Thursday, March 16, 2017

Our Derived World is Primary

Our paper and digital money reigns supreme over the physical monetary metals. Our propaganda, fake news and false veneers hold sway over a "truth" that no one can actually determine. And our "sentiments" - thoughts about the future - move markets above and beyond the fundamentals of the "here and now".

And yet we wonder why the FED would hike rates into a calamitous economic present and future outlook, as Yellen feeds chamber echoes back into the "stunned reaction" - which had the exact opposite effect of its desired outcome (yes, even artificial markets eventually respond to counter intuitive output with counter intuitive reactions).

What no one is talking about - the elephant in the room - is the interest rate derivative complex managed by the true corporate owners of the FED, the $145 TRILLION in "systemic" interest rate derivative positions held by the top 5 primary dealers, the Too Big To Fail banks who legally own the Federal Reserve System, including the NY FED.

Yellen. Simply Doing As Directed

Our friends at the BIS will tell you that this notional $145 Trillion is a balanced risk operation that cancels out to some inconsequential fraction of that amount. And yet 5 years ago (the predominant length of term for forwards and swaps) everyone you knew was saying that the FED can NEVER raise rates, and that in fact they are likely to follow suit with Europe into negative territory.

I would posit that 5 to 6 years ago, certain larger players took substantial positions against sequential 25 basis point hikes 5 years forward. And the FEDs primary dealers now stand to make massive profits on the FEDs actions today. I won't speculate on the size of these profits, because they will be taken in a world where "rule of law" is negotiable and many dollars change hands "off book". But rational thinkers can easily conclude that the seductive power of such guaranteed profits have a far greater impact upon the policy decisions of a wholly owned subsidiary than some indeterminate mandate.

It is astonishing that no one seems to grasp the huge conflict of interest between the FEDs primary dealers and its interest rate policy. Even more astonishing, many still do not even understand what the central banks truly are and who they serve, though this is gradually changing as the dollar system's Deep State structure fractures.

The point at hand is that the global financial and monetary system's derived world is the primary mover of our real world. It creates our future "reality" as an outcome of the derivative futures of true market makers like the NY FED, ESF, the Federal Reserve and it's Bailout Queens, JPM, Citi, B of A and Goldman.

This inexplicable and counter-intuitive world dominates us because we gradually came to accept the primacy of wealth by decree, of speculation over productive work, of easy money over sound money, of debt over equity and the age old lure of something for nothing. In short, our future does not affect the outcomes of speculation. Rather, speculation itself shapes our future.

Some of us do hope (in vain, yet hope we must) for a return to the free market reality of times "more sound" than those we exist through today. We do this, even though it is likely that Capitalism will be extinguished in the coming systemic "blame game" and replaced by a world you are guaranteed to loathe even more than this one, if you can make it to the other side intact.

Not everything in this world rests on a speculative profit of one type or another, but so much more does than most realize in this derivative world that so few understand, and thus have come to accept.


  1. Thanks for making your blog public again, I do enjoy your thoughts a great deal. It does seem hopeless does it not? I was just re-ready those early blog posts of FOA, and how immanent change seemed to be back then (2000), and now here we are 17 years later...

    1. +1 for making blog public again. Re: change, have we really moved from inevitable to imminent? I expect that the change will be achieved in a similar manner (being attended by multitude of parties) to Bretton woods conference rather than in a manner similar to Plaza accords i.e temporary solution to structural problem executed by five sovereign representatives Any thoughts?

    2. Dear heavens, mistaken immanent for imminent. Using cell phone to write an answer - folly :-)

  2. It's hard to fathom a system more out of control, but it is not out of tune with reality - it shapes our reality, and what an out of control reality it is.

    I will not predict when this top spins off the table, but the edge has never looked nearer.

  3. What a noble decision to offer your superb thought to the public again. I very much cherish reading the annals. Thank you.

    1. It is a privilege to offer thoughts to those who understand them.

  4. I also wish to thank you for making your blog public again, sincerely, Enough