Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21
UK Covid-19 Booster Jabs Moderna, Pfizer Are They Worth the Risk of Side effects, Illness? - 22nd Nov 21
US Dollar vs Yields vs Stock Market Trends - 20th Nov 21
Inflation Risk: Milton Friedman Would Buy Gold Right Now - 20th Nov 21
How to Determine if It’s Time for You to Outsource Your Packaging Requirements to a Contract Packer - 20th Nov 21
2 easy ways to play Facebook’s Metaverse Spending Spree - 20th Nov 21
Stock Market Margin Debt WARNING! - 19th Nov 21
Gold Mid-Tier Stocks Q3’21 Fundamentals - 19th Nov 21
Protect Your Wealth From PERMANENT Transitory Inflation - 19th Nov 21
Investors Expect High Inflation. Golden Inquisition Ahead? - 19th Nov 21
Will the Senate Confirm a Marxist to Oversee the U.S. Currency System? - 19th Nov 21
When Even Stock Market Bears Act Bullishly (What It May Mean) - 19th Nov 21
Chinese People do NOT Eat Dogs Newspeak - 18th Nov 21
CHINOBLE! Evergrande Reality Exposes China Fiction! - 18th Nov 21
Kondratieff Full-Season Stock Market Sector Rotation - 18th Nov 21
What Stock Market Trends Will Drive Through To 2022? - 18th Nov 21
How to Jump Start Your Motherboard Without a Power Button With Just a Screwdriver - 18th Nov 21
Bitcoin & Ethereum 2021 Trend - 18th Nov 21
FREE TRADE How to Get 2 FREE SHARES Fractional Investing Platform and ISA Specs - 18th Nov 21
Inflation Ain’t Transitory – But the Fed’s Credibility Is - 18th Nov 21
The real reason Facebook just went “all in” on the metaverse - 18th Nov 21
Biden Signs a Bill to Revive Infrastructure… and Gold! - 18th Nov 21
Silver vs US Dollar - 17th Nov 21
Silver Supply and Demand Balance - 17th Nov 21
Sentiment Speaks: This Stock Market Makes Absolutely No Sense - 17th Nov 21
Biden Spending to Build Back Stagflation - 17th Nov 21
Meshing Cryptocurrency Wealth Generation With Global Fiat Money Demise - 17th Nov 21
Dow Stock Market Trend Forecast Into Mid 2022 - 16th Nov 21
Stock Market Minor Cycle Correcting - 16th Nov 21
The INFLATION MEGA-TREND - Ripples of Deflation on an Ocean of Inflation! - 16th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Federal Reserve Antics - I Don’t Know Whether to Laugh or Cry

Stock-Markets / Market Manipulation Sep 20, 2013 - 11:20 AM GMT

By: Profit_Confidential

Stock-Markets

Michael Lombardi writes: After yesterday’s Federal Reserve antics, we were taken by the reaction of one well-known writer, who said, “I didn’t know whether to laugh or cry.” That is truly the most apt phrase for the current situation.

To sum up the bigger picture:

Almost 100 years ago to the day, the U.S. “subcontracted” money and the banking system to third parties. These third parties called themselves the “Federal Reserve” but, of the few unchallenged facts one can determine about the actual ownership of the Fed, it becomes clear they are neither “federal” nor a “reserve.”


As an aside, the only two presidents in U.S. history who fought the central banking system tooth and nail were Lincoln and Kennedy. The original “greenback,” named by Lincoln, was named so because it was “free” money not based on debt. This is a historical fact.

Once the Fed was in place, the U.S. moved from an economy that paid for goods with free money, to an economy that paid for goods with debt or promises. Any doubts about this were completely removed in 1971, when Nixon took the U.S. off the gold standard. However, within a year, by 1972, Nixon had put deals in place with Middle Eastern countries that effectively made the greenback the only way to buy oil. This effectively made the buck the world’s reserve currency, and the U.S. was back on top.

By the 1980s, scholars began to notice that the U.S., as well as other countries that had adopted the central banking template, were in danger of imploding via deflation. The computer revolution of the 1990s delayed the evolution of the deflationary scenario temporarily, culminating in the 2000 stock market crash as expectations exceeded reality.

In the same approximate period, “central planners” loosened the chains that for decades had kept the banks in the role as enablers to the system, and allowed the banks to become deal-makers in their own right. This is now considered part of the paradigm by which the U.S. attempted to transition from a manufacturing to a pure service economy, and the derivative market exploded.

Cynics began to note that, when the economy produced a widget or a loaf of bread, the consumer could actually use the widget or eat the bread. Plus, there were jobs to be had making the widget or growing the wheat for the bread. However, when the economy produced profits through 100% paper trades in the invisible derivative market, the gains (which were indeed real) provided benefit to only a very tiny percentage of the economy, a portion which later came to be known as the “1%.” And there, because of the efficiencies in the banking sector, no new jobs were created or even needed, as the older manufacturing jobs continued to disappear.

This was hardly a viable model. Strange and bizarre attempts were made to artificially boost this new “Franken-conomy” by, for example, encouraging anyone with a pulse to buy a home on credit (the so-called NINJA loans—NO INCOME NO JOB NO ASSETS NO PROBLEM).

This, in turn, created yet another “bubble” or Ponzi scheme, whereby neighbors were flipping homes to neighbors at higher and higher prices. The banking sector, in its new role as Master (not Slave) could not resist taking all the new debt being created in the bubble and re-packaging it into a new type of derivative instrument, and then selling it at a profit to less predatory organizations seeking a higher return.

The system collapsed. Books and Hollywood movies have been done about this event. The current issue of Businessweek right now is 100% devoted to the behind-the-scenes stories of this event. The federal government intervened on a scale never before seen in the history of the modern world and used public money to “bail out” the banking sector on the grounds the sector was “too big to fail.”

The banking sector happily accepted the money and gave much of it back to its own people as bonuses for the year. To this day, no executives have been punished for any of this.

Meanwhile, the public was told this was all in their best interest.

Although the banking sector was now in great shape, the rest of the economy was in tatters. Also, the federal government itself was painfully aware that much of the debt service it owed to foreign countries from the decades prior to the crash would become un-payable if rates of interest on that debt rose or remained high. Although this was never made clear to the public, the U.S. was close to bankruptcy.

The Fed then proposed a solution. It would use its money creation power to intervene in credit markets and purchase its own debt. Even now most Americans still do not understand this process. You owe Visa a lot of money. You are a poor risk. Visa charges you 22% a year on the balance. You call Visa and say that, because you are able to print money under the law, you are going to buy back all your debt from them with new money.

Wait, it gets better. Because you have just created such a strong demand market for your own debt (after all, you are buying it) you suggest to Visa that they should not charge you 22%, which is the rate for a poor risk creditor, but rather one percent, which is the rate for a rock-solid credit risk. Visa agrees, and drops your rate to one percent. As word gets around that Visa now considers you a great risk, and is only charging you one percent, everyone else wants to loan you money (because you are such a great risk) and also offers one percent. Bang! One percent is now the new lending rate because of the key trend-setter.

The new ultra-low lending rates really, really help your pals in the banking sector (who can now make money by reinvesting in any investment with a rate of return higher than one percent, which is most of them!) and also helps lower the service costs on your own payments to foreign creditors. You are happy.

Once again, the public is told this is in their best interest (hah!) and it will bring in a new era of prosperity. But the new era of prosperity does not arrive as planned. Jobs disappear. Manufacturing disappears. More Americans are on food stamps than at any prior time in history.

Flash-forward to September 2013. The Dow Jones Industrial Average “has been well managed.” It is up. Gold has been well managed. It is down. Politicians have been demanding that the “heroin” of the low rates (from the self-buying of debt) be removed from the system, because it is addictive and is stifling what little remains of the capitalist system. You want to do this. You announce you will do it (taper). But the numbers, even after being re-defined many times to the point of insanity—ARE STILL BAD. The experts say that removing the medicine will kill the patient.

Against this backdrop, you surprise everyone by saying the current regime of low or manipulated rates will continue until there is improvement. (Well, not quite everyone. Your “pals” knew what was coming and were able to make millions by front-running key markets. Zerohedge asked in an editorial yesterday, “WHO TOLD THE TRADERS IN ADVANCE?”)

Analysts who read your pronouncement and understood the implications “don’t know whether to laugh or cry.”

And now, kind reader, you understand why.

Source -http://www.profitconfidential.com/economic-analysis/i-dont-know-whether-to-laugh-or-cry/

Michael Lombardi, MBA for Profit Confidential

http://www.profitconfidential.com

We publish Profit Confidential daily for our Lombardi Financial customers because we believe many of those reporting today’s financial news simply don’t know what they are telling you! Reporters are trained to tell you the news—not what it can mean for you! What you read in the popular news services, be it the daily newspapers, on the internet or TV, is the news from a “reporter’s opinion.” And there’s the big difference.

With Profit Confidential you are receiving the news with the opinions, commentaries and interpretations of seasoned financial analysts and economists. We analyze the actions of the stock market, precious metals, interest rates, real estate and other investments so we can tell you what we believe today’s financial news will mean for you tomorrow!

© 2013 Copyright Profit Confidential - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 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