Long-time readers of NOTES FROM UNDERGROUND are well aware that one of my key rules about global finances is MONEY IS FASCIST. In an interview with Rick Santelli today, I reiterated my views about how global capital needs to secure stability (hence the idea of money being fascist) as the world’s equity markets suffered from the “new ” uncertainty of geopolitical events over the weekend.
If you accept that FASCISM is the primacy of social and political stability over the rule of law, the idea is that as long as money has a safe harbor it will tolerate dictatorship or any other type of authoritarian government. The idea that the Chinese Politburo CAN and WILL secure the Chinese growth story regardless of the possibility of social unrest is paramount for the MONEY IS FASCIST. Provide a stable relative high return and money will find its way to your shores. Instability raises fear in foreign and domestic investors. The safety of the rule of law seems to matter in times of FEAR. Otherwise, show me my 10 percent. Enjoy the Santelli interview as it sets the agenda of an über volatile year.
Tags: China, Equities, fascist, Saudi Arabia
January 4, 2016 at 9:07 pm |
100% agree on how money is fascist. It doesn’t give a shit about free markets or democracy, it wants stability. Humans don’t respond well to fascism long term. It’s not sustainable.
January 4, 2016 at 9:16 pm |
The belief that money likes Fascism in unsustainable, and therefore nonsensical. The money that Fascism confiscates from society to sustain itself eventually leads to the instability that that capital abhors, as the world is witnessing now.
Yes, the rule of law is a pillar to attract capital, but freedom and human ingenuity (real education) are equally important, and equally disintegrating in the west. As capital realizes that it is not safe in Europe, then Japan, and finally the US, it will be flying around the world as Herbert Hoover observed, “like a cannon on the deck of the world in a tempest-tossed era”.
The first govt that EQUALLY enforces the rule of law, maintains spending <8% of GDP without deficits, and maximizes freedom for the people at the expense of govt will be a magnet for capital. Unfortunately, all of these fly in the face of what the establishment wants. Therefore, we will get to see what capital does in a crash and burn scenario. So sad we can't learn even once from history.
January 5, 2016 at 3:25 am |
“Provide a stable relative high return and money will find its way to your shores”
England a poster child for this, consider the industrial revolution. One of the many reasons it took hold in England was a decent financial system people trusted, a reasonable legal system to protect your ideas AND the use of 10″ naval guns on pretty much anyone who decided to take issue. So our Chinese chums have a ways to go to get to the point where people stop giggling at their “numbers” and stop being pissed at their little stunts like Lenovo putting hacks into the bios of their laptops, Nice interview Trotsky.
January 5, 2016 at 3:33 am |
I don’t think Adam Smith would agree that money is fascist. Mussolini and Hitler required working with what we call crony owners of capital. Initially the trains may have run on time, but decisions made by a closed money club will never be as efficient as a totally free marketplace guided by the “{invisible hand”. People require freedom and not some bureaucrats in Rome or Berlin churning out regulations. You are confusing short term stability (which is what the Fed has been trying for 7 years) with long term efficiency. Schumpeter’s “creative destruction” is unstable and sometimes chaotic but it works fort the long term. The Luddites loved stability.
January 5, 2016 at 5:31 am |
Asherz–also I am not intending to confuse entrepreneurial capital and its animal spirits with CRONY KAPITALISM—
January 5, 2016 at 5:25 am |
Asherz–agree and it is why the economist made schumpeter its economist of the last 100 years several years ago–but in the short run it is fascist
January 5, 2016 at 5:49 am |
blacklisted is correct. Money will most readily fly to free economies with government staying out of the way. Autocratic governments can at any time confiscate your money. Money abhors fascism
January 5, 2016 at 5:53 am |
blacklisted is correct. Money will most readily fly to free economies with government staying out of the way. Autocratic governments can at any time confiscate your money. Money abhors fascism in the long run. The algos may love fascism because their time frame are seconds minutes and hours.
January 5, 2016 at 7:08 am |
Historically, oney eats stability for breakfast and lunch. Point.
January 5, 2016 at 7:11 am |
and then provides the main course for dinner???????
January 5, 2016 at 9:08 am |
skip dinner 🙂 By the way, reading Ian Bremmer´s 10 geopolitical risks… http://www.eurasiagroup.net/pages/top-risks-2016
January 5, 2016 at 10:06 am |
I am not an Ian Bremmer fan–whatsoever
January 5, 2016 at 3:25 pm |
can you recommend experts on geopolitics? thanks.
January 5, 2016 at 4:00 pm |
always liked these two (sic):
financial times
https://www.chathamhouse.org/
https://www.foreignaffairs.com/
AND trotsky of course, he’s our main man for this stuff. I think it pays to consider that the world has always been a complex place, that NO ONE has a real handle on how the markets will handle it because if they did they would have all the money. All we do is to take a good hard look at what the various accepted indicators are up to Yra covers them all the time to see what the market believes AND we read the Financial times to get a general explanation of what current events are most influential. An example would be today suggestions were made to look at Japan and Commodities as contrarian plays ( buy when blood in water) just LOOK an consider. We also like to read Barrons on a Sunday to see what the boring people are thinking about 🙂 we use this to add to our long term trades ie SPX naked puts etc.
hope this helps
January 5, 2016 at 4:06 pm |
arthur—i try to link when i see important articles–John Mauldin is now including George Freidman in his free weekly letter
January 6, 2016 at 3:36 pm
Thanks Yra and the american limey… As Jim Leitner said, I read The Economist religiously!
January 5, 2016 at 3:49 pm |
our breakfast discussion group has ONE more fed hike in 2016 citing all the geopolitical stuff about to happen. SO supposedly mkt +ve ( mkt wants fewer thinking 2-3 Fed looking at 4 giggle) BUT with earnings coming up and the US consumer spending on healthcare and worried about jobs ergo NOT spending, seems that we will have a volatile ( all here seem to agree) but rangebound market. Thoughts Trotsky ?
January 5, 2016 at 4:07 pm |
Corbyn–pay attention to the Eurodollars and the two year notes as the two year eurodollars have priced in the whole nine yards
January 5, 2016 at 4:31 pm
Will do Trotsky and I prefer “V” thank you very much Corbyn is a tad “adventurous” for my taste 🙂 I am REALLY looking forwards to this year and reading all the non crimethink missives from our glorious leader. All hail Yra
January 6, 2016 at 8:26 am |
Ah, h-bomb Meanwhile, China takes full advantage of reserve currency status pushing the Yuan down 7 consecutive days now in attempt to keep consumer market flooded with more goods we no longer have additional storage space for?
January 6, 2016 at 1:22 pm |
I think this proves the US FED actually thinks we’re dumb.