AI, Congress and the FED, oh my!
Congress – Massive Structural Change – Zero Regulations
I review the G 20 news, and I really belly laugh. The kiddies having no clue and always looking. backward report information that is UNCOUPLED from markets today. Over 90% of all trading – which controls market prices in all asset classes – is AI. No human is moving capital at 440 trillion into postures or theories such as the kiddies are reporting.
First: the world is in a new economy that the world. has never known or experienced before. The new economy was born and compressed in only 60 months. Its much like Elron Mush my hero having the kiddies report his financial death at Tesla, as he burned through 100 million in loss per WEEK folks, as his never ending ark lamp came on. Hey build an entire assembly line in a tent in our own parking lot. Hey staff it with self correcting humans and scrap all the robotics. Tesla does not die turns a profit and Musk is the ark lamp hero for share holders. No one every built an entire assembly line in a parking lot in three weeks folks. AI is alive.
The new economy operates to maximize profit in the shortest time frames – say every 72 minutes world wide in markets that never sleep and are 24.7. All outside any regulatory frame work at margins and leveraged digital trading the world has never not ever seen before. No one regulates the new economy which is in sixty months compressed into GLOBAL INTEGRATIONS the world has never experienced nor has history to even manage. In this new economy the box top rules to navigate the landscape are being written and are not in print yet. Just think of that alone.
This week the SYSTEM SAVERS ( and I remain skeptical of that idea ) were interviewed. Old Bernake ( of whom I am not a fan ) suggests how they saved the system in 2008 was “right” when I think it was “fatally wrong” . They conclude that there are LESS FIRE HOSES in place to handle a future crises than they had available in 2008. I agree with that. RISK is far higher for system collapse today due to the structural change inside a SUPER CHANGE speed still unfolding as we do noting at a G 20 level where= the real thinking is required. No one is really thinking and the system – the new modeling and structures – are unfolding where using old tools and tactics ( such as the Fed shuttle launch on normalizing interest rates is fatal to the new economic destruction in our opinion ).
NOW COMES CONGRESS
Central banks are using obsolete tools to manage monetary policy. This is dangerous to system stabilityToday Central bank policy must focus on system stability first and other mile stones second. System stability must be the new bed rock. However the central banks like the Fed have no clue on stability issues and are evoking antique policies that fail and trigger global system vulnerability. Risk is super high and growing because policy makers are backward and leadership has yet to initiate forward corrective policies. AI in super money pools is at war ( which is entirely new ) producing volatility we predicted here and to which prior to this summer the world has never experienced as the NEW NORMAL. Until leveraged short selling managed digitally is moderated by new regulatory frame works the entire system is at risk of failure. Why?
Liquidity. It would take too long to explain here but the liquidity risk is to vast that the central banks working collectively to drain liquidity from a fragile system at 2019 are insane. Their policy rule books apply to 1950 before offices had fax machines. It is a shame really.
In comes the biggest RISK OF ALL. The American elections in the USA produce into a entrenched partisan polarization and popularism warfare the markets have never dealt with in modern times. The new congress breeds uncertainty on the level of grid lock, political warfare in politicized justice – with endless investigation and impeachment risks flying in the Congressional Hurricane winds, and no one knows which structure ( such as their own ) will be damaged.
AI is moving portfolio from risk of forward growth investing ( known as risk investing ) over to % flows unseen in 10 years toward Fed created high interest market positions, with re-positioning creating the forward market place. This is the first full on AI market correction.
moar…
https://bernydohrmann.com/2018/12/11/congress-massive-structural-change-zero-regulations/