This week was Fed meeting week. Since the Fed IS the “market” these days the “markets” hang on every word they say. Since the Fed inferred that they may raise rates in 2023 the “markets” showed their displeasure by falling. Of course, when Fed President Powell spoke the “markets” rallied a bit because he said that inflation may not be transitory in the beginning which put more pressure on the “markets” but then his teleprompter must have told him what was going on and just a few minutes later he reversed course and said he expected inflation to decrease. So, in a matter of minutes the whole picture changed- AMAZING!
My take on this is that they have to give the illusion they are in control of inflation but they are the ones who are creating the inflation. The inflation is being created to keep our Federal government solvent (not really but to at least make it appear that way) so they can keep spending FAR beyond our means.
How far? How about a deficit that they admit to of over $3.6 TRILLION just this year. (CBO Revenue and US Treasury Spending) This is just Federal spending. How about the hundreds of billions doled out to the States that they are now using to pretend they are solvent also?
I believe that all of these short-term interventions are just that. The inflation is here to stay and is likely already in the mid-teens rather than the 5% that we are allowed to know. Any reduction in the central bank’s liquidity injections (conjuring up “money” from nowhere at virtually no cost and buying assets) and the entire edifice would likely collapse in no time. Don’t expect any reduction in their actions at all.
I also believe that they are not just buying assets to prop up the price and keeping banks solvent but that they are using this as an excuse to virtually BUY IT ALL. Some central banks are buying ETFs, stocks and bonds. These purchases keep prices FAR higher than they would be without the fake demand being created by these purchases but this action also provides perfect cover for “printing and buying” schemes that allow central bankers to amass real assets with nothing more than a click of a few buttons. To me, this is theft from every person who actually works for a living. It drives the price of assets up, it drives the price of goods up and makes many endeavors that we need to sustain life uneconomical because there is not a real supply and demand price but a fake price produced by traders.
In the old days when merchants would travel to sell their goods they were met by bands of men who would demand a fee for safe passage. They may have even run into pirates who would steal their assets and send them back to where they came from empty handed. Today, these same types of people use sophisticated trading programs, high-frequency trading and other means to extract a bounty from the producers. It is basically the same outcome but the victims today, in many cases, are not even aware that they are being taken advantage of. (Think Robinhood selling trade information to Citadel so they can front-run the trades or JP Morgan rigging the price of silver and gold lower while buying loads of it at a reduced price). Both Robinhood and Citadel have paid millions in fines BUT they are still doing the same thing. JP Morgan has paid BILLIONS in fines. I am not even going to go into Blackrock buying homes with hundreds of millions in cheap loans from the Fed and making prices unaffordable for people who just actually want a place to call home. In some cases they are buying at 20-50% above asking price. Try doing that as an individual and see if a bank will finance that.
It is a tragedy that this type of behavior is taking place but an even larger tragedy is that it is being done right out in the open and it is being allowed. Of course, fines have been paid but it appears the actors look at this as a cost of doing business. Heads they win- tails we lose.
While the Fed wants to give the illusion of a strong economy the numbers don’t add up. The only thing that appears to actually be booming is prices we pay to buy what we need to survive and the debt being conjured up to give the illusion that we still have an expanding economy. The economy is actually contracting and the difference is being made up by the massive debts we are incurring on a daily basis.
Even though we hear we have a “recovery”, where is that recovery for our booming homeless population?
If there were a true “recovery” why would the Fed and virtually all central banks be “printing and buying” to infinity with no end in sight? Why not raise rates right now and stave off inflation?
Inflation is a tax on everyone but it impacts the poor the most.
Just last week we had another 412,000 people file first-time unemployment claims. While that is an improvement from the prior few months it is higher than last week and breaks a string of declining first-time claims. There are still approximately 15 million people getting some sort of Covid relief payments.
It has been a long time since I mentioned the over 100 million people who are conveniently not counted in the unemployment numbers because they have been unemployed so long they no longer count. HINT: They still exist and still need resources to survive. The fact of the matter is that there are more people riding in the economic wagon and fewer people pulling it. The only way to NOT have a collapse is to create larger and larger interventions with larger and larger purchases of assets. Again, a perfect setup for the central banks to “print and buy” virtually all assets. Also, a perfect setup to destroy a currency.
As I have written about in the past- each intervention has to be bigger than the last to get the same result. In an article by Charles Hugh Smith he wrote: “What $1 trillion accomplished 12 years ago it takes almost $4 trillion” to accomplish today.
Most people are likely unaware of what is taking place and would like more stimulus- too bad this just creates more debt and the “benefit” that is received is consumed in weeks or months. In the meantime, prices rise and we are all on the hook for a load of more debt. At the same time there is more “cash” chasing fewer goods. This is a classic setup for higher prices and likely STAGFLATION.
As I write this the “markets” are lower and gold and silver are down more than the stocks. With the current setup I have just described this appears to me to be a massive buying opportunity as the Fed has many believing that they MAY raise rates 2 years from now. Don’t bet on it- unless market forces do it for them. With government debts exploding any meaningful increase in interest rates would be deadly to government finances. I am not just talking about US government finances but the finances of cities, states and nations.
Sometimes you have to take a step back, take a deep breath and understand that this illusion- no matter how real the powers that be make it seem- will end- and likely end VERY badly.
Remember- if there is inflation the value of the currency goes down. That means prices go up- for almost everything. If we have deflation then the massive debts that we have amassed become largely unpayable leading to panic in the “markets” and a flight to safety. In my opinion, one asset wins each way. That is gold. It is one of two assets that central banks can list as a “riskless asset” on their balance sheet. The other being US Treasury notes. If there is indeed inflation it is likely that silver would outperform the gold.
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