Monday, October 20, 2014
Go To Original
I met with Sheldon S. Wolinin Salem, Ore., and John Ralston Saulin Toronto and asked the two political philosophers the same question. If, as Saul has written, we have undergone a corporate coup d’état and now live under a species of corporate dictatorship that Wolin calls “inverted totalitarianism,”if the internal mechanisms that once made piecemeal and incremental reform possible remain ineffective, if corporate power retains its chokehold on our economy and governance, including our legislative bodies, judiciary and systems of information, and if these corporate forces are able to use the security and surveillance apparatus and militarized police forces to criminalize dissent, how will change occur and what will it look like?
Wolin, who wrote the books “Politics and Vision” and “Democracy Incorporated,” and Saul, who wrote “Voltaire’s Bastards” and “The Unconscious Civilization,” see democratic rituals and institutions, especially in the United States, as largely a facade for unchecked global corporate power. Wolin and Saul excoriate academics, intellectuals and journalists, charging they have abrogated their calling to expose abuses of power and give voice to social criticism; they instead function as echo chambers for elites, courtiers and corporate systems managers. Neither believes the current economic system is sustainable. And each calls for mass movements willing to carry out repeated acts of civil disobedience to disrupt and delegitimize corporate power.
“If you continue to go down the wrong road, at a certain point something happens,” Saul said during our meeting Wednesday in Toronto, where he lives. “At a certain point when the financial system is wrong it falls apart. And it did. And it will fall apart again.”
“The collapse started in 1973,” Saul continued. “There were a series of sequential collapses afterwards. The fascinating thing is that between 1850 and 1970 we put in place all sorts of mechanisms to stop collapses which we can call liberalism, social democracy orRed Toryism. It was an understanding that we can’t have boom-and-bust cycles. We can’t have poverty-stricken people. We can’t have starvation. The reason today’s collapses are not leading to what happened in the 18th century and the 19th century is because all these safety nets, although under attack, are still in place. But each time we have a collapse we come out of it stripping more of the protection away. At a certain point we will find ourselves back in the pre-protection period. At that point we will get a collapse that will be incredibly dramatic. I have no idea what it will look like. A revolution from the left? A revolution from the right? Is it violence followed by state violence? Is it the collapse of the last meaningful edges of democracy? Is it a sudden decision by a critical mass of people that they are not going to take it anymore?”
This devolution of the economic system has been accompanied by corporations’ seizure of nearly all forms of political and social power. The corporate elite, through a puppet political class and compliant intellectuals, pundits and press, still employs the language of a capitalist democracy. But what has arisen is a new kind of control, inverted totalitarianism, which Wolin brilliantly dissects in his book “Democracy Incorporated.”
Inverted totalitarianism does not replicate past totalitarian structures, such as fascism and communism. It is therefore harder to immediately identify and understand. There is no blustering demagogue. There is no triumphant revolutionary party. There are no ideologically drenched and emotional mass political rallies. The old symbols, the old iconography and the old language of democracy are held up as virtuous. The old systems of governance—electoral politics, an independent judiciary, a free press and the Constitution—appear to be venerated. But, similar to what happened during the late Roman Empire, all the institutions that make democracy possible have been hollowed out and rendered impotent and ineffectual.
The corporate state, Wolin told me at his Oregon home, is “legitimated by elections it controls.” It exploits laws that once protected democracy to extinguish democracy; one example is allowing unlimited corporate campaign contributions in the name of our First Amendment right to free speech and our right to petition the government as citizens. “It perpetuates politics all the time,” Wolin said, “but a politics that is not political.” The endless election cycles, he said, are an example of politics without politics, driven not by substantive issues but manufactured political personalities and opinion polls. There is no national institution in the United States “that can be described as democratic,” he said.
The mechanisms that once allowed the citizen to be a participant in power—from participating in elections to enjoying the rights of dissent and privacy—have been nullified. Money has replaced the vote, Wolin said, and corporations have garnered total power without using the cruder forms of traditional totalitarian control: concentration camps, enforced ideological conformity and the physical suppression of dissent. They will avoid such measures “as long as that dissent remains ineffectual,” he said. “The government does not need to stamp out dissent. The uniformity of imposed public opinion through the corporate media does a very effective job.”
The state has obliterated privacy through mass surveillance, a fundamental precondition for totalitarian rule, and in ways that are patently unconstitutional has stripped citizens of the rights to a living wage, benefits and job security. And it has destroyed institutions, such as labor unions, that once protected workers from corporate abuse.
Inverted totalitarianism, Wolin has written, is “only in part a state-centered phenomenon.” It also represents “the political coming of age of corporate power and the political demobilization of the citizenry.”
Corporate power works in secret. It is unseen by the public and largely anonymous. Politicians and citizens alike often seem blissfully unaware of the consequences of inverted totalitarianism, Wolin said in the interview. And because it is a new form of totalitarianism we do not recognize the radical change that has gradually taken place. Our failure to grasp the new configuration of power has permitted the corporate state to rob us through judicial fiat, a process that culminates in a disempowered population and omnipotent corporate rulers. Inverted totalitarianism, Wolin said, “projects power upwards.” It is “the antithesis of constitutional power.”
“Democracy has been turned upside down,” Wolin said. “It is supposed to be a government for the people, by the people. But it has become an organized form of government dominated by groups that are only vaguely, if at all, responsible or responsive to popular needs and popular demands. At the same time, it retains a patina of democracy. We still have elections. They are relatively free. We have a relatively free media. But what is missing is a crucial, continuous opposition that has a coherent position, that is not just saying no, no, no, that has an alternative and ongoing critique of what is wrong and what needs to be remedied.”
Wolin and Saul, echoing Karl Marx, view unfettered and unregulated capitalism as a revolutionary force that has within it the seeds of its own self-annihilation. It is and always has been deeply antagonistic to participatory democracy, they said. Democratic states must heavily regulate and control capitalism, for once capitalism is freed from outside restraint it seeks to snuff out democratic institutions and abolish democratic rights that are seen—often correctly—as an impediment to maximizing profit. The more ruthless and pronounced global corporate capitalism becomes, the greater the loss of democratic space.
“Capitalism is destructive because it has to eliminate customs, mores, political values, even institutions that present any kind of credible threat to the autonomy of the economy,” Wolin said. “That is where the battle lies. Capitalism wants an autonomous economy. It wants a political order subservient to the needs of the economy. The [capitalist’s] notion of an economy, while broadly based in the sense of a relatively free entrance and property that is relatively widely dispersed, is as elitist as any aristocratic system.”
Wolin and Saul said they expect the state, especially in an age of terminal economic decline, to employ more violent and draconian forms of control to keep restive populations in check. This coercion, they said, will fuel discontent and unrest, which will further increase state repression.
“People with power use the tools they have,” Saul said. “As the West has gradually lost its economic tool it has turned to what remains, which are military tools and violence. The West still has the most weaponry. Even if they are doing very badly economically in a global sense, they can use the weaponry to replace the economics or replace competition.”
“They decided that capitalism and the market was about the right to have the cheapest possible goods,” Saul said. “That is what competition meant. This is a lie. No capitalist philosopher ever said that. As you bring the prices down below the capacity to produce them in a middle-class country you commit suicide. As you commit suicide you have to ask, ‘How do we run this place?’ And you have to run it using these other methods—bread and circuses, armies, police and prisons.”
The liberal class—which has shriveled under the corporate onslaught and a Cold War ideology that held up national security as the highest good—once found a home in the Democratic Party, the press, labor unions and universities. It made reform possible. Now, because it is merely decorative, it compounds the political and economic crisis. There is no effective organized opposition to the rise of a neofeudalism dominated a tiny corporate oligarchy that exploits workers and the poor.
“The reform class, those who believe that reform is possible, those who believe in humanism, justice and inclusion, has become incredibly lazy over the last 30 or 40 years,” Saul said. “The last hurrah was really in the 1970s. Since then they think that getting a tenured position at Harvard and waiting to get a job in Washington is actually an action, as opposed to passivity.”
“One of the things we have seen over the last 30 or 40 years is a gradual silencing of people who are doctors or scientists,” Saul said. “They are silenced by the managerial methodology of contracts. You sign an employment contract that says everything you know belongs to the people who hired you. You are not allowed to speak out. Take that [right] away and you have a gigantic educated group who has a great deal to say and do, but they are tied up. They don’t know how to untie themselves. They come out with their Ph.D. They are deeply in debt. The only way they can get a job is to give up their intellectual freedom. They are prisoners.”
Resistance, Wolin and Saul agreed, will begin locally, with communities organizing to form autonomous groups that practice direct democracy outside the formal power structures, including the two main political parties. These groups will have to address issues such as food security, education, local governance, economic cooperation and consumption. And they will have to sever themselves, as much as possible, from the corporate economy.
“Richard Rorty talked about how you take power,” Saul said. “You go out and win the school board elections. You hold the school board. You reform the schools. Then you win the towns. And you stay there. And you hold it for 30 to 40 years. And gradually you bring in reforms that improve things. It isn’t about three years in Washington on a contract. There has to be a critical mass of leaders willing to ruin their lives as part of a large group that figures out how to get power and hold power at all of these levels, gradually putting reforms in place.”
I asked them if a professional revolutionary class, revolutionists dedicated solely to overthrowing the corporate state, was a prerequisite. Would we have to model any credible opposition after Vladimir Lenin’s disciplined and rigidly controlled Bolsheviks or Machiavelli’s republican conspirators? Wolin and Saul, while deeply critical of Lenin’s ideology of state capitalism and state terror, agreed that creating a class devoted full time to radical change was essential to fomenting change. There must be people, they said, willing to dedicate their lives to confronting the corporate state outside traditional institutions and parties. Revolt, for a few, must become a vocation. The alliance between mass movements and a professional revolutionary class, they said, offers the best chance for an overthrow of corporate power.
“It is extremely important that people are willing to go into the streets,” Saul said. “Democracy has always been about the willingness of people to go into the streets. When the Occupy movement started I was pessimistic. I felt it could only go a certain distance. But the fact that a critical mass of people was willing to go into the streets and stay there, without being organized by a political party or a union, was a real statement. If you look at that, at what is happening in Canada, at the movements in Europe, the hundreds of thousands of people in Spain in the streets, you are seeing for the first time since the 19th century or early 20th century people coming into the streets in large numbers without a real political structure. These movements aren’t going to take power. But they are a sign that power and the respect for power is falling apart. What happens next? It could be dribbled away. But I think there is the possibility of a new generation coming in and saying we won’t accept this. That is how you get change. A new generation comes along and says no, no, no. They build their lives on the basis of that no.”
But none of these mass mobilizations, Saul and Wolin emphasized, will work unless there is a core of professional organizers.
“Anarchy is a beautiful idea, but someone has to run the stuff,” Saul said. “It has to be run over a long period of time. Look at the rise and fall of the Chinese empires. For thousands of years it has been about the rise and fall of the water systems. Somebody has to run the water system. Somebody [in modern times] has to keep the electricity going. Somebody has to make the hospitals work.”
“You need a professional or elite class devoted to profound change,” Saul said. “If you want to get power you have to be able to hold it. And you have to be able to hold it long enough to change the direction. The neoconservatives understood this. They have always been Bolsheviks. They are the Bolsheviks of the right. Their methodology is the methodology of the Bolsheviks. They took over political parties by internal coups d’état. They worked out, scientifically, what things they needed to do and in what order to change the structures of power. They have done it stage by stage. And we are living the result of that. The liberals sat around writing incomprehensible laws and boring policy papers. They were unwilling to engage in the real fight that was won by a minute group of extremists.”
“You have to understand power to reform things,” Saul said. “If you don’t understand power you get blown away by the guy who does. We are missing people who believe in justice and at the same time understand how tough power and politics are, how to make real choices. And these choices are often quite ugly.”
Go To Original
There is an unspoken rule in American politics, expressed ever more clearly in each election cycle, that the more important an issue is, the less it can be discussed—much less decided—by the election. The US military has embarked on a new war in the Middle East, democratic rights have been eviscerated, millions are without jobs, household incomes are falling, and a record number of people are being deported from the country. Yet, with the 2014 midterm election just 17 days away, none of these issues are being discussed.
What accounts for this hollowing-out of American politics and the transformation of elections into empty biennial rituals? As with all significant political transformations, these changes are rooted in deeper social processes. One does not have to look all too far to identify them.
Over the past several weeks, report after report has been released documenting the extraordinary growth of social inequality in the United States and throughout the world.
Late last month, Forbes magazine reported that the 400 richest people in the United States saw their wealth grow 14 percent over the past year. The following week, the Organization for Economic Cooperation and Development reported that global social inequality has eclipsed the pre-Great Depression highs of the 1920s.
This week, Credit Suisse reported that the top one percent of the world’s population control nearly half of all wealth, with the ultra-rich concentrated in the United States.
This was followed by the release of a paper by economists Emmanuel Saez and Gabriel Zucman showing that wealth in the US is increasingly monopolized not merely by the wealthiest 10 percent or even the top 1 percent, but by the top 0.1 percent. They concluded, “Virtually all the increase in the top 10 percent and top 1 percent shares over the last three decades is due to the rise in the top 0.1 percent share, from 7 percent in the late 1970s to 22 percent in 2012.”
Even US Federal Reserve Chair Janet Yellen, who is overseeing the continued handout of oceans of cash to the financial markets, felt compelled to warn of the “extent of and continuing increase in inequality in the United States.” She noted in remarks Friday, “By some estimates, income and wealth inequality are near their highest levels in the past hundred years, much higher than the average during that time span and probably higher than for much of American history before then.”
How can these vast changes in economic relationships not have had a profound and transformative impact on political life?
The historian Edward Gibbon once summed up the political form of the Roman Empire as “an absolute monarchy disguised by the forms of a commonwealth.” Taking our cue from his definition, we can say that the United States has become an oligarchy disguised by the outward, increasingly threadbare trappings of a democracy.
Whatever the pretense of “one person, one vote,” the fact is that the top 0.1 percent dictates policy and essentially selects the personnel tasked with carrying it out. A somewhat broader, still highly privileged and small, section of the population has some influence—the top 5 or 10 percent. The interests and concerns of the bottom 90 percent have absolutely no impact on government actions.
Money buys elections. The 2012 election, the most expensive election cycle in history, was decided by some $6.3 billion in campaign cash. An analysis of elections to the House of Representatives found that 93 percent were decided by which candidate raised the most money. In the 2004 elections, a stunning 98 percent of victorious candidates out-spent their opponents.
2014 is set to be the most expensive non-presidential election in US history, despite widespread popular indifference.
Not only do the politicians do the bidding of the wealthy, they are themselves increasingly numbered among the rich and super-rich. Earlier this year, the Center for Responsive Politics reported that, for the first time in history, most members of the US Congress are millionaires.
Not content with the power it already has, the US ruling class is moving to remove all remaining restraints on money in politics. In April, the United States Supreme Court issued a ruling removing the cap on the total amount of money individuals can contribute to political campaigns.
The financial oligarchy has used its unlimited political power and influence to divert an ever-greater share of the US economy to financial speculation and fraud. The Obama administration and the Federal Reserve, after bailing out the banks, have kept interest rates at zero for nearly six years, fueling a raging financial bubble.
The dictatorship of the wealthy is inextricably tied to the basic structure of the capitalist system. Economic life is totally subordinated to the insatiable profit demands of the giant banks and corporations, whose top executives account for a growing portion of America’s ultra-rich.
“Financial markets are faced with uncertainty that isn’t going away. The slowdown in Europe is probably in the early innings, the Fed hasn’t begun to raise interest rates, and geopolitical crises seem to pop up by the day.” Jeff Cox, Finance editor, CNBCGo To Original
Six years of zero rates and trillions of dollars of asset purchases couldn’t stop stocks from falling sharply on Wednesday. All three major indices moved deep into the red, with the Dow Jones leading the pack, dropping an eye-watering 460 points before rebounding nearly 300 points by the end of the session. Risk-free assets, particularly US Treasuries, rallied hard on the flight-to-safety move with the benchmark 10-year Treasury yield slipping to a Depression era 1.87 percent before climbing back above the 2 percent mark. US financials were the worst hit sector, taking it on the chin for 9 percent by mid-day, while Brent crude was soundly walloped, falling to a 47-month low on oversupply and deflation fears. Stock market gains for the year had nearly been wiped out before a miraculous about-face turned Armageddon into a so-so day with survivable losses. Even so, analysts have already started paring back their estimates for 4th quarter growth while traders stocked up on antacid for Thursday’s opening bell.
The proximate cause of Wednesday’s bloodbath was weaker than expected economic data from Europe–which is sliding towards its third recession in five years– droopy retail sales in the US, and a report from Department of Labor showing that wholesale prices for producers are edging closer towards deflation, the opposite of what the Fed is trying to achieve via its aggressive monetary policy.
But the real trigger for the selloff was not the dismal data, but the policies that have been in place since the Financial Crisis of 2008. While the Obama administration has steadily decreased demand by shaving the deficits which provide vital fiscal stimulus for the economy, (On Wednesday, the USG announced the budget deficit fell to $483 billion, the lowest since 2008) the Federal Reserve has been providing trillions of dollars of cheap money to the banks and brokerages. The result of this one-two combo has not only been the biggest transfer of wealth in human history, but also “a fundamental breakdown in the functioning of the global capitalist economy.” As the International Monetary Fund (IMF) noted in a recent paper on the global recovery: “a pickup in investment has not yet materialized…reflecting concerns about low medium-term growth potential and subdued private consumption.” Demand shortfalls in the advanced countries “could lead to sustained global economic weakness over a five-year period.” (IMF report records global economic breakdown, Nick Beams, World Socialist Web Site)
Simply put: The Fed’s policies have made investors richer, but they haven’t created opportunities for recycling profits, which is a critical part of capitalism’s so called virtuous circle. Anemic investment, means less hiring, less spending, weaker demand and slower growth, all of which are visible in today’s sluggish, underperforming economy. Pumping money into financial assets (QE) can fatten the bank accounts of rich speculators, but it doesn’t do jack for the economy. It just creates bubbles that burst in a flurry of panic selling. Here’s more from Larry Elliot at the Guardian:
“Six years after the global banking system had its near-death experience, interest rates are still at emergency levels. Even attaining the mediocre levels of activity expected by the IMF in the developed countries requires central banks to continue providing large amounts of stimulus. The hope has been that copious amounts of dirt-cheap money will find its way into productive uses, with private investment leading to stronger and better balanced growth.
It hasn’t happened like that. Instead, as the IMF rightly pointed out, the money has not gone into economic risk-taking but into financial risk-taking. Animal spirits of entrepreneurs have remained weak but asset prices have been strong. Tighter controls on banks have been accompanied by the emergence of a powerful and largely unchecked shadow banking system. Investors have been piling into all sorts of dodgy-looking schemes, just as they did pre-2007. Recovery, such as it is, is once again reliant on rising debt levels. Central bankers know this but also know that jacking up interest rates would push their economies back into recession. They cross their fingers and hope for the best.” (World leaders play war games as the next financial crisis looms, Larry Elliot, Guardian)
The policies implemented by the Obama administration and Fed have achieved precisely what they were designed to achieve; they’ve enriched the voracious plutocrats who run the system but left everyone else scraping by on less and less. An article in the Washington Post explains what’s going on in greater detail. Here’s a short excerpt from the piece titled “Why is the recovery so weak? It’s the austerity, stupid”:
“Welcome to Austerity U.S.A., where the deficit is back below 3 percent of GDP and growth is still disappointing—which aren’t unrelated facts.
It started when the stimulus ran out. Then state and local governments had to balance their budgets amidst a still-weak economy. And finally, there was the debt ceiling deal with its staggered $2.1 trillion of cuts over the next decade. Add it all up, and there’s been a big fiscal tightening the past few years, something like 4 percent of potential GDP. Indeed, as Paul Krugman points out, real government spending per capita has been falling faster now than any time since the Korean War demobilization. (chart)
And, as you can see above, all this austerity has been hurting GDP growth since 2011. It shows the Hutchins Center’s new “fiscal impact measure,” which looks at how much total government tax-and-spending decisions have helped or harmed growth. The dark blue line is what policy has actually done, and the light blue one is what a neutral policy would have done. So, in other words, if the dark blue line is below the light blue one, like it has the last three years, then policy has subtracted from growth.” (Why is the recovery so weak? It’s the austerity, stupid. Washington Post)
By cutting the deficits, Obama reduced the blood flow to the real economy and weakened demand. That’s what torpedoed the recovery. In contrast, stocks and bonds have done remarkably well, mainly because the Fed pumped $4 trillion into financial assets which was a taken as a greenlight by risk takers everywhere to load up on everything from overpriced equities to low-yield junk. Now, after more than three years without as much as a 10 percent correction, the momentum has shifted, volatility has returned, earnings are looking wobbly, and the fear is palpable. Stocks appear to be headed for a major repricing event. Here’s how investment guru John Hussman sums it up in his Weekly Market Comment:
“Our concerns at present mirror those that we expressed at the 2000 and 2007 peaks, as we again observe an overvalued, overbought, overbullish extreme that is now coupled with a clear deterioration in market internals, a widening of credit spreads, and a breakdown in our measures of trend uniformity…
…it has become urgent for investors to carefully examine all risk exposures. When extreme valuations on historically reliable measures, lopsided bullishness, and compressed risk premiums are joined by deteriorating market internals, widening credit spreads, and a breakdown in trend uniformity, it’s advisable to make certain that the long position you have is the long position you want over the remainder of the market cycle. As conditions stand, we currently observe the ingredients of a market crash.” (The Ingredients of a Market Crash, John P. Hussman, Ph.D., Hussman Funds)
Sounds ominous, doesn’t it? And Hussman is not alone either. The bearish mood on Wall Street is gaining pace even among those who focus more on geopolitical issues than fundamentals, like the Bank for International Settlements’ Guy Debelle who said in an interview on CNBC on Tuesday that he was concerned about the possibility of a “violent” market drop, particularly in bonds.
“If I had told you that there were heightened tensions in the Middle East and Eastern Europe, uncertainty about the turning point in U.S. monetary policy, a succession of strong U.S. job numbers, uncertainty about the future direction of policy in Europe and Japan, as well as increased concern about the strength of the Chinese economy, you would not be expecting that to make for a benign time in financial markets,” Guy Debelle of the BIS said. “But that is what we have seen for much of this year.” (CNBC)
But stocks aren’t cratering because of tensions in the Middle East or Eastern Europe. That’s baloney. And they’re not falling because of decelerating global growth, plunging oil prices or Ebola. They’re falling because no one knows what the heck is going to happen when QE stops at the end of October. That’s what has everyone in a lather.
Keep in mind, that 20 percent of the current market cap (more than $4 trillion) is stock buybacks, that is, corporations that have bought their own shares to juice prices. Do you really think that corporate bosses are going to play as fast and loose after the Fed stops its liquidity injections?
Not on your life. They’re going to pull in their horns and see what happens next. And if things go sideways, (which they very well could) they’re going to cash in and call it a day. That’s going to drive down stock prices and send markets reeling.
Stocks have nearly tripled since March 2009 when the Fed started this “credit easing” fiasco. So if stocks rode higher on an ocean of Fed liquidity, then how low are they going to go when the spigot is turned off? There are some, like technical strategist Abigail Doolittle, who think the S and P 500 could suffer a major heart attack, dropping as much as 60 percent before equities touch down. Check it out from CNBC:
“(Abigail) Doolittle, founder of Peak Theories Research, has made headlines lately suggesting a market correction worse than anyone thinks is ahead. The long-term possibility, she has said, is a 60 percent collapse for the S&P 500.
In early August, Doolittle was warning both of a looming “super spike” in the CBOE Volatility Index as well as a “death cross” in the 10-year Treasury note.
And so it’s come to pass at least for the VIX, which has jumped 74 percent over the past three months and crossed the 20 threshold that historically has served as a dividing line between complacency and fear. That’s its highest level in nearly two years. From Doolittle’s perspective, the spike represents a bad-news/bad-news scenario … that the near-term selling action is likely to continue and even accelerate…
…she thinks “violent waves of selling action” could send the VIX all the way to 90—even beyond its peak during the financial crisis.” (CNBC)
Now maybe Doolittle is just exaggerating or paranoid, but her conclusions do seem to square with CNN Money. Here’s a clip from yesterday’s article:
“CNNMoney’s Fear & Greed Index is a good indicator of market momentum. Today it hit zero. That’s a huge red flag and showcases extreme fear in the stock market. The only other time the index ever touched that low point is in August 2011 — shortly after Standard & Poor’s downgraded the U.S. debt.
Volatility — or what some are calling “market whiplash” — is clearly back in the market. The VIX, an index that measures volatility and is one of the factors that goes into the Fear & Greed Index — spiked again today. It’s up a whopping 60% in the past week alone.” (Extreme Fear in stock market, CNN Money)
So fear and volatility are back, but liquidity has suddenly gone missing. That sounds like a prescription for disaster to me. So what can we expect in the weeks to come?
Well, more of the same, at least that’s how Pimco’s former chief executive officer Mohamed El Erian sees it. Here’s how he summed it up on Wednesday in a Bloomberg editorial:
“Though unlikely to be as dramatic as today, market volatility can be expected to continue in the days and weeks to come as two forces compete: first, the forced deleveraging of certain investors, particularly overstretched hedge funds registering big October losses; second, central banks scrambling to say all sorts of reassuring things. All of this will serve to reinforce October’s longstanding reputation as a threatening month for investors around the world.” (October’s Wild Ride Isn’t Over Yet, Mohamed A. El-Erian, Bloomberg)
Did he say “forced deleveraging”?
Uh huh. So, after a 6 year bacchanal, the Fed is finally going to take away the punch bowl and force the revelers to pay down their debts, clean up their balance sheets, and take a few less risks. Is that it?
Yep. It sure looks like it. But, that could change in the blink of an eye, after all, the Fed has its friends to think of. Which means that Ms. Yellen could announce QE4 any day now.