The Fed’s Dilemma Is Our Problem!

Affiliate Link Disclosure

A road sign showing two arrows leading in different directions and a label below that says dilemmaPundit Bill Bonner predicts:

“Most likely, the stock market will crash sometime before the 2020 election. We can’t know when.

…. The end of the stock market boom, too, is unpredictable. But each passing day brings us a day closer to when it will crash and burn.”

Bonner’s prediction is in line with our 2017 article, “An Economic Showdown Is Looming”. I suggested the Fed, part of the deep state, was setting up President Trump to be another Herbert Hoover. The deep state wants the market to crash so they can crush capitalism and further consolidate federal government control.

Fed Chair Yellen announced the Fed would begin raising rates in 2015. After one early increase and she held off until after the election. Despite Ms. Yellen’s vehement objections to the politics of holding off on rate increases before the election, it sure looked political.

CNN Money reports:

Federal Reserve Chair Janet Yellen gave the U.S. economy a nearly clean bill of health, two days before Donald Trump arrives at the White House. (Emphasis mine)

“Now, it’s fair to say, the economy is near maximum employment and inflation is moving toward our goal.”

CNBC quoted Ms. Yellen:

“Would I say there will never, ever be another financial crisis? …. That would be going too far but I do think we’re much safer and I hope that it will not be in our lifetimes and I don’t believe it will be.”

In 2018, the Atlantic Article, “The Federal Reserve Chair Is Ignoring President Trump”, Fed chairman Powell reassured us:

“Not every business cycle is going to last forever, but no reason to believe this cycle can’t go on for quite some time, effectively indefinitely.”

The underlying Fed message – Bush broke it, Obama fixed it, and now Trump is responsible.

The Fed has a symbiotic relationship with congress, enabling them to spend without consequences. In return, congress allows the Fed (owned by member banks) to create the illusion of acting in the best interest of the public while bankers make billions.

Mr. Powell’s aggressive rate hikes were affecting the market.

Nasdaq reports, “Fed Chair Speech Cost Investors $1.5 Trillion”:

“…. On average, JPMorgan analysts say, the three news conferences hosted by Powell to clarify Fed rate-setting meetings have heralded an average 0.44 percentage point drop in the S&P 500…and those losses have totaled some $1.5 trillion so far….”

The losses were temporary as the market rebounded – so far!

Mr. Bonner adds:

“A crash in the stock market now would immediately be followed by a recession. Unemployment would soar to 8%… maybe 10%. The Dow would be cut in half.”

“Economic independence is the foundation of the only sort of freedom worth a damn.”

– H. L. Mencken

Using the JP Morgan math, If a .44% drop equals $500 billion, would investors lose over $50 trillion in a 50% decline?

The World Bank estimates the market capitalization of listed domestic US companies to be a little over $30 trillion. JP Morgan math must be taking into consideration a whole lot of other investments that would be affected by a market decline.

Pension funds and 401k’s are already in deep trouble. A sudden, major market drop would destroy much of the remaining wealth of all Americans. No president would be likely to survive that kind of catastrophe. Politicians of all flavors should fear citizens storming the castle.

When To File For Social Security Special Report – Click Here!

On the verge

Ambrose Evans-Pritchard reports, “IMF (International Money Fund) fears the world’s financial system is even more destructive than in 2008”:

“The International Monetary Fund has presented us with a Gothic horror show. The world’s financial system is more stretched, unstable, and dangerous than it was on the eve of the Lehman crisis.

…. Even a moderate shock would cause company “debt-at-risk” – that is, where the debtors do not earn enough to cover interest payments – to spiral up to $19 trillion. This is a staggering 40 percent of corporate liabilities.

…. Pension funds and insurers that used to act as a stabilizing buffer in financial crises are now part of the problem and might next time join the panic rush for narrow exits.”

The Fed’s dilemma

While the Fed might be part of the deep state, their primary purpose is to protect the banks and their profits. If the goal is to create another Great Depression to oust the president, how much will it cost the banks to get the job done?

The Institute for Local Self-Reliance provides a graphic showing just how big the Giant Banks Are.

Share of U.S. Deposits, 2018

The top banks control 53% of all bank deposits. In 1999 the Clinton administration repealed the Glass-Steagall Act, allowing banks to turn into investment (casino) banks.

Commercial Banks in the U.S.

The concentration of wealth has been mind-boggling. There are around 4,500 banks, down from almost 9,000 in 1999. 35 banks hold assets over $100 billion. The remaining 47% of banking assets are distributed among the other 4,465 banks. Who do you think the Fed listens to?

The big casino banks are now primarily investment and brokerage houses. Statista tells us there is approximately $18 trillion invested in mutual funds.

Average fees for equity funds are .55% and actively managed funds .76%. Estimating an average fee basis of .60%, should the market drop in half, $9 trillion, Wall Street would lose $540 billion in fees annually.

Using JP Morgan math, destroying over $50 trillion in wealth would cause a race for the exits and liquidity crisis, unlike anything the world has ever seen.

Gold Silver Ad

But wait, there’s more!

Demon Ocracy’s recent article “Derivates: The Unregulated Global Casino for Banks” is downright scary:

“…. A derivative is a legal bet (contract) that derives its value from another asset, such as the future or current value of oil, government bonds or anything else. …. A derivative buys you the option (but not the obligation) to buy oil in 6 months for today’s price/any agreed upon price, hoping that oil will cost more in the future. (I’ll bet you it’ll cost more in 6 months). Derivatives can also be used as insurance, betting that a loan will or won’t default before a given date. So, it’s a big betting system, like a Casino. …. The system is not regulated what-so-ever…. (Emphasis mine)

Most large banks try to prevent smaller investors from gaining access to the derivative market on the basis of there is too much risk. The derivative market has blown into a galactic bubble, just like the real estate bubble or stock market bubble. …. While derivatives are traded in microseconds by computers, we really don’t know what will trigger the crash or when it will happen, but considering the global financial crisis this system is in for tough time, that will be catastrophic for the world financial system.”

The 9 largest banks hold a total of $228.72 trillion in derivatives – approximately 3 times the world economy. No government in the world has money for this bailout. (Emphasis mine)

Wall Street on Parade writes, Mega Banks Tell SEC: Derivatives Could Blow Up Wall Street Again:

“Experience, however, shows that neither a state nor a bank ever have had the unrestricted power of issuing paper money without abusing that power; in all states, therefore, the issue of paper money ought to be under some check and control; and none seems so proper for that purpose as that of subjecting the issuers of paper money to the obligation of paying their notes either in gold coin or bullion.”

– David Ricardo

“According to JPMorgan’s 10K, it has sold credit derivative protection on $177 billion of “subinvestment grade” i.e., junk credits. When you sell credit protection, you are on the hook to pay the buyer if that entity goes belly up. When you are selling credit protection on subinvestment grade entities, it is far more likely that they could go belly up.

JPMorgan Chase will likely argue that they have also purchased boatloads of credit derivatives, which might be on the same entities, but there is no way for anyone to accurately predict if this mega bank has aligned these risks correctly. Even the bank admits that, writing in its 10K the following:

JPMorgan Chase could incur significant losses arising from concentrations of credit and market risk. JPMorgan Chase is exposed to greater credit and market risk to the extent that groupings of its clients or counterparties….”

As mentioned, “Even a moderate shock would cause company “debt-at-risk” – that is, where the debtors do not earn enough to cover interest payments – to spiral up to $19 trillion. This is a staggering 40 percent of corporate liabilities.” What’re the chances of JP Morgan Chase bond derivatives going belly up?

While the casino banks hold almost $229 trillion in derivatives, someone holds the other side of the bet. There will be a winner and a loser.

I’m reminded of the time we camped next to a small casino in northern Minnesota. I went to the craps table, got hot, and made $3,000. I went to cash out and the cashier said, “I don’t have the money!” I freaked out for a moment and she said, “I have to go upstairs to get it.”

You never win the bet until you get paid!

The Fed’s dilemma is this. Are the banks willing to absorb mind-boggling losses to allow the market to crash for political reasons, hoping for another bailout? Will they continue with more QE, fueling bank profits while driving interest rates down?

Either choice is going to hurt the average American.

The Fed may have decided to keep the illusion going.

Total Assets Chart

A year after Mr. Powell assured us, “…. No reason to believe this cycle can’t go on for quite some time, effectively indefinitely”, he has quickly reversed course.

“Economic planning, regulation, and intervention pave the way to totalitarianism by building a power structure that will inevitably be seized by the most power-hungry and unscrupulous.”

– Friedrich Hayek

Market crash or more Quantitative Easing with low interest rates? Pick your poison.

Unless there is massive public outrage, the thought of allowing the casino banks to eat their own losses, and change the law to separate investment banks from commercial banks will not be considered.

Congress will protect themselves and the banks. After the 2008 crisis, they passed laws creating the illusion of fixing things. If you think the political upheaval is bad now, just wait, its gonna get worse! It’s just a matter of time…

Tim Plaehn The Dividend Hunter

For more information, check out my website or follow me on FaceBook.

Until next time…

Dennis

www.MillerOnTheMoney.com

“Economic independence is the foundation of the only sort of freedom worth a damn.” – H. L. Mencken

This post contains affiliate links. If you make a purchase after clicking these links, we will earn a commission that goes to help keep Miller on the Money running. Thank you for your support!

Click to visit the TBP Store for Great TBP Merchandise

21
Leave a Reply

avatar
  Subscribe  
Notify of
Solutions Are Obvious
Solutions Are Obvious

The goal is to create a greater depression and they could care less about the presidency.

“Give me control of a nation’s money and I care not who makes it’s laws.” – Mayer Amschel Bauer Rothschild

The latest REPO ‘NOT QE’ is simply a last minute gift to the banks so they have adequate funds to purchase everything worth owning that they don’t already own or control once they pull the plug on the economy. They are using a variant of the same playbook used during the Great Depression.

The way to look at this is to consider that REPO money is supposed to be an overnight loan or at most a very short term loan. If the loans are to be repaid in short order, then why does the FED have to continuously pump counterfeit into the system. The repaid loan from yesterday should provide the liquidity for the REPO loan tonight, shouldn’t it?

Although I can no longer find the PLOS ONE article from a few years ago, the major financial institutions already own the bulk of the world via interconnected ownership, controlling boards of directors and other machinations. Newsweek, I believe did a follow up article on the PLOS ONE analysis performed by a group out of Switzerland that painstakingly discovered who owns what.

yahsure
yahsure

That was a fun article. Cheered me right up. while the media pushes Global warming lie as the big problem we face I believe An Economic collapse is something to be more concerned with.

Dan
Dan

Good to see your writing again, Dennis.
I’m sure not all readers here will agree, but it’s a tough crowd.
Most probably have a good grasp already of what you explain, with scant few “Ah-hah’s!” of discovery.
But if some of what you write opens up a few sets of eyeballs and educates a bit more,
then perhaps they’ll follow you a little more closely, with a desire to learn more.
Hope you’re on the road to recovery, and your health has improved.

Dennis Miller
Dennis Miller

Hi Dan,

Thanks for the concern. The chemo port and stomach tube were removed last week. Progress is slow, but it is progress.

I do appreciate the kind words and encouragement.

Best regards,
Dennis Miller

mark
mark

“While the casino banks hold almost $229 trillion in derivatives, someone holds the other side of the bet. There will be a winner and a loser”.

Yep…not me.

Those of us who see it coming will avoid the direct shrapnel. But we all will suffer from the concussion…and the world will change, dramatically.

Those who are prepared will do what the prepared always do…survive.

Those who are either herd clueless or grasshoppers who play the fiddle, will do what stupid herds and smug grasshoppers always do in the prophetic winter…the 7 lean years, starve.

Glock-N-Load

Mark…I’M HOLDING!!!

Glock-N-Load

I want to make a wager. No stock market crash before the election. Any takers?

mark
mark

Donkey,

Some days I think the crash is just around the corner…and some days I think its just around the corner and down the street, and some days I think it is sneaking up behind me.

The only think I know for sure is it coming.

I just need five more months to build this house and I’ll be 95% Galt, behind two gates and 15 punji pits in the markamo.

This is interesting…written by a Marxist mouthpiece…he has a lot right and in the end you will read what they plan.

https://www.thestranger.com/slog/2019/05/30/40347971/americans-are-not-prepared-for-the-coming-mother-of-all-stock-market-crashes

Glock-N-Load

I’ll check it out. Btw, you don’t post often enough. I understand though.

mark
mark

I pop in and out all the time, but I write for a magazine, 3,000 word stories (I write by rewrite so it takes 9,000 words to get 3,000) and a running 1,000 to 1,500 word business blog…but I keep up…its the place to be!

Fleabaggs
Fleabaggs

Mark..
Something not being taken into account by the average person reading about 200 trillion in derivative coming home when things crash is the fact that now, everything has been turned into a derivative by being used as collateral. If a car or a house or farm has a loan it’s likely that the car or the loan itself has used as collateral for another loan. It was being done in Japan before the crash over there. Bankers admit that unwinding any derivative to discover the party responsible is nearly impossible when large numbers are in play. We may not even have a financial crash in stocks and bonds at first. If too many futures options are short the market overseas before Wall street opens, they may just not open. Prices will be frozen in space and become worthless but without the market ever reopening. Chicago and Tokyo would cooperate as well but if we made the chicoms mad they may allow Hong Kong futures to open and allow the price to implode.

mark
mark

Flea,

I recently moved most of what I don’t already have ‘stashed’ from a decent bank, BB&T (they are now merging with Sun Trust – I’m out of there) into a small Credit Union. Every month I siphon out a couple of grand…quietly and under the radar.

My wife’s’ 401k is in short term treasuries. Between both I’m building a house/last stand, and in 5 months will be 95 % Galt.

I think you are right about China & the IMF & Gold and another 911 inside attack, but this one on the Dollar and all of U.S.

Anonymousse
Anonymousse

I learned a hard lesson in ’08. Due to my particular circumstances (working for a major financial institution), in addition to losing all the “gains” in my 401k, I lost about 60% of my principal (based on some back of the napkin calculations).

Never again.

If I can’t touch it or hold it in my hand, it doesn’t exist and I don’t own it. I’ve spent the last 10+ years working to deleverage and pay off my home etc. Just hoping I can complete the process before they yank the rug out from under us again.

Stay healthy, stay flexible, and most of all understand that when this everything bubble bursts it’ll likely wipe everybody out who counts their “wealth” in “soft assets”. Just my humble opinion.

Lager
Lager

It’s amazing how much extra capital is available, if still working, but free and clear of a mortgage payment, a car payment, and any home equity / home improvement loan payments.
Still, the wolves of expenses have to be fed.
-Utilities; insurance – medical, car, home, disability, umbrella, life, etc.
-property taxes, licenses, and fees;
-food and fuel;
-maintenance costs;
-retirement planning contributions or alt. savings
-alms, as 10% seed money, if one believes in such practices, and
Lastly, vacation / entertainment.

All those costs continually headed higher, as inflation, with interest income and wages stagnant, or drifting lower.

Sure isn’t easy for Joe Lunchbucket.

Avoiding credit debt is crucial.

And distinguishing needs vs. wants, to corral deficit spending.

Living within ones means is achievable, but takes sustained discipline that far too many lack.
The earlier in life it is learned, the faster one can escape debt slavery, and cast away the shackles.
Got junk silver? Items for barter?

End of poetic waxing.
Good day.

AWBBBB
AWBBBB

The Justice Dept began reinterpreting Glass-Stegall under Reagan, Carter was a pause in the Nixon/China game after taking the US completely off the gold standard in 1972, culminating from the Federal Reserve Act in 1913. A lot of other nastiness in 1913 during the Wilson administration, including the FRA, 14A, and 15A.

At the end of the day, repeal and repudiate is the way forward. Let anyone try to get in Trump’s way. A second Trump administration will lower the boom on deficit spending. The government will get shut down. We need Trump supporters in Congress, and a market crash, war, or currency crisis will have an opposite effect of what the satanic world order intends.

gilberts
gilberts

I don’t think they’re prepared for the monster they’re going to unleash. I can’t imagine the anarchy and chaos that will explode across the nation. Ferfal, for instance, described a 3 month period of chaos before people started to realize the new normal in Argentina, and learned to pattern their lives around potential kidnappers, never stopping at red lights at night, keeping distance around yourself in public, etc.

I can’t help thinking if they actually do this before 2020, they won’t be hurting Trump at all. They’ll be giving him the ammunition needed to declare a state of emergency and to put further elections on hold indefinitely until the chaos has passed. Think about that- the powers have already been given to him for just such an eventuality. He would regretfully, sorrowfully, with crocodile tears and promises to make everything better than ever before, accept the solemn powers granted him for times of national emergency to be president-for-the-duration. Of course, it might bite TPTB in the ass, since he could literally do ANYTHING he wanted to, including national sweeps to get all his enemies. They might want to think again about waiting for a more mediocre stuffed shirt to be in office, because Trump never forgets his enemies.

But I think the chaos could lead to something good. I hope the chaos ends big government. With no cash and no credit and no support, I suspect most of Uncle Sugar’s crazy programs and plans will be DOA. My dream is this impending chaos stops the security state right in its tracks. Everything not directly connected to survival in this moment will, I like to imagine, fall by the wayside and be abandoned. Despite the certain chaos in the streets, people will have a great deal more freedom than they have in some time. I traveled to Russia and the Ukraine back in the late 90s. Despite all the horror stories, I felt like they had a lot more freedom than we did. You could do whatever you wanted. Seatbelts were not required. Smoking was OK anywhere. There were grocery stores, but there were a lot more open air markets where people bought and sold whatever they wanted. You could literally buy anything from anyone. One guy offered me an RPG for 10K. Too expensive for my taste; that was what I would expect to pay in my own nation, not Odessa. Unfortunately, I think we’ll also be like them in the collapsing infrastructure aspect. The Odessa Times carried warnings for foreigners with advice like, “Ladies should not walk on the sidewalk in high heels due to the many cracks in the cement.” There were also warnings to keep bottles of water by the toilet due to frequent power failures, which were common in the evenings.

Another benefit of this national gotterdammerung will be the certain death of the welfare state. They might have bread lines, and I expect some sort of programs a’la The Depression to stave off actual starvation, but the free chicken wings and free fake hair blacks sing praises to on youtube will be over. I assume govt will hand out boxes of staples, like flour and rice and oil, and millions of lazy idiots will starve to death as a result. We might see millions of illegals run back to the border with the freebies cut off. Maybe not, but I can still dream.

I don’t think we will be able to avoid this crisis and, I suspect, many of us will die or suffer greatly in it, but I think in the long run it will be good for us. It will definitely strip the deception out of the system. And it will ruin the financial parasites who have constructed the system we’re trapped in. And it will ruin a lot of politicians. And it will destroy a lot of banks. I hope we get thousands of suicides on Wall Street. I hope mobs chase down every business criminal they can find. The free money machine will no longer be funding all the irregularities and excesses of the system, so I expect college, if it exists, will be a reasonable price. Poor adults will no longer be getting paid to make poor children. Cars will likely no longer be under strict design controls and, I hope, will have a more reasonable price. Food will probably be at a premium, but without the current system’s monkeyshines, at least farmers will know their precise value. Lots of things will change, but I think in the long run it will benefit us. Sort of like taking a dump after a nasty bout of constipation, I think we’ll all be able to breath a sigh of relief once it has passed.

gilberts
gilberts

PS- If you have not found a place for yourself to weather the chaos, get on it doggon’ it. We moved away from DC and we’re so happy now where we are. We left an urban butthole for a productive agricultural region. We got a nice garden in this year. I experimented with a permaculture bed. My permaculture test bed did wayyy better than the larger traditional garden bed. I got a fence up to keep our critters in and other critters out. I planted fruit trees and berry bushes. Next year, I’ll be doing more. In a few years, this place is going to be awesome. And it’s quiet. No more DC chaos and daily out-of-control crime from our uninvited undocumented guests.

Also, get yourself a stockpile of food. It’s not that bad if you add in some spares of what you’re already buying when you go shopping. Buy the closeouts and dry staples in bulk. If you got money, buy case lots. If you got a lot of money, buy a year supply in #10 cans. I’ve gone both routes, but at least by buying non-perishables I already like, I will be able to enjoy it if I really need it. If you hate kippered herrings and rice, why would you stock a year of it?

I occasionally go to dollar store and stock up on the meds and spices and cleaning stuff. One thing that I think nobody considers- foot stuff. Foot powder, fungal cream and spray. You won’t need it until you’re burning and itchy and you realize you don’t have it. That’s a really uncomfortable feeling. Toothpaste, mouthwash, and toothbrushes, too. Sewing kits. Duck tape. Batteries and flashlights. I get this for me and I keep an additional bin full of these items to trade. Go price a sewing kit some time. They used to be a buck. The current price might surprise you.

And booze. I stock those $7 bottles for the same purpose. I got a little bit of everything. Some top shelf, a lot of bottom. And wine. I got bottles and boxes. The connoisseurs aren’t snotty about the boxes-they keep air out of the wine better than corks. They stack better, too. I’ve stocked beer in the past, but, sadly, it didn’t survive pilfering by yours truly. I don’t like paying high prices for one of the easiest things in the world to make, so my near-term plan is to get started in brewing my own. Not Mr. Beer, but real beer brewing. Chocolate. I learned one thing last winter- chocolate, at least our cheap US chocolate, does not survive cold storage well. I stored it for years indoors and it was fine, but last winter I put it in the garage. The cold forces the oils out of the chocolate, creating a mess, and leaves the chocolate dessicated and ugly. It tastes the same, but is crumbly and looks gross. You live and learn.

mark
mark

Good Posts gilberts…we are walking down the same path.

Check into a Harvest Right Food Freeze fryer. Besides canning, freezing, and a root cellar its another way to store the abundance your are creating for the future.

After TSHTF it will be invaluable. I’m getting ready to start putting buckets of steaks away.

Home

gilberts
gilberts

Thanks for the link. I’ve been interested for a while, it’s just a bit pricey for my taste. There’s a preparedness tore near where I live that has them. The owner does demos every week, showing different foods he’s processed.
My buddy had one. His only complaints were the oil getting contaminated and requiring frequent filtration. I think he had an accident one time that blew half-frozen food all over his basement.
I’ve been using a LEM stainless steel dehydrator, which is pretty good. I like to dry apples, bananas, and pears. Young one loves ’em.

mark
mark

No doubt, it is pricey, the $500 sale price comes in and out…to be honest I already have a massive amount of long term stored food and production capability already in place.

I see it as food insurance…as when TSHTF it’s price will be worth it.

I buy a lot of legacy ‘stuff’ for my family.

Fleabaggs
Fleabaggs

Gilberts.
“at least farmers will know their precise value”. Amen. As it is now, nobody nowhere knows the real price of anything. There is no price discovery because of those monkeyshines. Subsidies, tax breaks, regulations ad nauseum. Dad used to bring home boards full of nails from teardowns and have me pound them out and straighten them. Then put them in soup cans and stack the boards. We new the price of nails and boards. Not so today but they will as you say.

Discover more from The Burning Platform

Subscribe now to keep reading and get access to the full archive.

Continue reading