In ancient Roman religion and myth, Janus is the god of transitions–beginnings and endings of conflict, war and peace, journeys, trades and eras. Janus has two faces, as befits a god that looks both to the future and to the past.
In our era of omnipotent central banks worshipped by the Status Quo, we have a goddess of financial transitions–Janus Yellen, the two-faced chair/deity of the Federal Reserve–to usher in the Great Transition from risk-on to risk-off.
What is risk-on? Speculative bets directly enabled by central bank issued free money for financiers–also known by the bland technocrat perception management labels stimulus and quantitative easing (QE).
The primary risk-on policies are:
1. ZIRP–zero interest rate policy. This enables financiers (but not J.Q. Citizen) to borrow money for next to nothing and then use this free money to buy assets that pay dividends or interest.
This is effectively a gift to banks and financiers. The goal is straightforward: transfer great wealth from the peasants who once earned interest on their savings to the banks, who have rebuilt their bad-bet-shattered balance sheets on the backs of tax donkeys and savers.
2. Asset purchases. The Fed has bought almost $4 trillion of Treasury bonds and mortgages from primary dealers (banks) and other financial institutions. This is effectively a transfer of cash directly into the financial system.
Those closest to the Fed money-spigot benefit directly from asset purchases (a.k.a. quantitative easing). Those far from the spigot (the 99.9%) get nothing but slightly lower interest on their crushing debt.
Those with low/no debt have lost hundreds of billions in interest that has been transferred to the banks by ZIRP and QE, which actively suppresses interest rates.
3. Liquidity. This simply means the Fed will create as much money as is needed to meet the borrowing needs of the financial system. This unlimited liquidity is offered not just to U.S. banks, but to the entire global banking system. The Fed doesn’t just bail out U.S. speculators–it bails out speculators worldwide.
