In recent economic news, headlines are being dominated by concerns over rising bond yields. Increased bond yields are a sign of a possible spike in inflation and, logically, they call for the Federal Reserve to raise interest rates in order to prevent that inflation.
Higher bond yields also mean there is a competitive alternative to stocks for investors – both factors that could trigger a plunge in the stock market.
If one studies the real history behind the stock market crash during the Great Depression, they will find that it was the Federal Reserve’s interest rate hikes that caused and prolonged the disaster after they had created an environment of cheap and easy money throughout the 1920s. Former Chairman Ben Bernanke openly admitted the Fed was responsible back in 2002 in a speech honoring Milton Friedman. He stated:
“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.”
This then raises the question – inflation or deflation? Will the Fed “do it again?”
Probably not in exactly the same way, but we will see elements of both inflation and deflation soon in the form of stagflation.
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brandon smith, alt-market, stagflation, government stimulus, pandemic, lockdowns, central banks, fed, us federal reserve, great reset, globalists, globalism