Precious Metals

The Fed is a “Pickle”

G1 3

Miles Franklin
sponsored this article by Gary Christenson. The opinions
are his.

Breaking
news: The Wall Street casino created another all-time high for the S&P 500
Index during the week ending February 14. Regular new highs reassure people,
but others fear they are symptoms of another Fed inspired bubble.

The
“pickle” description is explained below. Stay tuned.

The
Federal Reserve is monetizing bonds—directly funding the federal deficit
because congress and the administration spend more than their revenues. The
coming recession will increase the shortfall, expand debt and force more
monetization. Stagflation anyone?

Corporations,
individuals and governments can ill afford higher interest rates. Expect the
Fed to monetize at low interest rates to fund government expenditures. QE4ever
is happening because it must.

What
other gambles exist in the Wall Street casino?

  • The Fed bets it can monetize via QE4ever and
    create minimal consumer price inflation. If not, the BLS will massage statistics.
  • The Fed bets it can increase its balance sheet,
    aid hedge funds, feed Wall Street banks, please President Trump, buy off
    congress, and keep its position of power and influence. Based on a century of
    evidence, they can, for a while longer.
  • The Fed bets it can levitate the stock market
    and boost the economy long enough to reelect President Trump in November 2020.
  • The Fed “prints” currency units, and those
    currency units buy congresspersons, presidents, media corporations, the
    military-industrial-security complex and everyone important. The Fed is betting
    it will last nearly forever.
  • The Fed bets they can continue their “take from
    the poor and give to the rich” program of controlled dollar devaluation for
    many more years.
  • The Fed bets that “Federal Reserve Notes” are
    better than gold because they are “the only game in town,” even though gold
    retains its value and dollars buy less every year, as planned.
  • The Fed bets the existence of Fort Knox gold is
    irrelevant. Total value, at current prices, is less than $300 billion, and the
    Fed created more than $300 billion from thin air in the past several months.
  • The Fed bets it can plan to normalize their
    balance sheet, even though normalization would create a depression. Plans are
    not facts.
  • The Fed bets it can avoid deflation and
    manufacture enough, but not too much, consumer price inflation. Doubtful.

IN
SHORT, THE FED IS A GAMBLER.

The
politicians and economists at the Fed are gambling with the health of the
economy, purchasing power of the dollar, individual savings, Fed credibility, pension
funding, and retirements. The gamble will work poorly for most people, but the Fed
will protect the political and financial elite.

WHAT
DO WE KNOW ABOUT GAMBLERS?

A
few thrive. Most lose money. Some lose jobs, savings, health, marriages, and
their lives. Businesses built Las Vegas casinos from profits generated by customer
losses. Many people dumped a huge number of dollars to create and maintain that
monument to wishful thinking and hopium.

Las
Vegas sounds like the Federal Reserve—a monument to wishful thinking, hopium, greed,
and lobbying power.

GAMBLERS
ANONYMOUS
or GA helps compulsive gamblers. A few clichés from GA:

  • If nothing changes, nothing changes. [If the Fed
    continues “printing,” the devaluation consequences of printing will persist.]
  • Once a cucumber becomes a pickle, it can never
    be a cucumber again. [The Fed has passed the point of no return; it is a pickle.]
  • If a gambler holds a shovel, he will dig himself
    a deeper hole. If he puts the shovel down, it’s possible to climb out. [The Fed
    will not drop their shovel. Their “hole” will get bigger.]

There
are two kinds of gamblers
. A “cucumber” gambles and quits. A “pickle”
gambles, loses too much, and moves to Las Vegas to dig a deeper hole and gamble
more. A pickle’s life usually ends badly.

The
Fed is a pickle.
It has transformed from an occasional gambler, a cucumber,
into a pickle, an incorrigible gambler making bigger bets and blowing larger
bubbles every decade. Cucumbers can become pickles, but once a pickle,
always a pickle.

SO
WHAT? WHO CARES ABOUT VEGETABLES AND FED GAMBLING?

  • The Fed gambled that lower interest rates (near
    zero) would “stimulate” the economy and bail out Wall Street’s bad bets. The
    cost for “Main Street” was large. We should care.
  • But low interest rates made government debt less
    costly to refinance. This encouraged the government to spend even more and
    create massive debts. Ugly consequences must occur.
  • And low interest rates allowed corporations to
    borrow inexpensively, buyback stock and levitate stock prices to unsustainable
    heights. A correction or crash is inevitable. The stock market downdraft will
    hurt many people.
  • Low interest rates minimized income from
    savings. To get income, low interest rates forced people to invest in risky
    vehicles, such as overvalued stocks. Total risk increased. The stock market
    soared, thanks to Fed intrusions, but most profits went to the upper 10%.
  • Governments, individuals and corporations borrowed
    and created excessive debt. That excessive debt is leverage, which makes the
    economy more fragile. A credit crunch, higher interest rates, a pandemic,
    war or other shock could devastate the economy, cash flow, profits, savings,
    investments, available credit, and the purchasing power of the currency.
  • The Fed’s market manipulations and interest rate
    controls encouraged malinvestments and bad decisions. The next recession will
    be worse than if the Fed had intervened less.
  • The Fed claims they saved the global economy
    with at least $16 trillion in below-market loans, swaps, QE and more. The next
    crisis will encourage the Fed to double down. It worked once, so expect a
    repeat performance.
  • The
    Fed created easy credit and expanded bubbles in sovereign debt, stock markets,
    and real estate. The next correction or crash will remove $trillions in equity
    from the stock and bond markets. Real estate may crash again. Bet on the Fed to
    implement QE4ever. Inflate or die!
  • How do we know a recession, correction or
    crash is coming?
    Because bubbles always burst, and recessions follow booms,
    regardless of what politicians and Fed Chairmen want. This is a bubble, and
    it will burst, maybe soon, perhaps after the November election.

QUESTIONS:

  • Why do $13 trillion (or so) of sovereign bonds
    “pay” negative interest? Does this sound like a debt bubble in search of a pin?
  • Why are four tech companies (Amazon, Microsoft, Alphabet,
    and Apple) worth more than $1 trillion each in stock market capitalization?
    Bubble valuations?
  • Why is real estate so expensive in some locations
    that most people can’t afford it? Prices will come down.

What
reset is necessary to restore balance, integrity, and healthy investments to
our markets?

  1. Honest
    money that can’t be created by the banking cartel.
  2. Balanced
    budgets for governments.
  3. Focus
    on manufacturing, not financialization.
  4. Focus
    on real money, not debt and fake fiat currency units.
  5. Will
    any of the above happen? Probably not.

From Alasdair Macleod: “Coronavirus and credit – a perfect storm.”

“This article posits that the spread of the coronavirus coincides with the downturn in the global credit cycle, with potentially catastrophic results.”

From
Ron
Paul
:

“The Fed’s counterfeiting has created the biggest economic bubble in history. A severe economic crisis will be the inevitable result. Indications from Fed Chairman Powell are that more QE will be on the way. Can an increase in the disease succeed in being the cure?”

From
David
Rosenberg
:

This turbocharged debt cycle will end miserably – it’s just a matter of when.

From
Sherrod
Brown at Senate Banking Committee

“Chairman Powell, you and your highly capable staff at the Fed have been proactive and creative in protecting Wall Street and the money markets from this President’s erratic behavior. And I’m glad you have. We’re all appreciative of that. But what I hope to hear from you today is how you’re going to be proactive and use that same level of creativity to make the economy work for everybody else.”

From
Graham
Summers
:

“During his testimony, Chair Powell stated that cutting interest rates won’t work anymore and that the Fed will need to ‘aggressively’ implement QE and other items during the next downturn.”

From
Sven
Henrich
:

“11 years after the financial crisis there is no path to balance sheet normalization, there is no path for rate hikes, there is only the path of more intervention to disproportionally benefit the same people that have benefited for the past 11 years.

“Permanent intervention. That’s their answer. That’s intellectual bankruptcy and exposes central bank policy to be an empty suit.”

Other
ideas about what will fix our fiscal, monetary and political mess are
available, although unlikely. A summary of Doug Casey’s ideas is listed “for
entertainment purposes only.” [his words]

  1. Allow
    the collapse of all zombie corporations – banks, brokers, insurers and
    government contractors.
  2. Abolish
    all regulatory agencies.
  3. Abolish
    the Fed.
  4. Cut
    the military by 90%.
  5. Sell
    most government assets.
  6. Eliminate
    the income tax.
  7. Default
    on the national debt.

Mr.
Casey knows his suggestions will not be implemented.
“If nothing changes,
nothing changes.” No material change is likely, unless a devastating economic
collapse forces change upon the world.

GOT
GOLD? WHAT ABOUT GOD, GRUB AND GUNS? All may be needed to protect savings and
assets.

Miles Franklin
can’t help with God, grub or guns, but they sell gold and silver. Buy both to
protect your assets from the consequences of Fed gambling with our future and
the value of paper dollars. Call 1-800-822-8080.

Gary
Christenson

The
Deviant
Investor

Source: milesfranklin.com

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