The FREE Investment Newsletter That Really Works!
We face a dichotomy. It certainly doesn’t get much press and frankly most people never put two and two together, but I believe it is something we need to at least give some thought to.
We know the Central Banks of the world have inflated bubbles of enormous size in both bonds and assets, especially equities. Why have they done that? Well the common thinking is that they’ve done that to ward off economic disasters and keep economies moving higher. Okay, let’s go with that for a minute.
Our Central bank is but one of many, all under the direction/leadership of the Bank of international settlements, the BIS. They weaseled their way into commandeering our monetary policy back in 1913 by the most ugly of ways, and established themselves as our nations “bank”. They’d been trying to do that for over 150 years. Persistent bunch.
So they say that they’re there to “smooth out the cycles”. In any free market there are indeed growth periods and periods of contraction. Manufacturers produce and produce and then as demand slows, they have too much capacity, so they let go some folks, and cut back for a while. Then as demand recovers, they ramp things up again and hire back more folks and the game repeats over and over.
The Central Bank, our Federal Reserve said to the people “don’t ya’ll hate those business cycles? Well we can smooth em right out. When things get too hot we’ll adjust interest rates and currency volumes and slow things down a bit, and when they start to slow, we’ll push the economic accelerator and keep your factories humming” That was the basic pretense and they buffered all that with a mandate to keep inflation in check and sustain maximum employment.
So the first question is… did it work? Well just 17 years after their inception we had the great depression. Then because of WWII the nation clawed its way out of a very nasty situation as we produced war materials. Even “moms” were employed like the vaunted “Rosie the Riveter”. The Federal Reserve didn’t pull us out of the depression, time and War did.
Since then the “swings” in the business cycles have become bigger, not smaller. All their pushing of buttons and pulling of levers hasn’t smoothed out the cycles, just the opposite. Instead of the free market which is self limiting as to how hot or cold the economy can become, the Fed’s would push it to extremes. Then when a boom cycle was already so over extended and long in the tooth, they’d crash things and we’d have recessions and soft depressions. Fail.
So the fact is that the Federal Reserve is indeed worthless as far as doing what they’re supposed to do. Yet interestingly they have the ability if they were really into running things properly, to fix things. Ut-oh, there’s a problem. If they have the ability to truly make an economy better, and they don’t employ it, does that mean they are actually engineering it to fail?
Let’s consider this…In the Great Depression, the Fed’s forced the banks to continually increase their reserves. Well, money in reserve is NOT money being loaned out to businesses and citizens for consumption. By 1936 reserves were at all time record highs and yet the Fed’s insisted they increase their reserves even more. That more than just about anything else they did is why the depression continued for so long.
Well in the crash period of 2008, the Fed’s came up with all sorts of lunacy to “save the world” They had Hank Paulson out there screaming that the end of the entire financial structure was at hand and they had to take unusual methods of action to save things. Well, what they did however was maniacal at best, if not outright criminal.
Follow the plot for a minute here. The banks were loaded to the gills with illegal, toxic mortgage backed securities worth pennies on the dollar. The Fed’s printed money like madmen, to the tune of trillions, and bought that toxic slop for OVER par in most instances. ( meaning instead of dollar for dollar, they paid 1.02, 1.03, 1.04)
Now the banks; which were insolvent holding all this trash that was worth nothing, was getting umpteen billions for this crap. Then in a twist only they could conjure up, the Fed’s said “now that we’ve paid you quite handsomely for all that crap, you guys take all those excess reserves you now have and park it right here at the Fed AND we’ll pay you INTEREST on it.” This is why the banks went from being so blatantly broke they needed Bail outs, to having excess reserves.
But wait, it gets better. The banks were also holding huge volumes of Treasuries. There too the Fed’s said “not to worry, we’ll buy them from you to, at par or even better”. Between the Mortgaged backed securities and the selling of Treasuries to the Feds, the banks got 2.5 TRILLION worth of excess reserves. Reserves they parked right at the Fed and gathered interest on.
Consider the depth of this scam, because it is breathtaking. The banks created bubbles. The bubbles got so out of control, they were selling mortgages as “assets” which contained absolute garbage. Like 20 year old McDonald Fry cooks buying 500K dollar homes. Then when it all blew up and the banks were left bankrupt, the Fed’s PRINTED up money, Gave it to the banks in exchange for the MBA’s, and when they got so much money they didn’t know what to do with it, the Fed’s said “put it here and we’ll pay you to do it”. Wow.
So just like in the 30’s, banks were deterred from making loans to mom and pop America, so their money could sit at the Fed and make money doing it.
“Now Bob, that was an emergency measure to keep the entire system from collapse, surely you can’t fault them for that?”
Oh yeah I can. Because 1) the bankers themselves AND the Fed’s were co conspirators in creating the biggest housing bubble and fraud mortgage bubble in history, and 2) THEY ARE STILL PAYING INTEREST ON THOSE RESERVES.
Folks you can’t even make this stuff up. They put on this big show about interest rates and how they’re so scared to raise them because of this and that, and meanwhile TRILLIONS of dollars that was supposed to “fix the economy” Sits right at the Fed’s and the banks make billions for doing NOTHING. No loans.
They are a two sided coin, talking out of both sides of their mouth. They preach to us about how necessary they are and we have to hang on every word they say to try and predict what they’ll do with Interest rates and meanwhile, they could unleash ENORMOUS stimulus to the real economy by forcing banks to actually get back in the business of being a bank and making money by creating good loans.
So we’ve got a bit of a problem here don’t we. All around the globe the Central banks are printing money, to supposedly fix all the ills, but instead it’s parking at banks AT INTEREST. It’s not getting to Main Street. It’s going to Corporations so they can buy back their own stocks. Oh they’re still making loans, but YOU can’t get one. However, if you’re GE and want to send jobs to China, and buy back a few billion in stock, they’ll be at your door in the morning with the money bag.
Thus we have to conclude that the Fed’s have NO interest in saving the economy, creating jobs, or getting the middle class back to health. They do however have a vested interest in making obscene money for their member banks, and the Corporations they so love.
The ultimate goal is to drive the world toward a one world central planning system and the Fed’s are part of that game. Their little shows and agonizing over the language in their statements is all grand drama…but it’s just that. Drama. They have NO desire to fix the middle class, they see them as slaves. And the lower class? They consider them as bacteria. This is all about crashing the system, so when it’s in the dumpster, they can hold up the BIS as a savior and rescue us.
This is the second letter in a row where I’ve tried to make the case that the Fed’s are NOT in the business of fixing this economy. They are in the entertainment business for the masses. Their real agenda is to “manage a crash” where things get just ugly enough that we cry for them to “Please do more for us!”. And they will…oh how they will. Just remember, “negative” interest rates, which they hinted at last week, means “we” get to pay “them” for allowing us to use a bank. Now tell me again how the Fed’s are looking out for us……
Chop and slop. 300 up, 300 down. No trends, no continuity. Just full bore panic buying or selling depending on that particular day. Like a proverbial yard of chickens with no heads, running to or fro on autopilot.
Monday up. Tuesday down big. Today was a whipsaw, but I think it was also VERY telling. Let me explain….
The market was soggy, down a few points. Then about an hour into the session Dow Jones ran a headline stating that Mario Draghi said and I quote “If needed, QE will be extended beyond September 2016” Well that got them all excited and the S&P and the DOW both went positive for a while. But as we approached the noon hour, the wheels were once again coming off. By 12:30 we were down 103 DOW points and 9 on the S&P.
You can sense the change. People are finally beginning to wake up to the idea that the Fed’s are bogus. They are losing confidence in both the Central bankers AND their fiat money. Don’t forget for ONE minute the fact that the ONLY way a money that is not supported by gold or silver can survive is if people TRUST the folks managing the stuff. They are finally beginning to think they’ve been conned. They have.
In the past a statement like that would have sent global markets soaring for 3 days. We couldn’t get 30 minutes. The effect is gone. So after a long grinding day, we ended the session with the DOW off about 50 and the S&P down 4. Yawn.
Tomorrow can be an interesting day. Why? Well after the market closes Janet Yellen is addressing the U. of Mass. And you can bet everyone will be hanging on her every word to see if she changes her stance from no rate hikes to “maybe one”. That “should” keep the market fairly contained tomorrow.
Here’s the wrap up. The low set yesterday was 1929, and that aligns with a down “wave” pattern, if you’re into such things. So it is imperative that they keep the S&P above 1930. We closed at 1938. If we were to lose that level, it’s safe to assume we’ll see 1913 and after that we’ll be testing 1867.
On the “up” side, if they get us up and over today’s high at 1949, they might have a couple more up days in them, but again we’re held hostage by the Yellen.
I mentioned on Sunday, that the next year or so is going to be incredibly interesting as we’re in a slow motion crash, and figuring out what to do concerning not just your retirement accounts and 401K’s, but your entire life situation that is going to be important. There’s a lot of things to consider because from where we sit a global reset is in the works, and with it is going to come some serious challenges.
According to the last verifiable record of such things, there’s now 200 trillion in debt around the globe, up 50 trillion from 2008. The derivative situation is over 650 trillion. Something is going to change, and it’s going to change in a big way. I invite any and all of you to join our Insiders Club for a year. Why? Because I’m going to work like hell to try and help guide people through what could be an almost historically lumpy period. We are literally just one credit default, one bank implosion, one errant missile fired, one “something” from a situation that could cascade through this debt ridden system like the flu through nursery school. We’ve embarked on a mission of exploring topics from “do you cash out your retirement accounts” to “should we move money off shore” to you name it. Everything’s going to be on the table and we’re going to discuss it all.
Go to investyourself.com and hit the big red button. It’s 24.95 a month or 199.95 for a full year. It does NOT matter if you’re not a stock trader or investor. We’re going to be discussing everything from urban survival in a bad situation, to community gardens, to holistic medicine to you name it. You should come along.
I’ll see you all on Sunday.
On Friday we got the non farm payroll report, and boy…if the powers that be ever wanted to paint something to look perfect, this was their Rembrandt moment. Not only did the headline number beat the estimates of a gain of 235K by coming in at 257K; they went back and did some of the most aggressive “revisions” to prior reports that I’ve ever seen.
Let me paint the picture for you. According to our Government bean counters the last few reports have shown the most job gains in 17 years. They say that wage growth was the best since 2008, as they told us wages grew by 0.5%. The BLS did revisions to the entire year of 2014, and remember the “polar vortex” last January? They said at the time we only got 144K jobs. Now they say that looking back, it was really 247K. But that was nothing compared to what they did to November. Now they say November posted a gain of 465K jobs. That’s the most monthly gains since the tech bubble boom of the late 90’s. A time when there really were jobs galore.