The Federal Reserve’s policies have so screwed up both financial markets and the economy that vicious blowback is inevitable. From Chris Martenson at peakprosperity.com:
The Federal Reserve is ruining us
Last week, volatility made a long-overdue return to the US and global equity markets.
It began with a 2-day back-to-back violent drop. Day 3 saw a big rebound, swiftly followed by two more days of gut-wrentching losses. And then finally, last Friday, the day saw massive swings both high and low, ending with a huge upside run.
During this period the S&P 500 lost more than 300 points. Since then, though, the market has been steadily rising.
Is the danger past? Are the markets safe once more?
And if so, did the markets recover organically? Or were they rescued by The Plunge Protection Team (PPT)?
The answer matters.
If such intervention was rare we could almost justify it, if it took the form of simple, pre-arranged circuit breakers that shut the market down for a “cooling off” after they’ve moved too far, too fast. Indeed, these already exist, and are sufficient in our view.
But if such market interventions are routine, persistent, and generally depended on by the major market participants, then they’re highly destructive over the long term.
Sadly, we live with the latter.
Insiders get stinking rich by front-running the scheme (check). Normal adjustments are prevented (check), allowing dangerous bubbles of extreme overvaluation to form (check), while fostering malinvestment (check).
Do this long enough and you end up with a deformed economy, an eroded social structure, and markets that no longer function as appropriate mechanisms for capital distribution and economic signaling.
This is where we find ourselves today.
Modern-Day Soviet Crop Reports
In the former Soviet Union, the communist method of assuring economic progress was to set targets for production. Famous among them were the crop reports.
In these, year after year, the various regional oblast (province) authorities would declare having met or exceeded the crop targets, despite rarely ever truly doing so.
These crop reports were so famously unreliable that the Kremlin leadership eventually took to obtaining their information from US satellite reconnaissance data rather than their own internal reporting from local Communist Party bosses.
Basing next year’s crop planting decisions on these reports often led to famines, and sometimes even mass starvation of entire regions.
Poor data = Bad decisions.
To continue reading: The Worst Threat We Face Is Right Here At Home