"The Greatest Trick the Devil Ever Pulled"

“The greatest trick the Devil ever pulled was convincing the world he didn’t exist” - Baudelaire

Alan Greenspan died this week at 100 years old.

The title of this article has nothing to do with my opinion of Greenspan. Quite the opposite. I was fortunate to have met him on several occasions. He was a deep thinker, an intellectual and a gentleman. May he Rest In Peace.

My favorite story of Greenspan is that he was close friends with Ayn Rand, famed author of Atlas Shrugged, and a part of her inner circle, aptly called the "Collective," who would gather regularly to discuss politics, world events and ideas. She was even present when Greenspan was swore in as Chairman of the Council of Economic Advisors.

I always found it fascinating that someone so close to Ayn Rand, who was a strong proponent of laissez-faire capitalism, ended up being the Central Banker that became known for the “Greenspan Put”.

Since the “Greenspan Put”, we’ve had the Bernanke Put, the Yellen Put, the Powell Put and now … a hawkish Warsh?!!!

Give me a break.

Which brings us to the Devil…

Since 1971, when Nixon ended the dollar-to-gold convertibility, the US Dollar has lost 90% of its purchasing power.

I can picture an idealistic Greenspan starting as Fed Chair in August 1987, thinking he’ll make Ayn Rand proud …

… and then the October 1987 Crash happened…

… where Greenspan faced a tough dilemma:

• Embrace Ayn Rand’s teachings of laissez-faire and risk a 1929 downturn?

• Or intervene and save the system, even if that leads to currency debasement and future bubbles?

Greenspan stepped in to provide liquidity to save the system. Per his statement on October 20th, 1987:

• "The Federal Reserve, consistent with its responsibilities as the Nation's central bank, affirmed today its readiness to serve as a source of liquidity to support the economic and financial system"

Greenspan’s response to Black Monday ushered in “a new era of investor confidence in the central bank's ability to calm severe market downturns. Unlike many prior financial crises, the sharp losses stemming from Black Monday were not followed by an economic recession or a banking crisis”. (source)

For all the fanfare around Black Monday, the Market recovered relatively quickly and, in two trading sessions, the Dow recovered more than half its losses. Within two years, the Markets was at new highs.

It only took a few months in the job for Greenspan to capitulate against Ayn Rand’s teachings, in order to save the system…

… and as much as some people like to blame Greenspan for it, the reality is that it wasn’t Greenspan’s fault, or Yellen’s fault, or Powell’s fault because …

… well, our whole system is a giant Ponzi…

… and that’s absolutely fine as long as we accept it and trade it as such.

The Devil’s greatest trick is to convince us that he doesn’t exist.

The Fed’s greatest trick is to convince us that paper money is “sound” money!

Our system is designed to protect the Government from ever defaulting.

What this means is that we sacrifice the “purchasing power” of the Currency, in order to protect the “credit worthiness” of Treasuries.

Here’s a meme for the kids at the back:

…which brings us to today:

We have a new Fed Chair, Kevin “Home Alone” Warsh, and the Wall Street monkeys have already fallen in the trap that the Devil laid out for them.

They believe that Kevin is “hawkish”, that Kevin will “bring inflation down to 2%” and BofA even thinks that Kevin “will raise rates 3 times in 2026” …

Give me a break!

Here we had Greenspan, a disciple of Ayn Rand, flip within a few months when the system needed saving …

… and you think that “Home Alone” Kevin will stand up against this Giant Ponzi and let it collapse when the going gets hard?!!!

Not a chance…

…but sure, go ahead and tell me “the Debasement trade is over”…

… that’s what the Devil would have you think!

Good luck out there!

🌳🙏

Disclaimer:

This isn’t financial advice. This is Parody. This is the equivalent of Monty Python and Spaceballs for finance, but worse: This is the trading blog of a shrub. For all you know, I could be a 15-year old paper-trading out of my parents’ basement. Don’t be Stupid. Seriously. How many times do I have to repeat this.