It is not just the U.S. 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. Remember, it is important to realize 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.
BY BRANDON SMITH FOR PERSONAL LIBERTY
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. 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 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 at that time. 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 conservatives in particular, and it is a subject that politicians use to lure them 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. 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 though 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 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:
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 has 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 drop every time the Fed dumps more assets from its balance sheet. Take note that the mainstream media barely mentions the Federal Reserves 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 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. Remember, it is important to realize 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 doing, then I suggest you read the new Federal Reserve chairman Jerome Powell’s statements 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 warnings in 2012, yet he is implementing the exact measures he warned about in 2018. 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 start all over again.
New monthly highs are being replaced with new monthly lows as stocks are being steam valved down with each new 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.