Tag Archives: Federal Reserve

David Stockman on the Destruction of the Financial Markets and What it Means for You

Posted on May 1, 2020 | 1 comment

The economic consequences of lockdown lunacy are going to be far more severe than most people reckon. From David Stockman at internationalman.com:

International Man: Decades of money printing have created enormous distortions in the market. It seems that the coronavirus popped the Everything Bubble. Where do you see the stock market going?

David Stockman: I’d say it’s going in a new direction, and it’s not up year after year, month after month, day after day.

It’s not going to be a world where buying the dip is a no-brainer thing to do.

I think the stock market was insanely valued when the S&P 500 peaked at 3,380 on February 19th.

It has got a long way yet to correct.

Who knows what earnings are going to be?

No one knows how long these lockdowns will last.

You look at the news flow every day, and it’s like a massive political arm-wrestling match between the White House and the Democratic governors and mayors.

I’m sure in their minds, these local and state politicians, think they’re serving the public good and protecting the safety and lives of their citizens. But, the fact is, back in the unstated regions of their brains, they’re focused on taking down the US economy, which was Trump’s only claim to reelection.

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Broken System, by Sven Henrich

Posted on May 1, 2020 | Leave a comment

The Federal Reserve and its partners-in-crime central banks have damaged the world’s financial and economic system beyond repair. From Sven Henrich at northmantrader.com:

The Fed poisons everything, and I mean everything. From markets, the economy, and I will even go as far as politics. Sounds far fetched? Let me make my case below. But as much as the Fed poisons everything this crisis here again reveals a larger issue: The system is completely broken, it can’t sustain itself without the Fed’s ever more monumental interventions. These interventions are absolutely necessary or the system collapses under its own broken facade. And this conflict, a Fed poisoning the economy’s growth prospects on the one hand, and its needed presence and actions to keep the broken system afloat on the other, has the economy and society on a mission to circle a perpetual drain.

So how does the Fed poison everything?

Let’s start with the Fed actual process of working towards its stated mission: Full employment and price stability.

How does it do that? Well, for the last 20 years mainly by extremely low interest rates and balance sheet expansion sprinkled with an enormous amount of jawboning. The principle effect: Asset price inflation.

It’s not a side effect, it’s the true mission. The Fed has been managing the economy via asset prices even though Jay Powell again insisted on saying the Fed is not targeting asset prices.

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How to Think About the Fed Now, by Jeff Deist

Posted on April 18, 2020 | 1 comment

The Federal Reserve was blowing up the economy before anyone had heard of the coronavirus. From Jeff Deist at mises.org:

This text is excerpted from the introduction to Anatomy of the Crash, a Mises Institute ebook to be released in April 2020.]

The Great Crash of 2020 was not caused by a virus. It was precipitated by the virus, and made worse by the crazed decisions of governments around the world to shut down business and travel. But it was caused by economic fragility. The supposed greatest economy in US history actually was a walking sick man, made comfortable with painkillers, and looking far better than he felt—yet ultimately fragile and infirm. The coronavirus pandemic simply exposed the underlying sickness of the US economy. If anything, the crash was overdue.

Too much debt, too much malinvestment, and too little honest pricing of assets and interest rates made America uniquely vulnerable to economic contagion. Most of this vulnerability can be laid at the feet of central bankers at the Federal Reserve, and we will pay a terrible price for it in the coming years. This is an uncomfortable truth, one that central bankers desperately hope to obscure while the media and public remain fixated on the virus.

But we should not let them get away with it, because (at least when it comes to legacy media) the Fed’s gross malfeasance is perhaps the biggest untold story of our lifetimes.

Symptoms of problems were readily apparent just last September during the commercial bank repo crisis. After more than a decade of quantitative easing, relentless interest rate cutting, and huge growth in “excess” reserves (more than $1.5 trillion) parked at the Fed, banks still did not have enough overnight liquidity? The repo market exposed how banks were capital contstrained, not reserve constrained. So what exactly was the point of taking the Fed’s balance sheet from less than $1 trillion to over $4 trillion, anyway? Banks still needed money, after a decade of QE?

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The Road to Perdition Is Paved With Evil Intentions–A Final Reckoning, by Jim Quinn

Posted on April 13, 2020 | Leave a comment

As has become the norm with Washington bailouts, those who need it the least end up with the most. From Jim Quinn at theburningplatform.com:

In Part 1 of this article I pointed out how we have allowed ourselves to be cowed by authoritarian “experts” who have proven to be nothing but incompetent and wrong every step of the way, while the financiers have used the crisis once again to pillage the citizens as they did in 2008/2009.

The absurdity of shutting down this country based on academic death models that make economist and climatologist models look highly accurate in comparison, can be seen in the ludicrousness of the following chart. And realize we did this on purpose because of a virus that will kill .018% of the U.S. population. And most of those deaths will occur in several highly dense urban enclaves, with the rest of the country barely affected.

By shutting down the country the government has crushed virtually every business in the country and putting tens of millions out of work, with resulting crash in tax revenues at the Federal, State and Local level. At the same time, Trump and everyone in Congress have become Bernie Sanders socialists, except most of it is corporate socialism. The deficit was already on track to top $1.2 trillion, but with the $2.2 trillion stimulus package, and more to come, the deficit this year and next will approach $3 trillion.

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Takeover, by Sven Henrich

Posted on April 13, 2020 | Leave a comment

The Fed’s frenzied balance sheet expansion is laying the groundwork for the next bubble, which will be even more detached from reality than the present one. From Sven Henrich at northmantrader.com:

We can’t print ourselves out of this crisis again, but that isn’t stopping the Federal Reserve from trying. Thursday’s intervention program, the latest in a string of panic moves to keep the financial system afloat, constitutes a complete takeover attempt of the market ecosphere, only the buying of stocks directly is last missing piece of eventual complete central bank control of equity markets. But seizing control of the bond market is the nearest equivalent step.

Not only that, the Fed is buying junk corporate debt propping up companies that should be let to fail as Chamath Palihapitiya pointed out poignantly this week. But not this Fed, no, with its actions it is again setting up the economy for yet another slower growth recovery, financed by even more debt.

QE doesn’t produce growth, that is the established track record:

Nobody wants to talk about the consequences to come following this crisis, but that doesn’t mean the consequences won’t be a real and present reality.

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When Money Died, by Doug Noland

Posted on April 13, 2020 | Leave a comment

The consequences—economic, financial, and political—of the Federal Reserve’s massive expansion of its balance sheet will haunt generations to come. From Doug Noland at zerohedge.com:

Sitting at the dinner table, our eleven-year old son inquired: “If a big meteor was about to hit the earth, how much money would the Fed print?” I complimented his sense of humor. Yet it was a sad testament to the historic monetary fiasco that will haunt his generation.

Federal Reserve Assets surpassed $6.0 TN for the first time, having inflated another $272 billion for the week (to $6.083 TN). Fed Assets inflated an astonishing $1.925 TN, or 46%, in only six weeks. Bank of American analysts this week suggested the Fed’s balance sheet could reach $9.0 TN by the end of the year.

M2 “money supply” surged another $371 billion for the week (ending 3/30) to a record $16.669 TN. M2 expanded an unprecedented $1.136 TN over five weeks (up $2.123 TN, or 14.6%, y-o-y). For some perspective, M2 has expanded more during the past six months than it did during the entire nineties (no slouch of a decade in terms of monetary inflation). Not included in M2, Institutional Money Fund Assets expanded an unparalleled $676 billion in five weeks to a record $2.935 TN. Total Money Fund Assets were up $1.375 TN, or 44%, over the past year to a record $4.473 TN.

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Risk? We Don’t Need No Stinking Risk! by Tom Luongo

Posted on April 13, 2020 | 1 comment

Financial downside risk, at least the kind that Wall Street supposedly faces, has been socialized. From Tom Luongo at tomluongo.me:

We’ve crossed the monetary Rubicon. There is no going back to the way things were. With the creation of a series of Special Purpose Vehicles (SPV) the Treasury Dept. and the Federal Reserve have fundamentally altered the financial landscape of the United States.

We are no longer a country that tolerates the risk of capitalism. To be honest, we haven’t been that country for a very long time. Steadily over the course of my life (I was born in 1968 the year the London Gold Pool failed), the global monetary system has cut tie after tie to the discipline of the free market in money.

With the U.S. at the center of the system, it was inevitable that we would reach the point of no return once there was no other way to reflate the system.

And it has been in the service of arrogating the power of money creation, and by extension the power that confers to the printers, to a global oligarchy I’m fond of calling The Davos Crowd.

My last post was an open letter to these folks letting them know that no matter how much they try to scare us into accepting a world where they have total control over our lives their chances of success are limited because we can see them and what they are planning.

The response I’ve received from people to that post confirm my view on this. Few things I have written have generated the kind of passion I’ve seen from folks.

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The “Coronavirus” Worm Has Turned: It Is now Time to Face the Truth, by Gary D. Barnett

Posted on April 9, 2020 | 1 comment

Who benefits from the coronavirus outbreak? From Gary D. Barnett at lewrockwell.com:

“A society becomes totalitarian when its structure becomes flagrantly artificial: that is, when its ruling class has lost its function but succeeds in clinging to power by force or fraud.” ~ George Orwell (1956). “The Orwell Reader: Fiction, Essays, and Reportage”, New York : Harcourt, Brace

It is time for some hard truth that seems to escape nearly every American, but in reality, it is truth that is purposely hidden from view by the entirety of the mainstream. With this coronavirus fraud, the bigger picture is left in the shadows, and this of course is by design, and easy to accomplish in a country consumed by fear. The bigger picture that is only being addressed by a small number of people is the real elephant in the room, but virtually invisible to the masses. This is certainly due to deceit and corruption, but also is made so complicated as to assure that the common man does not understand it, and in fact will not pursue the real story behind this pandemic facade. These hidden enemies of all people and freedom are the Federal Reserve Banks and those controlling the monetary system.

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The Monetary Abyss Stares Back and Asks Who’s Next? by Tom Luongo

Posted on April 3, 2020 | 2 comments

The central bankers are making their last stand to stop their sworn enemy, deflation, with copious amounts of debt. It can’t work. From Tom Luongo at tomluongo.me:

We are at a critical moment in the history of politics and markets. Everyday the U.S. government stares into the fiscal and monetary abyss and chucks trillions in hoping that will be enough to finally fill it.

We stand by hoping that it will work to reflate markets collapsing from a catastrophic mispricing of assets. At least some of us do. I don’t.

I hope it fails and it’s because those inflated prices fuel the very global political order that is anathema to human advancement.

President Trump is finally happy with his FOMC chair, Jerome Powell, after he opened the door to unlimited quantitative easing, nearly unlimited liquidity injections via the repo markets, and taking interest rates to the zero-bound.

It’s clear that the Keynesians at the Fed and the U.S. Treasury Dept. have no answers to the problems in front of them. They are simply doing what they always do when a crisis hits. Print money and hope someone still believes the new money is worth buying.

The sudden supply and demand side shock to the global economy thanks to the COVID-19 coronavirus is outside of their frame of reference.

To best understand what we’re dealing with here you have to understand how these people think. Modern economic theory, based on John Maynard Keynes’ General Theory of 1936, imagines the economy as a bathtub.

And that bathtub is constantly draining as credit is destroyed. Money flowing out of the economy has to be replaced with a constant stream of new money, in the form of new credit, or the bathtub drains. The velocity of new money has to keep up with old money or the system drains.

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Will Coronavirus End the Fed? by Ron Paul

Posted on March 30, 2020 | 1 comment

We can only hope coronavirus ends the Fed. From Ron Paul at ronpaulinstitute.org:

September 17, 2019 was a significant day in American economic history. On that day, the New York Federal Reserve began emergency cash infusions into the repurchasing (repo) market. This is the market banks use to make short-term loans to each other. The New York Fed acted after interest rates in the repo market rose to almost 10 percent, well above the Fed’s target rate.

The New York Fed claimed its intervention was a temporary measure, but it has not stopped pumping money into the repo market since September. Also, the Federal Reserve has been expanding its balance sheet since September. Investment advisor Michael Pento called the balance sheet expansion quantitative easing (QE) “on steroids.”

I mention these interventions to show that the Fed was taking extraordinary measures to prop up the economy months before anyone in China showed the first symptoms of coronavirus.

Now the Fed is using the historic stock market downturn and the (hopefully) temporary closure of businesses in the coronavirus panic to dramatically increase its interventions in the economy. Not only has the Fed increased the amount it is pumping into the repo market, it is purchasing unlimited amounts of Treasury securities and mortgage-backed securities. This was welcome news to Congress and the president, as it came as they were working on setting up trillions of dollars in spending in coronavirus aid/economic stimulus bills.

This month the Fed announced it would start purchasing municipal bonds, thus ensuring the state and local government debt bubble will keep growing for a few more months.

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