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Fed Official Confesses Fed Rigged Stock Market — Crash Certain

CNBC Video

In a dynamite interview, Richard Fisher, former president and CEO of the Federal Reserve Bank of Dallas, gave what may be the biggest confession you’ll ever see and hear from a Federal Reserve insider: the Federal Reserve knowingly “front ran” the US stock market recovery (i.e., manipulated the market) and created a huge asset bubble. Fisher expresses certainty that the “juiced” stock market will come down and is coming down now that the Fed has taken its foot off the accelerator … and that it has a long way yet to go.

While that is no news to readers here whose eyes are wide open, a “market put” has been denied by the Fed and by many market advisors. That the market was an overinflated bubble created by the Fed has been denied, too; but Fisher clearly and gleefully admits the Fed created a bubble that will have to deflate now that the Federal Reserve’s stimulus is off.

As one of the members of the Federal Reserve’s FOMC (the Federal Open Market Committee, which sets US monetary policy), Richard Fisher participated in and voted on all of the Fed’s policies of zero interest and quantitative easing, so he has inside knowledge of all the discussions behind the scenes at the Fed.

Here are the significant quotes from Richard Fisher on CNBC’s video:

 

What the Fed did — and I was part of that group — is we front-loaded a tremendous market rally, starting in 2009.

It’s sort of what I call the “reverse Whimpy factor” — give me two hamburgers today for one tomorrow.

I’m not surprised that almost every index you can look at … was down significantly. [Referring to the results in the stock market after the Fed raised rates in December.]

Basically, we had a tremendous rally, and I think there’s a great digestive period that is likely to take place now, and it may continue.

We front-loaded at the Federal Reserve an enormous rally in order to accomplish a wealth effect.

I wouldn’t blame [what is happening in the market’s now] on China. We’re always looking for excuses.

I wasn’t surprised at last year. And I wouldn’t be surprised at a rather fallow performance this year as well.

A lot of people are building cash positions…. Those [investors] that are taking a longer term view are being extremely cautious here, are raising their cash levels, are nervous about the valuations that are in the market.

The values are very richly priced here, so I could see significant downside.

 

Asked if saw a big unwind from the Fed’s 6.5-year policy and what it would look like on the way down, Fisher responded,

I was warning my colleagues, “Don’t go wobbly if we have a 10-20% correction at some point…. Everybody you talk to … has been warning that these markets are heavily priced.

 

Elsewhere Fisher said:

 

The Federal Reserve is a giant weapon that has no ammunition left.

You have to be careful here and frank about what drove the markets…. It was, the Fed, the Fed, the Fed, the European Central Bank, the Japanese Central bank … all quantitatively driven by central bank activity. That’s not the way markets should be working…. They were juiced up by central banks, including the Federal Reserve…. So, I think you have to acknowledge reality.

 

It’s about time for breaking the economic denial. Acknowledging reality is what many in the mainstream media, at the Fed, and among economists and stock analysts refused to do.

Now that the US stock market appears to be crashing, is Richard Fisher’s confession to cover his own hind end, by saying, “I warned the guys about this, and I voted against QE3 because I knew it went too far?” Is he just the first rat to flee the sinking ship, or is he just the most honest of Fed officials who is no longer on the board so feels freer to talk?

Your thoughts? (And please pass the confession along so that it gets lots of play time because you don’t get a confession like this about the inner arguments of the Fed very often. I imagine Yellen is doin’ a little yellin’ right now.)

  • The Fed Audit GAO (Government Accountability Office) report Of the Federal Reserve

    http://www.gao.gov/new.items/d11696.pdf

    They are all just rearranging the deck chairs and faces and everything will still remain the same!

    October 14th, 2015 1% now wealthier than 99% combined; 40% of US children in poverty; 30,000 children poverty-murdered daily.

    Credit Suisse documents in Global Wealth Report 2015 that the world’s wealthiest 1% now own more assets than Earth’s 99% combined.

    http://investmentwatchblog.com/1-now-wealthier-than-99-combined-40-of-us-children-in-poverty-30000-children-poverty-murdered-daily-arrests-of-01-are-when-now/

  • “Who controls the issuance of money controls the government!” Nathan Meyer Rothschild

    Here is the .01% list: Which Corporations Control the World? A surprisingly small number of corporations control massive global market shares. How many of the brands below do you use? It is a Small World at the Top, and the largest banks hold a total of $25.1 trillion dollars or enough to fund the federal U.S. government for over 7 years or roughly $3500 per person on earth.

    http://www.internationalbusinessguide.org/corporations/

  • QEternity

    seems honesty on the part of Fed-sters may be contagious

    https://youtu.be/G4TJ1sZXD18

    “The Fed got it wrong when it predicted a drop in oil prices would be a big boon for the economy. It turned out the world had changed; the US has a lot of jobs connected to the oil industry.”

    The sad part was this was SO easy to understand right as it began, I wondered how they could be spouting off such ridiculous nonsense.

    • I played the video before reading the remainder of your comments and thought right off the same thing you say in your last sentence. How could you NOT see it coming? He spends too much time talking about how the world has changed and how it’s easier to pull the plug on fracked oil. That’s irrelevant. It’s an excuse. The fact is that mining is having the same problems. Aluminum smelting is having the same problems. The problem with bonds is that banks were, again, reckless and so they piled in to high-risk loans. Just as with housing, piling in with loose credit terms (in this case rock-bottom interest on high risk loans) only works so long as everything else remains perfect. I the housing industry it only worked so long as the value of houses was going up. The Fed didn’t see it coming because bankers, being as stupid and greedy as they apparently are, believed the nonsense that housing prices would keep going up. So, they, AGAIN, believed the nonsense that oil prices would keep going up (or, in the very least, stay up).

      When I first figured out that the entire housing market was going to collapse and take the global economy down with it was in 2007 when I saw that housing prices were starting to slump. As I thought it through, I had this big “aha” moment when I realized that, because most of the market was financed with adjustable rate loans, it was going to come down within months. That was because I realized people were affording the adjustable rate loans by knowing they could refi when the interest normalized, or they could resell the house for a lot more; but what would happen if the house wasn’t worth more (no refi because no equity) or what would happen if the price went down (no resale possible either because the owner would be underwater).

      Since I could see it coming in 2007, they certainly should have, being the “experts” who have thousands of paid minions to research and think about these things and being, supposedly, smart people. I wouldnt’ expect most people to connect the dots in 2007 because they have other things to think about; but the Fed was TASKED with thinking about this. They were being grilled by congress about the possibility of a housing bubble. So, they have no excuse at all for not being able to think it through, except that greed and ideology blinded them.

      Same thing now proves exactly to be the case wit the Fed and financing in the oil and mining industry. The assumption was that Chinese growth would continue to expand demand. That was a bad assumption, especially when the Chinese clearly announced two years ago that they planned to dial demand back.

      BUT HERE’S THE IRRELEVANT PART: He says the Fed didn’t see this because they didn’t realize that the big companies could respond by dialing back their production. The big companies are ONLY dialing back production because they are not making any money by producing. They’re losing it. IF THEY COULDN’T DIAL BACK PRODUCTION, they would actually be losing MORE money and defaulting on their loans faster because the more they pump with some of these wells, the more they’re losing. In other words, they would not lose LESS if they were less “nimble,” less able to easily cut curtail production. They’re doing that to save their lives. Otherwise, their whole business would go under. So, it’s actually fortunate for the Fed that they can dial back because the problem, in the face of low oil prices, would be so much worse if they couldn’t. AND THE FED AND ITS BANKS KNEW THE COST OF PRODUCTION ALL ALONG. So, they knew the risk, should prices drop. They just made the same mistake they did in housing by assuming the prices could not drop on a protracted basis — an assumption the banks stayed with even after China announced it was planning to cut GDP back to 7% growth for the longterm.

      • QEternity

        Wait till auto loans start really defaulting…

  • Jorge1927

    In a society where the Rule of Law applied, as soon as Fisher had concluded his interview he would have been met by a couple of law enforcement officers who would have slapped cuffs on him. Following that, a SWAT team would have raided the FED and loaded scores of them into padded wagons. Finally, Bernanke, Yellen, Greenspan and others would have been tracked down and taken to jail to await trial. Alas, ours is *NOT* a society run by the Rule of Law but rather run by a gang of criminals that rape and plunder without any fear of Lady Justice. That, in a nutshell, is why we are in the sorry state that we find ourselves in.

  • QEternity

    The banks were ‘saved’ at the expense of the real economy. We loaded on more debt, squeezed ‘the little guy’ some more, and pulled as much demand forward as we could.

    What could possibly go wrong?

    • Well, I’ll tell ya 😉 in my next article (not that you need to know, as I know you know and could also tell me). The little guy is now squeezed as thin as gold leaf, but he’s not feeling so golden. Meanwhile the banks are looking very gilty (misspelling intended).

      • QEternity

        Dave, I live and breath this stuff. Have for years. What was the most recent stat that like 53% or something of the population would basically fail if they missed one paycheck. That’s just incredible.

        BTW, I highly doubt the banks are in any better condition than in the past. Just another illusion.

        • I’m inclined to agree. The Fed says they are, but the Fed was asleep at the switch last time, so why would we trust their regulation when no one regulates the Fed?

          • QEternity

            And there you have it. As Martin Armstrong says, we are headed toward a government crisis, and I throw the central banksters in with the lot of ‘government’. Like “The Wizard of Oz”, investors will finally see there is NOTHING behind the curtain but bluster and blowhard.

            • The charade is ending. I’m sure we will be as surprised as ever to see how many still cling to their blindness because they are afraid to see the truth. I have to trust that most of those who read here do so because they are not afraid to the truth and would rather see straight, even if they don’t like what the picture looks like. Like you, though, my thinking has been that enough people will start to see past the curtain at this point that we start to move back into reality and out of Wonderland. (Or as you put it, out of Oz.)

  • Fisher also said about the downturn/crash: “That’s a good thing.” Probably because he want to see normalcy restored to the market.

    Of course, he can say that because he’s loaded and has the bread to wait it out until normalcy is restored. I’m feeling the Bern!

    Fisher is also invested in long-term stock gains. But he noted that for many investors, even those who play the long game, they’re converting most of their positions to cash because they’re afraid of what’s coming. No sh*t, Sherlock!

  • jakartaman

    Wow! to hear an insider spill his guts is both refreshing and scary at the same time.
    Most of us know we are on the road to destruction – I always am amazed that it has taken as long as it has.
    My gut tells me that because we have been fudging the books that the pain is going to be much worse?