Tag Archives: Federal Reserve

The Engineered Stagflationary Collapse Has Arrived – Here’s What Happens Next, by Brandon Smith

The Fed intends to blow things up to pave the way for a globalist monetary system. From Brandon Smith at alt-market.com:

In my 16 years as an alternative economist and political writer I have spent around half that time warning that the ultimate outcome of the Federal Reserve’s stimulus model would be a stagflationary collapse. Not a deflationary collapse, or an inflationary collapse, but a stagflationary collapse. The reasons for this were very specific – Mass debt creation was being countered with MORE debt creation while many central banks have been simultaneously devaluing their currencies through QE measures. On top of that, the US is in the unique position of relying on the world reserve status of the dollar and that status is diminishing.

It was only a matter of time before the to forces of deflation and inflation met in the middle to create stagflation. In my article ‘Infrastructure Bills Do Not Lead To Recovery, Only Increased Federal Control’, published in April of 2021, I stated that:

Production of fiat money is not the same as real production within the economy… Trillions of dollars in public works programs might create more jobs, but it will also inflate prices as the dollar goes into decline. So, unless wages are adjusted constantly according to price increases, people will have jobs, but still won’t be able to afford a comfortable standard of living. This leads to stagflation, in which prices continue to rise while wages and consumption stagnate.

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How Quantitative Tightening Ends, by MN Gordon

When the pain level gets too high, QT4 will end the same way QT’s 1, 2, and 3 ended—with a quick reversal by the Fed and the initiation of another massive QE. From MN Gordon at economicprism.com:

The pursuit of decadence is always met with the painful reality that stopping the excess is much more difficult than starting.  This realization, like a killer in the night, lies in wait until just after the point of no return.  When the certain destruction cannot be undone.

John Maynard Keynes, Fabian socialist and the godfather of modern day economic planning, in his 1935 work, The General Theory of Employment, Interest and Money, wrote:

“Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”

In late November 2008, then Federal Reserve Chairman Ben Bernanke committed a fait accompli.  Though he may not have realized it at the time; he was blinded by his scholarly prejudices.

Bernanke, a smug Great Depression history buff of the highest academic pedigree, gazed back 80-years, observed several credit market parallels, and then made a preconceived diagnosis.

After that, he picked up his desktop copy of A Monetary History of the United States, by Milton Friedman and Anna Schwartrz, turned to the chapter on the Great Depression, and got to work inflating the money supply.

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The Big Questions We Should All Be Asking Geopolitically, by Tom Luongo

The biggest question is: can nuclear war be ruled out? Unfortunately the answer is no. From Tom Luongo at tomluongo.me:

To say that current events are ‘messy’ today would be the height of understatement. Everyday the headlines blare at us some new set of contradictory data points convincing us of some lie that serves someone’s purpose.

No matter how hard we try to keep up with things, cutting out the extraneous to find the nuggets of signal from the jungle of noise is more than a full-time job.

Sometimes, however, it’s best to take a few steps back, fall back on first principles and remind ourselves who the players are, what they want and then ask the big question of each of them… are they succeeding?

But to even ask that question we have to ask ourselves honestly the following question:

“What will they be willing to do to survive under present circumstances?”

This is the most uncomfortable question you can ever ask anyone. What would you do to survive? To protect your family? Your position? Your conception of yourself?

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Powell’s “Soft Landing” Is Impossible, by Daniel Lacalle

Assume crash positions, because we are sure not headed for a soft landing. From Daniel Lacalle at dlacalle.com:

After more than a decade of chained stimulus packages and extremely low rates, with trillions of dollars of monetary stimulus fuelling elevated asset valuations and incentivising an enormous leveraged bet on risk, the idea of a controlled explosion or a “soft landing” is impossible.

In an interview with Marketplace, Federal Reserve chairman admitted that “a soft landing is really just getting back to 2% inflation while keeping the labor market strong. And it’s quite challenging to accomplish that right now”. He went on to say that “nonetheless, we think there are pathways … for us to get there.”

The first problem of a soft landing is the evidence of the weak economic data. While headline unemployment rate appears robust, both the labor participation and employment rate show a different picture, as they have been stagnant for almost a year. Both the labor force participation rate, at 62.2 percent, and the employment-population ratio, at 60.0 percent remain each 1.2 percentage points below their February 2020 values, as the April Jobs Report shows. Real wages are down, as inflation completely eats away the nominal wage increase. According to the Bureau of Labor Statistics, real average hourly earnings decreased 2.6 percent, seasonally adjusted, from April 2021 to April 2022. The change in real average hourly earnings combined with a decrease of 0.9 percent in the average workweek resulted in a 3.4-percent decrease in real average weekly earnings over this period.

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Back To Square One, by David Stockman

Inflation will get much worse before it gets better, if it ever gets better. From David Stockman at davidstockmanscontracorner.com:

Apparently, it’s not even a high plateau which comes rumbling down the inflationary path. The April PPI for finished goods reported this AM was 15.6% above its a year ago level, making it the ninth straight month that it was up by swiftly rising double digits.

Needless to say, the geniuses in the Eccles Building did not see it coming, although producer level inflation has been roaring up the pipeline in plain sight for well more than a year. In fact, the Y/Y index rose from 2.6% in February 2021 to 9.5% by last April, yet they sat on their hands for another 11 months.

In view of the historically evident lag between producer and consumer prices, the chart below is nothing less than a stinging indictment of the incompetence, malpractice and cowardice of the Federal Reserve Board, the head of which is about to be coronated for a second term by the Fed’s clueless overseers on Capitol Hill.

Y/Y Change In PPI Finished Goods Index, February 2021-April 2022

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Dark Forces, Plain Speak, Brighter Gold & The Fed’s Sick End Game, by Matthew Piepenburg

The U.S. government is functionally bankrupt and the Federal Reserve has no palatable options. From Matthew Piepenburg at goldswitzerland.com:

Below, we look at debt forces alongside supply and demand forces to help investors see (and prepare for) the darker forces within an entirely rigged end game and shifting financial backdrop.

As usual, the end game will boil down to yield curve controls and more money printing, which means more currency debasement and a central bank system that secretly (and historically) favors inflation over truth and markets over Main Street.

2018: A Template for 2023

Throughout the entire year 2018, as the Fed forward-guided rate hikes at 25 bps a pop, I warned investors of a massive year-end correction and to prepare their portfolios accordingly.

This required no tarot cards or market-timing hype.

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Our Leaders Made a Pact with the Devil, and Now the Devil Wants His Due, by Charles Hugh Smith

Faustian bargains always have a way of making those who made them deeply regret it. From Charles Hugh Smith at oftwominds.com:

The unprecedented credit-fueled bubbles in stocks, bonds and real estate are popping, and America’s corrupt leaders can only stammer and spew excuses and empty promises.

Unbeknownst to most people, America’s leadership made a pact with the Devil: rather than face the constraints and injustices of our economic-financial system directly, a reckoning that would require difficult choices and some sacrifice by the ruling financial-political elites, our leaders chose the Devil’s Pact: substitute the creation of asset-bubble “wealth” in the hands of the few for widespread prosperity.

The Devil’s promise: that some thin trickle of the trillions of dollars bestowed on the few would magically trickle down to the many. This was as visibly foolish as the promise of immortality on Planet Earth, but our craven, greedy leadership quickly sealed the deal with the Devil and promptly inflated the greatest credit-asset bubble in human history.

Rather than trade away one’s soul, America’s leaders traded away the future security and stability of the nation. By refusing to deal with the real problems exposed by the collapsing financial scams in 2008-09, our leaders–both the unelected Federal Reserve and the elected “best government money can buy”–chose to bail out the scammers who had greased their palms so generously and sacrificed the prosperity of the many to do so.

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Peter Schiff: The Inflation Tsunami Is Just Getting Started, by Tyler Durden

We probably haven’t reached full-throttle inflation yet. From zerohege.com:

After CPI came in hotter than expected yet again in January, Peter Schiff appeared on Fox Business along with Chief Investment Officer and Portfolio Manager of Solutions Funds Group Larry Shover. Peter said that the inflation tsunami is just getting started and the Fed is powerless to fight it.

With the hot inflation print for January, the markets are now pricing in a 50 basis point rate hike in March. Peter said that won’t be enough.

If we still measured inflation the way we did 40 years ago, it would be 15%, not 7.5%. And the rate hikes they’ve proposed are completely inadequate. In fact, the Fed is intending to pursue an accommodative monetary policy. Even if they raise interest rates to 1 or 2%, that is highly accommodative. That’s the same type of interest rates they had when inflation was below 2%. You’ve got inflation at 7.5%, even the way they measure it – and rising. The only way to put out this fire is to have positive real interest rates. The Fed needs to get above the inflation rate. We’re not even going to get close. So, they’re going to continue to pour gasoline on the fire. And so, the entire time the Fed is inching up rates, inflation is actually going to be moving higher. Inflation is going to be worse in 2022 than it was in 2021, and real interest rates are going to continue to fall even as the Fed raises nominal rates.”

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No Wonder the Market Is Skittish, by Charles Hugh Smith

What happens when the central bank music stops. From Charles Hugh Smith at oftwominds.com:

The equity, real estate and bond markets all rode the coattails of the Fed’s ZIRP and easy-money liqudiity tsunami for the past 13 years. As those subside, what’s left to drive assets higher?

No wonder the market is skittish:

1. Every time the Federal Reserve began to taper quantitative easing / open spigot of liquidity over the past decade, reduce its balance sheet or raise rates from near-zero, the market plummeted (“taper tantrum”) and the Fed stopped tightening and returned to easy-money expansion.

2. Now the Fed is boxed in by inflation–it can’t continue the bubblicious easy-money policies, nor does it have any room left to lower rates due to its pinning interest rates to near-zero for years.

3. So market participants (a.k.a. punters) are nervously wondering: can the U.S. economy and the Fed’s asset bubbles survive higher rates and the spigot of liquidity being turned off?

4. The market is also wondering if the economy can survive the pricking of the “everything” asset bubbles in stocks, bonds, real estate, etc. as interest rates rise and liquidity is withdrawn. What’s left of “growth” once the top 10% no longer see their wealth expand every month like clockwork?

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Choose One, But Only One: Defend the Billionaire’s Bubble or the U.S. Dollar and Empire, by Charles Hugh Smith

The dollar and empire come first. From Charles Hugh Smith at oftwominds.com:

The Empire is striking back, protecting what really counts, and the Billionaire Bubble sideshow is folding its tents.

One of the most enduring conceits of the modern era is that the Federal Reserve acts to goose growth and therefore employment while keeping inflation moderate (whatever that means–the definition is adjustable). This conceit is extremely handy as PR cover: the Fed really, really cares about little old us and expanding our ballooning wealth.

Nice, except it doesn’t. The Fed’s one real job is defending the U.S. dollar, which is the foundation of America’s global hegemony a.k.a. The Empire.

One thing and one thing alone enables global dominance: being able to create “money” out of thin air and use that “money” to buy real stuff in the real world. The nations that can create “money” out of thin air and trade it for magnesium, oil, semiconductors, etc. have an unbeatable advantage over nations that must actually mine gold or make something of equal value to trade for essentials.

The trick is to maintain global confidence in one’s currency. There is no one way to manage this, as confidence in a herd animal such as human beings is always contingent. Once the herd gets skittish, all bets are off.

The herd is exquisitely sensitive to movements on the edge of the herd, where threats arise. There are various tricks one can deploy to maintain confidence: pay a higher rate of interest on bonds denominated in one’s currency, so global capital flows into your currency; treat this capital well with a transparent set of tax laws and judiciary / regulatory oversight, maintain a deep pool of liquidity so capital can enter and exit without stampeding the herd, and having at least a semi-productive, diverse economy that generates goods, services and income streams to support the currency.

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