Yield Shock On Wall Street, Conservative Default In Washington

During an appearance on Fox Business this AM, we were reminded once again why capitalist prosperity in America is so dangerously imperiled and why the great bubbles in the stock and bond markets are living on borrowed time.

It seems we got in a friendly but heated spate with the whole panel of Fox-style conservatives when it comes to the essence of Imperial Washington-----that is, war, spending, debt and printing press money.

Now, it's not that Maria Bartiromo and her gang--including Wall Street Journal Fed reporter, Jon Hilsenrath---are some kind of big government socialists. Indeed, they nodded favorably when we slammed the Horribus appropriations bill and out-of-control Federal spending.

But that turned into a blizzard of disagreement and arm-waving when it came to the utterly wasteful $80 billion Pentagon increase, the Syrian gas attack hoax, the deficit-ballooning Trump tax cut, the destructive impact of the Fed money printers and the $1.8 trillion government debt bomb now fixing to slam into the bond pits.

In a word, capitalist prosperity depends upon keeping the state and its central banking branch at bay and out of the way. And once upon a time that pretty much happened because the conservative party in Washington adhered reasonably well to the pillars of sound money, fiscal rectitude, free markets at home and non-intervention abroad.

In the last three decades, however, the GOP has either jettisoned these pillars of capitalist prosperity or relegated them to ritual incantation. Either way, they have had virtually no role in real governance since the Gipper last nodded in their direction decades ago.

What has happened, instead, is that the neocons hijacked the GOP and turned it into the party of Empire---the very opposite of Robert Taft's notion of homeland security and non-intervention.

Likewise, the supply-siders spread the insidious lie that deficits don't matter and that you can grow your way out of unfinanced tax cuts.

So, too, the devotees of Alan Greenspan and the Wall Street lobbies buried the storied idea of sound money--supplanting it with the new ideology of monetary central planning and stock market bailouts.

Stated differently, the GOP in Washington today is essentially useless because it has abandoned the pillars of prosperity and has become an opportunistic gang of neocons, social cons, tax cons and Wall Street handmaidens. As a result, we now have a financial system that is flying blind toward a monumental monetary/fiscal crack-up.

On the one hand, the monetary central planners at the Fed have destroyed honest price discovery and monetized vast amounts of public debt. So doing, they have fostered the massive inflation of financial assets on Wall Street and have accommodated any and all factions of the "deficits don't matter" gang in the Washington GOP.

The latter was all well and good, of course, as long as the Fed was in a QE mode, vacuuming-up the public debt hand-over-fist, or its counterparts abroad were doing the same.

On the other hand, it would appear that even the Keynesian monetary central planners now realize that they have over-stayed their hand, and must therefore "normalize " with all deliberate speed---if for no better reason than to reload their dry powder for their next recession-fighting encore.

Needless to say, this impending epochal shift to QT and normalization by the Fed and other central banks is fixing to leave the GOP's gang of factions high and dry.

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