Monday , February 17 2020
Home / Epsilon Theory / The Church of the Long Now

The Church of the Long Now

Summary:
To receive a free full-text email of The Zeitgeist whenever we publish to the website, please sign up here. You’ll get two or three of these emails every week, and your email will not be shared with anyone. Ever. That’s Minneapolis Fed President Neel Kashkari on the left and JR “Bob” Dobbs, High Epopt of the Church of the SubGenius, on the right. I know, I know … it’s me being mean to Neel again. But I just couldn’t help myself when I saw this Twitter thread yesterday from my favorite stalking horse of Team Elite. A little background here. The article that Neel is responding to is a spot-on Bloomberg Opinion piece by Elena Popina. In the court of investor opinion, the verdict is in. The Federal Reserve is guilty of quantitative easing. Never mind that

Topics:
Ben Hunt considers the following as important:

This could be interesting, too:

Rusty Guinn writes Options

Ben Hunt writes The Promised Land!

Ben Hunt writes Once You Buy a Prize, It’s Yours to Keep!

Ben Hunt writes You Had One Job


To receive a free full-text email of The Zeitgeist whenever we publish to the website, please sign up here. You’ll get two or three of these emails every week, and your email will not be shared with anyone. Ever.


The Church of the Long Now

That’s Minneapolis Fed President Neel Kashkari on the left and JR “Bob” Dobbs, High Epopt of the Church of the SubGenius, on the right.

I know, I know … it’s me being mean to Neel again.

But I just couldn’t help myself when I saw this Twitter thread yesterday from my favorite stalking horse of Team Elite.

The Church of the Long Now

A little background here. The article that Neel is responding to is a spot-on Bloomberg Opinion piece by Elena Popina.

In the court of investor opinion, the verdict is in. The Federal Reserve is guilty of quantitative easing.

Never mind that Chairman Jerome Powell tells everyone his efforts to shore up funding markets are “in no sense” QE. Try as policy makers may, they’ve lost the ability to convince people that Treasury purchases aren’t at least partially why the Dow Jones Industrial Average is up almost 4,000 points since late August.

Sure, it’s all labels. If you want to call it QE, you can. Or not. If you want to ascribe the rally to Powell, that’s up to you. Certainly the Fed thinks it’s on solid ground. Rather than trying to drive down long-term interest rates to stimulate the economy, a la QE, it’s simply buying T-bills to keep the financial system’s plumbing in order.

And then here’s the money quote:

The problem for policy makers is that perceptions matter in shaping sentiment. If everyone believes central bank largess is pushing up prices, what happens in the market when it’s turned off?

So right.

Anyhoo … Neel’s inability or unwillingness to engage with the actual points and questions raised by this Bloomberg article is nothing new. I’ve had my own run-ins in this regard.

The Church of the Long Now

So I had a Twitter “debate” with Neel Kashkari. But it wasn’t a real conversation. It was me talking to a wall. Maybe one day I’ll get to have a genuine conversation with Neel or Jim or Jay or Lael or Richard or one of the gang. But I doubt it. We can’t have a real conversation with central bankers because they are both guards and prisoners of the island of policy and thought that they’ve created. … Continue reading



No, I’m just going to take Neel on his own merits today. I’m just going to take his actual words as an accurate representation of his actual beliefs and intentions.

Here’s what Neel tweeted yesterday …

By inverting the yield curve, the Fed created a cartoon of recession risk in the real economy. Not an actual cause of recession risk in the real economy, because that’s not how a yield curve works. I mean, the yield curve isn’t a thing. It’s a derivative of market data observations that market participants assign meaning to as a predictive signal of recession risk. The shape of a yield curve has zero actual impact on the real economy. To use ten dollar words, it is epiphenomenon not phenomenon. To use Epsilon Theory words, it’s a cartoon. It’s a market cartoon of real world recession risk named “Inverted Yield Curve!”.

That cartoon had absolutely no impact in the real world, of course. It can’t. It had a huge impact though, in the market world.

The Fed created FEAR in market world that a recession might be coming.

Then the Fed took that fear away.

In the immortal words of Neel Kashkari … Should we be surprised that the market is up?

At no point did the Fed’s actions, either in creating market fear or in taking away market fear, have any impact on the real economy.

It was entirely an exercise by the Fed to maintain control over market world.

It was entirely part and parcel of the effort to transform capital markets into a political utility.

What is The Long Now?

Exactly this.

The Long Now is the construction of artificial fear and the removal of artificial fear in order to maintain the social POWER of the constructors and removers of those fears.

They’re. Not. Even. Pretending. Anymore.


About Ben Hunt
Ben Hunt
He is the chief investment strategist at Salient, a $14 billion asset manager based in Houston and San Francisco, and the author of Epsilon Theory, a newsletter and website that examines markets through the lenses of game theory and history. Over 100,000 professional investors and allocators read Epsilon Theory for its fresh perspective into market dynamics.

Leave a Reply

Your email address will not be published. Required fields are marked *