Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Dow Stock Market Trend Analysis - 25th Nov 20
Amazon Black Friday Dell 32 Inch S3220DGF VA Curved Screen Gaming Monitor Bargain Deal! - 25th Nov 20
Biden the Silver Bull - 25th Nov 20
Inflation Warning to the Fed: Be Careful What You Wish For - 25th Nov 20
Financial Stocks Sector ETF Shows Unique Island Setup – What Next? - 25th Nov 20
Herd Immunity or Herd Insolvency: Which Will Affect Gold More? - 25th Nov 20
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20
THE STOCK MARKET BIG PICTURE - Video - 19th Nov 20
Reasons why Bitcoin is Treading at it's Highest Level Since 2017 and a Warning - 19th Nov 20
Media Celebrates after Trump’s Pro-Gold Fed Nominee Gets Blocked - 19th Nov 20
DJIA Short-term Stock Market Technical Trend Analysis - 19th Nov 20
Demoncracy Ushers in the Flu World Order How to Survive and Profit From What Is Coming - 19th Nov 20
US Bond Market: "When Investors Should Worry" - 18th Nov 20
Gold Remains the Best Pandemic Insurance - 18th Nov 20
GPU Fan Not Spinning FIX - How to Easily Extend the Life of Your Gaming PC System - 18th Nov 20
Dow Jones E-Mini Futures Tag 30k Twice – Setting Up Stock Market Double Top - 18th Nov 20
Edge Computing Is Leading the Next Great Tech Revolution - 18th Nov 20
This Chart Signals When Gold Stocks Will Explode - 17th Nov 20
Gold Price Momentous ally From 2000 Compared To SPY Stock Market and Nasdaq - 17th Nov 20
Creating Marketing Campaigns Using the Freedom of Information Act - 17th Nov 20
ILLEGITIMATE PRESIDENT - 17th Nov 20
Stock Market Uptrend in Process - 17th Nov 20
How My Friend Made $128,000 Investing in Stocks Without Knowing It - 16th Nov 20
Free-spending Biden and/or continued Fed stimulus will hike Gold prices - 16th Nov 20
Top Cheap Budgie Toys - Every Budgie Owner Should Have These Safe Bird Toys! - 16th Nov 20
Line Up For Your Jab to get your Covaids Freedom Pass and a 5% Work From Home Tax - 16th Nov 20
You May Have Overlooked These “Sleeper” Precious Metals - 16th Nov 20
Demystifying interesting facts about online Casinos - 16th Nov 20
What's Ahead for the Gold Market? - 15th Nov 20
Gold’s Momentous Rally From 2000 Compared To Stock Market SPY & QQQ - 15th Nov 20
Overclockers UK Quality of Custom Gaming System Build - OEM Windows Sticker? - 15th Nov 20
UK GCSE Exams 2021 CANCELLED! Grades Based on Mock Exams and Teacher Assessments - 15th Nov 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Trump & The Fed

Politics / US Politics Nov 11, 2016 - 05:35 PM GMT

By: Dan_Amerman

Politics

There is critical information in the first 45 seconds of the Donald Trump campaign video below. Now the election is over, and this nonpartisan analysis is not about campaigns, politics or who should have been elected - but some absolutely fundamental changes that could be on the way.

The video was Trump's closing argument for his election, and was released on November 6th.


I count seven times in the first 45 seconds where Trump appears to running against the Federal Reserve as much as he was running against Hillary Clinton. There are three clips of vast sums of money. There are two panning shots of Federal Reserve symbols. There are two shots of Janet Yellen, with one of those being of her with other international central bankers.

Now, as long time readers may have noticed, I generally keep politics out of my writings, and haven't been saying anything about the election. While I have strong opinions, I don't see my role as being a political editorialist, we've all been surrounded by enough of that 24/7 throughout this election cycle.

But, helping people understand this strange new financial world of ours is my goal. And whether you are Republican, Democratic, independent, or have never even been to the United States, a soon-to-be new president quite explicitly identifying the Federal Reserve as a major source of the problems facing the United States could have extraordinary financial and monetary implications for all of us, around the world.

Artificial Stability & Its Price

As I have been writing about for some years now, our current very low yield markets are based upon record-setting levels of central banking interventions. Withdraw the interventions - and the apparent stability is subject to almost instant collapse (whether that would be a good or bad thing is another matter).

I won't repeat it, but a much more extensive analysis of the dilemma faced by the government when it comes to stability - and the very high price for investors and savers - is linked here.

There is also the issue that if the Federal Reserve loses control and interest rates return to more historically normal levels, this would lead to an extraordinary increase in annual deficits that would send the national debt soaring upwards and out of control (absent major tax increases). But if rates don't rise, then saver wealth could decrease by as much as 95% compared to historical norms, which creates an extraordinary conflict of interest between the government and savers, as analyzed here.

All It Takes Is One Election

There is another point that I have been making repeatedly in recent years, which is that while central banks can seem almost all-powerful for years at a time as they force stability and low yields onto markets - they are defenseless against one kind of risk. That risk is politics in general - and elections risk in particular.

As analyzed here in 2015, elections are an existential risk to both the Euro and the European Central Bank - because election risks could collapse the stability of the system at any time. As I wrote at the time:

"What is worth remembering is that politics is the "dog" and central banks and financial institutions are the "tail". Now for periods of time it may indeed appear that the tail is wagging the dog.

But, ultimately it's always the dog that wags the tail, and it is the central banks and banking systems who exist at the sufferance of whomever holds the raw political power.

Anyone who loses track of the underlying basics of the situation may find themselves facing the biggest financial surprise of their lifetimes, and perhaps much sooner than they expect."

On November 8th, 2016, a large dog in the United States did stand up and give itself a good shake, much like another large dog did in Great Britain earlier this year, as analyzed here. And the financial surprises could still just be getting started in each case on a global basis, particularly when the two are taken together and in combination with future elections in Europe.

Did Trump Mean What He Said?

Another factor that I think everyone can agree on is that the Donald takes things - personally. He seems to believe in striking back - personally. And he has made clear that he holds Janet Yellen personally responsible for using the Fed's very low interest rate policies to try to deny him the election, as one of the ways in which he said the election was rigged against him.

Keeping all those factors in mind, it is well worth going back and playing the first 45 seconds of the Trump campaign ad again, and perhaps several times. In Trump's closing argument - in what is in his mind the very center of his pitch to get elected - which person (aside from Hillary Clinton) and what institution are responsible for causing millions of people to suffer in America and must (implicitly) be dealt with in order to "Make America Great Again"?

Now, running on promises, and doing something quite differently after being elected is the political norm, so Trump won't necessarily attempt anything.

Indeed, that seems to be the current discussion among the media and the groups in power that are still trying to come to grips with what was for them the shocking results of the election. They were dead wrong in their "expert" consensus that Trump could never win the nomination. They were dead wrong in their reflection chamber consensus among themselves, even as of the very evening of the election, that Trump could never actually win the election. Until he did.

And now a new sort of consensus seems to be trying to coalesce around the idea that Trump either can't or won't do what he said he was going to do. The message is being tried out that there are too many limits in terms of laws and institutions, and the need for Congress to participate.

And maybe that will turn out to be true. Maybe Trump will spend his attention and political power on Obamacare and immigration changes, and Yellen will quietly serve out her term until February of 2018. Maybe Trump talked big in general, but he ends up being consumed by the realities of the system, and is able to make only incremental changes.

With the Republican establishment having lost the primaries, and the Democratic establishment having lost the general election, many of those on the inside are very hopeful that this will turn out to be the case.

But there is another alternative, and that is that Trump genuinely did mean exactly what he said. It could be that when the President-elect looks at himself in the mirror in the morning, he does see himself as an agent of decisive change. Which means that it is possible that he has every intention of using the full powers of the Presidency to bring about decisive changes in general - and changes at the Fed and monetary policy in particular.

If that is what works out to be true, then there are three dots to be connected, and possibly very soon.

1. Since the financial crisis of 2008, we have lived in a financial and economic world that is quite different from what came before. Prices and yields in all major investment categories - stocks, bonds, precious metals and real estate - are all dominated by central banking and governmental interventions.

2. Even as I have tried to educate people on how these markets work in ways that are very different from traditional markets, I have also been pointing out that there is a central vulnerability of this artificial stability -  a vulnerability that the central banks and markets refuse to even take into consideration. The Fed and other central banks aren't actually the source of power, and they can lose their power at any time as the result of elections.

3.There was an election, and if the new president actually meant what he said and does intend to act as a decisive agent of change - then every aspect of money and investments is in play on the most fundamental of levels. They are subject to change in ways that may have little to do with the paths of the last eight years, and may indeed turn upside the assumptions that have been driving prices and yields. This is true of stocks, bonds, mortgages, index funds, retirement accounts, savings and everything else.

If Trump does do anything, he may be very, very careful about how he does it. Trump does know about debt and interest rates. He likely knows full well the potential carnage if the domestic - or international - markets decide the Fed may no longer have their back. And he has explicitly stated that nations as deeply in debt as the United States need to have low interest rates.

But then again, he may not need to do anything. All that has to happen is for enough major investors to think that he may do something, and that gets them spooked, and consequences occur.

So what happens next?

I don't know. I've been thinking about that a lot as I digest the election results. I'll be thinking about it a lot more over the weeks to come and will have more to share.

But, I wanted you to have this information and to have it today. The monetary and investment world as we have known it over the last eight years may now be very much in play, and the old assumptions may not work for much longer. And if and when things start to work in an entirely different way - that change could happen very quickly, with little or no notice.

What you have just read is an "eye-opener" about one aspect of the often hidden redistributions of wealth that go on all around us, every day.

A personal retirement "eye-opener" linked here shows how the government's actions to reduce interest payments on the national debt can reduce retirement investment wealth accumulation by 95% over thirty years, and how the government is reducing standards of living for those already retired by almost 50%.

Much has been written about a $150,000+ advantage to waiting until age 70 before collecting Social Security. However, as explored in the analysis linked here, once we "raise our game" a bit, and use a more sophisticated type of analysis than some of the simplistic Social Security decision aids in wide circulation ─ all of that advantage can vanish.

National debts have been reduced many times in many nations ─ and each time the lives of the citizens have changed. The "eye-opener" linked here reviews four traditional methods that can each change your daily life, and explores how governments use your personal savings to pay down their debts in a manner which is invisible to almost all voters.

If you find these "eye-openers" to be interesting and useful, there is an entire free book of them available here, including many that are only in the book. The advantage to the book is that the tutorials can build on each other, so that in combination we can find ways of defending ourselves, and even learn how to position ourselves to benefit from the hidden redistributions of wealth.

Daniel R. Amerman, CFA

Website: http://danielamerman.com/

E-mail:  mail@the-great-retirement-experiment.com

Daniel R. Amerman, Chartered Financial Analyst with MBA and BSBA degrees in finance, is a former investment banker who developed sophisticated new financial products for institutional investors (in the 1980s), and was the author of McGraw-Hill's lead reference book on mortgage derivatives in the mid-1990s. An outspoken critic of the conventional wisdom about long-term investing and retirement planning, Mr. Amerman has spent more than a decade creating a radically different set of individual investor solutions designed to prosper in an environment of economic turmoil, broken government promises, repressive government taxation and collapsing conventional retirement portfolios

© 2016 Copyright Dan Amerman - All Rights Reserved

Disclaimer: This article contains the ideas and opinions of the author.  It is a conceptual exploration of financial and general economic principles.  As with any financial discussion of the future, there cannot be any absolute certainty.  What this article does not contain is specific investment, legal, tax or any other form of professional advice.  If specific advice is needed, it should be sought from an appropriate professional.  Any liability, responsibility or warranty for the results of the application of principles contained in the article, website, readings, videos, DVDs, books and related materials, either directly or indirectly, are expressly disclaimed by the author.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules