Yellen building support for no more stimulus.

Anyone who can do math knows that all of the stimulus done in the name of helping the people has really just been a bailout for the already rich at the expense of everyone else, especially the middle class and the even more marginal lower classes.  Leveraged gamblers got ahead at the expense of the work a day citizen.  But leveraged gamblers don't really produce any value, the work a day people do that.  And the fed knows this.  It knows that it and its buddies are parasites and that left unchecked, the parasites will kill the host.  So Yellen's speech today is nothing less than a a well considered warning to the rich IMO: the easy times are over and in fact we are coming for you.

Yellen's speech was simply the fed-speakization of Nick Hanauer's pitchfork revolution paper.  Yellen is tellin' Wall Street: the fed no longer has your back in the "risk on" game.  Time to go "risk off".  Time to deleverage.

I have been decoding fed speak for a long time and what I am hearing is a clear message that the Bernanke Put is dead.  The idea that the fed will backstop every bad speculation is a very poor one going forward for a simple reason: the fed's balance sheet is loaded to the gills with assets that they know they overpaid for.  They did so because without them buying the stuff, prices would fall and that would put the banks in a bad way to the point of many big banks going BK.

But the fed is a private bank too.  They are not immune from the rules.  Either they begin to deleverage themselves or they will BK at some point.  In the TV show, "Haven", the character "Duke" is a symbol of the central bank's balance sheets.  He is filled with "troubles" which threaten to blow him up if he doesn't let some out.  Each trouble that he releases eases his pain for a period of time while negatively affecting everyone else in nearly unpredictable ways.

In fact, the US fed will eventually BK anyway (which is what hyperinflation actually is - the people declaring that the central bank is BK) but we still have a good deal of time before that happens.  First we have to live through The Great Wind Down and it is not going to be pretty.  There will be plenty of unexpected "troubles".

It's like I have written many times: due to the fact that money is a proxy for human labor and credit/debt is a proxy for money, the creation of debt is basically the making of a promise to do labor at some time in the future.  Loans of labor must eventually be repaid with labor (or defaulted upon).  If there is not enough real labor to cover all those promises (and there certainly is not), the promises must be exposed at some point to be what they always really were: damned lies.  At that point, the promises are reneged on and the monetary equivalent of this is to default on the debt (which was effectively the note, the instrument, the accounting of the promises to repay the borrowed labor).

I'm trying to keep this in layman's terms that anyone can understand because the powers that be try to make it sound so complex.  It is in fact simple.  When debt is created in a fractional reserve system, it creates a false abundance of fake wealth.  Real wealth is only created by the labor of man.  Fake wealth is a future promise to do labor.  Those un-keepable promises are exchanged with people who in fact do real labor to create goods and services.  The net effect is that it seems like there is an abundance of labor in the economy, much more than is really there.  The laws of supply and demand kick in.  Thus, your ditch digger is paid a pittance for his menial but difficult and necessary work.  The labor of the plumber and the electrician and all blue collar workers are similarly devalued in the economy even though they are working hard each day.  White collars workers are devalued as well, but not to the same degree as the blue collar ranks.  The rich have all the toys and the real workers barely get by as a result.

The unwind of this debt is effectively a short squeeze on the naked shorting of human labor which is what debt in a fractionally reserved monetary system actually is.

So all this talk about income inequality is happening now for a reason: the herd has had enough and it is now beginning to complain about the heavy load upon its back has been placed there by the elite overlords.  The dumb elite (usually found sooner rather than later in smaller economies) simply ignore the complaints until their most productive bull either dies under the load or tips over the cart and gores the offending elite.  The more crafty elite want a sustainable, renewable labor resource so that their parasitism knows no end.

If you want to sustainably enslave the population, you must know when to remove some of the load.  Yellen is signalling this very clearly to anyone with ears to hear: the herd can't take much more of this and so we (the fed) are not longer going to support it.  This is a direct warning to the overlords: "We gave you a season for making outsize profits at the expense of the herd.  That season is now over.  We elite must now allow the herd to revive a bit, to rebuild themselves without our heavy weight upon their backs.  If you didn't put up a lot of reserves during the open season on labor then there is nothing we can do for you now.".

And so I hereby strongly confirm my long standing views that:

• Interest rates will now increase the pace of their ascension.  Not because the fed wants them to but rather because it sees no choice but to do so or be destroyed.
• Leveraged gamblers are in trouble.  They will simply default and walk away like that serial defaulter con man Donald Trump.  Some of the rubble from the collapse will fall upon the people in the form of lost jobs and so personal preparedness is a must.
• The stock and bond markets are well and truly screwed.  Nothing goes straight up or straight down but the wind is clearly at the backs of the market shorts.  
• Don't get over leveraged and you won't get tossed out in the head fake rallies.  
• Use stops in order to avoid getting into this pickle but if for whatever reason you get caught short and are not in jeopardy of getting a margin call, hold short if you can.  The rally will fade and then collapse to lower lows.  If we were 3/4 of the way done with the collapse then I would be a lot more nervous about getting caught short.  But right now the collapse is so early that the money will come easy for those who understand the game, keep their eye on the ball, don't get greedy, time their shorts using the wave count, and don't panic if caught short.
• Some people will just hold short the whole time and put up with the volatility.  That is really not a bad strategy if you can put up with the volatility.
• Another strategy is to hold half a short position all the time no matter what and then trade the swings with the other half.  Thus you always have cash to catch a wave bottom such as I called today on TVIX.  Of course, this approach requires that you sell half on what you believe to be the peaks as well.  Nothing shall be a workable substitute for discipline during this time.
• Anything that was bought using credit will be affected.  Houses, stocks, cars, etc.  The prices of all these things are very elevated in aggregate.  
• At first it will show up as lower prices on existing sizes.  
• But over time, it will simply mean lower prices for smaller sizes.  A shoebox sized car is in the future of most Americans, fewer Texans will be driving trucks around, etc.  Smaller houses will become the norm.
• The USA will experience a decline relative to the rest of the world.  After all, the only real exceptionalism we have over other peoples is our ability to run a global money con and to send our military in to take down anyone who would argue.  Our once impressive and venerable technical advantage over ROW (Rest Of World) is all but gone.  You can see this clearly taking place as the Chinese takeover of AMD begins to become obvious (similar to the Chinese takeover of IBM PC group which is now called Lenovo).  The white man at the helm is out on his ass quite abruptly and the Chinese woman is in.  Engineering heads at AMD will continue to diminish in the US and be added at lower salaries in Asia.
• The US military is about to take a big decline.  All of the "support our troops" bumper stickers on the cars of brainwashed sheeple will fade.   People will stop letting military board aircraft first and treating them like some kind of special class instead of what they really are which is just another middle class worker.  I can say this from ~6 years of military experience of my own.  I certainly do not hate the military but I see no need to worship them.  They do a job.  So does a ditch digger or an electrician.  If I was told I had to applaud either a military person OR the Mexican American guy who is laying my concrete patio, repairing my roof and painting my house for far less money than I myself would ever take for the same work had I to do it, well, the Hispanic dude is going to get the nod.  He creates stuff, military only destroys stuff.  What's there to think about in that decision?