Tag Archives: central bank policies

The Real Reasons Why The Media Is Suddenly Admitting To The Recession Threat, by Brandon Smith

The media is admitting to the recession threat because we’re heading into a recession. From Brandon Smith at alternative-media.com:

One thing that is important to understand about the mainstream media is that they do tell the truth on occasion. However, the truths they admit to are almost always wrapped in lies or told to the public far too late to make the information useful.   Dissecting mainstream media information and sifting out the truth from the propaganda is really the bulk of what the alternative media does (or should be doing).  In the past couple of weeks I have received a rush of emails asking about the sudden flood of recession and economic crash talk in the media.  Does this abrupt 180 degree turn by the MSM (and global banks) on the economy warrant concern?  Yes, it does.

The first inclination of a portion of the liberty movement will be to assume that mainstream reports of imminent economic crisis are merely an attempt to tarnish the image of the Trump Administration, and that the talk of recession is “overblown”.  This is partially true; Trump is meant to act as scapegoat, but this is not the big picture.  The fact is, the pattern the media is following today matches almost exactly with the pattern they followed leading up to the credit crash of 2008.  Make no mistake, a financial crash is indeed happening RIGHT NOW, just as it did after media warnings in 2007/2008, and the reasons why the MSM is admitting to it today are calculated.

Before we get to that, we should examine how the media reacted during the lead up to the crash of 2008.

Multiple mainstream outlets ignored all the crash signals in 2005 and 2006 despite ample warnings from alternative economists. In fact, they mostly laughed at the prospect of the biggest bull market in the history of stocks and housing (at that time) actually collapsing. Then abruptly the media and the globalist institutions that dictate how the news is disseminated shifted position and started talking about “recession” and “crash potential”. From the New York Times to The Telegraph to Reuters and others, as well as the IMF, BIS and Federal Reserve officials – Everyone suddenly started agreeing with alternative economists without actually deferring to them or giving them any credit for making the correct financial calls.

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Are Recessions Inevitable? by Ron Paul

With an honest monetary system in which no government had a role, recessions either might not happen at all, or would be much less severe than recessions are now. From Ron Paul at ronpaulinstitute.org:

Stocks fell last week following news that the yield curve on Treasury notes had inverted. This means that a short-term Treasury note was paying higher interest rates than long-term Treasury note. An inverted yield curve is widely seen as a sign of an impending recession.

Some economic commentators reacted to the inverted yield curve by parroting the Keynesian propaganda that recessions are an inevitable feature of a free-market economy, whose negative effects can only be mitigated by the Federal Reserve. Like much of the conventional economic wisdom, the idea that recessions are caused by the free market and cured by the Federal Reserve is the exact opposite of the truth.

Interest rates are the price of money. Like all prices, they should be set by the market in order to accurately convey information about economic conditions. When the Federal Reserve lowers interest rates, it distorts those signals. This leads investors and businesses to misjudge the true state of the economy, resulting in misallocations of resources. These misallocations can create an economic boom. However, since the boom is rooted in misperceptions of the true state of the economy, it cannot last. Eventually the Federal Reserve-created bubble bursts, resulting in a recession.

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The Battle of the ‘Flations has Begun, by Tom Luongo

Can central banks stop a deflationary tsunami? From Tom Luongo at tomluongo.me:

Inflation? Deflation? Stagflation? Consecutively? Concurrently?… or from a great height (apologies to Tom Stoppard).

We’ve reached a pivotal moment where all of the narratives of what is actually happening have come together. And it feels confusing. But it really isn’t.

The central banks have run out of room to battle deflation. QE, ZIRP, NIRP, OMT, TARGET2, QT, ZOMG, BBQSauce! It all amounts to the same thing.

How can we stuff fake money onto more fake balance sheets to maintain the illusion of price stability?

The consequences of this coordinated policy to save the banking system from itself has resulted in massive populist uprisings around the world thanks to a hollowing out of the middle class to pay for it all.

The central banks’ only move here is to inflate to the high heavens, because the civil unrest from a massive deflation would sweep them from power quicker.

For all of their faults leaders like Donald Trump, Matteo Salvini and even Boris Johnson understand that to regain the confidence of the people they will have to wrest control of their governments from the central banks and the technocratic institutions that back them.

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Free Money Socialism, by Sven Henrich

The world’s central banks keep spiking the punch bowl. From Sven Henrich at northmantrader.com:

In lieu of my weekly technical update this opinion piece instead: The free money whores are back again. Harsh? Perhaps. Untrue? Not really. As I’ve stated before our market system is broken, central banks, originally created to save economies from disasters have now become the prime movers in preventing so much as a cold propagating free money socialism for the top 1%. Indeed after a series of financial panics (particularly the panic of 1907) the Fed was created in 1913 for central control of the monetary system in order to alleviate financial crises. Now they are in the business of managing markets full time, all the time and have become the primary focal point of price discovery.

It is self evident:

According to Jay Powell the Fed’s primary mission is now to “sustain the economic expansion.” I’ve never used the term “manipulation” before, but let’s just be clear what “sustain the economic expansion” really means: To prevent natural market forces from taking hold. That’s manipulation.

Business cycles are natural. They serve a purpose, they lay the foundation for new growth, they weed out the excess, they permit for a reset of an aging expansion, for a renewed flourishing of innovation, new solutions, creativity, and yes growth.

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Trying To Prevent Recessions Leads To Even Worse Recessions, by Jesse Columbo

It’s like preventing forest fires builds up underbrush that eventually leads to even bigger fires. From Jesses Columbo at realinvestmentadvice.com:

Deutsche Bank strategists Jim Reid and Craig Nicol wrote a report this week that echos what I and other Austrian School economists have been saying for many years: actions taken by governments and central banks to extend business cycles and prevent recessions lead to even more severe recessions in the end. MarketWatch reports

The 10-year old economic expansion will set a record next month by becoming the longest ever. Great news, right? Maybe not, say strategists at Deutsche Bank.

Prolonged expansions have become the norm since the early 1970s, when the tight link between the dollar and gold was broken. The last four expansions are among the six longest in U.S. history .

Why so? Freed from the constraints of gold-backed currency, governments and central banks have grown far more aggressive in combating downturns. They’ve boosted spending, slashed interest rates or taken other unorthodox steps to stimulate the economy.

“However, there has been a cost,” contended Jim Reid and Craig Nicol at the global investment bank Deutsche Bank.

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Japan on a Larger Scale, by James Rickard

Go deep enough into debt and you can’t climb out, as Japan has found out and as the US and Europe are finding out. From James Rickard at dailyreckoning.com:

In my 2014 book, The Death of Money, I wrote, “The United States is Japan on a larger scale.” That was five years ago.

Last week, prominent economist Mohamed A. El-Erian, formerly CEO of PIMCO and now with Allianz, wrote, “With the return of Europe’s economic doldrums and signs of a coming growth slowdown in the United States, advanced economies could be at risk of falling into the same kind of long-term rut that has captured Japan.”

Better late than never! Welcome to the club, Mohamed.

Japan started its “lost decade” in the 1990s. Now their lost decade has dragged into three lost decades. The U.S. began its first lost decade in 2009 and is now entering its second lost decade with no end in sight.

What I referred to in 2014 and what El-Erian refers to today is that central bank policy in both countries has been completely ineffective at restoring long-term trend growth or solving the steady accumulation of unsustainable debt.

In Japan this problem began in the 1990s, and in the U.S. the problem began in 2009, but it’s the same problem with no clear solution.

The irony is that in the early 2000s, former Fed Chair Ben Bernanke routinely criticized the Japanese for their inability to escape from recession, deflation and slow growth.

When the U.S. recession began during the global financial crisis of 2008, Bernanke promised that he would not make the same mistakes the Japanese made in the 1990s. Instead, he made every mistake the Japanese made, and the U.S. is stuck in the same place and will remain there until the Fed wakes up to its problems.

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The Federal Reserve’s Controlled Demolition Of The Economy Is Almost Complete, by Brandon Smith

According to Brandon Smith, financial mayhem is imminent. From Smith at alt-market.com:

The Federal Reserve is an often misunderstood entity, not only in the mainstream, but also in alternative economic circles. There is this ever pervasive fantasy on both sides of the divide that the central bank actually “cares” about forever protecting the US economy, or at least propping up the US economy in an endless game of “kick the can”. While this might be true at times, it is not true ALL the time. Things change, agendas change, and sometimes the Fed’s goal is not to maintain the economy, but to destroy it.

The delusion that the Fed is seeking to kick the can is highly present today after the latest Fed meeting in which the central bank indicated there would be a pause in interest rate hikes in 2019. As I have noted in numerous articles over the past year, the mainstream media and the Fed have made interest rates the focus of every economic discussion, and I believe this was quite deliberate. In the meantime, the Fed balance sheet and its strange relationship to the stock market bubble is mostly ignored.

The word “capitulation” is getting thrown around quite haphazardly in reference to the Fed’s tightening policy. And yet, even now after all the pundits have declared the Fed “in retreat” or “trapped in a Catch-22”, the Fed continues to tighten, and is set to cut balance sheet assets straight through until the end of September. Perhaps my definition of capitulation is different from some people’s.

One would think that if the Fed was in retreat in terms of tightening, that they would actually STOP tightening. This has not happened. Also, one might also expect that if the Fed is going full “dovish” that they would have cut interest rates in March instead of holding them steady at their neutral rate of inflation. This has not happened either. In fact, I’m not exactly sure how anyone can claim with a straight face that the Fed has given up on Quantitative Tightening (QT).  Despite the many assumptions out there that the Fed is going to reverse on interest rates, I believe this is wishful thinking and that the Fed will not reverse rates in 2019.

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