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Fourth Turning 2022–Bad Moon Rising (Part 2)

January 25, 2022

FOURTH TURNING 2022 – BAD MOON RISING (PART 2)

In Part 1 of this article I laid out how the global elite have used this covid flu to manipulate the weak minded into a fear induced mass psychosis as a key element in their Great Reset plan to control the world and keep you technologically enslaved under lock and key. Now I will try to decipher how this mass hysteria might play out over the course of 2022 and beyond.

“Americans today fear that linearism (alias the American Dream) has run its course. Many would welcome some enlightenment about history’s patterns and rhythms, but today’s intellectual elites offer little that’s useful. Caught between the entropy of the chaoticists and the hubris of the linearists, the American people have lost their moorings.” – Strauss & Howe – The Fourth Turning

Federal Reserve Just Declared the American Dream is Dead for Most Americans

“The most effective way to destroy people is to deny and obliterate their own understanding of their history.” ― George Orwell

The American Dream, where all Americans, no matter the circumstances of their birth, had a legitimate opportunity to live a better life than their parents, based upon their own intelligence, work ethic, and good fortune, is an illusion in today’s world. The ruling elite have stolen the wealth of the nation and its citizens. This was not an accident, but a plan implemented over many decades, accelerating after Nixon closed the gold window and opened the door to unlimited amounts of debt being created out of thin air and backed by nothing.

 

One of the Fed’s only mandates was to maintain a stable currency. Since its inception in 1913 to 2020, the USD had lost 96% of its purchasing power. The USD has lost 7.5% of its purchasing power since 2020, as Powell and his cronies have lost control of inflation.

Visualizing the Purchasing Power of the U.S. Dollar Over Time

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Mike Pento Warns Global Central Banks Are Entering The Danger Zone

October 1, 2018

Mike Pento Warns Global Central Banks Are Entering The Danger Zone

Authored by Michael Pento via PentoPort.com,

Investors are experiencing huge moves in commodities, currencies, equities and in sovereign debt across the globe. And now the fall has arrived. Expect the volatility currently witnessed in markets to only surge.

This is because global central banks have overwhelmingly turned hawkish in a vain attempt to gradually let the air out of the massive bubbles they have spent the last decade recreating. Unfortunately, that is not the nature of asset bubbles—they don’t end with a whimper–and they are about to burst in violent fashion.

First off, our central bank hiked rates for the 8th time since December 2015 at the September FOMC meeting. While the Fed did remove the word accommodative from its policy statement, it also raised the neutral rate to 3%, from 2.9% on the Fed Funds Rate. And, most importantly, predicted it would stay above that neutral rate for two years—keeping it at the 3.4% level. It also indicated that December would be the next rate hike and that three more hikes are on the agenda for 2019.

Nevertheless, the Fed is now caught in a hydraulic press of its own making; and is completely unaware of the predicament it is in. An inflation rate of 2% has been its goal for the past decade. And now inflation, when measured by core CPI, is up 2.2% y/y and is up 2.7% y/y on the headline rate. Even though the Fed emphasizes the Personal Consumption Expenditure inflation rate rather than Consumer Price Inflation, it is still aware that inflation is rising above its target.

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Ask The Expert- James Grant

May 19, 2018

Ask The Expert- James Grant

James Grant is an author, columnist, and founder of Grant’s Interest Rate Observer. A frequent guest on business television, including CNBC, Fox Business News and a ten-year stint on “Wall Street Week”, Jim’s writing has appeared in the Wall Street Journal, Foreign Affairs, and The Financial Times. An inductee into the Fixed Income Analysts Society Hall of Fame, Mr. Grant is also a member of the Council on Foreign Relations and a trustee of the New-York Historical Society.

We are thrilled to have him answer seven of your burning questions, including:

  • Will the Fed continue hiking the Fed Funds rate?
  • Can we expect a surge in inflation soon?
  • What factors will lead to a stock market correction?

Get the answers to these questions, plus James’ forecast for gold prices, by listening here:

Listen to Ask The Expert on SoundCloud:

Will The Fed Really “Normalize” Its Balance Sheet?

September 21, 2017

Will The Fed Really “Normalize” Its Balance Sheet?

To begin with, how exactly does one define “normalize” in reference to the Fed’s balance sheet?  The Fed predictably held off raising rates again today.  However, it said that beginning in October it would no longer re-invest proceeds from its Treasury and mortgage holdings and let the balance sheet “run off.”

Here’s the problem with letting the Treasuries and mortgage just mature:   Treasuries never really “mature.” Rather, the maturities are “rolled forward” by refinancing the outstanding Treasuries due to mature.   The Government also issues even more Treasurys to fund its reckless spending habits.  Unless the Fed “reverse repos” the Treasurys right before they are refinanced by the Government, the money printed by the Fed to buy the Treasurys will remain in the banking system.  I’m surprised no one has mentioned this minor little detail.

The Fed has also kicked the can down the road on hiking interest rates in conjunction with shoving their phony 1.5% inflation number up our collective ass.  The Fed Funds rate has been below 1% since October 2008, or nine years.   Quarter point interest rate hikes aren’t really hikes. we’re at 1% from zero in just under two years. That’s not “hiking” rates.  Until they start doing the reverse-repos in $50-$100 billion chunks at least monthly, all this talk about “normalization” is nothing but the babble of children in the sandbox.  I think the talk/threat of it is being used to slow down the decline in the dollar.

To justify its monetary policy, Yellen stated today that she’s, “very pleased in progress made in the labor market.”  Again, how does one define progress?  Here’s one graphic which shows that the labor market has been and continues to be a complete abortion:

…click on the above link to read the rest of the article…

The Fed Can’t Save Us

April 6, 2016

The Fed Can’t Save Us

Janet Yellen

In December, the Fed hiked its target for the federal funds rate, which is the interest rate banks charge each other for overnight loans of reserves. Since 2008 the Fed’s target for the Fed Funds Rate had been a range of 0 percent – 0.25 percent (or what is referred to as zero to 25 “basis points”). But last month they moved that target range up to 0.25 – 0.50 percent. Ending a seven-year period of effectively zero percent interest rates.

From our vantage point, we already see carnage in the financial markets, with the worst opening week in US history. This of course lines up neatly with standard Austrian business cycle theory, which says that the central bank can give an appearance of prosperity for a while with cheap credit, but that this only sets the economy up for a crash once rates begin rising.

However, there is something new in the present cycle. The Fed is trying to raise rates while simultaneously maintaining its bloated balance sheet. It is attempting to pull off a magic trick whereby it can keep all of the “benefits” of its earlier rounds of monetary expansion (i.e., “quantitative easing” or “QE”) while removing the artificial stimulus of ultra-low interest rates. As we’ll see, this attempt will not end well, for the Fed officials or for the rest of us. In the meantime, Ben Bernanke will look on with concern, writing the occasional blog post and perhaps giving a speech about poor Janet Yellen’s tough predicament.

Austrian Business Cycle Theory

One of the seminal contributions of Ludwig von Mises was what he called the circulation credit theory of the trade cycle. In our times, we simply call it Austrian business cycle theory, sometimes abbreviated as ABCT. The Misesian theory was subsequently elaborated by Friedrich Hayek, and it was partly for this work that Hayek won the Nobel Prize in 1974.

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What If There Is No “Fed Put” – Paul Brodsky Thinks Yellen Will Not Bailout Markets This Time

January 15, 2016

What If There Is No “Fed Put” – Paul Brodsky Thinks Yellen Will Not Bailout Markets This Time

Earlier today, Art Cashin summarized most (very desperate) traders’ thoughts when he said that as a result of today’s market crash, “the Fed will try anything” to prop up the wealth effect it had so carefully engineered with seven years of central planning in the aftermath of the financial crisis.  Perhaps the only question left is “where is the put”, or where on the S&P 500 is the Fed’s breaking point beyond which Yellen will have no choice but to make a statement, or take action, in support of the market.

Yet one person who is far less sanguine abou the latest in a long series of central bank bailouts of the stock market is Macro-Allocation’s Paul Brodsky, who believes that instead of the Fed Put, the time of the Fed Call has come.

Here’s why:

The Fed Put Call

Investors are blaming Fed rate hikes, and hence a strong dollar, for weakening global output, commodity prices, and global equity prices so far in 2016.

The Fed knows exactly what it’s doing.

Equity returns are certainly dismal thus far in 2016. Through January 14 at 14:00PM EST, the MSCI World Index had declined by 8.6%. Accordingly, “the markets” had begun to doubt the Fed’s resolve to hike rates four times in 2016. Fed funds futures implied the December Fed Funds rate at 0.70%, up only 34 basis points from the current rate (0.36%). This implies the market is betting the Fed will hike once or twice more.

Clearly, investors see the equity markets as the leading indicator of Fed policy. We disagree. The Fed no longer works implicitly for equity investors (i.e., “the Fed Put”); it is primarily working for the U.S. banking system by stabilizing and increasing its deposit base, and for the state by providing an incentive across the world to invest in Treasury debt. 

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Dan Amerman: Financial Repression & The New Interest Rate Hike

December 21, 2015

Dan Amerman: Financial Repression & The New Interest Rate Hike

You have to understand one to make sense of the other

Financial repression authority Daniel Amerman returns this week to discuss the ramifications of the Federal Reserve’s first interest rate hike in nearly a decade:

The key to understand the situation here is that this is not normalizing, and we don’t have a precedent. We really don’t. We’re kind of all being soothed and reassured by the Wall Street Journal and Bloomberg and the financial authorities that we’ve been down this path before, we’ve been down it many times, more often than not we’ve had rising markets as a result and, really, there’s nothing to worry about. The issue with that is there are many things this time that are entirely different, and what is presented as ‘normalizing’, for instance, is going back to say a projected interest rate cycle like we saw in the 2000’s or the 1990’s. What’s completely different, among many other things, is that we’ve never had rates forced so low before, and they’ve never been so low for so long. So, if you look, say at a long-term graph since 1954, what’s been going on with the Fed funds rates, we’ve had plenty of reversals in interest rate direction, but they’ve been these brief little dips that look nothing whatsoever like this.

The other big issue, and this goes back to our prior conversation on financial repression, is that I don’t think you can take any interest rate increases from the 2000’s, 1990’s, 1980’s, 1970’s as being comparable. Because, we have the greatest degree of national debt outstanding that we’ve had since the 1940’s and the 1950’s. So, you have to go much further back in time to see how a rate increase works when you have a country that’s just absolutely massively in debt. And, it’s a very different process than these recent historicals they’re talking about.

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Wall Street and the Cycle of Crises

August 29, 2015

Wall Street and the Cycle of Crises

Regular readers of the leftish press have recently been presented with a raft of pleas coming from intelligent and occasionally articulate economists that the Federal Reserve not to raise interest rates. The general point being argued is that interest rates are the price of borrowed money, that raising them serves as a regressive tax because poorer borrowers pay a higher percentage of their incomes in interest expense than do rich people, and that the economy is still not fully recovered and higher interest rates risk sending ‘it’ lower again. Aiding the effort is the general loveliness of the people making the pleas versus the pissed-white-guys-in-suits contingent of monetary cranks who hate everything that the Federal Reserve does on the opposing side.

However, a wrinkle in the veil of loveliness can be found in ambiguity around the stated issues from none other than the Federal Reserve. The Federal Reserve is aware of the arguments of loveliness and is now wavering ever-so-slightly in raising rates only because a few stock markets have quite righteously shat the bed. Unless one conflates financial crapola with ‘the economy,’ a conflation the forces of loveliness insist is not warranted, then the Federal Reserve is now ambiguously poised to do the wrong thing for the wrong reasons (says the loveliness choir). The fact that all that the Federal Reserve seems to care about is ever-rising stock prices would seem to beg the question of why the forces of loveliness read so much more into the power of interest rates?

urierealrates1

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The Futility of Our Global Monetary Experiment

June 15, 2015

The Futility of Our Global Monetary Experiment

Jeff Deist: The Fed recently announced just this past week that it would not use specific dates for targeting higher Fed funds rate this year and you almost get the sense that poor Janet Yellen is at the end of this Greenspan-Bernanke experiment and there’s not much left for her to do. I mean, what’s our sense of Yellen and her position?

David Stockman: Yeah, I agree with that. I think in some ways they’re petrified as to where they ended up or they should be. After all, we’re in an experiment of monumental proportions.

Let’s just assess where we are. If they don’t raise the interest rate in June — and I think all the signals now are pretty clear they’re going to find another reason to delay — that will mean seventy-eight straight months of zero rates in the money market. As I always say, the money-market price, that is the Federal Funds Rate or Overnight Money or a short term treasury bill, is the most important price in all of capitalism because that determines the cost of carry, the cost of speculation and gambling.

When you conduct a monetary policy that says to the speculators, to the gamblers, “come and get it,” you are guaranteed free money to carry your positions, whether you’re buying German Bonds or you’re buying the S&P 500 Stock Index or the whole array of yielding or price gaining assets that are available in the financial market. This monetary policy also sends the message that you can leverage and carry those positions for free and roll it day after day without worry because the central bank has pegged your cost and production, and in a sense has pledged on its solemn honor that it will not change without many months of warning. And that’s what this whole thing is about — changing the language and so forth. I think you have created a massive distortion in the very heart of capitalism in the financial system.

 

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Central banks paralysed at the zero bound

March 27, 2015

Central banks paralysed at the zero bound

Though the Fed would deny it, it is clear from the minutes of the last Federal Open Market Committee (FOMC) meeting that a rise in interest rates has been put off indefinitely.

The subsequent rally in the price of gold and the sudden fall in the dollar tend to confirm this conclusion.

The Fed Funds Rate, which is the interest rate the Fed targets to set all other rates, has now been less than 0.25% for six and a quarter years, gradually declining from roughly 0.15% to about 0.10% today. It was set at a target range of between zero and 0.25% in December 2008.

Effective Fed Funds Rate

According to the Policy Normalisation Principles and Plans issued last September, the FOMC will raise its target range for the Fed Funds Rate “primarily by adjusting the interest rate it pays on excess reserve balances” when the Fed normalises interest rates, “using reverse repurchase agreements to take money out of circulation to the degree necessary”. The Fed also intends to reduce its holdings of securities and contract its balance sheet in the longer run.

If normalisation is the result of economic recovery we will be familiar with the playbook. Demand for money in the economy picks up, and instead of pyramiding bank credit on reserves held at the Fed, the Fed feeds back the excess reserves to the banks by selling government securities into the markets. The bear market in government bonds should be manageable because of underlying pension and insurance company demand coupled with a diminishing budget deficit. This is the long-understood theory behind withdrawing from deficit financing.

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Olduvai IV: Courage
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Olduvai II: Exodus
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