I taped a videocast with Max Keiser on Wednesday following the FOMC meeting. We discussed the usual things: The Fed, the stock market, GDP forecasts and Chicago pizza.
I come in at about the 12:50 mark or so.
The bit about Pizza is in reference to Chicago Pizza and Oven Grinder (CPOG), one of my favorite restaurants in Chicago. I made bets with Steve Keen and Max Keiser, on different occasions, that CPOG had the most unique pizza in the world.
Steve thought it was a good pizza but nowhere near the best pizza. But he did admit it was the most unique pizza he ever had and paid up. Max refused to pay. He said it wasn’t pizza.
You can check out CPOG here.
Mike “Mish” Shedlock
A nice interview, but I stopped watching after Max said something about the velocity of money slowing (being stopped?), and if the Trump-boom were really happening we would (I’m paraphrasing) “see all sorts of new loans being taken out”…
Talk about fighting the last war…
There is way way way too much debt outstanding already, and just about every crackpot scheme in the world has been leveraged to the kilt and then some. Only a fool would look for more borrowing now.
“Normally” (for the last 40-50 years anyway, not before that) — after a recession there would be some pent up demand, many loans would have been paid off or defaulted (written off). Ergo, some new lending would be happening in a recovery.
But after the idiots Bernanke and Yellen, an over-levered economy in 2008 got exactly the wrong medicine: more debt. The misallocation of economic resources severely damaged the US economy, and rendered traditional economic signals (new borrowing?!?!?) as useless.
We already have too many shopping malls, too much clutter in our closets, too much debt on credit cards, salary growth that is barely keeping pace with CPI (sort of) but not even coming close to covering the scam Obamacare or the scam college tuition. Borrowing costs are lower than any economically rational person would lend at even during an economic boom. It was too easy for talent-less academics at the Fed to lend OTHER PEOPLE’s money to cover over economic problems.
Like it or not, the US will pay dearly for the incompetence of Ben Bernanke and Janet Yellen. And like it or not (Yellen probably doesn’t like it) — Yellen is now being forced to normalize interest rates even though the recession Bernanke/Geithner/Paulson did ***NOT*** solve is back in force.
Congress gives tax breaks for debt. Every media criminal howls about lower rates to help MORE borrowing. Meanwhile, people who save for a rainy day or save to buy new business equipment are penalized — below market interest rates set by the politburo Fed, and taxed on what little they get.
Guess what folks? Congress taxes savings, yet gives tax breaks for debt — it was just a matter of time before we got a lot less savings and a lot more debt.
The recovery from 2007-2008 (when it actually starts, certainly hasn’t started yet) is going to involve LESS DEBT. Not more.
Max is fighting the last war.
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“Like it or not, the US will pay dearly for the incompetence of Ben Bernanke and Janet Yellen.”
Don’t forget Alan Greenspan. If anything, he was the ring leader.
Greenspan wrote, way back in the 1960’s, that 1920’s FED policy lead into the Great Depression. So he avoided that policy when he was in charge, right? No, he DOUBLED DOWN on it. It is not about incompetence. Greenspan knew better, yet did it anyway. Bernanke doubled down on Greenspan. Bernanke claimed to be a major student of the Great Depression. Yet he doubled down on what Greenspan did, which Greenspan said, lead into the Great Depression.
Greenspan was a gold bug. He threw that out the window, while FED head. Now he is a gold bug again. Truth is, he was a gold bug all along.
Despite the lessons of the 1920’s and 30’s being well known to these people, we have repeated the pattern anyway and not because the lessons were forgotten. The SEC KNEW leverage above 12 to 1 was dangerous, yet gave the Big Five investment banks leverage waivers anyway. All five crashed, just as it was known they would, running leverage upward of 30 to 1.
Glass Steagall was dismantled deliberately so what happened in the 1920’s could happen again. Now that it has, talk is of reinstating so it doesn’t happen again- wink wink, nudge nudge. Wash, rinse, repeat- on purpose.
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First time we ever heard of pizza was when visiting friends in Pittsburgh in the early 60’s. Ordered one , it was good, but there was no pizza back home in the Detroit area for a couple of years. They started popping up here and there and of course they all made it different. Then one day my brother came home with thee place to get it…. Blaziola’s. Nobody made pizza nearly as good, but they had no liqueur license so their clientele stayed limited. Eventually the owners retired in the late 70’s and there was nowhere around that was nearly as good. Then back in the mid 90’s a new pizza place popped up a couple of blocks away and we eventually got around to ordering a couple of pizzas from Paradise Pizza which was run by a middle aged Chinese woman that had a very limited English vocabulary, enough to take orders, and worked alone. When we went to pick the pizzas up, there was a sign in the window, “Went deliver, be back in minute”. About 2 minutes later she pulls up and unlocks the door and we pick up the pizzas and bring them home. OMG the first bite… It’s Blaziola’s pizza exactly. A few weeks later my brother stops by and we had pizza again, said nothing, and his first bite, OMG it’s Blaziola’s! Well, Paradise Pizza lasted about 9 months until the lady sold the business to a family that ran it into the ground and out of business in 3 months. Had this woman had the right people working with her she could have had a franchise easily.
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This has been a deleveraging recession. Debt is massively less, in terms of servicing costs and income, than it was around a decade ago.
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Did you bother to look at actual system-wide debt levels before mindlessly parroting the crap from CNBC?
Debt levels are up, and if you don’t want to be called out here for the idiot you are, you had better do some research instead of saying completely stupid things.
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I don’t suppose that whole scheme had anything to do with a mindless ZIRP ?
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ZIRP encouraged more debt when (in 2008) the economy already had too much debt.
The resulting misallocation of resources (more debt to keep non-economically viable entities on life support) is why Obama was the first banana-republic el-presidente never to get GDP growth above inflation.
Shifting economic resources from viable entities to prop up failures is how socialist countries fail. Penalize anything that works economically speaking, reward failure.
ZIRP is a reward for failure, paid for by entities that might otherwise make it.
I don’t know why Mish doesn’t mention the enormous costs of manipulated lower rates when he talks about the Fed normalizing rates… it would be a much more balanced and informative discussion.
Too much debt is not going to be fixed with even more debt.
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Wouldn’t the companies that were efficient, in the same industry, receive the same benefit of lower rates, keeping them more efficient than the inefficient company benefiting from zirp, therefore cancelling out the benefit to the inefficient company by zirp?
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Well when there is only one company and its name is Government…..
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@WT – “…Wouldn’t the companies that were efficient, in the same industry, receive the same benefit of lower rates…”
No, the companies deep in debt benefit the most (they pay less interest, while principal gets inflated away). The companies with actual profits (and thus cash that can be seized via segniorage) lose. People who saved for a rainy day or for retirement (and thus have cash that be be seized…) lose.
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Lance Jepsen, swing trader who quit using Fed GDP and GDP NOW as unreliable bunk, get’s into Federal Reserve rate hikes, ZIRP, censorship and political corruption… Spends only the last 6 minutes on stock analysis. Good points.
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– Yep. The usual “Austrian School” claptrap.
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– To elaborate: Max Keiser thinks that Janet Yellen is a “financial terrorist” because the FED keeps the FED’s Fund Rate at or (very) close to zero. What A LOT OF folks fail to grasp is that the FED (nearly) always follows (!!!) the 3-months T-bill rate. And the 3-month T-billrate is determined by a force called Mr. Market” and the FED follows “Mr. Market”. In that regard ZIRP is a policy executed NOT by the FED but by “Mr. Market” (i.e. all market participants combined).
– Is Max Keiser also blaming the FED for short term rates rising (3 month & 2 year yield) ?? Is Yellen then also a “Financial Terrorist” ?
– In the year 1873 short term rates also went down to zero but there wasn’t a Federal Reserve around. The FED opened its doors in 1913.
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yep… fed follows.. wizard of oz.
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– Agree. There’s a Wizard Of Oz and that wizard is called “Mr. Market” and NOT “the FED”. The “man behind the curtain” is Mr. Market.
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I think you have the analogy messed up. The wizard is the one ‘pretending’. If you think the Fed is not the one leading, but making it seem they are, the FED is therefore the wizard.
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So what does it tell you when the fed/banks can only give away the money they have created at lower and lower interest, even for ‘free’ !?
1. No one wants it.
2. People don’t want the strings attached to it.
3. People have nothing left to have those strings attached to.
4. The money itself has become worthless outside of the existing debt structures and some parallel essential activity.
5. People actually base their borrowing on realistic needs, even when what is offered is for free.
6. Banks are just teasing because they have no better idea what to do in an office all day.
When rates rise, is it not because there is a shortage of money and therefore rates should be lowered to increase supply ?
Do you think banks are more interested in real inflation adjusted returns than making sure nominal accounting fits?
Sort of /s
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– When the 3 month T-bill rate is this low then it tells me that there’s a very strong demand for those T-bills (in comparison to the supply).
– When rates for those t-bills rise then people are pulling their money out of T-bills because they need that money for something else. E.g. investing in higher yielding instruments (corporate bonds, stocks, real estate, longer term T-bonds, ……. ). And that’s what happened from e.g. mid 2004 up to say mid 2006.
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– Banks – in general – don’t factor in inflation. They’re interested in today’s value of money.
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In 1873 rates went down to zero for how long? One month?
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– Don’t know how long those rates remained close to zero.
– In 1873 there was a financial crisis as well.
https://en.wikipedia.org/wiki/Panic_of_1873
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– In that regard Max Keiser and Mish are “Financial populists” as well.
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I always enjoy watching max because he’s a very entertaining paradox. He seems to have great respect for the truth and does not swallow and disgorge the usual lefty progressive claptrap yet he is essentially a left wing progressive personality himself. How he copes with the cognitive dissonance is a mystery to me, but he manages to cope with it well.
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I haven’t eaten at the Oven Grinder in fourty years. Wow, nice to know that some things never change.
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sounds like a gay bar restaurant
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please, unique is unique you can’t be more unique or very unique or slightly unique!
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Just watching Nancy Pelosi on Face the Nation. What a fucking liar. She makes my blood boil when she gives the Obamacare line that it has obtained all the goal. My health insurance and healthcare has gotten worse every since it became effective. I’m so pissed I can’t even type!!!! My doctor hates it-can’t have a meaningful conversation because he has to fill in the form with lots of bullshit questions. I hope she gets a tainted lot of Botox!
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Another post without mentioning the biggest reason for rising stocks – global capital flows, and the source of our problems – career politicians. Why?
The Fed could be eliminated tomorrow and nothing would change with govt fraud, corruption, and malinvestment. Install short term-limits, with ex-politicians living by the laws they pass, and the necessary reforms become possible.
Career politicians will NEVER constrain, much less end the Fed and their bankster banks that sell their debt/lies. Term limits are actually possible if voters vote out every incumbent every election.
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Yeah but a few rich well connected people can usually outsmart half a billion people making a single collective either or choice every four years…
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We need short term limits for bureaucrats. As it is, they stay much longer than Congressional committee chairmen, who are there to get money quick before they retire/die. Bureaucrats are there to build empires. It can be fixed, but the system is designed to grow until it kills the nation.
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Good show Mike. Started watching Max on PressTV before he and Stacey moved to RT. He is a big fan of Jamie Diamond 🙂
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About that pizza. I am sure it tastes great from the dollops of cheese on it. Pizza is probably one of the most unhealthy foods around. The best pizza is made with feta cheese. Check it out if you can’t help it.
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That’s no pizza pictured there. Now, where do we get a slice of that good old Ray’s pizza … was that Famous Ray’s, Original Ray’s, Ray Bari’s ….. (and 66 other Rays you get in an around NYC)?
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