by Brandon Smith
The Federal Reserve is an often misunderstood entity, not only in the mainstream, but also in alternative economic circles. There is this ever pervasive fantasy on both sides of the divide that the central bank actually “cares” about forever protecting the US economy, or at least propping up the US economy in an endless game of “kick the can”. While this might be true at times, it is not true ALL the time. Things change, agendas change, and sometimes the Fed’s goal is not to maintain the economy, but to destroy it.
The delusion that the Fed is seeking to kick the can is highly present today after the latest Fed meeting in which the central bank indicated there would be a pause in interest rate hikes in 2019. As I have noted in numerous articles over the past year, the mainstream media and the Fed have made interest rates the focus of every economic discussion, and I believe this was quite deliberate. In the meantime, the Fed balance sheet and its strange relationship to the stock market bubble is mostly ignored.
The word “capitulation” is getting thrown around quite haphazardly in reference to the Fed’s tightening policy. And yet, even now after all the pundits have declared the Fed “in retreat” or “trapped in a Catch-22”, the Fed continues to tighten, and is set to cut balance sheet assets straight through until the end of September. Perhaps my definition of capitulation is different from some people’s.
One would think that if the Fed was in retreat in terms of tightening, that they would actually STOP tightening. This has not happened. Also, one might also expect that if the Fed is going full “dovish” that they would have cut interest rates in March instead of holding them steady at their neutral rate of inflation. This has not happened either. In fact, I’m not exactly sure how anyone can claim with a straight face that the Fed has given up on Quantitative Tightening (QT). Despite the many assumptions out there that the Fed is going to reverse on interest rates, I believe this is wishful thinking and that the Fed will not reverse rates in 2019.
What I do see is the Fed using rhetoric and head fakes to give the impression that they plan to go dovish in the future. And, this is being wrongly interpreted as the Fed being dovish now. But why is the Fed doing this while also continuing to dump its balance sheet? In my view, it is because they are almost finished with the task they set out to accomplish with QT in the first place, and they now have to make it appear as though they want to accommodate as the system breaks down.
In my article ‘Party While You Can – Central Bank Ready To Pop The Everything Bubble’, I outlined a process or tactic which the Fed has used on many occasions in the past: The creation of economic bubbles through inflation and artificially low interest rates, followed by abrupt tightening and higher interest rates into economic weakness. This tactic is highly effective in accomplishing ONE GOAL – financial collapse.
It is the same strategy the Fed used at the beginning of the Great Depression. It is also what the Fed used to trigger the crash of 2008. And, in 2018-2019, the Fed is doing it again.
For over two years now the Fed has been instituting tightening measures after inflating perhaps the largest economic bubble in modern history, also known as “the everything bubble”. The Fed did this despite extreme weakness in economic fundamentals, and is continuing forward until the fourth quarter of this year despite nearly every sector of the economy showing steep declines or a greatly reduced pace of growth.
It is perhaps not a coincidence that the Fed announced it would be cutting assets until September just as the Treasury Yield curve inverted for the first time since 2007. The same thing happened just before the crash and recession that started in 2008. An inverted yield curve is generally a sure sign of a decelerating economy or recession/depression.
What bewilders me are the numerous claims in the mainstream and alternative media that the Fed is somehow oblivious to what it is doing. This is simply not true. Jerome Powell in his statements in the Fed Minutes of October 2012 explains plainly exactly what would happen if and when the Fed tightened policy into weakness. He essentially admits that a crash will occur.
Four years later in the wake of the Trump presidency, Powell somehow conveniently finds himself the Chairman of the Fed, and what does he do? He tightens policy into economic weakness fully aware of what would happen next. I’ll repeat this point again because I don’t think some analysts out there get it: The central bankers KNOW that they are causing a crash. They are doing it deliberately. The question we need to ask is, why?
Over the past ten years the Fed may have acted as a crutch for markets, but this was not their true goal. Rather, the 2008 credit bubble collapse was used by the bankers as a rationale to create an even bigger bubble; a bubble that now encompasses every aspect of our financial structure. QT was needed to pop this bubble, and so the Fed tightened.
For many months now the Fed has stated that the US economy is “strong” and “in recovery” despite the evidence at hand. In March, they did not reverse tightening; they only admitted in an indirect way that the economy is not in recovery. They have until September to finish using QT for a controlled demolition of the Everything Bubble. This is more than enough time.
As noted in recent articles, US housing, autos, credit, retail, and even employment are faltering, while prices in most necessities remain high or are climbing. All that is left is for stock markets to follow the fundamental indicators down (as they usually do). This trend started at the same time as the Fed’s tightening began. All that was needed to set the avalanche in motion were moderate rate hikes and asset cuts.
The timing of the current crash is perfect for the banking elites for a number of reasons. Most importantly, they now have a scapegoat to pin the crash on in the form of “populist movements”. I warned about this ploy way back in early 2016 before the Brexit vote and the presidential elections. It is the reason why I predicted the Brexit vote would succeed and that Donald Trump would be president. The elites needed someone to blame for the collapse of the everything bubble they have been planning for the past 10 years.
The Brexit has turned into a three ring circus, a major distraction from the ultimate intended end game which I have long believed will be a “no deal” scenario. A no deal event is being painted in the mainstream media as a kind of economic doomsday for Europe, and I believe it will be, but not for the reasons they describe. Europe has been set up for a fall, just like the US, for many years now. Government and corporate debt levels are at extreme highs and major banks in Germany and Italy are on the verge of implosion.
A hard Brexit is useful to the elites as a scapegoat for a crash that was going to happen anyway. The bankers don’t plan on facing the music, they want “populist” groups to get the blame.
Trump has been a very effective ally to the banking class. After loading his cabinet with these “swamp creatures”, he then went on to take full credit for the very stock market rally he originally criticized during his campaign as a fraudulent bubble created by central bank stimulus. Then, he started a trade war which has dragged on for many months. It has shown no signs of slowing, and, is providing excellent cover for the Fed as it pulls the plug on life support for the economy.
Trump’s exoneration in terms of the Mueller probe and the Russiagate farce was easy to see coming. I have been saying for the past two years that Trump will never be impeached (or never impeached successfully) exactly because the banking elites WANT him right where he is. Russiagate was meant to drive leftists even further into extremism, it was NOT meant to unseat Trump.
If the markets were to tank this year (in January I predicted they would retest December lows starting at the end of March through April), then Trump would get total credit in the mainstream for the crisis and the Fed would avoid the majority of the blame.
Once again, lets consider the timing of current events – The Fed is tightening until September but pretending as if it is backing off. The yield curve has inverted. Major fundamentals are dropping exponentially. At the same time, we have Europe on the verge of a fabricated crisis in the form of a potential no deal Brexit, and we have US trade negotiations which have been delayed once again, perhaps until June, maybe longer.
I don’t believe in the “perfect storm” as a matter of coincidence, but I do believe according to the evidence that perfect storms can be deliberately engineered. Bottom line, no matter what the mainstream says in the coming months, the Fed knew what it was doing.
There are many advantages to an engineered crash. As noted, it was going to happen eventually anyway. It is simply delusion to think that the central bank can prop up the system forever. We sometimes hear the claim that this was done in Japan, but the Fed increased its balance sheet to $4.5 Trillion dollars in the span of two years – it took the Bank of Japan decades to get to the same level. There comes a point in which stimulus and increased debt provides diminishing returns when trying to hide economic weakness, and the Fed has already hit that point.
The Fed is crashing the system now because they have sovereignty activists and nationalists to point the finger at. They are also crashing the system now because the everything bubble is at its peak. Corporate and consumer debt are at historic highs, and the bankers are looking to cause maximum damage. Finally, the banking establishment has loyalties to certain agendas which are far outside national interests, including the often mentioned Agenda 2030 and the “global economic reset”. These agendas call for greatly increased global centralization of economic power as well as geopolitical power; in other words, global governance.
With chaos comes opportunity for those in power. They don’t let a good crisis go to waste, especially when they created the crisis. I have written extensively about this issue in past articles such as ‘The Economic End Game Explained’ and ‘IMF Reveals Cryptocurrency Is The New World Order End Game’.
No matter what the mainstream media says over the course of this year, I want readers to remember that this was a disaster at least ten years in the making. It is not something that suddenly fell out of the sky. It was not something that was unexpected or unpredictable. It was highly predictable to those with the eyes to see. It was NOT a mistake.
You can contact Brandon Smith at: email@example.com