Economic Old Age And The Infections Of Monetary Central Planning

Monday morning we heard one of the usual bubblevision suspects, a Keynesian street economist by the name of Ian Shepardson, giving the all-clear signal to buy stocks.

He claimed business cycles don't die of old age, and implicitly, therefore, that the Fed has your back and will keep GDP and earnings chugging ever higher. And, besides, there is huge pent-up demand for CapEx, which is purportedly going to trigger a new leg of strong GDP growth.

That proposition is so ridiculous, of course, that we could dismiss it as typical Wall Street baloney, bilge, bosh and bunkum, and be done with it. After all, here are the 28 previous business expansions since 1879, and they all assuredly died of something. And 10 of them occurred before the Fed opened for business in 1914.

So you can't say that all which transpired before June 2009, when the current so-called recovery incepted, is pre-history; and that the US economy is now under the awesome tutelage of Keynesian minders at the Fed who have unlocked the secret of maintaining unbroken full-employment forever, world without end.

At least, you can't say that if you have an ounce of common sense and are not jiggy with the misplaced arrogance of Keynesian PhDs who actually think they can predict and prescribe how to keep a $19 trillion economy on the straight and narrow.

In fact, the Ian Shepardson's of the world are just the auxiliary posse of the Keynesian PhDs and apparatchiks who run the Fed and other central banks based on the same anti-market arrogance.

They have spent the last 10 years blocking, nullifying and suffocating market forces in the financial system. So doing, they have drastically falsified any and all financial asset prices---from overnight carry trade funds, to the FAANG stocks, the 10-year UST, shale-patch junk bonds and the 100-year debt issued by Argentina (of all places) last June, among countless others.

The result if a financial system fraught with incendiary bubbles, excesses and booby-traps, such as the hundreds of billion of ticking time-bombs in the risk parity trades or in the momo roach motels of the stock market like Amazon, Netflix or highflyers in the tech space like Nvidia and Broadcom. During the last 5 years, the latter two have posted 17X and 12X gains in market cap, respectively, compared to net income growth of just 5X and 4X.

Moreover, these distortions and metastases have spilled over into the real economy big time.

The Fed's Bubble Finance regime on Wall Street, in fact, is a predator on main street. It incentivizes the corporate C-suites to strip-mine cash flows and balance sheets in order to fund massive financial engineering maneuvers, thereby shrinking investments in productive assets, new products, more efficient and skilled employees and other entrepreneurial ingredients of capitalist growth.

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