“Mayday, Mayday, Mayday”: 13 Random Revelations from April, 2018

This article was originally published by Doug “Uncola” Lynn at TheTollOnline.com

As we travel the stormy seas on the way to our forthcoming destination, thirteen revelations from April, 2018 are now randomly recorded by this mate as follows:

1.) According to a April 22-24, 2018 Fox News poll of 1,014 randomly chosen registered voters nationwide:  Two-thirds said it is at least “somewhat important” that Mueller’s Russia investigation continues, and “56 percent think it’s likely the special council’s probe will find that Donald Trump committed criminal or impeachable offenses”.

2.)  A recent Quinnipiac poll found that 70% of Democratic voters would like to see impeachment hearings begin if Democrats regain control of the House and Senate.

3.) At a rally in Washington Township, Michigan on Saturday, April 28^th, Trump claimed Republicans will retain the House and Senate in the 2018 midterm elections because of the economy:

‘Jobs are booming and confidence is soaring. All over the world, they’re talking about this success,’ the president crowed.

Since Trump took office, the U.S. economy has added 2.7 million jobs — an average of 181,000 per month — while growth was fastest in counties that gave Trump the most votes, according to a Washington Post analysis of U.S. Labor Department data.

 4.) According to Kiplinger:  Interest rates will continue rising due to “government deficits and an expanding economy with slightly higher inflation”. This means, although the Fed raised rates only once during Obama’s presidency, they have raised rates five times so far since Trump’s election and with two more increases anticipated in June and December of 2018; plus three to four more hikes expected in 2019. If all those occur, then rates will be raised 10-11 times in the 38 months between Trump’s 2016 election win and the start of 2020.

5.) At an engagement over the weekend attended by my family and friends –  I spoke with several Republican voters and NOT ONE had heard of the April 2018 criminal referrals by Congress to the Justice Department and FBI. In fact, when I informed them of the referrals which included James Comey, Hillary Clinton, Andrew McCabe, and others, most thought I was joking; while one politically conservative relative simply told me he was sick of Trump’s twittering.

6.) On April 12, 2018 – James Mattis, the US Secretary of Defense, admitted there was no evidence of the recent chemical attack in Syria; and the lack of proof was also reported to have been confirmed by the Organization for the Prohibition of Chemical Weapons (OPCW) last week. It looks like Trump may have bombed Syria for nothing, but it’s okay because Americans don’t really care.

7.) At Saturday’s debauched, even x-rated, White House Correspondents’ Association dinner –  hatred, misogyny, and hypocrisy were celebrated even though some CNN reporters in attendance later said it was uncomfortable, cringeworthy, and harsh. Of course, no one expressed outrage DURING comedian Michelle Wolf’s disastrously devious and disrespectful diatribe. Not even one heckler. Not one.

8.) The Political Left is comprised of bona fide racists who, last week, called rap star, Kanye West, and conservative commenter, Candace Owens, “Uncle Tom, Coon, Uncle Ruckus, and other insults”. Moreover, it is now in vogue for comedians like Stephen Colbert to broadcast fried chicken and crazy negro jokes.

9.) In April, the U.S. Department of Justice continued to cover-up the corruption of the same intelligence agencies that Senator Chuck Schumer once claimed had “six ways from Sunday” at “getting back” at Trump. The collusion of the intelligence agencies against a constitutionally elected president is now a matter of public record and the legal double standards have been exposed for all to see. It appears the Justice Department’s latest strategies are to stall, or comprehensively redact, the release of documents and to ignore deadlines imposed by Congress in the hopes of a Blue Wave this fall carrying, and burying, all of their dirt back into the swamp.

10.) The unprecedented and disgraceful April 9, 2018 raid  of a lawyer currently representing the sitting President of the United States, proves that both the constitution, and attorney client privilege, are now dead in America. It is, perhaps, fitting the raid was the result of a referral from Robert Mueller’s likely illegal special counsel investigation.

11.) Trump’s allies are drowning in legal fees, his pick to lead Veteran’s affairs was forced to withdraw from the nomination process, and his immigration policies remain overturned by federal judges.

12.) The head coordinator for an illegal migrant caravan that is now attempting to invade the U.S. southern border, is originally from Mexico and remains a permanent resident of Minnesota. If the caravan was legitimately seeking political asylum, they would have remained safe within Mexico’s borders; yet they all kept marching north. That means any claims of asylum were always a farce and, although Attorney General Jeff Sessions has called the caravan “a deliberate attempt to undermine our laws and overwhelm our system”, none of its organizers here in America appear to be in any legal jeopardy at this time.

13.) Congressman Mo Brooks (R-AL) has recently stated that many of the Republicans who have announced their retirement from Congress in 2018, did so for fear of being assassinated by crazed, gun-toting leftists.

Indeed. Transitions are markers to what will pass as our voyage traverses the ocean of time from history to revelations unknown. So stay awake, keep your eyes on the horizon, your hands steady at the helm, and, look for true north to guide some, but not all. Most importantly, keep your life preservers near and dear.

Up and down, round and round it goes; how it ends, we just don’t know. Either the storm will pass or the ship will sink. All aboard and bottoms up. Anchors away.

It’s May.

Leading Investor: The Next Financial Downturn Will Be Caused By Corporate Debt

The last recession in 2008 was spurred by excessive debt in the private sector, mostly in the housing market.  But this time, it’ll be worst and much more difficult, as the problem will be caused by corporate debt, according to several leading investors.

The ensuing downturn could be immediate and sharp, once the bull market ends. But some, such as Peter Schiff, already believe we are in a bear market. “Stocks are expensive. The bull market is over. It’s now a bear market. People want to get out. People are allocating out. Growth is slowing whether people want to acknowledge it or not,” said Schiff.

But others still think they have yet to hit the top. “Once we peak, our work shows that we should expect maybe a 40% decline in equities from their peak,” Scott Minerd, chairman of Guggenheim Investments, told Yahoo Finance. “I’m talking about a recession, possibly in early 2020. Stocks tend to do well two years before a recession. But in this rally, it’s the opportunity to sell.”

At the Milken Institute Global Conference in Los Angeles, the world’s top investors are asking how much longer the good times can last. They claim the current bull-market rally began in 2009, making it one of the longest on record. But others, such as Peter Schiff, said it’s a false recovery because of the money printing scheme employed.

“When we do all that [print money to recover from a recession], the dollar is going to implode because everybody is going to know that the [money printing scheme] experiment failed. Everybody is going to know there is no way out of this box. There is no normalization of rates. That is ever going to happen. Their [The Federal Reserve’s] balance sheet is never going to shrink. The balance sheet is going to grow permanently, which means this banana republic debt monetization. They can no longer pretend that they’re not doing the same things as South American banana republics. It’s a pure ‘we just print money to finance government spending,’ which is going to explode,” said Schiff. –SHTFPlan

The good news, if there is any to be had, is that the tax cuts President Donald Trump signed in 2017 could juice markets a bit longer by leaving more money in American’s pockets. But some investors gathered at the Milken Conference also feel that the corporate forces are now swirling that will trigger the next downturn.

Because the tax cuts didn’t offer a decrease in the size of government, they will add to US government debt. Spending, not taxation, is the problem and will be until the government is reduced. And while the Federal Reserve is gradually raising interest rates, they may still not be high enough to allow for aggressive monetary policy by the time a recession hits and the Fed needs to cut interest rates. “We’re in danger of having a collision between monetary policy and fiscal policy,” Minerd says.  Once interest rates rise, the amount owed on the massive amount of debt corporations hold will increase along with the debt owed by the federal government.

We are in for a rough ride, everyone.

If Minerd is right, some of the riskiest investments include high-yield bonds, other fixed-income securities, and eventually stocks. But some investors will undoubtedly hold on, hoping to squeeze out the last gains before the market turns.

Yahoo‘s suggestion? Keep a parachute handy. But we prefer you actually prepare and store things that are of use. Prepping can be difficult and it’s often hard to take that first step, but if you’re new and interested in learning, it’s never too late to start preparing for any potential outcome.  The book titled The Prepper’s Blueprint offers a simplistic and easy to follow guideline for those who would like to take that first step.

Peter Schiff: ‘The Fed Is Like Mr. Magoo! We Are Headed For A Massive Financial Crisis’

Peter Schiff has been saying that even though the stock market is on a slow downward slide, the biggest problem is actually in the bond market. Last week, Schiff warned us to be wary of the calm before the storm, and this week, he said most, including the Federal Reserve, are oblivious to the upcoming crash.

Yields have risen to levels not seen since before the 2008 crash. More significantly, the yield curve is flattening, according to Schiff. 

According to Seeking Alpha, Schiff pointed out, if you go back to the Second World War and look at average bond yields, these low rates are an aberration. They’ve been low for a long time, but they aren’t going to stay low forever. And yet the market seems to think it’s going to go on for another 30 years.

“Clearly, the market assumes that interest rates on 10-year government bonds are going to stay just barely over 3% for the next 20 or 30 years. I mean, that is crazy. Why would anybody think that?”

Just consider the deficits as well. The federal government is running $100 billion per month budget deficits – and this is during a supposed economic expansion. What’s going to happen when we hit a recession? And of course, rising interest rates just compound the problem. As Treasuries come due, the government has to replace them with higher interest rate bonds. This expands the deficit even further.

Also compounding the problem is the money printing scheme the Federal Reserve has taken to.  Why in the world would any rational person assume inflation will remain low?

We also have interest rates at around 3% and there is already some handwringing and nervousness. But as Peter said, they could easily blow through four or even 5%. The Fed keeps saying it plans to reduce its balance sheet, but it hasn’t sold very many bonds to date. What happens if they follow through with tightening plans and start dumping bonds on the market?

If [the Fed] continues to stay on this path, or at least the rhetoric is on this path, rates could blow through 3% like a hot knife through butter.”

Schiff then discussed Minneapolis Fed President Neel Kashkari, who said they [the elite globalists that run the Federal Reserve] can’t find any signs of an impending crisis. He said there are no warning signs at all.

“Well, of course, that’s exactly what they said in 2007 and 2008. In fact, even when there was the mother of all warning signs – the crash of the subprime market – the Fed looked at that and said, ‘That’s nothing. It’s contained.’ We’re not worried about that.’ So the Fed has already proved when it comes to warning signs and seeing them in advance, they’re like Mr. Magoo. They have no idea what’s going on. And in fact, just like Mr. Magoo, they create all kinds of havoc all around them as they blindly move through the economy having no idea what’s going on, and there’s just all kinds of carnage.We are headed for a massive financial crisis.”

Schiff has yet to change his mind: we are headed for some major problems in the economy and most are unaware and unprepared.

Doug Duncan: Even US Government Economists Predict Trouble Ahead

This report was originally published by Adam Taggart at PeakProsperity.com

Doug Duncan is not your average beltway economist.

The chief economist for Fannie Mae is surprisingly outspoken about the troublesome outlook for the US economy. He’s worried about the rising cost of debt service as outstanding credit continues to mount at the same time interest rates are starting to ratchet higher, too.

He predicts the US will enter recession within a year, concurrent with a topping out of America’s real estate market. It wouldn’t surprise him to see the stock market falter, too, as central banks around the world begin a coordinated tightening of monetary policy and — similar to the thoughts recently expressed within our podcast with Axel Merk — Doug expects Jerome Powell to be much more reluctant to intervene in attempt to support asset prices. Having met personally with Powell, Doug thinks the Fed is now happy to see some of the air come out of the Everything Bubble (just not too much and not too fast) — a market change from past Fed administrations:

Our forecast definitely sees slowing economic activity, particularly in the second half of ’19. Part of it has to do with the length of the expansion. Just because an expansion is long doesn’t mean it’s going to end; but they all have eventually ended, and this one is getting pretty old. I think if it’s not the second longest, it’s getting to be the second longest that we’ve ever had shortly.

The tax bill was viewed differently by different parties, but the capital markets initially took that — plus the $300 billion agreement to get past the expiration of government funding plus the budget agreement — they took all those things as inflationary. The tax bill itself has a lot of temporary provisions – some of them don’t expire for up to seven years – but some start expiring as soon as three years out. Like, on occasions, take actions today which they see having benefits up until that time of the expiration of those terms, plus the spending component – the $300 billion – also will likely take place in the next four quarters. That suggests that the second half of ’19 we may well see the impulse from those things starting to fade. And that will be happening at the same time as the Fed, if it does what it says its going to do, will be continuing its tightening(…)

So,what keeps me up at night? Well, I don’t like the idea that we have a debt to GDP ratio of 100 percent. I don’t think we’re Japan because we have a more entrepreneurial economy, not a mercantilist economy, but that doesn’t mean that debt doesn’t reduce your flexibility. It definitely reduces your flexibility, so it raises risks from that perspective.

The trade negotiations, obviously, are of a concern. Milton Freeman said a good free trade agreement can be written on one page. NAFTA was two thousand pages. It would be silly to suggest Trump doesn’t have a point that there’s not something in that two thousand pages that didn’t work against American interests. On the other hand, if you’re going to throw $150 billion of tariffs at the second largest economy in the world, you should expect a reaction. Those who read the history books and the Smoot Hawley tariffs and the Depression and have some understanding of the relationship between the two of those have to be a bit nervous. The Fed, I’m sure, is looking at that.

And the domestic economy, the thing that probably troubles me more than anything else is the decline in new business formation. It’s been underway for thirty years. I’ve got staff that are working just trying to understand that. There’s a couple reasons why I worry about that. I just make a comment about ours being an entrepreneurial economy which means it is ‘dynamic’ – people don’t care if the average income is higher than theirs if theirs is the median. If they expect that there’s an opportunity for them to grow and gain one of those high incomes, then they’re OK. But if they lose that hope, that leads us to some different possible political economy outcomes which I don’t view as particularly optimal.

But from a self-interested perspective — remember that we’re in the housing and new business formation space – it used to be the case that a when small business would start, it couldn’t afford to pay the same wage rate as a large business did because it didn’t have the scale or the output or that kind of thing. But what the worker who got the lower wage job also got was training on how to get to work on time, how to work a full day. They would pick up some skills and some behaviors that worked broadly in the employment market. Over time they would move up, and most of them would eventually get to the middle class and buy a house. That’s breaking down.

If that engine of growth for people has been cut off, then we could be facing a permanent underclass which carries a whole different set of connotations for a society which, to me, is pretty troubling.

Click the play button below to listen to Chris’ interview with Doug Duncan (45m:19s).

To read the transcript of this podcast, please click here.

Peter Schiff: We Are In A Bear Market, All News Is Bad News

After rallying on Friday, stocks tanked on Monday, dropping over 450 points. In fact, it was the worst first day of the second quarter since the Great Depression.

Stocks dove Wednesday as well on the heels of China’s announcement that they will intensify the trade war with more tariffs, according to most analysts.  But Peter Schiff, the financial guru who accurately predicted the 2008 recession has a different take.

According to Schiff’s blog, Schiff Gold, most analysts blamed the plunge on the escalating trade war, but Peter Schiff sees it quite a bit differently. He said it was just another bad day in a bear market. In fact, he said the market could have rallied because the Chinese response wasn’t as bad as it could have been. But when you’re in a bear market, all news is bad news.

Schiff says that the media’s talking heads are simply using the tariffs as an excuse. The real truth is that most people are in a selling mood. “Stocks are expensive. The bull market is over. It’s now a bear market. People want to get out. People are allocating out. Growth is slowing whether people want to acknowledge it or not,” said Schiff.

The media pundits are optimistic too; just like they were before the 2008 recession, said Schiff. “That’s what’s going on now. Nobody thinks there’s a problem. Everybody is optimistic. Everybody is bullish. So, when you see these classic signs that something is going wrong, you just ignore it.”

The bottom line is Schiff thinks the economy is going to tank (although he isn’t sure how soon that will occur) and the stock market is going to continue its bear run. But the Fed is not going to be able to come to the rescue this time around because of inflation. If it does try to launch more QE to bail out the stock market, it will completely tank the dollar.

When we do all that, the dollar is going to implode because everybody is going to know that the experiment failed. Everybody is going to know there is no way out of this box. There is no normalization of rates that is ever going to happen. Their balance sheet is never going to shrink. The balance sheet is going to grow permanently, which means this banana republic debt monetization. They can no longer pretend that they’re not doing the same things as South American banana republics. It’s a pure ‘we just print money to finance government spending,’ which is going to explode.

The national debt is an often overlooked aspect of the economy, but in truth, it will play a big role in an economic collapse and Schiff is sounding the alarms.

The Real Reason Why Stock Markets Will Continue To Crumble This Year

This report was originally published by Brandon Smith at Alt-Market.com

Public sentiment on the economy is generally influenced by to two false indicators — the national unemployment rate and stock markets. This is not to say the average person tracks either of these numbers very vigorously; they don’t. What they do is hear these numbers on the morning news, the radio news on their way to work (if they are employed) or they hear them on the evening news just before bed. If the jobless rate is low and the Dow is high, then all is right with the world, at least financially.

When it comes to the economy, most people are lost.

The average American, in particular, is not as oblivious to the world of political and social discourse as they are on economics. Whether on the left or the right of the political spectrum, most citizens know that lines are being drawn and ideological battles are accelerating into realms of the extreme. Conservatives and the liberty activists that stand at the front line of the culture war understand quite well the threat of globalism and the “philosopher king” elitism of international financiers. They know that these criminals must eventually be dealt with if freedom and stability are to return to the world.

There is a rather common disinformation tactic used to manipulate people within conservative circles that has made a resurgence lately in the wake of the Trump election win. It is the idea that Americans within the “working class” aren’t interested in “high-minded” debates over philosophical conflicts, such as the conflicts between individualism versus collectivism and globalism. There is also the notion that “real” Americans could not care less about the elitist culprits behind the political theater of the false left/right paradigm.

This attitude is presented as a superior one. That is to say, disinformation agents play to people’s egos, suggesting that the working class should be focused on putting food on the table and money in their wallets and that the rest of this “intellectual nonsense” should be ignored as frivolous.

I have seen this working-class cultism before. When I lived in Pittsburgh for a time, there were many people who adopted the image of the steel mining working man, even though steel mining was almost non-existent in the region. People were extremely proud of the idea that they came from a tradition of industrial production, and technical and intellectual pursuits were predominantly ignored in the hopes of perpetuating the mining town mystic. The problem was, all of these folks were wage slaves now in the midst of Pittsburgh’s garbage economy. There were too many people scrambling for too few low wage jobs and production was a thing of the distant past.

And they were supposed to be proud of this?

The working class hero meme is nonsense. It is not a real thing; not anymore. It is something that appeals to many of us conservatives in particular, and it is a subject that politicians use to lure us with a pied piper song of reconstruction and reformation promises that they never intend to keep.

And, the idea that working Americans struggling to survive “do not care” about the bigger picture is a lie, perpetuated by disinformation peddlers trying to appeal to any misplaced sense of superiority. They want us all not only to remain ignorant, but to be prideful of that ignorance. They want us to look down our noses at anyone offering in-depth insight into why the world is becoming a harder place to live. In fact, they want us to revel in the struggle; to revel in self-flagellation and sing songs of how good we are at suffering and barely scraping by.

I mention this within an economic article because I do not see this disinformation tactic being successful, at least not yet. What I do see are millions upon millions of Americans who want answers, and many of them are well aware that the root of the problems they face today comes from globalism and globalists. All that is left is for them to understand the causes of the economic disasters they will soon face, so that they can prepare more effectively to counter them and change their own fates for the better.

The working man is smart enough to care about the bigger picture. So, with that in mind…

If you have not been tracking economic activity for the past several years then the frenetic movements of markets recently might have you a bit confused. I’ll summarize the “great stock market recovery” that many people have grown accustomed to in a single quote from former president of the Federal Reserve Bank of Dallas:

“What the Fed did — and I was part of that group — is we front-loaded a tremendous market rally, starting in 2009.

It’s sort of what I call the ‘reverse Whimpy factor’ — give me two hamburgers today for one tomorrow.”

Fisher went on to hint at his very reserved view of the impending danger:

“I was warning my colleagues, Don’t go wobbly if we have a 10 to 20 percent correction at some point… Everybody you talk to… has been warning that these markets are heavily priced.” [In reference to interest rate hikes]

I want to break down the situation in the clearest terms possible so that there are no misconceptions here. The bottom line is this — the Federal Reserve through monetary stimulus packages and near zero interest rates engineered an artificial economic recovery from thin air. But, just as they print money from thin air, everything the central banks create has fleeting value and will eventually crumble.

The Fed not only pumped trillions of fiat dollars into banks and corporations, they also purchased over $4 trillion (officially) in various assets. These purchases coincided with interest rates so low that loans through the Fed were essentially free for corporate borrowers. But what did corporations do with these loans?

Well, they poured that cash into their OWN stocks, of course. They did this through something called “stock buybacks” which is basically a legal form of stock market manipulation. Companies purchase their own stocks and reduce the number of stocks circulating on the market, thereby elevating the value of the remaining stocks and pushing the Dow to new highs every year… until this year, that is.

The Fed’s control of stock market prices is made perfectly clear in this chart, which shows the S&P 500 rising in exact tandem with the Fed’s balance sheet purchases:

As I continually warned before the Fed pushed forward with balance sheet reductions, if stocks rallied in close relation to the rising balance sheet, then it only follows that stocks will crash as the balance sheet falls.  It appears as though this is exactly what is now happening.

You see, there is a problem with this model of economic alchemy. It only lasts so long as the central banks perpetually increase the ability of nations and corporations to take on debt. Ultimately, even central banks do not have the power to facilitate debt forever. They have limitations. That said, they never intended to continue with this farce anyway.

Giving the Federal Reserve the power to dictate the terms of the economic “recovery” also gave them the power to dictate the terms of an economic collapse. And now with Donald Trump in office an economic collapse can be achieved without the central bankers even getting any blame.

Donald Trump’s trade war activities set in motion by numerous tariffs have now provided a convenient cover for the banking elites. I do not believe it is a coincidence that Trump announces new trade measures (or fires an economic adviser) every time the Federal Reserve raises interest rates and cuts its balance sheet.

I also do not believe it is a coincidence that the Dow suffers a 1,200 to 1,500 point loss every time the Fed dumps more assets from its balance sheet. Recognize that the mainstream media barely mentions the Federal Reserve’s rate hikes and balance sheet cuts as being the cause of the renewed instability in stock markets. They blame Trump’s trade war rhetoric as the cause.

Again, I want to make this clear — Trump’s tariffs have little or nothing to do with the falling stock market. What Trump’s tariff theater does do is act as a smokescreen to hide the Fed’s culpability in the crash to come.

I warned of this distraction dynamic in January of this year in my article ‘Party While You Can – Central Bank Ready To Pop The ‘Everything’ Bubble‘.

It is not just the Fed that is pulling the plug on stock market support. Central banks around the globe are tightening policy, raising interest rates and halting purchases of new assets. It is important to remember that the fiscal bull run that the central banks conjured up since the crash of 2008 cannot continue unless the central banks continue to expand debt through purchases and easy credit. They are now doing the reverse.

And if you think the central bankers are somehow ignorant of what they are triggering here, then I suggest you read the new Federal Reserve chairman Jerome Powell’s thoughts in 2012 on the matter. He states unequivocally what will happen if the fed raises interest rates and dumps the balance sheet.

Powell made these comments in 2012, yet in 2018 he is implementing the exact measures he warned about. The Fed is perfectly aware that it engineered a recovery and now it is perfectly aware that it is engineering a calamity, and Powell is as big a part of the banking cabal as Yellen or Bernanke ever were.

A pattern appears to have developed in the past few months in terms of the ongoing decline in stocks. Every time the Fed cuts the balance sheet or raises interest rates stocks plunge by around 1,200-1,500 points within a few days. Then, there is a smaller rebound about a week later, which then fizzles out going into the next month as stocks return to a slower grinding downward trajectory. Then the cycle starts all over again.

New monthly highs are being replaced with new monthly lows as stocks are being steam valved down with each fresh balance sheet cut.

While stocks in the grand scheme of things are generally irrelevant, they still represent a psychological marker for the public. As go stocks, so goes the economic sentiment of the masses. It is an unfortunate thing, but also a true thing.

I expect that as the balance sheet cuts increase in size, it will become more difficult for stock markets to produce meaningful rebounds. Which means the bankers will need even greater distractions from the Trump administration and other political assets to hide the true source of the economic breakdown. A trade war alone will probably not be enough. Some regional wars are likely in the making. As these events unfold, it is vital that as many people as possible are made aware of the real reason and the real criminals behind them. A time of reckoning is required, and a reckoning requires accountability.

The banking elites hope to cause so much confusion and catastrophe that the masses will forget who was truly behind it all. We might not be able to stop the greater crash from taking place, but we can prepare accordingly, and we can educate others so that we can stop the culprits from fading back into the fog.

If you would like to support the publishing of articles like the one you have just read, visit our donations page here. We greatly appreciate your patronage.

You can contact Brandon Smith at: brandon@alt-market.com

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How Will Gold Prices Behave During The Next Economic Crisis?

This report was originally published by Brandon Smith at Alt-Market.com

It is generally well known in economic circles and in the general public that precious metals, including gold, tend to be the go-to investment during times of fiscal uncertainty. There is a good reason for this. Precious metals have foundation qualities that provide trade stability; these include inherent rarity (rather than artificially engineered rarity such as that associated with cryptocurrencies), tangibility (you can hold gold in your hand, and it is relatively difficult to destroy accidentally), and precious metals are easy to trade. Unless you are attempting to make transactions overseas, or in denominations of billions of dollars, precious metals are the most versatile, tangible trading platform in existence.

There are some limitations to metals, but the most commonly parroted criticisms of gold are in most cases incorrect. For example, consider the argument that the limited quantities of gold and silver stifle liquidity and create a trade environment where almost no one has currency to trade because so few people can get their hands on precious metals. This is a naive notion built upon a logical fallacy.

Gold backed paper currencies existed for centuries in tandem with the metals trade. Liquidity was rarely an issue, and when such events did occur, they were short lived. In fact, the last great liquidity crisis occurred in 1914, the same year the Federal Reserve began operations and the same year that WWI started. This crisis was, as always, practically fabricated by central banks around the globe. Benjamin Strong, the head of the New York Fed in 1914 and an agent of the JP Morgan syndicate, had interfered with the normal operations of gold flows into the U.S. and thus sabotaged the natural functions of the gold standard.

Central banks in Germany, France and England also applied influence to disrupt currency and gold flows, causing a global panic. This engineered disruption seemed to take place through conscious co-operation between central banks. Does any of this sound familiar?

For those who are interested, the history of the 1914 liquidity crisis is outlined in detail in the book ‘Lords Of Finance: The Bankers Who Broke The World’, by Liaquat Ahamed.

When gold and currency are tied together, gold prices tend to remain rather stable, as they are often set by the national treasury. In 1914, the price of gold was $20 per ounce and had maintained that approximate value for decades. To give some perspective on value, in 1914 the average house cost $3,500, or 175 ounces of gold.

But what happens when gold and national currencies become disjointed from each other? Take a look at the hyperinflationary crisis in Weimar Germany. The price of gold per ounce went from 170 marks to 87 trillion marks within five years! Over that same five year period, gold value in Germany had increased at almost TWICE the rate of inflation, indicating that gold not only kept up with the devaluing mark, but made anyone holding gold rather rich in the process.

This is a very important fact. The common argument against gold is that the metal is not really a wealth creating investment, but merely protects your buying power. As the Weimar crisis shows, this is not always the case. In some circumstances, often during times of economic disaster, precious metals can in fact generate more wealth than what you put into them.

Then there is the issue of government interference in gold markets and trade during crisis. As the Great Depression in the U.S. began to take hold, investors turned aggressively to gold and silver as a means to offset the crashing values of most other assets. In a highly controversial move in 1933, President Roosevelt outlawed the private ownership of gold bullion and set the price of gold at $35 per ounce.

Keynesian economists like Ben Bernanke often try to assert that the gold standard was the reason why interest rates had to be hiked as the depression was escalating, and that this was the cause of a greater crash. They are only half correct. Increased rates did indeed cause a larger and more prolonged crisis, but this had little to do with the gold standard.

Clearly, in 2008 the U.S. and most of the world was NOT on a gold standard, yet we suffered a very similar collapse in credit and equities as happened in the Great Depression. Also, there is no gold standard forcing the Federal Reserve to raise interest rates today, yet they are doing so despite escalating negative indicators in the real economy.

Whether or not this will cause an even more violent economic catastrophe remains to be seen, but Jerome Powell, the new Fed Chairman himself, warned in 2012 that this is exactly what could happen. Jerome Powell has stated in no uncertain terms that rate hikes will continue under his watch in 2018.

Central banks were the core institutions to blame for the Great Depression, not the gold standard, considering the fact that central banks did NOT follow a true classical gold standard exchange internationally, and instead tried to establish a global basket exchange system of multiple currencies and gold in what they called the “gold exchange standard”.

Add to this the unnecessary interest rate hikes as deflation was pummeling assets, and you have a perfect recipe for calamity. Even Ben Bernanke, in a 2002 speech to honor Milton Friedman, openly admitted that the Fed was the root cause of the prolonged economic carnage during the Great Depression:

“In short, according to Friedman and Schwartz, because of institutional changes and misguided doctrines, the banking panics of the Great Contraction were much more severe and widespread than would have normally occurred during a downturn.

Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”

The use of gold prohibition had mixed results. Obviously, it did not stop the freight train of the Great Depression. In fact it probably exacerbated difficulties in trade and savings. Black markets took over and precious metals were still highly sought after.

As far as the crash of 2008 is concerned (a crash which is still ongoing today), we all know what happened with gold markets. In the lead up to the crash, from 2004 to 2008, gold doubled in value. Then, after the initial crash from 2008 to 2012, it doubled again.

Despite predictions by mainstream economic naysayers, gold has not collapsed back down to pre-crash levels. In fact, gold has remained one of the most effective investment performers for years.

The question is, what happens next? Setting aside gold confiscation as a factor (a factor which I believe would be impossible to enforce in today’s markets), we can see that massive fiat stimulus as a means to artificially support a deflationary fiscal system, as well as central bank intervention in general, leads to collapse and a flight to hard assets like gold. Even with rising interest rates and the potential for a spike in the dollar index, if the rest of the economy is in steep decline, investors and others will still turn towards precious metals.

As I have mentioned in previous articles, the initial reaction of gold prices to faster interest rate hikes may be negative. That said, I do not believe gold will drop as dramatically as mainstream economists expect. Once higher interest rates kill the stock market bubble as well as the renewed housing and credit bubble, gold will skyrocket as one of the only asset classes with tangible real world value.

 

If you would like to support the publishing of articles like the one you have just read, visit our donations page here. We greatly appreciate your patronage.

You can contact Brandon Smith at: brandon@alt-market.com

After 8 long years of ultra-loose monetary policy from the Federal Reserve, it’s no secret that inflation is primed to soar. If your IRA or 401(k) is exposed to this threat, it’s critical to act now! That’s why thousands of Americans are moving their retirement into a Gold IRA. Learn how you can too with a free info kit on gold from Birch Gold Group. It reveals the little-known IRS Tax Law to move your IRA or 401(k) into gold. Click here to get your free Info Kit on Gold.

Market Analyst: ‘The Fed Has Lost Control Of Markets! We Are In A Lot Of Trouble!’

Gregory Mannarino, the founder of TradersChoice.net joined USA Watchdog’s Greg Hunter for an interview.  While speaking with Hunter, Mannarino said that the Federal Reserve isn’t losing control of the market, it has already lost control and we are in some very serious financial trouble.

Mannarino said the markets are out of control and it’s the Fed’s fault.  Not that we didn’t know that, but the whole economy is unraveling and not many seem to have noticed.  Mannarino, who is a professional trader says the new Fed Head, Jerome Powell, caused the market to sell off last week, not president Donald Trump’s tariff talk. Powell blurted out in Congressional testimony that the “U.S. is not on a sustainable fiscal path.” 

“They have already lost control. If they were in control, would they still be buying bonds like they are? Would they still be trying to ‘get it right’? They cannot unwind this in a normal way. They have created a system of bubbles, and they are well aware of this. These things tend to collapse very violently when they do. If the Federal Reserve or any of these central banks were in control, do you think we would be in the situation we are in right now? Absolutely not. All they have done is liquefy the world with debt and buy everything they can to keep this propped up. This is not control. This is some kind of a Frankenstein they have created by trying to prop everything up.”

“The stock market is in a bubble that is being suspended on the back of the debt bubble. So when the debt bubble pops, every other subsequent bubble connected to it is gonna burst along with it…forget the stock market…it’s the bond market that tells the story,” Mannarino warns.

Mannarino says that the whole system is fake, and he and Hunter say it’s definitely possible that central banks are giving each other money to buy their own bonds.  If that’s happening, and many market analysts firmly believe that it is then the Fed is in desperation mode.

“This [the markets] is a corpse here, that’s on life support. And that’s all it is. So, there’s going to be a terrible moment or reckoning. Inflation? Forget about it. Of course, there’s going to be massive inflation. They can’t stop it…we’re in a lot of trouble here…let’s say we start getting surreal inflation, and they’re going to start hiking super fast.  Well, what’s that going to do? BAM! There goes your debt bubble and then we’re done. Back to the stone age. Stock market down 6,000 will probably seem like a dream come true because it might even go lower than that.”

“People are going to lose everything; worse than last time if they’re not ready for what’s coming. That means watching the bond market….there’s gonna be an unbelievable price to pay for this at some point.”

Ron Paul: ‘The Fed Is At A Crossroads…Crisis Is Coming’

The Fed has created a mountain of problems for everyone in the United States and every single solution that they come up with leads to even more problems. Ron Paul recently discussed what the Fed has done, how it tries to keep things going, and the inevitable economic crisis that is coming.

Ron Paul has been one of the few steadfast proponents of liberty, which is likely why he’s no longer associated with the government at all. In a recent video, Paul discussed the problems the Federal Reserve created and why their solutions will generate an economic crisis of epic proportions.

“They [The Fed] have a lot of power, but their main goal is to do central economic planning which always fails. It’s also a gimmick because they have meetings, they are supposed to have eight a year, and then there’s a big announcement…they come out and they make a statement and the chairman is interviewed, and then, later on, you get the minutes. It’s big fanfare. But I see it as mostly propaganda, just carrying a message. Getting it from the people who really run things, the deep state, and they get it out there. But it does have a lot of effect on the market. I actually believe that there are some people who know how fictitious the Fed really is and how inept it is, but still watch it because they know a lot of other people are going to pay attention…the deep state is not a part of the government, but they have a lot of influence.”

Paul went on to explain that often we are told it’s not right to criticize the Fed. But that will change.

“The next downturn, which I think will come soon, the Fed’s not going to get credit for getting us out of it. They didn’t get any credit for getting us out this last recession which we’re really, in many ways, still in…times are different. But times are getting much worse now. This next downturn is going to be a serious one and the Fed doesn’t have any magic whatsoever…central economic planning never works no matter how long they get away with it.”

And something we’ve heard from top financial experts such as Peter Schiff, Paul also says there’s a trend to ditch the dollar, which will lead to its collapse.

“I think it [the dollar value] is going to continue to erode on international exchange markets and this will hurt us because that’s also the reason that we see interest rates going up,” Paul says. “Peter Schiff is right,” Paul continued. This whole house of cards will come crashing down as interest rates rise.

New Fed Chairman Will Trigger A Historic Stock Market Crash In 2018

This report was originally published by Brandon Smith at Alt-Market.com

Ever since the credit and equities crash of 2008, Americans have been bombarded relentlessly with the narrative that our economy is “in recovery”. For some people, simply hearing this ad nauseam is enough to stave off any concerns they may have for the economy. For some of us, however, it’s just not enough. We need concrete data that actually supports the notion, and for years, we have seen none.

In fact, we have heard from officials at the Federal Reserve that the exact opposite is true. They have admitted that the so-called recovery has been fiat driven, and that there is a danger that when the Fed finally stops artificially propping up the economy with constant stimulus and near zero interest rates, the whole farce might come tumbling down.

For example, Richard Fisher, former head of the Dallas Federal Reserve, admitted a few years ago that the U.S. central bank has made its business the manipulation of the stock market to the upside:

What the Fed did — and I was part of that group — is we front-loaded a tremendous market rally, starting in 2009.

It’s sort of what I call the “reverse Whimpy factor” — give me two hamburgers today for one tomorrow.

I’m not surprised that almost every index you can look at … was down significantly.

Fisher went on to hint at the impending danger (though his predicted drop is overly conservative in my view), saying, “I was warning my colleagues, don’t go wobbly if we have a 10-20% correction at some point…. Everybody you talk to … has been warning that these markets are heavily priced.”

One might claim that this is simply one Fed member’s point of view. But it was recently revealed that in 2012, Jerome Powell made the same point in a Fed meeting, the minutes of which have only just now been released (emphasis ours).

I have concerns about more purchases. As others have pointed out, the dealer community is now assuming close to a $4 trillion balance sheet and purchases through the first quarter of 2014. I admit that is a much stronger reaction than I anticipated, and I am uncomfortable with it for a couple of reasons.

First, the question, why stop at $4 trillion? The market in most cases will cheer us for doing more. It will never be enough for the market. Our models will always tell us that we are helping the economy, and I will probably always feel that those benefits are overestimated. And we will be able to tell ourselves that market function is not impaired and that inflation expectations are under control. What is to stop us, other than much faster economic growth, which it is probably not in our power to produce?

When it is time for us to sell, or even to stop buying, the response could be quite strong; there is every reason to expect a strong response. So there are a couple of ways to look at it. It is about $1.2 trillion in sales; you take 60 months, you get about $20 billion a month. That is a very doable thing, it sounds like, in a market where the norm by the middle of next year is $80 billion a month. Another way to look at it, though, is that it’s not so much the sale, the duration; it’s also unloading our short volatility position.

Keep in mind, that Jerome Powell is now the CHAIRMAN of the Federal Reserve. In 2012, he was well aware of the exact effects that the removal of stimulus (which includes low interest rates) would have on the false recovery in stock markets. He continues…

My third concern — and others have touched on it as well — is the problems of exiting from a near $4 trillion balance sheet. We’ve got a set of principles from June 2011 and have done some work since then, but it just seems to me that we seem to be way too confident that exit can be managed smoothly. Markets can be much more dynamic than we appear to think.

When you turn and say to the market, “I’ve got $1.2 trillion of these things,” it’s not just $20 billion a month — it’s the sight of the whole thing coming. And I think there is a pretty good chance that you could have quite a dynamic response in the market.

I think we are actually at a point of encouraging risk-taking, and that should give us pause.

Investors really do understand now that we will be there to prevent serious losses. It is not that it is easy for them to make money but that they have every incentive to take more risk, and they are doing so. Meanwhile, we look like we are blowing a fixed-income duration bubble right across the credit spectrum that will result in big losses when rates come up down the road. You can almost say that that is our strategy.

If Powell was fully conscious in 2012 of what would happen in markets due to the Fed’s balance sheet reductions, the question is, will he be honest about it now? My suspicion is that he will not, given that his very first interaction with the American public after becoming head of the Fed was to regurgitate the same nonsensical talking points that we heard from Janet Yellen for years. The mainstream media is desperately attempting to suggest that Powell may “surprise investors” with a change in rate hike policies and the reduction of balance sheet, but so far the markets are not buying this.

Powell’s first day as Chairman was greeted with the sharpest drop in U.S. equities in years. Yellen’s parting gift to investors in January was an $18 billion reduction in the Fed balance sheet, $6 billion more than the Fed originally claimed would occur. It is clear to me that just as stocks climbed in direct correlation to the Fed balance sheet, so too will they fall in direct correlation to the Fed balance sheet. Only a week after the balance sheet was cut more than expected, stocks fell by nearly 10%.

So, the question now is, will Powell continue this trend of rate hikes and balance sheet reductions, being that he is recorded as knowing what the results will be? I believe that this is exactly what he will do. Why? Because the Fed’s goal is the deliberate controlled demolition not only of U.S. markets but also U.S. debt instruments and the dollar.

If I am wrong, then Powell, knowing the threat, will reverse rate hike policies and stop dumping the balance sheet in an effort to prop up the system. If I am right, then we will see Powell continue these policies over the course of 2018 and allow the system to implode.

How will this influence the price of gold? Well, in the near term we could see a measured decline or a stagnant metals market as we have seen so far this month. That said, when the real equities crisis kicks in, expect metals to skyrocket as investors rush to safety. The psychology of the markets will come into play far more than fundamentals for a time. One must account for willful ignorance and how long it can be maintained before facts take over.

There are a few major factors that come into play in terms of interest rate hikes and the balance sheet, including the fact that corporate debt is now at levels far beyond that held just before the crash of 2008. We are also witnessing the highest consumer debt levels in history, while personal savings have plunged.

Treasury yields are also spiking to 10 year highs, decoupling from stocks and suggesting that balance sheet reductions might be contributing to a flight from equities.

Stock buybacks, fueled by low interest rates, have helped pump up stocks for years. However, most companies are prohibited from buybacks right before they report their earnings. Without buybacks this past week, we have seen what happens – complete market mayhem. If this is what takes place in a month of reduced buybacks, what will happen when interest rates are raised high enough to make borrowing capital from the Fed prohibitive (ie, too expensive)?

What does all this translate into? The reality that there is NO MECHANISM within our economy that is buoyant enough to keep markets afloat when the Fed backs away. Nearly everyone is in massive debt, there is no one left to buy at the level needed except the Fed.

We are only standing at the beginning of this apparent new trend in equities, but it will be interesting to see what the reaction will be within the system as the Fed continues hiking rates and reducing the balance sheet. Will the beginning of every month in 2018 be met with a brand new storm of selling and panic? It’s hard to say. However, the math certainly does not support a bull market through the rest of this year.

In the meantime, it is likely that blind faith in positive returns will spark intermittent buying events in the short term, and unaware investors (and algorithms) will see this as vindication that buying will always be the answer. But, these buying events so far seem to be met with even more severe downturns. It will not take very many Fed meetings to discern whether or not the central bank will continue to back up stocks. To me, it appears that the decision to pull the plug has already been made.

***

If you would like to support the publishing of articles like the one you have just read, visit our donations page here. We greatly appreciate your patronage.

You can contact Brandon Smith at: brandon@alt-market.com

After 8 long years of ultra-loose monetary policy from the Federal Reserve, it’s no secret that inflation is primed to soar. If your IRA or 401(k) is exposed to this threat, it’s critical to act now! That’s why thousands of Americans are moving their retirement into a Gold IRA. Learn how you can too with a free info kit on gold from Birch Gold Group. It reveals the little-known IRS Tax Law to move your IRA or 401(k) into gold. Click here to get your free Info Kit on Gold.

Central Banks Will Let The Next Crash Happen

This report was originally published by Brandon Smith at Alt-Market.com

If you have been following the public commentary from central banks around the world the past few months, you know that there has been a considerable change in tone compared to the last several years.

For example, officials at the European Central Bank are hinting at a taper of stimulus measures by September of this year and some EU economists are expecting a rate hike by December. The Bank of England has already started its own rate hike program and has warned of more hikes to come in the near term. The Bank of Canada is continuing with interest rate hikes and signaled more to come over the course of this year. The Bank of Japan has been cutting bond purchases, launching rumors that governor Haruhiko Kuroda will oversee the long overdue taper of Japan’s seemingly endless stimulus measures, which have now amounted to an official balance sheet of around $5 trillion.

This global trend of “fiscal tightening” is yet another piece of evidence indicating that central banks are NOT governed independently from one another, but that they act in concert with each other based on the same marching orders. That said, none of the trend reversals in other central banks compares to the vast shift in policy direction shown by the Federal Reserve.

First came the taper of QE, which almost no one thought would happen. Then came the interest rate hikes, which most analysts both mainstream and alternative said were impossible, and now the Fed is also unwinding its balance sheet of around $4 trillion, and it is unwinding faster than anyone expected.

Now, mainstream economists will say a number of things on this issue — they will point out that many investors simply do not believe the Fed will follow through with this tightening program. They will also say that even if the Fed does continue cutting off the easy money to banks and corporations, there is no doubt that the central bank will intervene in markets once again if the effects are negative.  I would say that this is rather delusional thinking based on a dangerous assumption; the assumption that the Fed wants to save markets.

When mainstream economists argue that the Federal Reserve could conceivably keep low interest rates and stimulus going for decades if necessary, they often use the example of the Bank of Japan as some kind of qualifier. Of course, what they fail to mention is that yes, the BOJ has spent decades increasing its balance sheet which now sits at around $4.7 trillion (U.S.), but the Fed exploded its balance sheet to around $4.5 trillion in only eight years. That is to say, the Fed inflated a bubble as large if not larger than the Bank of Japan in less than half the time.

Frankly, the comparison is idiotic. And clearly according to their own admissions, the Fed is not going to be continuing stimulus measures anyway. People cling to this fantasy because they WANT to believe that the easy money party will never end. They are sorely mistaken.

I have been battling this delusion for quite some time. When I predicted that the Fed would taper QE, I received a predominantly negative reaction. The same thing occurred when I predicted the Fed would begin hiking interest rates. Now, I’m finding it rather difficult to break through the narrative that the Fed will intervene before the next crash takes place.

There is something so intoxicating about the notion that central banks will stop at nothing to prop up stock markets and bond markets. It generates an almost crazed cult-like fervor in the investment world; a psychedelic high that makes financial participants think they can fly. Of course, what has really happened is that these people have jumped off the roof of their overpriced condo; they think they are flying but they are really falling like a brick weighted down with stupidity.

Former Fed chairman Janet Yellen upon exiting her position stated:

“If stock prices or asset prices more generally were to fall, what would that mean for the economy as a whole?”

“I think our overall judgment is that, if there were to be a decline in asset valuations, it would not damage unduly the core of our financial system.”

Yellen also said when asked about high stock prices:

“Well, I don’t want to say too high. But I do want to say high. Price/earnings ratios are near the high end of their historical ranges…”

“Now, is that a bubble or is too high? And there it’s very hard to tell. But it is a source of some concern that asset valuations are so high.”

Since the middle of last year, the Fed has been calling the stock market overpriced and “vulnerable.” This rhetoric has only become bolder over the past several months. Dallas Fed president Robert Kaplan dismissed concerns over the affect rate hikes might have on markets and hinted at the potential for MORE than the three hikes planned for 2018. The Dow fell 666 points that same day.

New York Fed’s Bill Dudley shrugged off concerns over recent volatility, saying that an equity rout like the one that occurred in recent days “has virtually no consequence for the economic outlook.”

Jerome Powell, the new Fed chairman, has said while taking the chair position that he will continue with the current Fed policy of rate hikes and balance sheet reductions, and reiterated his support for more rate hikes this past week (while the mainstream media hyperfocused on his lip service promise to watch stock behavior closely). This indicates once again that it does not matter who is at the wheel of the Fed, its course has already been set, and the Chairman is simply there to act as the ship’s parrot mascot. The Fed is expected to raise interest rates yet again in March.

Now, all the evidence including the Fed’s surprise balance sheet reduction of $18 billion in January shows that at least for now, the central bank no longer cares about stocks and bonds.

In the meantime, 10 year Treasury Yields are spiking to the ever present danger level of 3% after a hotter than expected inflation report, and the dollar index is plunging. Showing us perhaps the first signs of a potential stagflationary crisis. Bottom line – markets are not long for this world if yields pass 3% and the falling dollar provides yet another excuse for faster interest rate hikes. More rate hikes means eventually cheap loans will become expensive loans.

My question is, if the Fed is not going to feed cheap fiat into banks and corporations to fuel stock buybacks, then WHO is going to buy equities now?

What about corporations? Nope, not going to happen. With corporate debt skyrocketing to levels far beyond that seen just before the 2008 crash, there is no chance that they will be able to sustain stock buybacks without aid from the Fed.

What about retail investors? I doubt it. Retail investors are the primary pillar boosting stocks at this stage in the game, but as we saw during the panic last week, it is unlikely that retail investors will maintain hands strong enough to refrain from selling at the first sign of trouble. They do tend to hastily jump back into markets to buy every dip because for many years this simplistic strategy has worked, but if the Fed continues to back away from stimulus and we seen a few more incidences like the 1,000+ point drops of recent days, investor conditioning will be broken, and blind faith will be replaced by doubt.

What about the American consumer? Will consumer profits boost companies and give them and they stock shares a solid foundation? I can barely write that question without laughing out loud. There was a time (it seems like so long ago) when company innovation and solid business strategies actually meant something when it comes to equities. Those days are over. Now, everything is based on the assumption of central bank intervention, and as I already noted, central banks are pulling the plug on life support.

Beyond that, U.S. consumers are now buried in historic levels of personal debt.

What about the Trump administration’s latest $1.5 trillion infrastructure plan? Will this act as a kind of indirect stimulus program picking up where the Fed left off? Unlikely.

Perhaps if such a plan had been implemented eight years ago in place of the useless bank bailouts and TARP, it might have made a difference. Though, a similar strategy did not work out very well for Herbert Hoover. In fact, many of the Hoover-era infrastructure projects were not paid off for decades after initial construction. Hoover was also a one term Republican president that oversaw the beginning of the Great Depression.

The system is too far into debt and too far gone for infrastructure spending to make any difference in the economic outcome. Add to that the fact that Treasury yields are liable to continue their upward trajectory due to the increased deficit spending, putting more pressure on stocks.

Interestingly, Trump’s budget director has even admitted that the plan will lead to even faster increases in interest rates, and Fed officials have been using this as a partial rationale for why they plan to continue cutting off stimulus measures.

I think anyone with any sense can see the narrative that is building here. The Federal Reserve is going to let markets crumble in 2018. They are going to continue raising interest rates and reducing their balance sheet faster than originally expected. They will not step in when equities crash. And, they don’t really need to. Trump continues to set himself up as the perfect scapegoat for a bubble implosion that had to happen eventually anyway. Now, the central banks can sufficiently avoid any blame.

***

If you would like to support the publishing of articles like the one you have just read, visit our donations page here. We greatly appreciate your patronage.

You can contact Brandon Smith at: brandon@alt-market.com

After 8 long years of ultra-loose monetary policy from the Federal Reserve, it’s no secret that inflation is primed to soar. If your IRA or 401(k) is exposed to this threat, it’s critical to act now! That’s why thousands of Americans are moving their retirement into a Gold IRA. Learn how you can too with a free info kit on gold from Birch Gold Group. It reveals the little-known IRS Tax Law to move your IRA or 401(k) into gold. Click here to get your free Info Kit on Gold.

Is A Massive Stock Market Reversal Upon Us?

This article was originally published by Brandon Smith at Alt-Market.com

I have been saying it for years and I will say it again here — stocks are the worst possible “predictive” signal for the health of the general economy because they are an extreme trailing indicator. That is to say, when stock markets do finally crash, it is usually after years of negative signs in other more important fundamentals.

Of course, whether we alternative analysts like it or not, the fact of the matter is that the rest of the world is psychologically dependent on the behavior of stock markets. The masses determine their economic optimism (if they are employed) according to the Dow and the S&P and, to some extent, by official and fraudulent unemployment statistics. When equities start to dive, society takes notice and suddenly becomes concerned about fiscal dangers they should have been worried about all along.

Well, it may have taken a couple months longer than I originally predicted, but it would seem so far that a moment of revelation (that slap in the face I discussed a couple weeks ago) is upon us. In less than a few days, most of the gains in global stocks for 2018 have been erased. The question is, will this end up as a “hiccup” in an otherwise spectacular bull market bubble? Or is this the inevitable death knell and the beginning of the implosion of that bubble?

After I predicted the election of Donald Trump, I also predicted that central banks would begin pulling the plug on life support for equities markets. This did in fact take place with the Fed’s continued program of interest rate increases and the reduction of their balance sheet, which effectively strangles the flow of cheap credit to banking and corporate institutions that fueled stock buybacks for years. Without this constant and ever expansionary easy fiat, there is nothing left to act as a crutch for stocks except perhaps blind faith. And blind faith in the economy always ends up being smacked down by the ugly realities of mathematics.

I believe the latest extraordinary dive in stocks is NOT a “hiccup,” but a sign that “contagion” is still a thing, and also a trailing sign of instability inherent in our fiscal system. Here are some reasons why this trend is likely to continue.

Historic Corporate Debt Levels

As mentioned above, artificially low interest rates have allowed corporations incredible leeway to manipulate stock markets at will using stock buybacks and other methods. However, there are still consequences for this strategy. For example, corporate debt levels are now at historic annual highs; far higher even than debt levels just before the crash of 2008.

If this doesn’t illustrate the falseness of the so called “economic recovery”, I don’t know what does. Beyond that, what happens as the Fed continues to raise interest rates and all that debt held by the “too big to fails” becomes vastly more expensive? Well, I think we are seeing what happens. Over time, faith in the corporate ability to prop up equities will erode, and a considerable decline is built directly into the farce.

Price To Earnings Ratio

In some of her final statements upon stepping down as the head of the Federal Reserve, Janet Yellen had some choice comments about the state of equities markets. These included statements that stock market valuations were high and that the price-to-earnings ratio of the S&P 500 (the ratio of stock values versus actual corporate earnings per share) were at a historical peak. This fits exactly with the policy shift I warned about in 2017, and my assertion that Jerome Powell will be the Fed chairman to oversee the final crash of the post-bailout market bubble.

The spike in P/E ratios is not only taking place in U.S. markets. For example, the same trend can be observed in countries like India. Meaning, there are equities valuation problems around the world.

The issue here is that corporate earnings do not justify such high stock prices. Therefore, something else must be inflating those prices. That something was, of course, central bank stimulus, and now that party is almost over, whether the “buy the f’ing dippers” want to admit it yet or not.

10-Year Treasury Yield Spike

Have spiking Treasury bond yields actually been a signal for an “accelerating economy” as mainstream economists often suggest? Not really. In the era of central bank monetary manipulation, it is more likely that yields were spiking because markets are anticipating the arrival of Jerome Powell as Fed chair and accelerating interest rate hikes rather than an accelerating economy.

The notion that the economy itself might be “overheating” in 2018 is a rather new and nefarious propaganda meme being used by central bankers to set a particular narrative. I believe that narrative will be the claim that “inflation” is a key concern rather than deflation and that central banks must act to temper inflation with more aggressive rate increases. In reality, what we are seeing is not “inflation” in a traditional sense, but stagflation. That is to say, we are seeing elements of price inflation in necessary goods and services and well as property markets, but continued deflation in the rest of the economy.

The Fed in particular will continue to ignore negative fundamentals because they are seeking to deliberately pop the market bubble they have created.

The spike in 10-year bond yields seems to be correlating closely to the recent volatility in stocks. This volatility increased exponentially as yields neared the 3% mark, which appears to be the magical trigger point for equities failure.  Though yields suffered a modest decline as stocks tumbled this week, I still recommend keeping an eye on this indicator.

Dollar Weakness

As I have mentioned in recent articles, there has been a strange disconnect between interest rates and the U.S. dollar. As the Fed continues its policy of hiking interest rates, generally the dollar index should rise in response. Instead, the dollar has been swiftly falling, only stalling in the past couple of trading sessions. If the dollar index continues to fall even as stocks decline and rates increase, this may suggest a systemic risk to the dollar itself.

Such risk could include a dollar dump by foreign central banks in favor of a wider basket of currencies, or the SDR trading basket created by the IMF.

Balance Sheet Reductions Accelerating

The Fed’s most recent release of data on its balance sheet reduction program shows a drop in holdings of $18 billion; this is far higher that the originally planned $12 billion slated by the Fed. Meaning, the Fed is dumping its balance sheet holdings much faster than it told the public initially.

Why is this important? Well, if you have been tracking the behavior of stocks over the past few years as well as the increases in the Fed’s balance sheet, you know that stock markets have risen in direct correlation with that balance sheet. In other words, the more purchases the Fed made, the higher stocks climbed.

If this correlation is directly linked, then as the Fed reduces its balance sheet, stocks should fall.

So, the fed announces its latest round of balance sheet reductions on January 31st, the reduction is much higher than anticipated, and within a week we witness the largest two day market drop in years. You would think this observation might just be important, but if you look at the mainstream economic media, almost NO ONE is mentioning it. Instead, they are searching for all sorts of random explanations for what just happened, none of which are very logically satisfying.

I believe that the Fed will not only continue its program of interest rate increases even if stocks begin to flounder, but that they will also unload their balance sheet as quickly as possible.

Corporate Investor Comments

Major corporate investment firms are beginning to raise their voices about the potential not only for stock devaluations, but also the amount that they might fall. Sydney-based AMP capital suggested a rather moderate 10% pullback in equities, which I think will become the talking point for most of the mainstream media over the next couple weeks. At least, until the whole thing comes crashing down much further than that.

The head of Blackstone COO expects stocks to fall at least 20% this year, a much more aggressive number but not high enough in my view.

I still believe these kinds of estimates are only applicable in the very short term. By the end of 2018, it is possible that markets will double the worst estimated declines predicted by the mainstream investment world given the fundamentals.

Central Banker Comments

Comments by agents of the Federal Reserve reinforce the notion that the central bank is about to crush the bull market bubble. San Francisco branch head Robert Kaplan has been quoted as saying the Fed may be required to hike interest rates MORE than the three times expected by mainstream economists in 2018.

As noted above, Janet Yellen’s exit statements were decidedly “hawkish,” suggesting that property markets and stocks are overpriced. On top of this, Jerome Powell, the new Fed chair, has been quoted in Fed documents from 2012 (finally released this past month) discussing the market bubble the Fed had created and the need to temper than bubble. In other words, Powell is the perfect man for the job of imploding stocks. Powell even predicted in 2012 that when the Fed raises rates the reaction by stock markets might be severe. Interesting that markets would plunge the very first day Powell assumes the Fed chair position.

I suppose finally a Fed agent and I have something in common. We’ve both been predicting the same exact market outcome caused by the same trigger event for around the same number of years.

I outlined in great detail the plan for the “global economic reset” and Powell’s role in overseeing the next stock crash in my article Party While You Can – Central Bank Ready To Pop The Everything Bubble. In that article, I predicted exactly the results which seem to be developing today in equities.

In essence, Powell is being portrayed by the mainstream media as “Trump’s guy,” and the change in Fed leadership is now being referred to as “Trump’s Fed.” This is not random rhetoric. I can’t think of ANY other president in the past that was given credit by the mainstream media for the activities of the Federal Reserve. Trump’s control over the Federal Reserve is zero. But, the actions of the Fed over the course of this year will undoubtedly crash the very equities markets that Trump has been foolishly taking credit for since his election.

The real issue here now is, how fast will this ugly festering sore explode? That’s hard to say. I would not be surprised if markets fall about 20% below recent highs in the course of the next couple of months and then stall. We may even see a couple spectacular bounces in the near term, all set to trumpets and fanfare by the mainstream economic media who will proclaim that the latest shock-drop was nothing more than an “anomaly.” Then, the crash will continue into the end of 2018 and panic will ensue.

That said, if there is some kind of major geopolitical crisis (such as a war with North Korea), then all bets are off. Stocks could crash exponentially over the course of a few weeks rather than a year. As the past few days have proven, stocks are not invincible, not in the slightest. And all the gains accumulated in the span of years can be wiped away in an instant.

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You can contact Brandon Smith at: brandon@alt-market.com

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