The Fed Is Lying To Us

"When it becomes serious, you have to lie"

by Chris Martenson

Case in point: On October 4, Federal Reserve Chairman Jerome Powell publicly claimed the US economy is “in a good place”. Yet somehow, despite the US banking system already having approximately $1.5 trillion in reserves, the Fed is suddenly pumping in an additional $60 billion per month to keep things propped up. 

The Fed’s Rescue Was Never Real 

Remember, after a full decade of providing “emergency stimulus measures” the US Federal Reserve stopped its quantitative easing program (aka, printing money) a few years back. 

Mission Accomplished, it declared. We’ve saved the system. 

But that cessation was meaningless. Because the European Central Bank (ECB) stepped right in to take over the Fed’s stimulus baton and started aggressively growing its own balance sheet — keeping the global pool of new money growing.

DYI Quick Comment:  Around and around we go as the QE baton was handed off from one major central bank to another when it stops nobody knows?!

Every trick in the book has been used.  QE. Operation Twist. Jawboning by Bernanke, Yellen and now Powell. More jawboning and tweets from the President and his administration. And now, fresh interest rate cuts and a resumption of QE (but don’t call it that!) by the Fed. 

Collectively, these efforts have horsewhipped stocks and bonds higher and higher over the past decade — which was the intent. But it seems the higher they go (and thus further distorted from their underlying valuation fundamentals), the Fed becomes ever more frightened of a correction.

DYI Quick Comment II:  A mild recession – which I’m currently anticipating will cut the U.S. market by 50%!  You bet the central banks are scared!

The last rate hike was in January and the Fed is now back to lowering rates. With the federal funds rate at a measly 2.0% today and likely headed lower from here, the Fed has practically no wiggle room to speak of at this point:

DYI Quick Comment III:  The Fed’s has more room to cut and lots of it!  A mild recession the Fed’s will push out to 5 year or less Treasury bills/notes negative!

It’s no longer an issue of keeping stock prices attractively high. It’s about accelerating social inequality, the rejection of capitalism and globalization, rising geopolitical divisions, resource scarcity, and the loss of liberty, health and happiness. 

Central planners’ extractive policies are now manifesting in all of these ills.

 DYI:  In the end Mr. Market will have his way bringing back down to earth valuations for stocks and corporate bonds especially high yield/junk bonds.  So hold onto your hats and cash and precious metals better valuations are ahead.  

DYI