Common Cents

Coup de Grace

Ralph Murphy

(3/17) The Federal Reserve Chairman issued a statement 15 March that unspecified interest rates would be dropped to zero for borrowers and a $700 billion bond purchase program would proceed as planned. It’s sourcing and terminology raised “red flags” of concern as to the sincerity of the program objectives in citing an opaque and curable Coronavirus or health issue as grounds for it. The idea conjured prior successful manipulation themes. From the likely description it would affect an interest rate that has been sourced to fiscal abuse but is now neutralized pending statutory review of the Treasury bill and related commercial rates used by banks for investment or consumer loans.

There are three fundamental market determinants that the Federal Reserve or central bank and its counterparts abroad have leverage over their whole respective economies. The money supply and provision are its unique function. It’s also linked to a regulatory role closer tied to commercial interest rates, and has indirect impact on the index or more importantly now alleged mercantile exchanges that as evolved seem to control derivatives or commercial yields and output.

The Fed announcement as interpreted and followed by varied central banks from Europe to Asia and the Southern Hemisphere would impact what’s known as a treasury bill or means for the government to withdraw funds from the economy in the event of a downturn. That hasn’t happened in years and the interest rate that brokers the deal was paid with the bond purchases in an awkward arrangement confusingly and feloniously billed as a means to inject transaction currency into the economy. It was a fund withdrawal tool. There is a counterpart in that scenario known as the discount rate that does inject new money in an expansion cycle but it has to also override the Treasury bill withdrawals and the Fed said it would be extended in looser terms as part of the deal. It hovers at 2% but does vary and is lightly mentioned to press projections.

The European Central Bank followed that lead, as did importantly the Bank of Japan and others, which had in recent years maintained independent host negative interest rates up until then. Those rates are very unique to world banker interests and confusingly hard to justify by stimulus arguments of the officials as they do offer no new growth equity currency to infusion needs. That would still have to be a discount window or new introduction source by the central bank to trusted “ cutting edge” pioneers in new output ventures that can’t acquire the funds of other sourcing as its committed elsewhere. That negative rate was somehow paying what must have been institutional investors to retain their capital but again clearly provided no new currency to the economy itself if growth was sought. It was an an irregular cyclical loss with the steady outflow or rotating money replenished as sourced to tax funds unless the Americans paid it.

If the follower is concerned about being manipulated as has proven the case with too many of these bills it’s understandable but this time probably not an issue. The “Too big to fail” pitches for example led to consolidated funds and subsequent TARP redirects not growth, almost guaranteeing failure without legal redress. Subsequent binding federal law in Dodd Frank consolidations followed central bank Basel accords which legally justified merged world funds and tried to send it all to China. That new zero interest on bonds to strategy projection or meeting of the federal bank minds seems methodology and not policy commitments as again the treasury bills would be relegated to null in investment interests. That concern doesn’t include the historically effectively bank theft transfers to “allies” billed as caused by non-existent recessionary forces either.

The $700 billion bond purchase also conjures visions of reckless spending amid weak justification and “ we know better” civil mum but to the current control environment is probably closer linked to retention in tax holdings for approved and legislative fiscal policy. That and other claims by the Federal Reserve are in check to offsetting less populist authority. What has surfaced to recent market analysis and likely was overlooked by the press and the federal establishment seems the drift in what was known as the derivatives markets that used to be relatively agrarian and little noticed as a Chicago novelty. During the course of the Obama era of banking consolidation the Chicago Mercantile Exchange or CME Group merged with its counterpart NYMEX by 2008 and conventional concepts of derivatives or relatively minor stock yields morphed into all profits of most every listed corporation in the country and subsequently world through the international Commodity Exchange (ICE).

The CME Group was initially a tolerated agriculture exchange marketplace that benefited from what is known as “ futures trading” where the producer and consumer agree to a price on a good or service, there a commodity, at a predetermined date in time useful to that industry for planning and predictability. There are withdrawal circumstances or out “options” built into many contracts linked closer to speculative markets that seemed to develop parallel to the tangible good one itself. The speculative markets came under the broader header of stock exchanges, which to investment patterns play almost no role in the actual supply and demand of the good or service itself. They’re closer to gaming commission interests but are often quoted as justification to legislative resolve.

The commodity markets themselves were a “whole different story”. When they merged with New York and the ICE link abroad the planning or futures contracts extended to “all asset classes” with pricing authority, output, profit and commercial exchanges guaranteed and controlled by futures type controls. It seemed underpinned by the commercial banks for effective leverage more than threat coercion, which probably did serve a supplemental role. When Dodd Frank legislation was repealed two years ago it had by then consolidated institutional banks or corporate interests over depositor ones or smaller banks then unable to gain corporate financing.

The CME Group is clearly “listing”. There has to now be a “knock out” blow and reversal of affordant legislation as 1974 Commodities Futures Trading Commission or regulatory role seems closer to facilitating its management and longevity than actual competitive controls. In that type business environment there’s almost always an external broker. Given the size and scope of the undertaking and the very heavy cost on output and earnings it must have been facilitated by the federal government either through security or regulatory ease. It might have benefited by subsidy programs as well but to cause and effect in its temporary but near absolute contract authority seems more closely linked to cartel groups. They were broken up with the New York guild corporate and banking system players now jailed or killed.

The commodity group was the price and output authority for vast commercial interests but to program analysis was very vulnerable tin conventional legal scrutiny. Despite its mystique it quickly collapsed to relative program harmony amid structural and other challenges. Consolidation of anything, but especially money or it’s underlying source data, is very dangerous in impersonal controls. Europe and others have recognized that and they lack the often innocence of the American market where banking theft gets very vague but was a defining feature of recent external transfers cleverly and seemingly disguised by tax redirects. The commodity exchanges became a misnomer in briefly controlling most every aspect of corporate earnings this past eight years. It’s time to dethrone the Chicago group who now list to New York as well as recognize the salient features of the common stock exchanges as about as important as Gotham.