Misdirection And The Carnival Barkers Of Credit

Misdirection and the Carnival Barkers of Credit.

Every now and then I am compelled to annoy with another screed about the dangers of the Central Bank.  Let me first say I believe Fed officials are intelligent, well meaning, and superbly educated. I could add self-important, insular, and arrogant, but I won’t.  My purpose today is only a reminder.

Any and every thing the Fed does and says has a purpose. That purpose is to influence opinions and thus behavior. There is always an agenda. Fed officials are the carnival barkers of credit. Truth is not relevant. The purpose is to shape a consensus in financial circles that control the direction funds are flowing.  Misinformation and misdirection are utilities. The magic trick is not to make the elephant disappear when the audience glances away.  The trick is to make the audience glance away. It is no accident that the magician’s assistant is half naked and wearing sequins. Lady Gaga explains the Federal Reserve's jawboning process very clearly: “I’m telling a lie in a vicious effort to make you repeat my lie over and over until it becomes true.” My reminder is figure out where they want you to look because then you might be able to figure out where they don’t want you to look.  That is where the elephant is. ( Ben Hunt of Epsilon Theory is excellent on this subject}

Central Bankers are not liars by nature and once in a while some pure truth slips out. Recently Esther George gave us this when discussing QE and the taper “getting into this unconventional policy was uncharted waters and I can assure you that getting out of this will be equally experimental for us.”  That is an important and unusually candid remark. The enormous and creative effort by the Fed to support and revive the economy can be debated pro and con. But an undeniable fact is that the policy is a tar baby from which the Fed faces a difficult exit. How does one withdraw all that stimulus without stalling the economic recovery? The world is watching ready to react and change investment allocation the minute they sense interest rates will increase.  A lot of misdirection will be required.

Last year Bernanke mentioned the taper of QE and set off what is now called the “Taper Tantrum” in the credit markets as rates lurched sharply higher only to fall a good ways back again as the Fed really did not do much of anything. I hear that referred to as a mistake, but I disagree. I believe Mr. Bernanke put a pin to the balloon and relieved a lot of pressure. This may be a little boy cried wolf strategy. Create a few mini panic sell offs in bond markets to desensitize the markets and dull responses to policy changes. If so, it was just the beginning.  Keep your eyes on the elephant, don’t watch the shiny stuff.

Misdirection is a form of deception in which the attention of an audience is focused on one thing in order to distract its attention from another.  Wikipedia

The greatest enemy of knowledge is not ignorance  …  it is the illusion of knowledge.  Stephen Hawking

“All the perplexities, confusion, and distress in America arise, not from want of honor or virtue, but from the downright ignorance of the nature of coin, credit, and circulation.”  --    John Adams

“Everything the State says is a lie, and everything it has it has been stolen.” 
― Friedrich Nietzsche

"When it becomes serious, you have to lie," Juncker