Interbank Market News Scan: What traders need to know about politics …

What Traders Need to Know About Politics: Capital Hates Labor

Regurgitating textbook definitions of economic growth i.e., growth in employment or gross domestic product, etc., only throws you off the mark leaving you frustrated as you ask yourself, “Why are more people being left behind while others see growth in their stock portfolios?”

Economics has never been about growth in employment. Economics is about managing capital with the appropriate amount of labor and technology such that asset values grow. It means pushing the envelope on returns to capital by raising prices so that when discounted by some rate, the present value of the asset can increase thus increasing the value of an individual’s portfolio so that they can leverage the portfolio as collateral for borrowing money at low rates and buying bonds and stocks generating a yield greater than the interest they borrowed at.

In short, today’s economics is about optimizing the carry trade.

This approach to economics was exposed in 2007 and 2008. If this growth in income and asset value (the only inflation that matters) can be achieved without hiring another soul, the wealthy would be happy.

The politician’s job is to distract the low and middle-income populace with narratives of “attacks on democracy” “diversity and inclusion” and “climate change.” Throw in “gun violence” policy and attacks on the big banks ala Elizabeth Warren and Bernie Sanders and the masses really keep their eyes off the ball.

The politicians that are shedding crocodile tears over today’s inflation figures are either ignorant as to true economics or are putting on a show scripted by their supporting political action committees in order to throw the electorate off of the scent. Needless to say, I think it is the latter.

So, when your favorite politicians are telling you that they are looking out for your economic well-being by offering you $300 tax credits and promising you that they will beat up on the banks that are raising your interest rates on the adjustable-rate mortgage you foolhardily took out or dragging supermarkets into a hearing for raising the price on your T-bone steaks, ignore them. Their job is to ensure the distraction by cheerleading the greatness of their fiscal policies that eventually result in higher taxes or their social programs purposefully designed to be effective no more than eighteen months, assuming they are effective at all….

Meanwhile, replace fluffy concepts such as “economy” and “fiscal policy.” Accept that “socialism” and “capitalism” are policy terms designed more to divide, conquer, and garner votes versus helping put food on your table. Learn to accept that “capital” despises “labor” and her goal is to exterminate you or relegate you to an Andrew Yang universal basic income scheme. Stop repeating what you’ve read in a textbook. All lies. Either you have something of high value to trade for low value currency or you don’t. That is as “economy” as you need to get.

Exchange rates of interest as of 9:52 am AST

Currency pairExchange rate
AUD/USD*0.7422
EUR/USD*1.1793
GBP/USD*1.3804
USD/CAD*1.2593
USD/CHF*0.9182
USD/JPY*110.1900
USD/XCD+2.7000
USD/NGN+409.8540
USD/MXN*19.8603
Sources: *Reuters +OANDA

Rates reported by the Federal Reserve (Release Date 15 July 2021)

Effective Fed Funds Rate: 0.10%

Discount Window:  0.25%

Prime Bank Rate: 3.25%

3-month Treasury bill: 0.06%

6-month Treasury bill: 0.05%

1-year Treasury bill: 0.08%

Banks as currency agents …

Banks should think of themselves as the private sector currency agents of the State.  The currency encapsulates the economic, commercial, and social value of a political economy.  A State-issued currency ties the State’s citizens to a particular value system while providing a mechanism that accounts for a citizen’s wealth and serves the citizen as a medium of exchange for goods and services, including the payment of taxes to the State.

Banks help distribute State-issued currency primarily through the creation of credit.  Banks are a “port of call” for currency; receiving deposits from its customers, capital from its investors, and placing State-issued Treasurys, underwritten by the central bank, into its investment portfolio.  Banks issue loans to their customers creating money in the process.  This money can be deposited at other banks or used by consumers or businesses for purchases.  The fees for financial services provided to consumers and the interest earned from lending to end users and producers provide the banks with income that, along with the income generated by businesses financed by banks, can be taxed by the State.

The fallout from the 2007-2008 financial meltdown has created a narrative that banks are entities separate from the State; private sector “bad boys” whose reckless behavior from creating financial instruments doomed to perform poorly caused people to lose jobs and credit to freeze.  The narrative had citizens questioning why these misbehaving banks received bailouts from the U.S. government while ordinary citizens had to bear the brunt of the rippling effects throughout the economy. 

The answer is simple.  Selling debt instruments and earning fees for placing these instruments into the hands of investors part of the implicit agreement between the State and the banks as currency agents.  Even as elected officials such as Senator Elizabeth Warren, Democrat of Massachusetts and Senator Bernie Sanders, Independent of Vermont, argue for increased regulation of America’s larger banks, the truth of the matter is that dismantling the mechanisms of banking would be too costly to the State’s currency distribution system.  The State would have to re-write its laws to support an alternative system and for all the noise against the current system, seems to be in no rush to replace it.     

National Futures Association announcements of interest …

For Immediate Release
April 28, 2021

For more information contact:

Christie Hillsman, 312-781-1490, chillsman@nfa.futures.org
Karen Wuertz, 312-781-1335, kwuertz@nfa.futures.org

NFA orders former associated person Jeremy Ruth never to reapply for NFA membership

April 28, Chicago—NFA has ordered Jeremy Ruth, a former associated person of Postrock Brokerage LLC (Postrock), never to reapply for NFA membership status in any capacity or act as a principal of an NFA Member. Postrock is a former NFA Member introducing broker located in Chicago, Illinois.

The Decision, issued by an NFA Hearing Panel, is based on a Complaint issued by NFA’s Business Conduct Committee and a settlement offer submitted by Ruth, in which he neither admitted nor denied the allegations. The Complaint alleges that he failed to disclose the impact of commissions on customers’ profit potential and placed trades for customers which offered no economic benefit to them and only generated additional commissions. The Complaint also alleges that Ruth made misleading statements to customers and failed to disclose that all of Ruth’s other customers had lost money. Finally, the Complaint alleges that Ruth made unauthorized trades for customers or exercised discretion over customer accounts without obtaining written authority.

For more information, read the Complaint and Decision.

Source: National Futures Association

Treat America as a colony. Extract and profit as much as you can …

Opinion by Alton Drew

The typical American’s view toward the economy is what can this economy do for me; provide to me. There is this notion that social, cultural, or political allegiance to the economic system should be compensated with some guaranteed system of job or business opportunity. An economic system goes a long way in demonstrating its validity to taxpayers if it can provide jobs and an environment that supports trade, but relying on promises to “Make America great again” or “Build back better” is not wise or practical. You are setting yourself up for failure or mental and emotional depression.

Rather, it may be best to maintain a colonizer mentality. Yes, it is ideal that the governing authority of a jurisdiction have in place rules that facilitate and protect trade but that is not enough for any success. I find most political rhetoric on the economy is fluff and puffery and have observed that all substance in trade is generated from the “bottom” and on the “side.”

On the bottom is the extractor or producer, capturing and processing the resources necessary for creating goods and services. Coming in from the side are the traders who are constantly in search of information on consumer tastes, producer capacity, and opportunities for capital deployment. Also on the side is the capital, the holder of the “dry powder”, pooling resources with other holders of capital and weighing competing narratives provided by traders and merchants that describe the best investment opportunities.

Again, if government is doing its job, it is first and foremost ensuring optimal conversion of human, natural, and financial resources by implementing and enforcing rules that allow for accumulating and processing resources by traders and liberal movement of capital from investors. It is effective facilitation that gives elected officials fodder for validating and promoting the political economy.

The colonizer mentality tells us to keep an arm’s length between ourselves and the politician. I would argue they need us more than we need them. The politician cheerleads the economy but the producer, trader, and banker give the politician something to cheer about. While the politician’s rhetoric helps her hold sway over a voting public, the globalisation of capital and freedom to search for economic opportunity in alternative jurisdictions gives the producer/trader/banker some sway.

Both sides, the political and the commercial, need each other but the commercial side should avoid the populism and emotionalism that relegates most taxpayers to the “consumed” class, a class stuck in the downward spiral of selling time for pennies, where the failure to spend time on accumulating knowledge necessary for creating “currency” is creating, in my opinion, an increasingly devalued populace; one prone to the button-pushing of politicians.

Be non-emotional toward the political economy. America does not exist to nurture or cater to your emotions.