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Central Banks Buying Stocks Have Rigged US Stock Market Beyond Recovery

Central banks buying stocks have rigged the stock market to the point of ruin

Central banks buying stocks are effectively nationalizing US corporations just to maintain the illusion that their “recovery” plan is working because they have become the banks that are too big to fail. At first, their novel entry into the stock market was only intended to rescue imperiled corporations, such as General Motors during the first plunge into the Great Recession, but recently their efforts have shifted to propping up the entire stock market via major purchases of the most healthy companies on the market.

Brian Rich, writing for Forbes, describes the economic illusion created by central banks buying stocks during a time of presidential prosecution:

 

The chaos and dysfunction message is loud, but markets aren’t hearing it. The real story is very different. Stocks continue to surge; stock market volatility continues to sit at ten–year (pre–crisis) lows. The interest rate market is much higher than it was before the election, but now quiet and stable. Gold, the fear–of–the–unknown trade, is relatively quiet. This all looks very much like a world that believes a real economic expansion is underway, and that a long–term sustainable global economic recovery has supplanted the shaky post-crisis (central bank–driven) recovery that was teetering back toward recession.

 

In other words, political chaos in the regime is not denting the stock market, because central banks buying stocks are eliminating volatility. Indeed, if you were to gauge the economy at this point by the US stock market, everything must be grand because the Trump Rally has been one of our most exuberant stock rallies.

According to Rich, all of that is a central-bank-created slight of hand intended to distract you from what is happening in politics and throughout the macro economy:

 

Remember, the financial media and Wall Street are easily distractible. Not only do they have short attention spans, but they’ve been trained throughout their careers to find new stories to obsess about…. We have major central banks around the world that continue to print money. These central banks buy assets with that freshly printed money. That means, stocks, bonds and commodities go higher.

 

Distract you from what? Distract you via the roaring success of stocks from the fact that the central banks’ recovery is failing everywhere. As Rich says, the fate of the world now rests on the successful outcome of these new policies because the banks that are now too big to fail are the central banks, themselves. The Fed and its central proxies are creating a grand distraction from a story that would chill America to the bone … if the truth were told.

 

Proofs of central banks buying stocks to rig the market

 

The Federal Reserve already confessed it rigged the stock market last January in hopes of creating a “wealth effect” throughout the US economy. Its plan, confessed by ex-Fed governor Richard Fisher was to front-run the stock market with its forward messaging about bond purchases though which it created massive liquidity that would be invested in stocks.

It worked like this: By promising overnight profits on bonds to its member banks, the Fed knew they would soak up tons of bonds. From there, the Fed hoped the member banks would take the money they made off of buying US bonds and selling them immediately to the Fed for a profit and invest that money in stocks, which they did. (Whether the Fed was just hoping or was secretly directing its member banks to do so could be speculated about endlessly; but they expressed it as “hoping to create a wealth effect.”)

Until now I have been speculating about central banks buying stocks, claiming that was all that was supporting the stock market; but I was also just speculating for years that the Federal Reserve was intentionally front-running the stock market throughout its “recovery.” Now those interventions in the stock market, which fueled the Fed’s recovery throughout the market’s long climb, are a well-known fact, admitted to by the Federal Reserve. My speculation that the long bull market was driven almost entirely by banks was much doubted years ago when I and other writers gathered at Zero Hedge, were claiming that was exactly what the Fed was doing. I couldn’t prove it back then, but everything clearly pointed in that direction, even as many experts denied it.

Last year, I upped my claims to saying that I believed the only thing that terminated the stock crash in January was a move toward even more direct Fed rigging of stock prices via having proxies buy oil (one significant cause of the January crash) and stocks directly. All year long, I speculated that the Fed was merely holding the illusion of recovery together by directly buying select commodities and stocks to drive the markets back up because it was an election year in which they would “pull out all the stops,” In this case that expression doesn’t mean organ stops, but all the market stops, but particularly the biggest stop of all that said central banks should not buy stocks because their capacity to rig the markets is infinite, and they have no investment risk. They can buy and hold forever, and they can create new money to replace any they lose.

As if to confirm my suspicions, the Fed began talking early last year about the possibility of buying stocks directly. However, they implied that would only happen, if at all, in some distant future should the economy crash again. I stated that this thing they would like to be able to do overtly and with everyone’s blessing was something they were already doing covertly. They were merely running the flag up the pole to see if they could move from working through proxies to being able to work openly — testing the nation’s response by putting the idea out there.

Recently Bank of America, the Wall Street Journal and others have begun to state that central banks are buying stocks in huge quantities. The only questions remaining is whether they are doing so at the Fed’s bidding and whether they are doing it primarily to prop up an otherwise failing stock market.

By definition, cornering enough of the market to push it where they want it to go is called “rigging.”

 

What is the scale of central banks buying stocks?

 

The Forbes article from May continues,

 

Among the reports on portfolio holdings yesterday, we heard from the Swiss National Bank…. Switzerland’s central bank has more freshly printed money to put to work every quarter, and has been increasing their allocation to equities dramatically–$80 billion of which is now (as of the end of the first quarter) in U.S. stocks! That’s a 29% bigger stake than they had at the end of 2016. The SNB is the world’s eighth biggest public investor.

 

In one quarter, they upped their stake in US stocks by almost a third, and they are only the eighth-largest public investor! What are the other big guys doing?

Back in April, Bank of America noted that central banks had purchased $1 trillion in assets this year alone. Now, that includes bonds more than it does stocks; but globally it tells us that quantitative easing continues at a massive scale, even as the Fed is unwinding its stimulus (or says it is). Now, you have to know that a lot of that trillion dollars in less than a year is flowing across the ocean to the United States because the US remains the best looking horse in the glue factory. In fact, Marketwatch summed up BofA’s analysis of the situation by saying, “that might be all you need to know about stock and bond market performance in 2017.”

Indeed, that one fact by itself may sum up everything there is to say about why stocks are still rising and why the Trump Rally was as steep as it was and why it is trying for a third time to push a hole through the ceiling. Market watch notes that central banks have gobbled up a “record amount of financial assets” this year. At the time the research was conducted, this would translate into well over $3 trillion annualized, making this the strongest period of central-bank stimulus since 2007! No small claim, since that earlier period was the most extraordinary stimulus burst history had ever seen.

Ask yourself an honest question if you believe in the Fed’s continual recovery narrative: “Is this what recovery looks like — continued record amounts of stimulus forever?”

Yet, the story only gets richer. (Well, for some.)

The newly created money invested by the Swiss National Bank didn’t attempt to buy important but dying companies. It went predominantly to Facebook, Alphabet (Google) and Apple. Is it any wonder, then, that these stocks, known as the FAANG stocks, are the ones that drove the NASDAQ to new heights?

The Swiss National Bank has gone from having about 9% of its holdings in stocks back in 2007 to currently having 22% of its much larger balance sheet in stocks. Last year, when I speculated about all of this, the SNB had already increased its stock holdings by 41% in a year’s time! By the third quarter of 2016, when I was just speculating the central banks were the major driver, the SNB owned $1.7 billion of Apple, $1.2 billion of Microsoft and $1.08 billion of Exxon. (Remember my speculations on the oil connection?) Reuters reported last year that …

 

Switzerland’s central bank now owns more publicly-traded shares in Facebook than Mark Zuckerberg, part of a mushrooming stock portfolio that is likely to grow yet further. The tech giant’s founder and CEO has other ways to control his company: Zuckerberg holds most of his stake in a different class of stock. Nevertheless this example illustrates how the Swiss National Bank has become a multi-billion-dollar equity investor due to its campaign to hold down the Swiss franc.

 

In 2017, it stepped up its purchases!

Is this situation of central banks buying stocks insignificant to US stock prices? Not according to Bank of America:

BofA’s analysts called this “supernova of liquidity” the “only one flow that matters” and the “best explanation” for the double-digit gains in stocks that was happing in the first half of the year. They called it the “the $1 trillion flow that conquers all.” So, now we have moved from my speculating all of last year that central banks buying stocks were the sole factor that was pushing up stocks to Bank of America now proclaiming outright that it is the sole factor that matters in the rise of US stocks — a factor so huge that it dwarfs all other drivers.

 

More evidence of central banks buying stocks in the US

 

Is the Fed in bed with the Chicago Mercantile Exchange? I owe the following research to Chris Martenson on his Peak Prosperity website in an article titled “Where There’s Smoke … There’s central bank manipulation” and to Zero Hedge. I’ll summarize Martenson’s findings here, and you can check out the article if you want more detail:

After Hurricane Sandy, the New York Fed moved part of its markets group to Chicago where the CME is located. The Fed reported that the move was being done as a safety precaution so that all US central-banking operations would not be on a hurricane-prone coast. The move received very little coverage. (Only MSM organization reporting it was Reuters.)

Besides selling commodities and derivatives that central banks might naturally want to trade in (such as gold by which they manipulate the price of gold in order to secure their proprietary product — money), the CME sells futures on US stocks. The algorithms used by the bots that now do 80% of the driving in the US stock market peer into futures like a fortune teller looking into her crystal ball. So, the CME offers a lot of leverage for moving stock prices by steering the bots.

The largest investors the CME markets its operations to are central banks. The CME has a program specifically designed to entice central banks and to facilitate their purchases through discounted fees. That program doesn’t even try to hide its purpose as it is called the “Central Bank Incentive Program.” Incentive programs are reserved for the CMEs highest volume traders.

This past January, the CME wrote the following marketing summary of its Central Bank Incentive Program:

 

The Central Bank Incentive Program (“CBIP”) allows Qualified Participants [notice the caps, indicating the term has a legal definition] to receive discounted fees for their proprietary trading of CME Group Products. (CME Group)

 

They legally define “Qualified Participants” as

 

A non-US central bank, multilateral development bank, multilateral financial institution … or an international organization of central banks. [Said institutions must] execute all trades in the Qualified Participants name.

 

After all, you wouldn’t want a proxy using the name of the ultimate money source if that were the Fed or if it were acting on behalf of the Fed. You wouldn’t want the Fed’s name in any way associated with the trade.

Did the Fed move its markets group to the same place as the CME in order to develop proxy trading relationships with all of the central banks in the world that use the CME for trading in oil and stock futures? Strangely, not a single central bank on earth shows any CME products on its balance sheet; but surely the CME does not have this dedicated program for the sake of serving no one. Since CME incentive programs are reserved for the CME’s highest-volume traders (basically offering a bulk discount), central banks must be purchasing CME products and not disclosing so on their balance sheets. Why the apparent secrecy on the part of central banks as to their participation?

Not long after the Fed’s move to CME Land, Zero Hedge reported finding this little tidbit in one of the job descriptions at the Fed’s new market trading office: “Perform account services to foreign central banks, international agencies, and U.S. government agencies.”

Hmm. The CME group requires that central banks open accounts in their own name but that those accounts must be managed by a …

 

CME Group clearing firm or FCM (Futures Commission Merchant) for their proprietary trades and/or trades done on their behalf by an asset manager.

 

I wonder if people working in the Federal Reserves “markets group” engaged in “account services to foreign central banks” could serve as asset managers for a central bank with an account at the CME.” Just wondering. In which case, might they not help manage those central banks’ purchases in a manner that serves the aims of the Federal Reserve? Just a thought.

Maybe the Fed is just nearby to counsel them or urge them or provide incentives to make certain stock trades at certain times. Maybe the Fed’s move to the place where central banks of the world trade at a time when central banks buying stocks in the US has become a new phenomenon is all one big coincidence. Regardless, central banks are clearly engaged in massive US stock trades. You don’t get those bulk fee discounts any other way.

According to the Reuters article above,

 

The satellite office in the Midwest readies the New York Fed for perhaps the most delicate U.S. interest-rate hike ever. With rates having been near zero for more than six years, and markets flooded with reserves, the Fed will rely on an array of new tools to help it tighten policy, likely later this year.

 

MAYBE the move had less to do with fear created by Hurricane Sandy than it had to do with establishing the new tools that would help the New York Fed achieve intervention readiness for managing its first interest-rate increase without crashing stocks. I suppose one way to safely avoid a market crash when making your much-feared first interest-rate increase would be to get other central banks to jump in with rescue stock purchases if the stock market dared to respond negatively. Remember how the market leaped upward for a few days after the first increase? Was that the central banks jumping in before their new machine was fully calibrated or maybe giving a more-than-necessary boost just to err’ on the safe side?

We may never know, but we now certainly do know that central banks trade US stocks and a lot of it. We also know the CME’s “incentive” program for facilitating central bank stock futures trades (and other kinds of trade) was created in July of 2013, so it, too, is a recent innovation. Interestingly, the program lists one of its core principles as “Prevention of Market Disruption.” (“Plunge Protection Team,” anyone?)

Another sliver of proof comes from the Bank of Finland, which states that it started buying stocks in 2014, still a recent innovation and that it plans to ramp that up:

 

“When yields started to get really low and closer to zero in 2014, we decided to start equity investments,” said Jarno Ilves, head of investments at the Bank of Finland, who said he plans to increase his allocation to stocks. (Zero Hedge)

 

Oh, a couple of other parts of that job description:

 

Interfaces with market participants to obtain context for asset price movements…. Relates developments in financial markets to issues pertaining to financial stability.… Plans and executes transactions in foreign exchange or fixed income markets on behalf of the U.S. monetary authorities, foreign central banks, and other customers.

 

Would those “market participants” be the central banks that are the “Qualified Participants” in the CME’s incentive program, and would the “asset price movements” be intentionally targeted asset price movements, and not just observations of natural market movements?

Just asking.

 

Follow the money to see where central-bank rigging of sticks all ends up

 

The precarious part of this equation is what it shows of the Law of Diminishing returns that I keep harping about as an economic fundamental that cannot be averted even by central banks. The further we have gone into the “recovery,” the greater the amount of global stimulus that has been needed to keep the recovery afloat and the more direct and broad the intervention has had to become. There is no global reduction of stimulus so far. The only thing that has shifted is where the stimulus is coming from.

I have always stated that the recovery program is completely unsustainable and that all signs of life end as soon as the artificial life support is removed. The patient has been dead since 2008. We have gone from the Fed and/or US Treasury buying stocks to save a few key companies (an innovation at the time that was worrisome to many) to numerous central banks buying up large swaths of the market. The stock intervention has become greater, not smaller, because of the Law of Diminishing returns.

You have to ask yourself, as I did about Carmageddon, “What is the end game here?” What happens when central banks need to unwind from these positions and, so, start to flood the market with these stocks. I think the answer is they can no more do that than they can bring their recovery to a successful conclusion (hence the continued massive stimulus a decade after it all began, even as they talk of unwinding). It is absurd that anyone thinks the Fed is unwinding successfully when everyone else has been maintaining or increasing stimulus and when much of that flows to the US.

To see where this all goes, we have only to look at Japan where, again, the Law of Diminishing Returns erodes endlessly at their goals. Japan entered the game of rigging its stock market back in the 1990s, and it is still as desperately stuck in this liquidity trap as ever.

There is no end game. A recent poll of currency reserve managers at reserve banks showed that 80% of the 18 central banks polled plan to increase their investment in stocks. That was almost double the number of those interested in buying corporate bonds.

These people are flying by the seats of their pants to go where no man (or one Yellen) has ever gone before. They are trying to figure their way out as they go, just like Japan, which finds itself endlessly pitched back into new and greater rounds of QE every time it tries to taper. As a result, the Bank of Japan has now become one of the top-five owners in eighty-one companies on the Japan Nikkei 225 index and is close to being the number-one owner in fifty of those companies. (Effectively nationalizing those stocks.)

 

The Bank of Japan (BOJ) has been purchasing assets including exchange-traded funds (ETFs) and thus, indirectly, company stocks…. From a policy perspective, efforts to weaken Japan’s currency by lowering interest rates to negative levels has not worked and has attracted criticism, particularly from financial institutions. It seems that now the emphasis will be on weakening the yen as well as propping up stock prices. In the parlance of the gambling community, the BOJ has become the biggest “whale” in the market, holding a large share of stocks listed on the Tokyo Stock Market. Therefore, many investors have become increasingly focused not on company fundamentals but on the BOJ’s daily purchases…. It’s estimated that the BOJ now owns about 60% of Japan’s domestic ETFs and it’s expected the BOJ could continue purchasing more ETFs through 2017…. Market bulls are happy with the BOJ purchases, but opponents say the central bank is artificially inflating valuations and ironically discouraging companies from becoming more efficient. Interestingly, Japan’s Nikkei 225 Stock Average is actually down more than 8% year-to-date [diminishing returns, anyone?], although one might argue its fate could have been worse without central-bank buying…. Of course, the BOJ’s program is not unique. The Bank of England has a corporate debt purchase program worth about US$13 billion, and the European Central Bank has a similar program. (Franklin Templeton Investments)

 

The Bank of Japan is already buying ETFs at an annual pace of 300 billion yen ($2.4 billion), in addition to its existing annual purchase program worth about 3 trillion yen.

The Swiss, Israeli and Hong Kong central banks have also been or are small-scale investors in stock markets, but more aggressive buying may now be called for….

This could mean ramping up purchases of Japanese stocks to 10 percent of the outstanding total, or about 50 trillion yen, from around 0.5 percent currently.

Such a move would contribute to “pushing up equity prices….

“If the BOJ expands its ETF purchasing plan in June or July, then that could be the trigger for the ECB to look more closely at this,” said JP Morgan’s Panigirtzoglou.

Purchasing stocks would also go some way to supporting bank valuations, which have been hammered in recent months by the low and negative yields and a dismal first quarter trading environment. (Reuters)

 

The hope of central banks is to create a self-sustaining illusion, wherein people will see a market that appears healthy and growing and then jump in and take off where the central bank leaves off. As we can see from Japan, the results are not that positive, and the illusion certainly has never become self-sustaining. It is more of delusion. No central bank has navigated its way out of this so far. China, for having done the same thing, is probably worse off than Japan, truth be known beyond the always-deceptive cover of its double bookkeeping system.

You see, at the end of the day, this is not just stock manipulation; it is CYA time. The Fed’s recovery is a failure because it was never sustainable from its onset. It was a bankrupt idea. For the recovery to be called a success, GDP would have to have improved, and it has done nothing but doggedly follow a downward path for years. CLEARLY NOT A RECOVERY! GDP growth well that is now under 2% can hardly be called “recovery.” The end game was supposed to be that a thriving economy would be able to absorb the Fed’s very gradual unwinding, but that vital economy never emerged.

The central banks have painted themselves into a corner. By their own designs, they get no interest off all the bonds they hold. They cannot sell them without substantially raising the interest on the national debts of the nations they are obligated by charter to serve. (The ECB now owns 40% of Europe’s national debts.)  So, they buy stocks to maintain the illusion of recovery and to have someplace to put the money they keep on their balance sheets. Then they cannot sell those without crashing their own stock markets. So, the game continues to spiral upward in terms of the aggregate of CB investments … as seen in Japan and in China and now the US. Some call it the liquidity trap.

 

History of central banks buying stocks

 

Twenty years ago central banks didn’t even think of buying stocks. It may have happened in odd instances, but it was an anomaly if it did as a way to save a specific bank or credit union. During our first plunge into the Great Recession, the Federal Reserve and the US Treasury bought up large amounts of stock in order to save companies that were either vital to US employment or to financial markets that were dying from their own mistakes. Those were efforts to save specific key corporations.

In subsequent years, the Bank of Japan and the Peoples Bank of China soaked up stocks in massive amounts more or less across the board, not to save specific vital companies but to save their stock markets. The Chinese seized total central control of their market, even mandating that certain speculators stay out of the market, mandating that various proxies buy large volumes of stocks and locking the stocks that were falling worst out of trading.

As a result, they created a perfectly healthy and real stock market, right? No, they created a centrally controlled illusion that is not a free market at all; it is merely a fatalistically predetermined game in which the government has decided “the market,” a term that now requires air quotes, will do well. To achieve that end, the government or its central bank does whatever it needs to in order to keep stocks up. We all know China’s market became completely rigged. We are just now seeing in the mainstream media that the US stock market is also increasingly rigged by central banks buying stocks.

 

What about the official reason banks give for central banks buying stocks?

 

The main reason presented for central banks buying stocks is that all of their economic stimulus has resulted in hugely bloated balance sheets, and they need to invest that money somewhere. To which, I ask, “Why? When did making a profit become an operating objective of central banks, which like to claim they are not about profit making?

Since central banks are the first to claim they are not about making profits, that is a completely illegitimate reason for buying stocks; but that’s the CYA reason banksters give: According to Bank of America Merrill Lynch, nearly $11 trillion in global assets yielded negative interest last year. Thus, central banks are forced to reach for yield in riskier assets like everyone else. Really? That was all their doing. Central banks created that situation intentionally, and the Federal Reserve has been saying it wants to unwind its balance sheet. If so, why does it want to make bigger profits on the money it supposedly wants to unwind? It’s a completely self-contradictory argument. Yet, the experts are readily buying into it.

If you buy their argument, then you have to admit that central-bank policies are hurting the central banks just like they are hurting retirees and everyone else who needs yield in order to survive But why does the bank, which has the power to print money at will, care about earning it the hard way? No, I think it is really entirely about propping up their own stock markets. We know that is why Japan and China have been doing it. Why would the US be any different, even if the Fed hides behind proxies?

In the National Bank of Switzerland’s case, a different reason altogether is presented, which has some truth to it: The Swiss franc is hugely popular when times are bad. When everyone wants to buy francs, the value of the franc is driven up relative to other currencies, which makes it hard for Swiss companies to compete for international trade. To offset this, the Swiss National Bank tries to buy up other currencies. They have to put the foreign money somewhere, so they are investing it in top US companies. In proportion to the size of its national economy, the Swiss National Bank’s balance sheet is the most bloated of any major central bank … and still growing with no end in sight.

A convenient alignment of Fed interests with francish interests.

 

The risks from central banks investing in stocks

 

With central banks having the capacity to create money by decree anytime they want to, investment risk means little to nothing. Lose your money, it ceases to exist. In that case, just create more of it.

With their ability to create unlimited amounts at zero cost (just add some ones and zeros to an account somewhere), their capacity to move markets they choose to invest in is almost unlimited. Essentially, the only limit on how much they can do is inflation, which throughout the Great Recession has never posed as a limiting factor.

If central banks are allowed keep buying stocks as they have been doing, they have the power to nationalize companies and take central control of economies. It also means there is a tail risk that nations that heavily invest in US stocks could for political reasons order their central banks to dump their hoards and flush the US stock market down the toilet of history. They may not be likely to do that, but it certainly opens that possibility. To those who say, “They would never do that because they would lose so much money,” central banks don’t have to care!

As Zero Hedge wrote at the beginning of this year,

 

For those few who are still unfamiliar, this is how central banks who create fiat money out of thin air and for whom “acquisition cost” is a meaningless term, are increasingly nationalizing the equity capital markets. As the WSJ puts it “these central banks care relatively little about whether such investments make profits or losses—though they can matter politically—because they can always print more of their currency. So risk is less important, analysts say.” And since risk was no longer part of the equation, leaving only return, central banks started buying stocks….

So between central banks outbidding each other to buy “risky” assets with “money” that is constantly created at no cost, very soon all other private investors will be crowded out but not before every stock is trading at valuations that even CNBC guests won’t be able to justify….

The bad news, is that as more people realize that a free “market” now only exists in textbooks, and that Soviet-style central planning is the only game in town, confident in price formation will evaporate, in turn pushing even more market participants out of the quote-unquote market, until only central banks are left bidding on each other’s otherwise worthless stock certificates.

At the same time, efforts to invest reserve funds more broadly mean that more markets will be subject to what some critics describe as central-bank distortion, as large and often price-insensitive buyers run the risk of driving up prices and reducing prospective returns for other market participants.

For virtually all central banks, however, the grotesque central planning shift of the past decade means that instead of engaging in monetary policy, the world’s central banks are now activist hedge funds, who are focused first and foremost on “investment management.”

… and at the current rate of expansion, within a few years the world’s monetary authorities who are tasked with “financial stability”, will have acquired a majority of the world’s equity tranche, effectively nationalizing it.

 

Even the Wall Street Journal denies the argument that central banks have to care at all about making a profit. As Russia became more of a free-market economy, the United States has started to look more like the centrally-planned economy of the former Soviet Union. Markets have been centrally manipulated beyond the repair.

Central banks buying stocks applaud their own recovery effortsAs always, the central planners have the arrogance of the elite that causes them to think they have the brilliance to guide and control the markets of entire nations and even the entire world. How can anyone believe that such hubris will not end in total financial collapse?

Even bankers are starting not to believe in the mythos of central bankers. The latest comment on central-bank expertise and power by Deutsche Bank’s Dominic Konstam, who is “fighting the Fed,” said, “If we are right, then [central banks] will be wrong. We are biased towards a view that central bankers are not as powerful as they think they are in terms of delivering to their economic ‘targets.’ Structural forces are more important.”

 

 

  • Au Gratin

    I wish they would just announce to everyone that ALL markets are, and will be managed from now on. I wish I had known this 5 years ago.
    I learned it the hard way as did many others who thought we have free markets.
    As the stock market bull becomes the longest in history, then surpasses that, people will understand what I am saying. Too much is riding on it such as underfunded pensions so they simply will not allow it to correct.
    Same goes for gold and silver rising – not allowed.
    I am sure our monetary authorities knew a time would come when they would have to seize control of everything. I believe that time is here.
    The new reality has no precedent so history is no guide this time.

  • John Keil

    do you think with the anonymity of crypto central banks could be manipulating that market? like when ethereum went from 320 to .10 for a few minutes and shut down trading on bitrex last week? bitcoin has seen massive gains over this same time period as have most cryptos.

    • They certainly have the ability to do it secretively, but the question I have is what would be their purpose in doing it. They would be creating a strong competitor to their longstanding proprietary products. Now, if they thought they could gain 100% ownership of the crypt currency, I could see them doing it in order to turn the platform they most believed in and chose to buy surging popularity. However, I’m not sure they even could own something like Bitcoin. Perhaps you can tell me more about how that would work. If all they had was enough control to to rig the crypto market, that would be a big step down from what the absolute and secret control they have in their national currency.

  • Kim

    Looks like the Prevention of Market Disruption(s) Team better step up.

  • Kim

    It took me a few days to read this, process it and do some of my own research (following your links, reading those, and following more links).

    It’s just amazing- the audacity, you know, the CME, the relocation, “Prevention of Market Disruption”, “Qualified Participants”. . .

    it’s all incredibly fascinating.

    The market needs a new definition. It no longer resembles at all what it once was. It’s taking on a giant Ponzi appearance, but even that description seems inadequate.

    • In fact, now that we’re learning just how directly central banks are rigging stock prices with their nearly unlimited capacity to do so, that is exactly all it is — a Ponzi scheme. They can pump in new rounds until all their bankster friends are out and then let it fall by no longer adding new rounds. It won’t hurt them to write off the losses. HECK, THEY NEED TO WRITE DOWN THEIR BALANCE SHEETS ANYWAY!

      • Kim

        Forgive me if this was already mentioned (and mentioned, and mentioned. . .) we know the central banks are supposed to be the creditor of last resort, but as soon as it stops pumping funny-money into the markets (bonds, stocks, commodities. . .) who then is the bag holder of last resort?

        I was reading a little bit about modern money theory (MMT), those quasi-Keynesians, trillion-dollar-coin strikers, and it seems to me that even if the govt (the FED) could (and surely does) print all the money it wants to print via the central banks, SOMEBODY is not going to get paid. Kinda like the Special Prosecutor: SOMEBODY is going to get arrested for SOMETHING. We just don’t know who, and for what.

        These MMTs can strike all the trillion-dollar coins they wish, and deposit them into all the accounts they wish, but somebody is going to be holding a big empty bag before this is all said and done. What am I missing?

        • Sometimes when the market collapse the bag-holder of last resort is a large number of average people who help create the final rally of irrational exuberance with all their buying because they finally believe the market is going to go up forever. There has to be a large number sellers at that time, too, and those sellers are usually the smart money (as in big money) bailing out just before the Ponzi scheme goes down. But some of the big money isn’t that smart and goes down, too. You’re not missing anything because the big money has been showing signs of leaving this market during the Trump Rally.

          Now, if the central banks go down holding all the stocks, then maybe no one gets hurt. Everyone sold out the CBs, an what really happens if the CB has to write down all the value of all of their stocks. Maybe I’m missing something at that point, but it seems to me that money they pumped into the system just vanishes in write-offs as easily as it came. Hard money doesn’t vanish or paper money, but all of that is only a very tiny part of the money stream. Most money is just ones and zeroes in accounts, and that can disappear overnight. Since sudden disappearance of money cannot create inflation, and since the central banks can declare any amount of replacement money back into existence, I’m not really sure how the central banks can get hurt. However, when those stocks go down, anyone else holding the stocks will certainly get crushed.

  • Bill In Montgomey

    Outstanding work. Please keep it up.

    • Thanks, Bill.

    • Kim

      Agree! I am very appreciative of this blog, too.

      Now, if I could only get advice on my two pugs, I’d be set.

  • GonzoTheBurner

    I remember as a kid sitting in the car, and my dad was complaining about taxes. I said “Why does the government tax people when they are the ones that make the money” He laughed and said that’s not the way it works. Im 32 now, and he still didn’t know what the federal reserve was a few months ago. Tried to tell him, and he said he didn’t want to think about it (thought I was bullshitting). Him and his parents are the ones who racked up the bill and expect to retire on mine and the young ones backs. Suburban wage cucks are going to die a slow painful death. Me and the kids will be breaking our backs just to eat and stay warm, they will likely kill themselves because they were always weak and ignorant (because that’s what it took to sell their kids out to be run through the meat grinder). I know what I think, but do you have a picture you can paint for us on what you think the day-to-day life of the cart-pullers (young ones) will be, Dave. Maybe to give them a little motivation to invest in what will get them through these times?

    • I know what I fear. Because of the huge debt that my more-than-stupid-and-selfish generation put on them, they will pull the plug on all of us when we are helplessly cradled in the old-folks homes that they run but can no longer afford to continue running.

      • GonzoTheBurner

        Not all the old folks are bad, I know a few good ones here in my rural community. Those not willing to go down any of the easy roads will have to band together, young and old. The older folks did try to warn me through out my life. In highschool I had a history teacher named Mr. Escher, and he would say stuff about social security not being there when we grow up and feeling bad for us society is going bankrupt. He saw it all way back when, but we were to young and focused on the now to care. I care now.

        • There are lots of good ones and many who felt all along the way that the government’s deficit spending was completely wrong. So, I am only talking in the aggregate. Collectively, it is a generation that approved politicians who approved profligate spending. Republicans justified it as being about all-important national defense (when really it was a lot more about oil and empire building). Democrats justified it as being all about being sympathetic and generous to the poor when it was never their own money they were being generous with because they always approved far more spending on the poor that they approved in taxes on themselves. Both side blamed the other side, saying it was only the others side’s spending that was the problem. Ridiculous. Spending is spending. Pay for all of it; or stop it! Like Mr. Escher, I’ve been saying since I was a high-school student that social security would not be there by the time I finally reached that age. I haven’t reached that age yet, but that prediction, too, is looking right on track. What will happen is the age by which you qualify to receive SS will keep moving upward as I move nearer like a mirage. If I live long enough, I may eventually reach the mirage, but what is left will be far below what I need just to survive.

          Or we save social security by capping the amount that anyone can receive at a survival level so that the rich don’t get large payouts, even though they’ve paid a lot in and by denying it entirely to those who have other sources of retirement income that will let them easily survive … so that everyone survives, even those who have only social security because they never had enough income to even think about banking some for retirement, thought they lived modestly but had mouths to feed.

  • Au Gratin

    Central banks ARE the government. We’re only figuring this out now.
    And if it wasn’t for the internet, which they didn’t count on, or get control over in time, we would still be in the dark.
    Today there’s a major push to regulate the internet but I can assure you, it has nothing to do with our safety.
    Through taxes they already own everything. We have our numbers.
    It’s the only thing we have. It’s the only thing they fear.

    • V_ANGERY

      Around elves watch yourselves

  • Karen Berger

    I am so glad that I am retired and reasonably well situated. I have nearly none of my money in the stock market. I am not greedy. I believe that all of this boils down to one word…SIN! I could die at any moment. And, one second after I die nothing that I had here will matter. I answer to a higher authority.

  • Spatial Memory

    …As Russia became more of a free-market economy, the United States has started to look more like the centrally-planned economy of the former Soviet Union. Markets have been centrally manipulated beyond the repair….

    No person alive for centuries has ever experienced one single second of a free market economy. ‘They’ tricked you – Brilliantly.

  • Dave, according to ZeroHedge, the Fed is hiking the interest rate in order to rein in stock prices. Except stock prices continue to rise as the market ignores any and all Fed constraints.

    So the Fed cannot control the monster it created. They think that closing the barn door after the horses got out is meaningful. We’re living in a fantasy land of disastrous consequence.

    • Eye read that, too. I’m not sure that is the Fed’s official explanation. From what I’ve seen it is what people are inferring from the things the Fed has said in its typical vague way. So, that’s one explanation: they recognize they’ve inflated a bubble, and they are now trying to deflate it gently.

      I’m a little hesitant to believe that explanation because a year ago, former Fed governor Richard Fisher said they deliberately tried to inflate the stock market. It is, of course possible that they intended it would stop rising, as I thought it would when they started to raise rates. That would be the straightforward view of an honest Fed.

      In my slightly more jaundiced view, the Fed saw the market went crazy the second they raised rates on December 2015, first rising quickly, then falling and then all-out crashing in January. To avoid a crash, they got their friends at other central banks to start buying US stocks. That may have been a win-win with Switzerland, which needed to arrest the fall of the franc. Subsequently, they held some emergency meetings to decide what their longer-term plan was going to be — maybe even to talk about whether they should jump right in with stock purchases of their own. It would appear they settled on getting some of their colleagues at other central banks to stabilize things as being good enough.

      Under the jaundiced view, the Fed now knows their recovery won’t make it without this kind of continual emergency management, which even they know is not sustainable. They learn that as soon as the market fell to pieces in January, 2016. They were willing to make an all-out effort through 2016 to save face and to try to keep Obama-Hillary in office because Trump absolutely terrified globalists like them. (They, of course, hoped they could groom him into working with them if he did win; but why take that chance?) They were certain they would manage to keep him out, but they failed.

      Because they failed to keep an all-out globalist administration in office, they are raising rates to bring the market down, knowing full well that once the hot air starts to go out of the market — something they need to accomplish anyway — it will probably crash. If they can land it gently as ZH articles have said they are trying to do, they probably will do that (as I would suppose they would like to come out looking like successful heroes); but, if it has to crash, far better that it happens on Trump’s watch so they can blame him. (They, of course, will not say it is his fault. They’ll let others say that for them, and there are millions of Democrats ready to jump to that task.) They have to let the air out gently anyway, or everyone will blame them for the crash.

      So, they will do it as slowly as it should be done, maintaining a narrative about how the time is right to unwind gently; but if it all falls apart — as it most certainly will — they will hope the world blames it on Trump and the anti-globalists who elected him.

      I would be the first to admit that could be too cynical and too conspiratorial; but either way, their unwinding is going to crash the market. IF they have their colleagues continue to prop it up by continuing to purchase US stocks, then they are not really unwinding at all, but merely transferring the market’s support from their balance sheet to someone else’s; and I don’t see what their purpose in that would be because, then, they simply have to figure out how to unwind someone else’s balance sheet without crashing the US stock market.

      –David

      • Actually, most ZH articles predict a very hard landing. But when? That’s the $64Trillion question. “)

        • And the question literally does cost about that much!

          • Bill In Montgomey

            Maybe more when you include all of the “unfunded liabilities” on top of current debt and all of its “derivatives.” Of course when hyperinflation kicks in $64 trillion will become $64 trillion to the 100th power – if any figure that massive even exists.

      • Bill In Montgomey

        A few quick points. The stock market has to keep going up to protect all of the pension and insurance funds

        • Originally tax receipts were way down for the year, and it looked like the federal government was going to bottom out sooner than they originally thought. The theory then was that people were holding off on doing anything that would show taxable income if they could until Trump’s plans came to fruition. So, I think it may likely be that the profits that weren’t being taken now are as people are starting to give up on the notion that Trump’s tax plan is going to get passed this year. So, it could just be the backlog catching up.

          • Bill In Montgomey

            Is there a source where “capital gains tax income” is broken down so you can compare Y to Y trends? The stories I read simply say ‘tax receipts up’ but don’t itemize by the type of tax receipts. I think any decline in withholding receipts has been offset by increases in capital gains receipts. I mentioned gains from selling stocks, but I guess you could include gains from real estate sales too.

            I also imagine that a state like California is staying alive because of massive capital gains tax receipts (from property sales and all the tech millionaires cashing in).

            Anyway, if the stock market is up by X over recent years, shouldn’t it be a fairly easy proposition to get a pretty good estimate of how much revenue has been collected by government by taxing profits from any and all stock sales? I imagine this income is pretty significant. Significant enough that if it went away if the stock market crashed, the government would notice.

            I think you have pointed out that tax withholdings are steady, going up a small amount or even declining even though the population of the nation has been increasing at a much higher rate. Certainly, any increase in tax withholdings is far below the increase in the population. Probably like you, I think fewer people are working and those who are working aren’t working as many hours. This tells me income tax receipts from the 99 percent must be far below that needed to fund ever-growing government expernditures.

            • There might be such a site, but I don’t know of it. I think it would make sense that Cap Gains taxes are the big ones coming in now even if the reason is because people were holding back on taking profits and declaring taxes. It would be Cap Gains they were holding back on. Now, if they think the Trump tax plan isn’t going through this year, some might start taking those gain, rather than holding out another year.

              While there is no question that, if the stock market crashes, the government loses lots of revenue, creating revenue for the government is not supposedly one of the federal reserves guiding mandates. It’s twin mandate from congress is to manage inflation and maximize employment. Along the way, they create profits that they turn over to the government; and, of course, EVERYTHING they do affects in some way what the government will make in taxes.

              Regardless, they are raising interest rates this year and have said they will start selling off their assets; that will likely create higher interest on government debt because many of the assets they are selling are government bonds. To sell the larger supply of bonds, bond rates will have to rise, and that will include the government on its new issues in order to compete. At the same time, they have stocks to sell, even if the Fed has not been participating in buying US stocks directly. They have the stocks they acquired when they took over bad companies back in 2008 and 2009. Putting additional stocks on the market could somewhat suppress stock prices, but the main thing that will suppress stock prices is the higher interest rates because another major factor that has been supporting stock prices in recent years has been the enormous number of corporate buybacks, most of which were funded with cheap debt. As interest rises, buybacks are already becoming less popular.

              The bottom line is that the Fed cannot unwind without creating damage. They are in far too deep, and everything they now undo will have the opposite effect from when they did it (naturally). Their plan was that the economy would recover robustly so that the opposite effect would take it from maybe 4.5% GDP growth to 2.5%. However, since they are doing their unwind at about 2%, their unwind could easily take us into recessionary space; and, frankly, the Fed has proven itself the absolute master of creating recessions by raising interest rates. So, they will most likely do that again. It seems to be their MO — to count to much on their ability and need to keep raising and, so, to keep raising until the economy crashes, rather than stopping well ahead of that point.

              I think you are right about income taxes generally not keeping up with population growth, but I have looked into that.

            • Bill In Montgomey

              Amazingly, you are one of the few economic commentators who has devoted time and energy developing a theory that should be obvious – i.e. that governments and central banks are propping up stock markets. They are not just doing this for kicks or just to help their buddies get even richer. They are doing it to maintain the entire “status quo” system. We have reached the point that were the stock market to crash, the whole “game” would be over as far as these people are concerned. As they do not want the entire game to end in horrific fashion, they will do everything to continue it as is. Including “buying” as many stocks as needed both directly and indirectly. Similar to this new requirement is the need to keep the price of the monetary metals suppressed. In short, the game could also not continue if the prices of gold and silver were either sky-rocketing, or even rising steadily. To them – the protectors of the Status Quo – This simply cannot happen.

              I do think the pension funds are crucially important to the system not imploding. States cannot print money and they are on the hook for subsidizing all of these retiree pension funds. If the states’ contributions get too large, everything else the states are obligated to fund takes an eye-opening hit. Prisons, schools, road repairs, fire departments, etc. Of course The Federal Government and the Fed know this and know they don’t want to bail out all 50 states. One way to help make sure the Feds don’t have to do this is to make sure that the pension funds’ stock portfolios continue to appreciate.

              (I’ve read a quote from some California city manager that soon cities – and their revenue-collecting powers – will exist only to pay for the pensions of former employees. I don’t think it’s much of a stretch to include “states” in this sentence. Maybe even the national government. The bubble-expanding growth of the stock markets certainly delays the date this possibility becomes a reality).

              The notion that the federal government has such a vested interest (literally) in an ever-growing number of companies is quite terrifying and ominous for society.

            • I like to put the question as to why central banks own so much precious metal this way: Central banks don’t own gold because they are gold bugs. They own it because its the heaviest ballast that they can throw off if they need to keep their own balloons full of hot air afloat.

              And, as central banks acquire greater and greater private ownership of corporations — bearing in mind that the Fed is actually private with a few federally appointed (central-bank cherry picked) regulators joining the private banking cartel to provide window dressing for the public — the entire media sleeps through the risk of major banks slowly owning the world. When they are not repossessing houses, they are possessing corporations.

  • Auldenemy

    Another Haggith master class in CB insanity. I am not a trader, I have no financial qualifications and zero business skills (I couldn’t sell a fur coat to a freezing man in Alaska). I am Nobody (there are quite a few of us on planet earth). So this Nobody never made any predictions on the S&P500 except one, and it happens to have come true. If a Nobody could work out in 2015 that the S&P500 would continue to head north, then it shows how blatantly obvious the post 2008 CB and private banksters rigging of all markets has become. Some analysts on other sites were predicting an imminent stock market crash (and to be fair, one did come in January 2016 and was the worst new year crash for the S&P500 in its history). It was dealt with on 12 February 2016, with Yellen making long calls to the BOE and BOJ on that day. Some kind of concerted effort was made by for

    • Karen Berger
      • Nice graph. Welcome to the blog, Karen.

        • Karen Berger

          Thank you for the thoughtful insight.

    • steve jones

      I know quite a few big shot “somebodies” who cannot see through the web of lies of the “CB ponzi, death and debt system”, as well as this “Nobody”. Then again, they are paid the big bucks to i) not see it, ii) ignore it or iii) help maintain it.

      • Hi, Steve. Good to see you back in the comments section again. Like you, I remember having a conversation with an old banker friend of mine who firmly believed the size of the national debt would never matter because governments can create money. I imagine he believed that to his dying day; but that is only because his dying day came before the already exponential growth in debt took its steepest upturn at the end of the Bush presidency.

  • Spatial Memory

    Wiksilian Conundrum puts q2 window dressing charade and orderly market unwinding at unprecedented risk levels here. Jmho

    • Spatial Memory

      Here’s the worrisome ‘conundrum’ taking place in the bond market right now
      4 hours ago

      “One of the rules of thumb when investing over long periods of time is that US 10 year treasury yields ought to run close to US nominal GDP (US real GDP plus inflation). As the chart [above] shows, it would appear that US long term rates are too low,” Darby said= Rotflmao!!!

      http://www.cnbc.com/2017/06/26/the-worrisome-bond-market-conundrum.html

      ….even CNBC guests won’t be able to justify….

      Hello CW6. 🙂

  • V_ANGERY

    It seems to me that a lot of the economic policies favoured by the elite stem depend on shifting around a finite amount of wealth from one area to another to patch up leaks in a boat surrounded by an ocean of debt they created.

    They don’t really seem to create any real wealth, and socialist redistribution typically leads either to capital flight or demoralisation. So eventually something will give in my opinion.

    • Yes, and I think the fact that money is created in our system through the issuing of debt by banks undermines the whole concept of creating wealth. It doesn’t even seem fundamentally logical to me that an economy that has to be created on endlessly greater and greater piles of debt in order to keep creating money in the system is going to do anything other than make sure the entire economy is mortgaged out to banksters. I don’t think you can create enduring wealth over endlessly expanding caverns of debt.

      • V_ANGERY

        Agreed. Historically all fiat systems have failed or lose insane amounts of their original value. All the way back to the first governments to debase their coinage.

        Once you have a price on gold you know something is screwy. It means that your system is probably not based on a real asset with any practical. At least American banknotes can be burned as cheap fuel in the event of hyperinflation. Australian banknotes are just plastic.

        This massive ocean of debt really gets to me. I only recently turned 20 and it’s staggering to realise that democracy which was supposed to be the fairest system has devolved into stealing from people who can’t vote yet. Your own children. I didn’t get to vote to pay for the prosperity my country enjoyed 30 years ago.

        I imagine the current global system as a snowy mountain. You know there’s an avalanche building but you can’t know which snowflake will bring it all tumbling down.

        • That is the real economic sin above all others, which I have been harping on for some time: NO LIBERALS deserve to feel even the tiniest bit generous or caring or helpful for supporting welfare when they buy ALL of that welfare with their children’s or grandchildren’s money. NO CONSERVATIVES deserve to feel even the tiniest bit brave, strong or patriotic when they buy ALL of that military strength with their children’s or grandchildren’s money.

          You have awakened (in terms of reaching the age of political awareness) to discover that my generation and the one before mine are handing you the bill that supports all of their feelings of generosity or strength. You got to enjoy NONE of the benefits, and you have awakened to discover you owe ALL of the costs at a level that you will pay for for the rest of your life without ever paying off.

          I have spent my ENTIRE adult life railing against all of this, and have rarely gotten anyone to listen other than the few people (such as those gathered here) who already agree with me. The majority among both Democrats and Republicans REFUSE to see it because they refuse to see themselves as being that horribly selfish. They live in denial.

          • V_ANGERY

            Really all we can do is try to inform the people around us at this point.

            And to reiterate your point, I simply couldn’t initially believe the debt was so large that to pay it off at a survivable speed, the next 5-10 generations of americans would have to be taxed more and recieve less benefits.

            What really convinces me that there will be major political upheaval in the near-ish future is that a majority of this debt MUST be payed over the next 30 or so years which is simply impossible without hyperinflation. We stand today at a similar junction to the old weimar republic in the 1920s. And judging by the keynesians who rule all of the central banks worldwide, we will probably go down a similar route.

            The only difference is that the current batch of global bankers have gotten exceptionally skillfull at this balancing act. But eventually the combined mass of the debt will come crashing down and I don’t want to be in it’s way.

            I might move to the Philippines. Their President Rodrigo Duterte has made it his explicit goal to either remove the Rothschild banking cartel or die trying. He certainly seems to be pulling it off. Funny how Isis invaded a few weeks after he said that.

            • The best solution of all would be that an uprising large enough to succeed demands our politicians wipe out the entire debt. I would call that creative destruction. It would be very painful for all, but the solution to the debt problem is going to be painful anyway, so better that it be painful for those who created it and not for generations hereafter:

              1) Most debt is owed to banks who created this problem in numerous ways. They created the incentives to take out massive debt; they failed at regulating themselves; they created the adjustable-rate mortgages that tease people into taking out more debt than they can afford; etc.

              2) Those who profited most from creating the debt are the banksters who have mortgaged the world for their own benefit. They would be the ones to have to lose everything if it were all eliminated, essentially making them the ones to pay it all back by forgiving all the world’s mortgages.

              3) It’s a completely moral concept. It is, in fact, a biblical concept that was intended to keep large groups of people (such as your generation) from becoming bond slaves to the infernally rich. So, it’s a solution with God’s blessings. (Any time I can let banksters take the entire hit and know it makes God smile; that’s a good day on my calendar!)

              4) While it will wipe out our retirement plans, the retirees are the ones who took on the debt and intended to hand it to you so that they could feel generous with their welfare or strong with their military might. As the ones taking the second biggest impact of the hit, we are the ones who ought to be taking it. Our generation created the mess, let it fall most heavily on us in order to give you a clean start.

              5) While it will hurt us all, it will also empower us all for a new beginning. Even many retirees will be somewhat compensated for their loss of retirement plans by the fact that they also lose their mortgages and keep their homes. (The concept is everyone keeps whatever they now have possession of. The debt is wiped away; the physical assets all remain in our possession.)

              6) The truth is that most retirees are going to find out one day that their retirement plans get wiped out anyway. When the bond bubble and stock bubble burst, their retirement plans will be wiped out automatically. So, big deal! Do it orderly with debt forgiveness.

              I doubt, however, that we have the time to beat the clock on this one. I think creative destruction Jurassic style is going to clobber the whole world sooner, rather than later. What I wish for — but I don’t think it will happen — is that people have the resolve to make absolutely certain that the banksters and politicians lose everything before anyone else does. In other words, when banks to bust, 1) make sure that the banksters don’t just lose the value of their stocks and lose their investment in the banks and lose their bonuses and their pay that year, but that they also cover the depositors with the entirely of their personal possessions before the depositors lose one dime; 2) make sure the largest depositors lose everything before the small depositors lose anything because the largest (i.e., institutional) depositors were in the best position to evaluate the banks and protect themselves.

            • Spatial Memory

              Yikes!!!

            • V_ANGERY

              I agree wholeheartedly

            • Bill In Montgomey

              Yep. The ‘cure’ will be painful, but it will be more painful tomorrow (or in 2027 or 2037) than today. I actually think if we had genuinely free markets and limited government, limited taxes and very few regulations that deter job creation or entreprenuership – the economy would rally or recover far more quickly than people think. I like your suggestions as well. I also think the only way we MIGHT get to the place where these changes can be made is if a real audit of the Fed takes place. Maybe this would expose just how corrupt the entire system is and how many nations and people have been involved and get the attention of the masses. An engaged and enraged press corps would also help make this possible. Anyway, that’s why I push so hard for an audit, which I am certain will not happen.

              More likely, is that the system crashes and the crash is far worse than anything anyone living has ever experienced. This might be enough to make enough people correctly diagnose what caused the crash and resolve to not repeat these mistakes in the start-over phase. This is the “We must hit rock bottom” line of thinking.

              A third scneario (in my mind) is secession from the union by one or more states. I actually would love to see this. As an experminent, let’s let one or more states sececde. See how they carry on and what changes they make. And if the sky falls. And how many Americans begin to flee to these states/new nations.

              Secession – or the threat of secession – might be the thing that actually saves this country.

            • “it will be more painful tomorrow (or in 2027 or 2037”

              Exactly, and that is what I said in 2008 and 2009 when we started down this path — that delaying the pain for maybe another five to ten years was only going to make it far worse to bear. My analogy was that we were plowing the snow straight ahead, instead of off to the side, so the pile in front of the plow would simply get bigger and bigger until the plow could not push it anymore. Like you, I think we will have to hit rock bottom before we ever deal with these problems seriously. Even then the obfuscation, lies, and simply errors of thinking are so great, that I don’t have much hope we’ll move to the right answer. I think people will seek and even larger globalized solution and will blame Trump and the anti-globalists for the failure, saying, “If we had never voted for this guy, we might have made it.” That’s why, in one way, I wanted Hillary to win (not that I could stomach voting for her), but that it would be clear that the globalists are at fault; they are not the ones with the solution. If this goes down on Trump’s watch, as I am certain it is going to do (and sooner, rather than later), I think the majority will blame the president. (They usually do when the economy sinks; I see no reason American’s will respond differently this time. Unfortunately, he is also betraying his supporters is so many ways, that some of them will turn against him, too.)

            • Bill In Montgomey

              I appreciate your good thoughts on the secession scenario. All of these points would be valid if such an event was seriously considered.

              I think this will be seriously considered as seceeding from the union is really the only real leverage that states – and “the people” – have against a centralized federal government that they would violate has voided the pact/Constitution that created the union.. The “details” regarding possible compensation and ownership of plots of land could be worked out, or would be worked out one way or the other.

              I do not think that the U.S. government would use its military to invade and kill the people of seceeding states. Lincoln was willing to do this in 1861. Would a president be willing to do it in, say, 2027? The bigger question is would the soldiers of the U.S. military be willing to kill citizens of other states (and risk beings killed themselves) to “preserve the union?” Of course, there would be no “slavery” moral element this time.

              Of course, Many countries have seceded from other countries peacefully and Americans have seceded from its “Mother nation” on two ocassions, so history also shows it happened before and thus can happen again.

              All of this said, I imagine if one or more states did secede the resulting governments would probably soon resemble the government they just left. But maybe one state would give freedom and liberty and limited-government a real try. Personally, I’d like to observe such an “experiment.”

            • Well, one of the states talking most about seceding is California. It not only already looks like the government is wants to leave; but it looks like the prototype for what that government is becoming.

            • Bill In Montgomey

              I know. A state’s citizens agitating to secede not to have more freedom from a central government – but to offer even more draconian regulations and controls than even the central government is embracing – is a scenario I had not considered until recently.

              As I’ve increasingly adopted a libertarian viewpoint, I have to say let them do it if they want to. I don’t think it would change my life one way or the other. I’m sure I could still visit California and still buy products from California. I guess California could still buy products from, say, Alabama.

              The only question I might have would be if USC and the Tide could still play in football.

              I guess not since Alabama’s legistlature just passed a law that California’s governor does not approve of.

              Seriously, if California did secede that giant sucking sound we would hear would be of people and businesses leaving the state in mass. Some states would get the talents of some smart “refugees.”

            • Bill In Montgomey

              You are picking up on things at age 20 that it took me until age 40 to pick up on. I hope some of your peers are as enlightened as you are. Here in the states, Ron Paul had a strong influence on my thinking about economics, “sound money,” foreign policy and the real nature of government. Two things I admire about him: He views his mission in life as being an educator – educating people like me about issues he has studied greatly. Only by educating and persuading enough people can real change occur. Contrast this approach to that of the typical politico. Also, I’m struck by how optimistic he remains. He often comments that he was inspired by the number of young people he saw at campaign events, especially college students. They are getting this, he says repeatedly. Man, I hope he is right. Then maybe there is hope.

          • Bill In Montgomey

            I think your “railing” is advancing to a different level now. You are on the right track. If nobody else will investigate these people and hold them accountable, looks like you’ve decided, “well, sh*t, I’ll do it myself.” Question everything. Ask direct questions. Report the names of the people and organizations who will not give you any answers.

            • Thanks, and basically, yes. I have a little larger audience now than when I was young (not a huge one by any means), and I’m more focused in my criticism.

      • Auldenemy

        ….and nor do I. It is inverse to all normal practices of capitalism, and in fact is a kind of hidden communism. It is creating economies where by CBs will end up owning most companies!