Update 17:35 EST:
Subsequent to my original posting, the subscriber sent me a link to the referenced YouTube video below. Don’t chuckle, but it gets a lot of views and is monetized. I watched it and here were my comments to the subscriber below the video link (edited for grammar).
Hi Dave,
Okay, I sat through the video. Agh.
I don’t necessarily disagree with a lot of what this gentleman says (especially with respect to the pre-2008-09 timeframe). The problem is simple, he’s been wrong for 11 years worrying about a collapse, and the assets (collateral) that he calls garbage right now are not garbage like back then. It’s a whole different animal from last decade.
Moreover, he looks at the same charts we do and says that it’s QE that lowers the yields and that it can’t last. I counter, as I have all last decade, and claim that QE is not a problem; the markets have accepted it, there have been no collapses in asset prices, and the markets will all eventually be nationalized (managed) on a de facto basis.
The issue with this gentleman (and the others of his kind) is that he does not understand the hidden centralized management of the Conspiracy. I have repeatedly told the reader that to the untrained eye this system looks untenable and unstable. That is by design to freak people out. As long as people are freaked out, the powers-that-be can continue ramping up their system to further their grip on the control of the economy and over our lives. It is working very well. The more people that are like this gentleman, the more effective the globalists can be. It truly is an amazing conspiracy. And those who don’t understand are being bulldozed.
There is no repo endgame other than the fact that the overnight lending market will be nationalized by the Fed and Treasury. It already has. I feel so sorry for people who have listened to this stuff all decade. They have gotten wiped out. It’s a shame too.
I noticed he monetized his videos.
Chris
Original: 11:48 EST
Is the Fed trapped? Despite a ballooning Fed balance sheet, YoY CPI remains muted and the 10-Year UST yield has been fading.
Chris
I just watched a YouTube video which stated that the FED was trapped. The short reason is that when the FED expands its balance sheet it causes the Ten Year Treasury rate to increase.
The increase basically collapses the economy by depressing asset prices and tax revenues. I’d like to get your take as to if this is just a game of going back and forth forever or if there is a point of no return.
Regards,
Dave
Stocks, bonds, and real estate rise after the Fed announces resumption of balance sheet expansion and Fed funds rate cutI see the Fed has ammo to drop the Fed funds rate.The U.S. Fed: 40 years of aggressive easing and still going strong
Dave did not provide me a link to the particular YouTube video in question, but I do not need to watch it. I think we can observe the behavior of the marketplace to conclude that whatever this YouTuber is worried about is misplaced concern. In fact, I think this analyst should be more worried about continuing to place his viewers on the wrong side of the market.
Perhaps this YouTube expert should stop reading the ZeroHedge Twitter feed, since ZeroHedge has resorted to mocking the Fed and the Western establishment. The owners of ZeroHedge figure that if it continues to be wrong, they can just add humor to the mix. That obviously has sufficed as their Twitter following has been rising.
Here is my warning to the reader. Based on recent developments, including the surfacing of this manufactured corona-virus crisis, I can easily see a scenario where the Fed could add trillions more in Treasury assets without serious market dislocations and higher inflation. Furthermore, when the next manufactured catastrophes appear, I guarantee that the Fed will ramp up into overdrive as needed.
Think about the overnight lending crisis. By the time this is all done, the Fed will have effectively taken over the repo market. Via the IOER mechanism, its conspiring network of money center banks (e.g. JPM, BAC, GS), and its recent additions to the balance sheet, the Fed already has usurped control. While ZeroHedge mocks the Fed and its followers sleep, the Fed has already effectively “nationalized” overnight lending.
Wrap your mind around that thought next time you predict collapse.
All Zero Hedge articles from 2009 to 2016 could have a current timestamp
The internet has been used by the elites to impoverish the masses and the data back me up on this one. Even though the bottom 90% do not think so, they have been gutted and disenfranchised
Over the past week or so, I received a few emails regarding my stance on Zero Hedge and the alt-financial media and what they are predicting for 2020, and felt the need to respond.
I have a subscription to [alt-finance expert] and he said I was too harsh on Zero Hedge and that we should just take it with a grain of salt….
Dave
I think 2020 is the year that this thing goes down. I have to agree with the others [in the alt-financial media] over your take on this one.
Geoff
Who knows? Maybe for once, these outlets and writers will be right. But I doubt it. How can I rely on an outlet that has been wrong for over a decade? I wouldn’t, and you shouldn’t either.
Zero Hedge has been bearish on real estate since its 2009 founding
Even with its obvious and predetermined objectives, ZeroHedge’s followers continue to heed its “advice” and lose out
Okay, let’s assume that ZeroHedge is just exaggerating a bit, but is otherwise fairly accurate. We can easily verify if Zero Hedge is on the level. Let’s do a Google search for the following and see what comes up.
“Zero Hedge 2014 Real Estate”,
“Zero Hedge 2015 Real Estate”,
“Zero Hedge 2016 Real Estate”.
Anyone who searches on these terms will come up with dozens of articles on each search that will only either conclude there is a bubble or market peak. In fact, I do not see one bullish article in the hundred or so I came across.
10-Year performance of U.S. housing, which doesn’t include rental income returns. Based on 2014-2016 house prices, cap rates would be much higher than now.
So, what if you heeded the warnings of the alt-financial media and didn’t get involved with rental real estate last decade? You lost out on a once-in-a-generation opportunity to plan for your future and retirement. I am grateful I stopped listening to these broken clocks long ago.
Zero Hedge has been wrong on the stock market since 2009
I wonder how many investors and traders relied on ZeroHedge when going short TSLA, NFLX, or AAPL?
The Wilshire 5000 Total Market Index is a widely accepted benchmark for the U.S. equity market, and measures the performance of all U.S. equity securities with readily available price data
Once again, do a Google search for Zero Hedge articles regarding the “stock market” for 2014-2016. The findings are even more glaring. Zero Hedge has been wrong all decade. I am grateful I stopped considering its advice when I warned that gold was was going to tank in February 2013 (I wrote this article under a pseudonym). In fact, that’s about the time I weaned myself off of all alt-financial guidance and Alex Jones.
In fact, do a Google search for any year in the 2010’s and your results will be the same. Should I take Zero Hedge or its alt-financial lackeys with a grain of salt? Instead, I say that we should heavily discount or reject most of what they say, because their poor track records prove we should. Even if they turn out to be right, their logic and reasoning cannot be relied upon, as they would be correct more likely from chance.
Please understand why these charlatan outlets generate this type of reading and analysis. If these sources concluded what I report and analyze, they would never build any readership and sponsor base. The bottom 90% need to turn somewhere, and they predominantly steer toward the propagandist outlets like Zero Hedge. Those who have been effectively marginalized will be attracted to those who reaffirm their existing biases, even if they are better served by avoiding them.
Zero Hedge has been wrong about the repercussions of Fed policy since 2009
These are the types of articles that Zero Hedge pumps out by the dozen all day long. It paints a picture that illustrates a Fed that is in over its head and losing control of the monetary system and credit markets. Of course, if I believed this stuff, I never would have invested in stocks, real estate, bonds, or any other asset tied to interest rates. I would have been out of the U.S. dollar and into gold and cryptocurrencies. While both cryptos and gold have been profitable over the longer term, they do not produce any passive income, and I would never have developed my income stream if I stayed in them.
If we can conclude that the Fed is carrying out another agenda and that what it does is well calculated, then we can invest and trade more profitably.
Why doesn’t Zero Hedge criticize the Russian Sphere?
One more thought regarding Zero Hedge. Why doesn’t Zero Hedge denigrate the Bank of Russia? Why doesn’t it criticize Vladimir Putin. After all, President Putin is looking to further consolidate his grip on power in the same way as the Soviet leaders. Zero Hedge seems to be peculiarly quiet when it comes to castigating the former Soviet sphere. Perhaps, there is more to this than meets the eye?
If you are looking to invest and trade over the long-term, please be careful when choosing the media outlets you rely upon for your news.
I wanted to put out a quick update on the housing market, and while I wish to concentrate on the dynamics influencing the markets in the United States, we can observe the same secular trends throughout the former Commonwealth nations and Europe.
I have to conclude that residential real estate will continue to benefit from the highly coordinated central banking policy that was implemented in the wake of the Great Recession. While the numbers and ratios will be higher in the former Commonwealth markets, I see a gradual lift in prices throughout 2020 in most areas.
The combined value of every residential home in the United States was $33.6 trillion at the end of 2019, up 3.4% ($1.1 trillion) from a year ago and 51% ($11.3 trillion) from the start of the decade.
The total value of the U.S. housing stock is almost equal to the combined 2018 GDPs of the U.S.A. (~$20.5 trillion) and China (~$13.6 trillion), by far the world’s two largest national economies.
Despite these ostensibly troubling trends, mortgage debt growth remains subdued.
Although IRC tax changes to real estate since the late 1990’s and lower mortgage rates have benefited real estate when measured against GDP, we do take note of the growing disparityDespite higher house prices, mortgage payments as a % of disposable income have been dropping since the Great Recession. Lower interest rates have helped out on this front.
I have been keeping tabs on the Australian real estate market ever since several subscribers asked me to comment on it about a year ago. Indeed, despite affordability issues, I still see prices moving north.
Source: House price bounce leaves first home buyers behind, abc.net.au
Just when significant property price falls of around 15 per cent in Sydney and more than 10 per cent in Melbourne gave some prospective purchasers a sniff of breaking in, those markets turned around and launched higher again.
In fact, the last three months of 2019 saw the fastest quarterly property price growth in a decade, according to CoreLogic’s numbers.
Nationally, home prices rose 4 per cent during the fourth quarter, with increases of more than 6 per cent in both Sydney and Melbourne.
While Sydney and Melbourne, as well as the national average, are still below their 2017 peaks, at the current pace of growth those record price levels are set to be broken by March this year.
Last Spring and Summer we concluded that the malaise would soon end as the RBA and Australia’s Federal government would not tolerate any protracted downturn, and that any slowdown should have been viewed as a buying opportunity. Though aggregate house prices have not eclipsed their former highs, it is estimated that they will probably take them out in a few months. We correctly picked the most likely outcome and prices have begun to rise again, even though affordability issues continue to intensify.
We observed throughout 2018 that the central banks can no longer tighten monetary policy. Thus, their ongoing programs will continue to benefit house prices. The world is awash in U.S. dollars with low borrowing costs, and housing near the global cities of influence will continue to receive a bid, regardless of rental rates.
Though the growth in house prices have been rising higher than rents, the disparity can be attributable to lower interest rates, which have lowered capitalization rates
While house prices viewed through a wide lens could be seen as relatively more expensive based on long-term historical trends, we need to be prepared for the most probable scenario; the central banks will continue to guide the yield curve lower over time as all this outstanding sovereign debt will remain in service.
I do not want to stand in front of this train, and while prices and yields may look relatively unattractive, depending on the market, some decent deals remain for those who are under exposed to rental property investing.
-Our observations of the overall world condition are important, because each one describes the mechanisms of a well-oiled machine that powers the new world order.
-This machine is run with money, and the elites completely control their own system. It is their economy and monetary system. We let them take over and they held us hostage with higher asset prices and the fear of poverty.
-Most market forecasters find the behavior of the central banks and governments baffling. I see something else.
-Netflix is really pushing the new world order narrative. Many new shows denigrating Christianity; Messiah, Lucifer, The First Temptation of Christ, etc., are being produced. This is not by chance. The promotion of death and nihilism abounds everywhere.
-If a person does not understand this conspiracy, he or she will not be able to make sound investment decisions. Indeed, this system to an untrained outsider looks untenable and unstable, but to those who know, it is viable and sustainable.
-To those economists out there who refuse to believe, I say, welcome to the new world order.
We can use dozens of math formulas to verify economic research, but we need to make certain these formulas do not take on a life of their own. My prior research tried to answer why M2 growth was rising much higher than GDP growth without a commensurate pickup in inflation. We were able to show this dynamic via the drop in the velocity of money, however it doesn’t tell us why.
The velocity of money has been dropping since 2008, and its fall is just a verification of our ongoing research and theories
Hello:
Nearly all your assumptions make sense.
An exception is money velocity — you & Martin Armstrong treat money velocity as if it had meaning. It’s a component in a formula but doesn’t exist independently of that formula, thus it’s useless.
The formula itself is useless — it stems from mechanics, which has nothing to do with the economy.
Cordially,
Henry
Here was my response;
Hi Henry,
Thanks for the email. Please don’t equate me with Martin Armstrong 🙂
The velocity of money in the context of my prior discussion was a measure of how much money there is in the economy and how actively it’s being used by the economy. The charts in the article I think you reference demonstrated that M1 and M2 growth were rising much higher than GDP growth. That, by definition, tell us that the velocity has to be dropping. That’s all. I have no opinion on it, other than to say it is not a useless measure. It’s what we make of it.
With that said, nothing is ever useless, per se, and the measure of the velocity of money can serve us as a verification of research. It is one of a number of measures we can use to determine if what we are saying is correct. What is of importance is this; we need to figure out why M2 growth is rising relatively higher than GDP growth without stoking a commensurate rise in price inflation. In other words, we need to figure out why this velocity is dropping and what dynamics are at play. The rest of my research explains why, and from what you said, you generally agreed.
I submit that this money has lost its effectiveness in driving up prices levels, because of the active monetary sterilization from IOER, the general economic and sovereign overindebtedness, and the active offshoring of USD currency. The Fed and Treasury have developed a number of schemes to make certain that currency and money stocks are effectively taken off the economic balance sheet. I say job well done.
All these dynamics are reflected in the velocity measure; it is not the other way around, and velocity is not the tail wagging the dog. We can easily verify our theories by seeing the velocity, since it’s 2+2=4 math. If someone were to tell me that the current velocity of money was 2.2 vs. 1.2, I would have to conclude that prices were rising higher, ceteris paribus, since there are only so many goods and services that this money can bid up. Moreover, if the velocity was rising I would be concerned that the Fed would no longer be able to carry out its QE programs.
As the money stock measures climb by percentage of GDP, the velocity, by definition, has to fall. It is and has been for a long time. I put this in my analysis as a verification to show the reader of this simple algebraic relationship.
Where I also differ from Armstrong; My concern is that the velocity of money will begin to rise over time. I think his concern is that the velocity is dropping. My desire is to continue to see the velocity value drop, as this would be an “ex post facto” or hindsight verification of my theories as well as the viability of QE and its ability to drive up the markets over the longer term and keep the U.S. government in business.
Now, I have a suggestion for you; stop reading Martin Armstrong and concerning yourself with anything he says. 🙂 I would be careful in assuming something where there is nothing. We all have biases and I struggle to leave them at the door before entering.
Non sequitur; The alt-media tell of a conspiracy that has gotten the world to this point, yet refuse to believe the conspirators are in control of their monetary system
Note to reader: I recently received a number of comments regarding my economic theories and will share one below, but I wanted to emphasize this one important point in my analysis; Under QE, sovereign debt levels and their growth rates more strongly determine asset price inflation than do M2 and M3 growth.
If the owners of the central banks ever lost control of QE and the other monetary policies they promulgated in the wake of the manufactured 2008 collapses, then all the money printing in the world could not save the asset markets. Observe the nations that experienced hyper-monetary inflation and see how their asset markets fared with respect to the monetary printing. The asset prices never kept pace. That’s because their economies and financial systems fell apart.
Chris,
[I] just wanted you to know I started following your blog about 4 months ago. Very impressed with your observations. Don’t agree with everything, but think you are about 90-95% right about trends. The system is NOT going to crash, and the monetary/system reset already occurred in 2007-2009. They are just going to run up the debt forever, money has ceased to have any true value (if it ever did). I was a doomer catastrophist expecting the sky to fall every month, and have struggled to ween myself from this self-destructive and self-defeating mindset.
Kris
Here was my response (edited for grammar):
With the support of QE, the nations and debt slaves all dutifully spend and service their debts
Hi Kris,
Thanks for the email. I guess you are one of only a few who agree somewhat with my assessments as I do not get much fan mail.
The more debt, the more money. The bigger the debt millstone, the less that this money can drive up prices. [There is also the] incentive to spread the money outside the U.S. and keep it parked at the Fed [Excess Reserves]. It all gets sterilized. While the vast majority of the people, who cannot come to terms with this ostensibly grim dynamic, get stuffed with the debt, I see this as an auspicious opportunity. I see it as a time to move forward and make hay, because the sun is shining.
I am just a small potato, but I prefer this system over all others. Where else can I sit at home and get wealthier? Imagine the rest of the top 10%. They love what is going on. They are giddy, and they are the only ones that matter in this system. The poor debt slaves do not matter as long as they keep spending.
What will bring this system down? Only if the debt slaves stop spending. I drive about and shop, work on properties, and today I stopped at Trader Joe’s on the way home and the roads were jammed on Saturday, and the people were spending and spending. They cannot stop.
I marvel and thank the debt slaves for accepting their conditioning to spend until they are broke and for perpetuating their own servitude. I see no end. M2 can climb and climb forever and the economists can grab at all sorts of straws to try to explain what is going on, but you and I know that the new system emerged in 2008.
The elites now control it all. They control the media, TV programming, movies, internet searches, news, [most of the alt-finance], social media, etc., and they demand the sheep spend. The sheep are following their orders without even knowing what they are doing. With QE and all this new monetary policy, the elites now control the economy. It really is very simple.
If I didn’t comprehend what was going on, I too, would be guessing that a collapse or crash was coming soon. It may come, but the alt-finance have been predicting one all decade and beyond. It will happen eventually, but I am sad to report that it will probably not happen the way they think. They were eventually right with the one in 2008 and lost out on that auspicious opportunity.
My observation; many knowledgeable economists cannot come to terms with what is going on, so they keep coming up with different theories. My theory has worked and served me well for a long time, but my ideas are too difficult to accept. To accept them would mean something much more sinister is at play. To accept them would mean that much of what they learned was a farce. The fact that so many people in the alt-finance cannot accept this means that this system has plenty of legs to run. They don’t know their adversary.
Anyway, thanks for reading and keeping an open mind.
There is a sincere debate… regarding how there could be a 5x expansion of monetary base in 2008 (and a subsequent spike in M1 currency) and yet the real world price levels (CPI inflation) have not noticeably risen. It is my belief that this has been made possible by:
(1) interest on excess reserves (IOER) that essentially bribes/incentivizes banks not to lend, IOER caused no/low/contained consumer credit expansion means no price inflation (M1/physical currency increase is probably irrelevant) because prices generally correlate with credit; and
(2) something in Dodd Frank/Fed policy (I don’t know what) since 2008 that has allowed the Fed to directly monetize assets, specifically USTs—I believe you have correctly said that Fed has complete control over the yield curve, I’m not sure I’ve heard specifically how it has done this.
If you can explain number 2 specifically and how Fed can directly control/prevent a drop in asset prices, I think you will help more people and your correct message will get further amplified.
William
M2 as a % of GDP has been climbing for decades. Since the Fed is making sure all the debt outstanding is serviced, the deflationary forces persist and magnify, even as currency measures riseAs nominal GDP rises over time, M2 as a percent of GDP has been climbing faster. Hence, the drop in velocity. The velocity of money is the frequency at which one unit of currency is used to purchase domestically-produced goods and services within a given time period. In other words, it is the number of times one dollar is spent to buy goods and services per unit of time. If the velocity of money is decreasing, then less transactions are occurring between individuals in an economy.
-The higher the levels of in-service sovereign debt outstanding (e.g. US Treasuries), the higher asset prices will be, ceteris paribus. My observation has been that monetary growth is a much less precise indicator.
-Prior to 2008, monetary growth strongly correlated to higher general price inflation as a very low percentage of Mb and M1 was sterilized.
The United States has a more developed monetary system, it’s M2 as a % of GDP is less than most other nations. Japan’s economy has a higher level, because of its decades-long debt and asset monetization programs. Will the U.S. trend higher like Japan?
-In 2008, for the first time the global investors questioned how the nation-states would be able to stay in business. The successful implementation of the QE and asset purchase programs solved that dilemma.
-The Fed and other central banks could have chosen a number of routes in the wake of the 2008 crisis. They chose the current path of debt monetization and balance sheet additions. I am not here to say if this was wise; I only observe. This provides the nation-state governments with the money to operate.
-Prior to 2008, the world’s net savings rate and its balance sheet supported sovereign nation-state spending. Subsequent to 2008, QE was needed to keep nation-states borrowing and their spending needs growing.
-Since 2008, the global economy is no longer large enough to service the growing levels of outstanding debts, under normal circumstances (economic laws prior to 2008). Thus, the QE programs effectively act as a huge deflationary force. So, money velocity slows and the amount of money supply needed to operate the economy increases over time.
The Fed admits that it needs to maintain its IOER program and uses it as a vital monetary tool. Without it, there is a hyperinflationary risk to the system.If the banks can borrow from customers at near 0% in checking and savings, why bother lending?They can deposit all that money at the Fed risk free. They can shut their branches and layoff their workers, and this money becomes effectively sterilized.
-Since the promulgation of QE and the IOER program, large portions of the money supply have been effectively sterilized.
–The Fed admits that the IOER program is vital to keeping inflation lower. I agree. Keep in mind that as debt levels rise and money velocities slow, M2 must rise to keep the nominal GDP growing.
-If the Fed really wanted to increase consumer price levels, it should lower the rate of interest on excess reserves. But it won’t, because the lower the level of consumer prices, the more viable their QE programs.
As serviceable debt levels rise, the amount of money required increases over time when compared to GDP growth. Velocity drops and debt burdens to the economy climb.
-With the amount of US Treasuries rising and the dollar firm, USD-denominated securities should continue to be better supported than elsewhere. This paradigm should continue as long as the dollar is the reserve currency.
-My primary immediate concern on this current course of action is this; The Fed and Treasury seem to becoming less concerned over the repercussions of their actions. This means asset prices may move much higher than anticipated. In essence, as they grow more desperate, they may stop pretending to care.
-The Fed does effectively control the entire yield curve. As long as all the Treasuries are being serviced, yields will fall over time as an ever greater portion of GDP is committed to prior debt service.
-The Fed isn’t actively managing the yield curve, per se. Rather, QE by function will force rates lower over time as the world struggles to service debts and sinks further in a sea of deflationary red ink in which debt is never repudiated. This was easily apparent in the wake of the Fed’s about face in late 2018. Yields across the board fell and the yield curve flattened.
-Fed jawboning can play a part in managing yields, especially on the longer end. Longer-dated QE would also do the trick.
-With respect to William’s second question, The Fed is prohibited from buying stocks. It can only purchase Federal securities, such as Treasuries and Mortgage-backed securities. Please refer to this section of the Federal Reserve Act for more information.
We all have the potential to succeed. We need to stop living in fear and plan properly for the future.
Hi Chris,
I’ve been reading your blog since 2018 and [have] studied it religiously for quite some time now. I’m a firm believer of FIRE [financial independence, retire early] and I particularly loved George Carlin, but I know he rejects religion as he always said it is very self-limiting.
I [unshackled] myself and managed to achieve above market gains, although it’s not much as I’m based in Singapore. The elites here have been screwing the middle class by means of [limiting] property access and my worries are that they will one day make our financial markets unprofitable for anyone to further widen the gaps.
One fetish of human nature has always been the need to fight wars. The elites have since eliminated them (wars) but, replaced them with a more silent war for our minds and hearts…
Law and order and religious teachings [have been] totally reversed and defiled to keep the sheep sleeping. Because of this I no longer listen to modern music, watch dark-themed movies, and read modern literature anymore.
Defiance and being fearless is the only way to win this game. The stuff I read have taught me how to reverse engineer my life….
Jason
Here was my response;
Hi Jason,
Thanks for the email and for reading my blog.
I know this may seem ironic to my readers and non-remnant Christians, but like George Carlin, I too, avoid religion. I think that most organized religions have been usurped by darker forces with the intent to deceive and hinder us from attaining our rightful place. Regardless, I am an avid student of the Bible and would consider myself a Jesus man. The Bible has helped me a lot over the years, especially over the past dozen or so. It has helped me to uncover the concepts I write about on a daily basis. It works.
I have always said that the United States still provides the best opportunities anywhere. I say this, because despite what the media proclaim, the U.S. still has a stable legal framework, and a less punishing taxation structure that can reward hard work and ingenuity. Of course, within the U.S., some areas are better than others. I moved from New York and Maryland to Virginia to assist me in my investment and personal endeavors.
Nonetheless, I do not see these easy avenues in most other nations, except maybe the former Commonwealth countries. And even then, the tax burdens can be relatively overwhelming. Despite what we hear, a person in the U.S. can still succeed without having to bribe people, etc. I know the alt-media bashes the United States, but it still is better than other countries.
Regardless, it is possible to succeed in most nations, including Singapore. Singapore has really grown and moved up in status, and by emphasizing English it helps the country with business and financial market matters. While I have never been there, I watch YouTube and marvel at how it’s developed. I also communicate with others who have lived and traveled there.
As for the elites screwing people, this is true, because they have little concern for us, except to exploit us for profit. However, I have observed that most who struggle financially exhibit lethal and self-defeating behaviors, including making fear-based and subjective financial decisions. In addition, most people can no longer argue an idea in a logical manner and have lost their ability to think objectively.
We all have to look in the mirror before we blame others. The elites use their media to keep us down and promote this self-defeating and lazy behavior in the masses. This is why I try to get my readers to adjust their mindsets. Indeed, there is a conspiracy for our minds and hearts, but we don’t have to fall victim to it.
The truth is out there. For me it is the Bible, but religion pollutes its words. The internet, social media hive mind, TV and movies divert us away from seeing the truth. It sounds like you have taken the first steps to uncover reality as it really is. I hope you continue to build upon your budding wisdom and knowledge base.
Can the Fed sabotage Trump’s election or has Trump taken that opportunity off the table?
I received an email from a subscriber asking me to comment on another alt-financial analyst’s article from late December, regarding the Federal Reserve’s possible intention to sink President Trump’s campaign with a market crash prior to this November’s Presidential election.
I normally would not comment on other people who I think are doing an otherwise decent job, and I do not wish to single out this person’s commentary, but I found it similar to many other writings in the alt-media. So, here is some analysis on the matter.
Don’t worry about an Obama appointee. Trump’s Fed criticism precludes a repeat of 2008
U.S. President Donald Trump’s trade war with China keeps undermining the confidence of businesses and consumers, worsening the economic outlook. This manufactured disaster-in-the-making presents the Federal Reserve with a dilemma: Should it mitigate the damage by providing offsetting stimulus, or refuse to play along?
If the ultimate goal is a healthy economy, the Fed should seriously consider the latter approach.
There’s even an argument that the election itself falls within the Fed’s purview. After all, Trump’s reelection arguably presents a threat to the U.S. and global economy, to the Fed’s independence and its ability to achieve its employment and inflation objectives. If the goal of monetary policy is to achieve the best long-term economic outcome, then Fed officials should consider how their decisions will affect the political outcome in 2020.
Later that same day, Bloomberg published an article titled, Ex-Fed Official Dudley’s Call to Block Trump Draws Criticism, in which it said that Dudley’s op-ed comments were misguided and dangerous. Dudley also received a sharp rebuke from the Fed itself as a Fed spokeswoman said the central bank would not play politics.
The Fed rejected the suggestion that it would play politics with monetary policy.
“The Federal Reserve’s policy decisions are guided solely by its congressional mandate to maintain price stability and maximum employment. Political considerations play absolutely no role,” Fed spokeswoman Michelle Smith said in an emailed statement.
Pushback from analysts and economists also came thick and fast.
“Bill Dudley’s remarks are not only misguided but also dangerous coming from a former top Fed official,” said Gregory Daco, chief U.S. economist at Oxford Economics. “The Fed doesn’t have the luxury to stand idle in the face of a slowing economy.”
Jared Bernstein, who served as former Vice President Joe Biden’s chief economist, posted on Twitter that to “do what Dudley suggests compromises the Fed’s independence. Also, it could easily backfire as Trump often doubles down when challenged.”
Okay, with this background, I want to consider the chances that the elites have already manipulated the outcomes of past presidential elections. I think it’s fair to contemplate they rigged the 1960 and 2000 elections. With respect to the elites’ use of the Fed, I can specifically think of the 2008 election in which the Fed’s willfully ignorant monetary policy guaranteed an Obama victory. Trump is no dummy and I am sure he obsesses about a possible redux.
With this as a preface, I offer you my response to this reader (edited for grammar);
Hi Dave,
Thanks for the email….
As for my blog, my overriding thesis is this; the central banks will do whatever it takes to keep the nation-states in business with them in control, and they are in control of their system. They have admitted they assumed control in late 2008, under the Bernanke tenure. Why would the Fed sabotage the Trump regime via a crash now? They would get the full blame and have to accept the responsibility.
If the Fed owners hated Trump, they would just rig the election and never tell us. I am sure they already have done this (Kennedy in 1960, Bush 2000, maybe even Trump 2016). Trump is just a puppet.
If the Fed “screwed up” they would get the full blame at this point. The Fed is being used by the elites to control the U.S. nation-state and have fully accepted the responsibility of keeping things going, and crashing it would only expose a partisan intent. This could actually work in Trump’s favor as it would be viewed through the lens of Dudley’s partisan remarks.
But this won’t happen. Trump has been complaining about Fed policy throughout his whole term. The spotlight is now on the Fed and the Fed cannot “screw up” like last decade. The Fed’s owners have all the power they want [and all the tools they need to keep things moving forward]. Bernanke said the same over the weekend.
Furthermore, Dudley was arguing as a former fed official as he left the Fed in 2018. He was appointed by Obama to the NY Fed. He is just a partisan shill and he has lost a lot of street cred after that Bloomberg editorial. I remember it.
The Fed sharply rebuked him and from what I can see, the Fed has fully enabled Trump with QE4.
The Fed couldn’t just come out and say we are going to undertake QE4 without any cause. For now on, the Fed will ramp up their programs after manufactured market blowups. Their M.O. going forward will be exactly as it was in the wake of the repo madness.
Trump doesn’t want to get rid of the Fed. Trump only wants ultra-loose policy and he is getting it. QE is MUCH MUCH more important than rate setting. QE allows the nation-states to stay in business.
The contention between Trump and the Fed preclude a 2008 redux
I agree with Ben Bernanke, the Fed has all the tools it needs to keep this system moving forward. Look how simple it was to solve the repo market problems last year. I relayed this to the reader that the Fed could easily solve this dilemma by placing Treasuries, on a permanent basis, onto the Fed’s balance sheet. They did so to the tune of $400 billion and the problem was solved immediately. Now, the Fed will use this as an opportunity to effectively regulate the overnight credit market.
Think about the market’s near collapse in late 2018. All throughout 2018, I said that the Fed needed to stop unwinding its balance sheet and begin QE again. Look what it did, they redirected everything from the brink and onto a new bullish market trend. The Fed even cut rates 75 bps last year. I told the reader that the Fed needed to start QE again in order to move things along, and it did. All the problems were solved in the asset markets. Bond yields fell across the board and stocks and real estate began to firm around the world.
After all this show of force by the Fed since late 2018, how can it crash Trump’s election chances now? Even if the Fed wanted to torpedo Trump’s campaign, it no longer can. It has already revealed its power to move the markets, so by feigning impotence to stop a downturn their excuses would be viewed as totally transparent and disingenuous. But the elites can still rig the votes or plan something else out of the blue. However, that is not part of my expertise nor within the scope of my analysis.
I’ve been following you for about 6 months now after hearing about you on the […] blog. My question is should I start investing in RE now or just buy gold instead for now.
I am worried about the eventual downturn in the economy and people’s ability to pay rent. Rents in my area (Northeast PA?) are in the $1500.00 to $1800.00 range. I know of many people working three part time jobs with the bulk of their income going to rent. Also when the socialists return to power, I think there [may be] a change for rent controls, or worse, as mentioned in that blog recently.
As the Fed continues QE, shouldn’t the price of gold rise eventually? It seems the better option and less stressful. I am 62 years old, no debt, blue color, self employed, married, 1 child in college. Just trying to get through the reset without getting wiped out. I am worried about my family. Sorry for the long post. Thank you for all you do, for opening our eyes to the way things work.
Happy New Year and God bless.
Bill
Since 1971, the asset markets over the long-term are actually very predictable
U.S. Federal Housing Finance Agency; All-Transactions House Price Index for the United States. Compared to the other major asset classes, including gold, housing has underperformed in many areas, but housing has the potential to generate a lot of income for its owners.
So what if your worst fears were realized and the dollar collapsed? It has been collapsing in value since at least 1971, when the Nixon regime shut the international gold window.
Below, I show the performance of the Wilshire 5000, since the shutting of the gold window in 1971. In 1981, the IRS issued proposed regulations on 401(k) plans that sanctioned the use of employee salary reductions as a source of retirement plan contributions. Many employers replaced older, after-tax thrift plans with 401(k) plans and added 401(k) options to profit-sharing and stock bonus plans. Within two years, surveys showed that nearly half of all large firms were either already offering a 401(k) plan or considering one. The Dow Jones Industrial Average closed 1981 at 875.00. The massive subsequent performance of the domestic stock market was no coincidence.
Based on the log scale, the performance of the Wilshire 5000 index since the U.S. shut the gold window has been fairly predictable and even. The Wilshire 5000 is a market-capitalization-weighted index of the market value of all US-stocks actively traded in the United States. This chart does not include dividends.
Why was the stock market crash in 1987 so short-lived? Why have all subsequent stock market corrections been short lived? There are literally trillions of dollars waiting to be deployed; either by employees, employers, governments, or central banks. Are you going to stand in front of this freight train?
There were hundreds of billions in defined contribution dollars after the 1987 crash ready to be deployed within a couple years, and this flood continues to this day. Now, that amount is in the trillions and I do not care what the alt-financial media think. As many as 80% of the population may eventually agree with many of the aspects of what the alt-media proclaim, but by then it will be too late for them to matter. Because of the powerful and sinister effects of the internet and social media, the average person on the street can no longer control his spending impulses and humans have been conditioned into spending every last cent of their money.
All that consumer debt-slave spending goes to the top 10%, and those in that top echelon are now the only ones who can affect this system. The small person is now powerless to stop this self-generating dynamo. They cannot stop spending and are the unwitting victims of a parasitic, Hindu-style, predatory monetary and economic system.
Since 1971, gold has done very well over the long term. Its total price performance is similar to the Wilshire 5000, but it generates no income and is much less liquid.
Think about the other freight train. Imagine all those overseas dollars looking for a home. In 2018, the Federal Reserve Bank estimated that 80 percent of all $100 bills were held in foreign countries. It explained that residents in other countries, particularly those with unstable financial systems, often use the notes as a safe haven. In any protracted dollar run, these dollars will have to find a home somewhere. I say they will continue to gravitate to global real estate and domestic stocks. Perhaps these dollars will also seek gold and other non-consumable commodities.
The whole system is being nationalized and given over to the elites
Think about what happened in the overnight dollar lending market during the second half 2019. The Fed is using it as a justification to effectively regulate and nationalize the entire short-term lending market. Read this article from today’s Barron’s to see what I mean.
“Various [FOMC] participants remarked on issues related to the implementation of monetary policy, highlighting topics for further discussion at future meetings,” the meeting minutes said. “Among the topics mentioned were the potential role of a standing repo facility in an ample-reserves regime, the setting of administered rates, and the composition of the Federal Reserve’s holdings of Treasury securities over the longer run.”
I also have been observing many economists who are conjuring up tentative ideas to combat the next downturn. A popular one; direct injections of government money to the end-user to be used for general spending purposes.
Hand out some benefits and the debt slaves will never revolt
With interest rates already so low, the Federal Reserve can’t fight a downturn by itself, and so economists are casting about for new ways that government spending can be used spur demand.
And funnily enough, one excellent way to get your local community humming would be to send everyone a $1,000 coupon to be used for dinner at restaurants of their choosing, said Gabriel Chodorow-Reich, an economics professor at Harvard University.
At a panel at the American Economic Association, economists discussed a range of ideas to use fiscal policy to counter downturns.
Former U.S. Treasury Secretary Lawrence Summers suggested that Congress develop “semi-automatic stabilizers” or targeted spending that would be triggered automatically if there was a rise in the unemployment rate.
This would help get around the sometimes slow pace of Congressional decision-making.
Here is an article from today’s MarketWatch, titled, To fight the next recession, the government might send you money so you can go out to dinner with friends. If these types of programs are enacted during the next downturn, do you think the alt-media will be able to convince the average recipient that these programs are holding them back? Absolutely not. The elites will control the sheep by handing out these benefits to keep spending levels elevated, while the debt-slaves will only direct the resulting profits to the top levels of society. Since this spending will be financed with debt, inflationary growth should be minimal.
My most important advice; We need to drop the fear and change our mindset
My views are more sobering than most others in the alt-financial media, because they either believe we can turn this around or will propagandize like ZeroHedge with its self-loathing, anti-Western propaganda. I submit, we may have to wait a long time for any collapse, since most on this planet do not care what system they operate under, as long as they can have fun.
I differ, because I conclude that there are no longer any viable solutions for an ungodly global population. Our monetary and financial systems are a direct reflection of humanity’s moral compass and humanity has been corrupted to the core. The teachings of the Bible have been methodically adulterated and its philosophy has been effectively thrown into the trash heap of history.
With this in mind, I would advise all my readers to unplug from the collapse and reset talk that the alt-financial media are spreading. Imagine the tens of millions of dollars that ZeroHedge earns for its propagandist owners. Think of all the alt-media charlatans who earn tons of money off their crash-and-burn hype. It’s much easier to exploit people’s fears than to take risk and invest, as we do.
Case in point, this latest round of Iran war talk has injected a fresh round of “reset” scaremongering and I am certain that ZeroHedge’s page views skyrocketed over the past couple days. The elites running the new world order have been desensitizing us to a showdown with Iran since the Iranian hostage “crisis” in 1979. That was 41 years ago. I also recall the Iraq/Iran War of the 1980’s, which stretched on for over seven years. I remember during all that time how the Christian prophets on AM/FM radio thought Jesus’s return was imminent. What an embarrassment they turned out to be for the Christian faith and Bible. It’s not difficult to understand why real Christianity has become a running joke to most people on this planet.
During my undergraduate days, I recall my then-girlfriend’s father loading up on gold in anticipation of a big hyperinflationary downturn. Guess what, he eventually died with little money as their family struggled financially in a little house on Long Island. Why bother planning for the future when it will all come crashing down anyway? Unfortunately, things have a tendency to move in the same direction for much longer than we anticipate.
I can advise a person to do this or that, but if he or she cannot break free from their hard-wired biases, conditioning, and fear, he will always make fear-based investment and personal decisions. That is a recipe for disaster.
As for real estate or stocks, if a person has vacillated about getting involved all decade, I would suggest that he not get involved at this point. It takes a certain type of person who wishes to venture into these markets and not everyone is cut out for it. Many prefer risk aversion and there is nothing inherently wrong with this mindset, per se. My wife is extremely risk averse, while I prefer to take the risks. It works out well for us.
The internet is a killer to most people’s finances. Instead of empowering, the internet enslaves and impoverishes.
However, all is not lost. We all can still take some preventive actions to help ensure our long-term financial viability. We need to stop spending money like everyone else. We should restrict our social media usage to ZERO minutes a day. For those who are too fearful to use debt to buy income generating assets, I advise to eschew all forms of debt. College is not worth it anymore, unless you can get a degree that can teach about money and economics. Stay liquid in cash and gold, and stop worrying.
We have no control over who gets elected and the policies they promulgate, but we can see from the above charts that it doesn’t really matter. The freight train of central bank money and deficit spending is unrelenting. If socialists get into power, we know that the massive deficit spending on benefits will be negated by higher asset prices. Tax cuts results in the same outcome. Short of outright communist-style expropriation, real estate and rents will move higher as a result as supply is effectively restricted.
I don’t have anything else to add, but if we can overcome our mental handicaps, I have to believe the opportunities will appear and be self-evident.
