Shocking Development! JPM in the Crosshairs ~ The Risk Averse Alert

Monday, October 07, 2013

Shocking Development! JPM in the Crosshairs

Boy it sure looks like a mob family war is breaking out. Yesterday's op-ed appearing in the Financial Times titled, "Has JPMorgan become an argument for breaking up the banks?" is a hit on the derivatives king coming from a rather unlikely place. The author, Robert Jenkins, is a former member of the Bank of England’s Financial Policy Committee. We are left to wonder whether it was just a slow news day in London, or if the boom is about to be lowered. This very public challenge of JP Morgan Chase in the highest of places certainly is a development fitting "All Questions Point to London" of just one week ago today.

The verdict of the weighing machine rather appears something troubling is in the works. A mighty big bump in options premiums today, notwithstanding a market drop remaining within the tight range established over the past several trading days. Although the current state of most other technical measures suggests further downside pressure awaits, disproportionate fear the Volatility Index is displaying since late September coinciding with a well-contained market setback over the interim suggests last month's Psych!s peak probably does not mark top to the QE-Fed speculative orgy. Of course, this view is subject to change, but given previous occasions this year when a negative technical configuration warning of prospective trouble was not followed by the intensity of selling we would expect were the market's top finally in place, we might look at accumulating technical weakness to continue as the market drifts sideways to slightly higher going into 2014. Then again, at September's peak there may have materialized (this in relation to the market's advance since mid-November 2012) as much accumulated technical weakness as will be manifest prior to the lug nuts falling off this hyperinflationary, sovereign debt-fueled ruse juicing assets up and down the capital structure.

That's right, a ruse. Never—not once since August 15, 1971—have tax receipts been sustainable to any degree assuring parabolically increasing sovereign debt would be satisfactorily retired, and shrink as a percentage of total physical economic output. All the while every trick in the book of "creative," wildcat finance has been used to expand the means of increasing credit feeding a debt bubble at whose foundation has been not the physical economy's growing output potential, but its increasing marginalization. The odds of today's economic configuration being capable of generating wealth necessary to satisfactorily retire sovereign debt are zero. The fact is, too, the physical economy must shrink in the midst of today's arrangement, and the Federal Reserve is committed only to controlling its contraction for as long as is possible, not doing one damn thing to reverse it. This being the case, then, that even larger mountain of private sector debt is only the more doomed to a great reckoning. Forget about the very bottom of the capital structure. Should today's insolvent albatrosses somehow continue to rule the roost, the stock market as we know it is at risk of an extinction event. Now, to most this radical pronouncement would seem an unbelievable possibility. Yet I am willing to bet were Hamilton living today, he would agree with this assessment of the present moment's frightful vulnerability.

Of course, we should keep our heads about us and suppose today's hopelessly insolvent behemoths soon enough will meet their effective marginalization. This need not devolve into a circus of humiliation. Rather only cessation of their monopoly over political power. This prospect is not at all difficult to imagine, as the gods who saved the world from suffering another Great Depression are losing credibility by the hour.

Yesterday's Financial Times op-ed written by a former BoE official certainly can be credited for its attempt to break monopoly control over political power insolvent albatrosses like JPM enjoy. In and of itself, though, the matter of breaking up too big to fail titans of an imperial slave system is just one more distraction in the grand scheme of things. Although it might be reasonable to question London's ultimate intention calling for JPM's breakup, all suspicion could be laid to rest were the central banks of both the United States and the U.K. effectively nationalized and reorganized to supply credit needed to reverse the physical economy's counter-productive contraction, that a debt burden today impossible be credibly dealt with in a manner restoring confidence. This necessarily means radically shifting from a framework cultivating scarcity to a paradigm promoting abundance. Just how we get there given today's political climate is anyone's guess, but there are a couple qualified leaders in both the U.S. House of Representatives and Senate, and when it comes right down to it a couple is all we need.

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