Pushing People

Every once in a while you get a nugget of truth in our noise filled world. And when you do you have to cherish it. Like a prized possession.

In the real world it is considered impolite to push someone. People can get startled and stumble, or they can fall and hurt themselves or worse, depending on what they get pushed into or over.

But in the monetary world if you push people you’re just a hero.

No, really:

For years central banks have told us their primary mandate where concepts such as price stability, 2% inflation and full employment and such. Their primary tool: Low and negative rates. It was meant to be an emergency measure to deal with a crisis.

It became a permanent fixture of the financial system:

It takes effort to get to $9.7 trillion in negative yielding debt you know.

But when you do the absurd long enough it becomes acceptable and normal. Indeed we are now told pushing people into risk assets is a good thing.

Don’t take my word for it.

Here’ the St Louis Fed literally using the phrase “pushing people”:

The money quote:

“Negative interest rates may seem ludicrous since why would an individual buy a government bond with a negative yield, but this is what a central bank would like you to think. The central bank’s goal is to incentivize agents to shift investments away from government bonds to something more productive economically, thus stimulating the economy”.

For emphasis: “The central bank’s goal is to….shift investments away from government bonds….”

I missed that in the primary mandate discussion, but, to be fair it has been a smashing success.

“Pushing People” has aided, abetted and encouraged the largest one way push into equities we’ve seen in modern history.

Here’s $FAW the FTSE all word index. No more down months:

…adding $15 Trillion in global market cap in the same time frame:

….exacerbated by investors throwing their hands in the air and just stuffing cash into passive ETFs:

…producing the highest forward valuations in many years nearly 30% above the 10 year average:

People got pushed alright. But perhaps that’s not the entire truth. Perhaps the truth is uglier than this. Perhaps it’s called taking people’s investment choices away. Perhaps it’s called forcing people to make investment decisions they otherwise would not make.

Perhaps it’s called manipulation of markets and people to achieve an end not attainable by any other means, you know the means of free market forces.

Hence, whatever you call it, don’t call it free market capitalism. Call it what it is: A centrally planned economy the primary modus operandi of which is “pushing people”.

Hope nobody falls and gets hurt, but if they do, will those that did the pushing still be called heroes?

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