Hi Russ.
In reply to your reply :)
(( [Glenn ] Their game is "gearing" and "leverage" ... [Russ] Good terms for it, mine being the more colorful, "pump and dump". ))
I like the terms "gearing" and "leverage" because they both employ the concept of a "lever" (i.e. that which amplifies the effect of an applied force). And the ability to "lever" is at the heart IMO of what Doug Noland refers to the current regime of "Structure Finance".
So the notion here is that the system itself is structured to allow for maximum effects of gearing - with derivatives, swaps, hedges, etc., and efforts to "manage" risk by "structuring" supposedly non-correlated or minimally-correlated assets/risk profiles.
I tend to think of "pump" and "dump" more as behaviors speculators engage in to extract wealth from the system (i.e. market). "Gearing" and "leverage" in contrast, while also activities undertaken by actors in the system, to me emphasizes that the system itself is constructed precisely to be "geared" or levered".
Anyway, a small point, but just thought I'd share my thinking on it.
(( [Glenn]Take one policy response pole (say the inflationary), and gear it to the max. ... [Russ]I don't really see this being pumped or geared to the max yet))
Point well taken Russ. And I didn't really mean to suggest that we are there yet, more just to suggest a perspective on how the game is "played". I'm really not sure where we are on this front, and I look to your "real time" analysis to help me on this one! (smile)
(( [Glenn] which in our situation I expect to be a more deflationary emphasis, with a pronounced return to positive real interest rates (i.e. a normalization of the interest rate structure) ... [Russ] I most certainly have this prospect on my radar screen, and I think people would be nuts not to ... I'm not going to react to mere MoP words though: my motto being if it looks like a duck, walks like a duck, probably is a duck. ))
Here you loud and clear on this one. I feel the "big money" policy boys (& girls) are not far from "acting" to dampen global demand. What combination of currency revaluation, interest rate movement, or continuing rising commodity prices produce this result I can't say. But, continuing negative real interest rates to my mind will cause more problems than it solves for nearly ALL players, and I have to believe at some point they'll act (I know, you'll believe it when you see it! LOL!).
(( [Russ] I know you subscribe to the Big Centralized Conspiracy (BCC) theory, and I for one will not laugh at it, like others might. My view is different though. I subscribe more to the Little Decentralized Conspiracy (LDC) theory. ))
Russ, say it ain't so! People laugh at me?!!! I'm shocked! (smile)
Just to clarify. I in no way believe that every phenomena or market dynamic is the product of some "big conspiracy theory". I think there are many forces that combine to produce the behavior of any complex system. Furthermore, if the human condition didn't buffet the markets with all manner of aspirations and fears, there will be no "raw material" for operators of the "big lever" (i.e. money supply, interest rate policy, currency policies, fiscal policies, etc.) to pull.
I guess I'd say it's the combination of the central "gearing" agencies, and the rich variety of pension funds, investment brokers, hedge fund operators, currency traders, mom-and-pop investors, etc. - the "rogue traders" and the "sheep" as you put it - that makes the market what it is.
So basically, I think we probably see things pretty similarly here.
But the "lever" itself (i.e. the money supply, interest policy, regulatory environments, and the rules of structured finance), to my view, is managed by a very tight, powerful, elite group. And these folks significantly serve interests that operate behind the scenes and are largely unaccountable to any democratic political process.
To understand the nature of this elite, their motivations and their ethic, helps explain a lot of economic and market phenomena (i.e. leverage/gearing, monetary policy, credit conditions) that otherwise might seem incomprehensible.
Anyway, them's my 2 cents on the matter. Nothing I'm sure that is new to your vantage point, but just want to clarify my position lest someone accuse me of belonging to the "tin foil" hat club. ;)
Best wishes,
Glenn |
