David Stockman has an excellent 15-minute interview up about the great carry trade on his website.

The core concept to understand about how the financial markets are behaving now is that certain market participants are able to borrow enormous amounts of money, which they can then funnel into assets that they deem to be low-risk. These actors then use the profits from this carry trade to re-invest into riskier assets that have a yield.

That’s not just the Yen carry trade, but other ‘risk-free’ trades involving quantitative easing schemes that essentially allow the primary dealers (and their friends) to issue treasuries and then sell those same treasuries back to the Fed (and its friends) at a profit.

[I disagree with the linked Forbes investment-newsletter writer about what the Bank of Japan is likely to do: I doubt that they will raise rates to curb price increases… they’re more likely to just grind the Japanese into fancy wagyu beef burger by further debasing the Yen. Chomp chomp nom nom nom. Delicious Japanese-meat.]

Understanding this simple concept can save you a lot of time that would otherwise be spent trying to suss out why financial markets are behaving in the way that they are.

If you’re one of the primary dealers, you enjoy a privileged market position relative to everyone else. It grants superior access to credit that, under the rule of the post-crisis Central Bank regime, enables them to dictate the directions of different markets.

This Matthew Lesko economics of infinite free paper money to favored trading houses is a frequent choice employed by failing governments to buy more time to resolve their issues. This delaying technique creates insupportable economic trends in various unrelated markets, through the direct and indirect issuance of new credit.

It is also a method of enriching connected financiers at the expense of the underlying economy. This, in turn, annihilates the public trust in the financial system, thereby weakening the entire social and political structure that makes a complex economy feasible.

The credit issuance must find a market to deploy it in, pushing more investment activity than consumers are actually likely to be capable of supporting — this is the predicament that the borrowers and entrepreneurs caught in this bear-trap are now squealing about.

Creatures caught in traps are there to be gobbled by hungry beasts; not rescued by sympathetic financial hippies with bailouts.

My article about millennials became a discussion topic at a gay-friendly cyberpunk samizdat forum the other day, so I figured that I’d revisit the topic for the benefit of racist bodybuilders everywhere.

One topic that I didn’t really cover was the observation of what observers about the Japanese call grass-eating behavior, or Herbivores — men and even women who show little interest in professional ambition, the opposite sex, and family life. Popular commentary has tended to blame a ‘slow economy’ (a mostly meaningless descriptor) and other factors like video games being too awesome. Others argue that obesity, especially in the US, puts a damper on the libido.

One of the reasons is that the former social institutions that existed to encourage men and women to get together and stay together are no longer present. They have been replaced by institutions that encourage people to break apart and to stay apart.

Baby boomers tend to have a lot of trouble understanding this about their kids, because at least I can observe from the earlier lives of my parents and those of the parents of some of my friends, it was more common even for them to see a marriage as something that involves some early support, deferral of gratification, and waiting for success to happen.

Almost every millionaire that I know, with a few exceptions (and those came from rich families), did not begin earning more than $500,000 a year until their late 30s or 40s. Maybe it’s because I’ve fallen down some rungs on the class ladder, but this whole notion seems to be alien to most millennials, who tend to be remarkably present-oriented.

The notion that a wife would stay with her husband while he worked hard through his late 20s, 30s, and early 40s before tasting real success in a career is completely alien to most young women today. The idea that saving and sacrifice might be necessary to secure the family’s prospects is just not something that is much understood or discussed. The thought seems to be that ‘success’ should appear immediately, and when it doesn’t, they become hipsters who jump from field to field without ever committing to one of them.

People are encouraged instead to subordinate others to themselves rather than to subordinate themselves to the family — and why not, when families are seen as quick-dissolve social arrangements, to be discarded as soon as your heart tells you to flit off to someone else?

Although this isn’t really historically common (marriage and procreation were once more reserved for men who were already successful and established, whereas many people wound up with limited prospects, especially men), in America, the dominant expectation is that everyone is encouraged to get married, get their white picket fence, and start having kids.

Millennials who are inclined to get into ‘long term relationships’ (a pair bond with limited legal and no religious standing) don’t really see marriage as something that requires deferral of gratification, or that careers require an enormous amount of continuous investment. They see it as something that should be a party from the first moment, fit for showing off through photos posted online.

And let’s not forget that what goes into middle class success is a whole lot of dullness. People keep trying to sex up labor as if it’s exciting, especially as it relates to technology. It’s really not: 99.999% of it is deadly dull, detail-oriented work, bug-fixing, testing, and reality-checking.

Creative work that’s supposed to be glamorous (in an attempt, perhaps, to appeal to women) is actually writing or designing 20 things, having all 20 rejected, and then having to do it all over again, through six cycles, on punishing deadlines, to sell blouses or deodorant. Jobs that involve travelling the world really means living in airplanes and hotels.

Younger people tend to not understand that, in order for people to earn a big income, or even a middle class income, it requires an enormous ongoing time investment that precludes a lot of nights out on the town, time cuddling babies, and going to see cool bands. Because of the inflation of education, younger people tend to think that their education covers all of that, rather than just being an entry ticket for increasingly dilapidated, technologically antiquated corporate work. They think that when they get that ‘A+,’ it’s all that should matter, and if their A+ isn’t enough to get a good job, they should go get another Master’s degree  so that they can.

The grass-eating behavior on the lower end has a lot to do with the breakdown in trust within the corporate system. In Japan as in the US, it usually sets in when the person fails to get real traction in a corporate system that is less and less capable of producing real financial growth.

When it’s easier for your corporation to boost its stock price by borrowing money at nothing and buying its own stock, there’s no real point in hiring employees whose productivity will not be able to be absorbed by the non-financial economy anyway. And so these post-2007 young people find themselves with little that’s really productive to do with their lives that’s readily available.

While it was once possible for young people to walk into a job track that would stay with them for life, it’s now not possible to chart a clear, secure course within a single company. This lack of stability also discourages settling down into one city, and instead encourages people of both genders to fly around the country.

When people opt out of that entire path of settling in one area, they also opt out of having a rich social life, to the extent that such a thing is even all that possible to have for the typical person. Facebook rushes in to fill the void.

Arguably, this has a lot to do with civil rights legislation which forbids discrimination against anyone in particular. The way that corporate America has adapted to this is to discriminate against everyone by default. They then permit certain people to slip through the cracks when employees personally recommend them. On rare occasions, someone gets through the hiring barriers through the official human resources procedure.

For women picking men, the guy with an office job is no longer a safe bet. That guy and his job could be obliterated tomorrow with no warning. So the woman gets very stressed out, and then she goes to get a job also. Now, they are both stressed out and fat, and neither looks all that appealing to the other one. She stays home and watches TV, and he stays home and plays League of Legends, when neither of them is working a second job.

If they do get together, she is spending their household into bankruptcy, and he is not terribly motivated to get a promotion, because his wife is constantly browbeating him, and she would spend it all anyway. That magazine article about stay-at-home dads begins to look more and more appealing every day… pushing around a stroller sounds easier than being assistant to the regional manager, after all…

Attributing all of this to a single phenomenon would be wrong, but much of it is downstream of the consequences of the equality doctrine. When men and women are encouraged to become equal, the sexual polarity is no longer present, and when there is no polarity, there is no attraction.

The media picks up on this. There is no surer way to sell magazines (besides putting Dr. Oz on the cover) than by putting an exceptionally masculine or exceptionally feminine person on it. The articles will tell people to be androgynous, but the pictures will be of sexually polarized people doing super-sexy things, cavorting in bikinis while telling women to work hard so that they can afford a better class of lipstick, and not to sweat it if they get fat.

The media becomes hyper-erotic to compensate for the elimination of eroticism from real life. The ugliness of public spaces, of the workplace, the excessive abstraction in the arts, draws the common people into flashy media in which some eroticism is still permitted. Feminists and other social justice warriors seize on even this, demanding that art portray people as androgynous as they are in real life, because it shows them up and attracts the imagination.

The way out of the situation is to drop the pretensions to equality.

It is also to present a superior alternative to the Brezhnev-like androgyny that’s become more common to the West, both in art and in reality. The reason why the Greeks had all those heroically proportioned statues were to show people what the body ought to look like in its ideal form. When we stop providing those ideal forms, or denigrate them, the people begin to physically degenerate into formless blobs, abstractions even in their own flesh.

It’s remarkable how many of the aesthetic criticisms of Communist life apply to the contemporary social scene: the dumpy, disheveled Soviet woman is the dumpy, disheveled American woman of today, putting in time to meet her quota, putting on her serious face in an ‘important’ meeting and then sobbing in the bathroom.