot like another bailout. The repo market froze up when banks started smelling trouble and rates for overnight, collateralized loans spiked north of 10%.
Many speculate that a major bank was on the verge of collapse – perhaps the long-struggling Deutsche Bank or HSBC.
Of course, it is possible that there is no crisis. The hundreds of billions might be just be simple charity for the nation’s wealthiest institutions. Perhaps the Fed is printing and lending money at less than 2% to bankers who want it to speculate, pay bonuses, and/or lend it forward at much higher rates.
It sure would be nice to know. Next time the Committee meets for oversight we suggest some tougher questions, such as:
The original characterization of the Fed’s intervention in repo markets was clearly a fabrication. Can you explain the program’s real purpose?
Is it appropriate for the Fed to print hundreds of billions and lend it to unspecified banks at far below market rates, and do it under false pretenses?
Is the Fed propping up one or more banks that would otherwise be in default? If so, please explain why “Too big to fail” remains the policy at the Fed and how well that policy is working out for Americans at large.
Is the Fed bailing out an international bank? Please lay out how it serves Americans’ interest to send hundreds of billions of dollars to foreign companies.
The Federal Reserve Bank is not a federal agency. It is a quasi-private organization, and its shareholders are the largest banks on Wall Street. Does that have anything to do with why the answer to every problem in the financial markets seems to be “print money and hand it to the banks”?
And, is it appropriate for an organization which is wholly owned by banks to be the primary regulator of the banks?
While it would be wonderful if a principled Congressperson asked these sorts of questions, we aren’t holding our breath.
The last time the Fed performed an overt bailout for bankers in 2008, Congress went along even though it was terribly unpopular. This is probably why Fed officials are lying and why Congress isn’t challenging them for it.Americans Are Not “Free to Choose” Anymore.When you write for a wide audience, no matter what you say, or how carefully you say it, some people will misunderstand. Sometimes it’s amusing. Reading through my feedback (and I do read all of it), I get called both heartless capitalist and bleeding-heart socialist in reaction to the same article.
In fact, I’m neither. I am a capitalist, and proudly so. I believe free markets are the best way to bring maximum prosperity and peace for everyone. But I’m not heartless, nor do I think markets are perfect. Even the best medicines can have serious side effects. That is doubly so when you aren’t taking the medicine correctly.
I also don’t think the word capitalism means what we think it means, at least those of us of a certain age. Take a look at the data from an interview Charles Payne did with David Bahnsen on Fox Business a few weeks ago.
Asked if they favor capitalism or socialism, 49% of Millennials favored socialism. But if you ask if they favor big business or “free enterprise,” the numbers change significantly. In the future, I intend to substitute “free market” for capitalism where possible.
Fake Capitalism
Capitalism, at least the free market version, can’t work without competition. It motivates producers to offer the best products at the lowest prices, and lets consumers choose whatever best fits their needs.
Yet instead of encouraging and protecting competition, the US government increasingly suppresses it.
Last February I wrote about a then-new book, The Myth of Capitalism, by old friend Jonathan Tepper and Denise Hearn. They aren’t leftists at all. They respect classical capitalism and want it to work better than it is.
Here’s a quick snippet from the book.
"Free to Choose" sounds great. Yet Americans are not free to choose.
In industry after industry, they can only purchase from local monopolies or oligopolies that can tacitly collude. The US now has many industries with only three or four competitors controlling entire markets. Since the early 1980s, market concentration has increased severely. We’ve already described the airline industry. Here are other examples:
Two corporations control 90 percent of the beer Americans drink.
Five banks control about half of the nation’s banking assets.
Many states have health insurance markets where the top two insurers have an 80 percent to 90 percent market share. For example, in Alabama one company, Blue Cross Blue Shield, has an 84 percent market share and in Hawaii it has 65 percent market share.
When it comes to high-speed internet access, almost all markets are local monopolies; over 75 percent of households have no choice with only one provider.
Four players control the entire US beef market and have carved up the country.
After two mergers this year, three companies will control 70 percent of the world’s pesticide market and 80 percent of the US corn-seed market. The list of industries with dominant players is endless. It gets even worse when you look at the world of technology. Laws are outdated to deal with the extreme winner-takes-all dynamics online. Google completely dominates internet searches with an almost 90 percent market share. Facebook has an almost 80 percent share of social networks. Both have a duopoly in advertising with no credible competition or regulation.
Amazon is crushing retailers and faces conflicts of interest as both the dominant e-commerce seller and the leading online platform for third-party sellers. It can determine what products can and cannot sell on its platform, and it competes with any customer that encounters success.
Apple’s iPhone and Google’s Android completely control the mobile app market in a duopoly, and they determine whether businesses can reach their customers and on what terms. Existing laws were not even written with digital platforms in mind.
So far, these platforms appear to be benign dictators, but they are dictators nonetheless.
It was not always like this. Without almost any public debate, industries have now become much more concentrated than they were 30 and even 40 years ago. As economist Gustavo Grullon has noted, the “nature of US product markets has undergone a structural shift that has weakened competition.”
The federal government has done little to prevent this concentration, and in fact has done much to encourage it. Broken markets create broken politics. Economic and political power is becoming concentrated in the hands of distant monopolists.
The stronger companies become, the greater their stranglehold on regulators and legislators becomes via the political process. This is not the essence of capitalism.
True, nothing stops investors from creating competition for Facebook, Google, and Amazon. Well, nothing except that it would take tens of billions of dollars in a very high-risk venture.
Many of today’s large corporations would collapse if we had actually free markets—for instance, insurance companies protected from out-of-state competition.
So in one sense, it’s true that we need government out of the way. But we need to remove not just regulations, but also the various subsidies and favors as well.
Sadly, I have a hard time getting conservative friends to see this. They think that resisting left-wing policies is enough. But we have to do more than stop bad policies. We have to offer something better than “let nature take its course.”

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