- JoNova - https://www.joannenova.com.au -

The Ben Factor. One man drives a market. The world pretends it is “free”.

How much is that company worth? You can look at its PE, debt, market spread, sovereign risk, and discounted cash flow, but in the end, it’s the Ben Factor (BF) which dominates all companies, metal prices, and sovereign currencies in the West.

The Ben hath spoken, and said that in future, if the economy is looking better, he might slow the printing of $85 billion US dollars a month, some indefinite non-specified day. All that was … obvious. But, world-wide investors and traders hang off the words, trying to second-guess what the BF banality implies. No one will say it, but everyone knows that it the rate of the flow of easy cash so much as slows, all hell will break loose. Balanced on this thin veneer of pretense, stocks, metals and whole national currencies change direction within minutes.

The Ben has spoken.

What hath changed since yesterday? Not much. But global paroxysm ensues.

Bernanke taper talk sends markets into a tailspin

Closing Bell: S&P 500 posts biggest fall since November 2011 on Fed’s stimulus plan

EMERGING MARKETS-Latin American stocks tumble to four-year low

China, Fed frenzy send Aust stocks tumbling 2%

Oil posts biggest drop in seven months

Stocks tumble around the globe

Respected commentators in the mainstream media report these events with straight faces, as if it is normal that economic activity in a free market depends on the King-maker-called-Ben. A bureaucrat. Millions of investors have effectively stopped assessing company profits, and they place bets instead on money supply. Will The Ben keep printing money at the same rate? Will it get harder to get loans? Will consumers stop buying things they don’t really need? Will consumers just stop? Can the BF manage an exponential rise with tweaks and announcements, opening the flow of the IV drip while telling the patient he is using less medication? How long will the placebo effect keep working?

The Dow, the S&P500, the ASX, TSX, FTSE have all become giant roulette wheels, but people stopped betting on the roll of the dice, and bet instead on whether the dice have six sides and six numbers. They bet on what the croupier will do next. How is his mood? Will he keep using the dice with three sixes, or switch back to the one with two? Will he say he’s using the slower dice, but secretly roll a more loaded one? Who checks the dice?

In an economy where supply and demand are known to be the key drivers of every price, no one utters the phrase that must not be spoken: “money supply”. No one discusses monetary aggregates. The US Fed tells us they are so irrelevant that they even stopped publishing the large aggregate known as “M3” a few years ago. No one in the mainstream complained.

In the West we have a paper-based financial economy and trust banks and government, more or less. The Western media hail the bureaucrats at central banks who set interest rates as heroes. (Central planners in the Soviet Union were also hailed as heroes by their press — but how could that possibly be relevant, eh?)

The big unspoken charade continues.

PS: The Ben apparently is on the way out. Who will be the next Ben? You can vote > “Other” > “Ron Paul” like I did. Go on. Poke them.

9 out of 10 based on 72 ratings