by Brandon Smith, Alt Market:
Back in 2018 leading up to Christmas the Federal Reserve began publicly flirting with the notion of ending asset purchases, reducing their balance sheet and committing to an all around taper of stimulus. I wrote about it extensively at the time along with my position that the Fed could and would taper, at least for a short period, which would lead to an accelerated crash of stocks. This did in fact happen, but as we all know the Fed reversed course not long after.
This reversal was seen by many as proof that the Fed would “never” actually pursue a full blown taper and that stimulus measures would go on forever. I believed it could be a dry run for a more aggressive taper event down the road. I argued that the fed would continue stimulus until stagflation became evident to the public, and then a careful game of scapegoating would have to be played and another taper would commence.
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It is also important to understand that there were many in the economic media that also argued that because the dollar is the preeminent world reserve currency the central bank could print dollars perpetually without inflationary consequences. This notion became a basic fundamental of Modern Monetary Theory (MMT).
Of course, MMT is utter nonsense. There are ALWAYS consequences for overt money creation even for world reserve currencies. It doesn’t matter if you try to price your national currency without comparisons to foreign currencies; under globalism and economic interdependency the velocity of money matters. If a country is printing with wild abandon, those dollars are going to buy less labor, less production and less goods overseas. Nothing defeats the laws of supply and demand, not even strategic debt creation.
We are now at that stage again where price inflation tied to money printing is clashing with the stock market’s complete reliance on stimulus to stay afloat. There are some that continue to claim the Fed will never sacrifice the markets by tapering. I say the Fed does not actually care, it is only waiting for the right time to pull the plug on the US economy.
In previous articles I have described the Federal Reserve as an “ideological suicide bomber.” There are some people out there that still do not grasp this concept and it boggles my mind to see how they rationalize many of the fed’s actions, as if the people running the fed are “oblivious” to the damage they are doing.
First and foremost, no, the Fed is not motivated by profits, at least not primarily. The Fed is able to print wealth at will, they don’t care about profits – They care about power and centralization. Would they sacrifice “the golden goose” of US markets in order to gain more power and full bore globalism? Absolutely. Would central bankers sacrifice the dollar and blow up the Fed as an institution in order to force a global currency system on the masses? There is no doubt; they’ve put the US economy at risk in the past in order to get more centralization.
At the onset of the Great Depression, the Fed increased interest rates into weakness after years of artificially stimulating markets with low cost debt. This prolonged the deflationary crash for many years. It was not until many decades later when former Fed chair Ben Bernanke gave a speech celebrating economist Milton Friedman’s 90th birthday that a central bank official finally admitted that the organization was culpable for the Depression debacle.
“In short, according to Friedman and Schwartz, because of institutional changes and misguided doctrines, the banking panics of the Great Contraction were much more severe and widespread than would have normally occurred during a downturn.
Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.” – Ben Bernanke, 2002
What Ben Bernanke did not admit to was that the engineered deflationary crisis greatly benefited the allies of the Fed – The international corporate bankers. Companies like JP Morgan and Chase National were suddenly in a prime position to seize unlimited power in the US. But how?
Not many Americans today realize that a hundred years ago banking was highly decentralized. In fact, there were thousands of smaller community banks all across the country back then that were not attached to titanic banks like JP Morgan. One of the biggest coups of the Great Depression was that at least 9000 of these small banks were destroyed by the crash or absorbed by the international banks. There was no longer any local competition to the major corporations, they now dominated all lending markets.
If you wanted a loan or if you wanted to open a savings account after the depression, you would have to go through a small handful of mega-conglomerates. Complete centralization of finance had been achieved and the Fed helped to make this happen. Was this purely coincidence and negligence on the part of the Fed, or, did they know exactly what they were doing?
To be clear, the Catch-22 of taper vs stimulus and stagflation vs deflationary collapse is only a trap for the American public, it is NOT a trap for the Fed.
Again, they don’t ultimately care about the survival of the US economy. They’ve been destroying our financial system and currency slowly for over 100 years and they have been speeding up the process ever since the crash of 2008; why would they suddenly want to save it now? The Fed may taper or they may not. I predict they will once again officially taper at least for a time. Whether they continue to hold to that taper and for how long is a separate question. In either case, the dollar’s purchasing power still comes under threat and price inflation will still be the result.
If the Fed sticks with asset purchases and ultra-low interest rates, then the current stagflationary crisis will continue to grow. If Biden gets his “Build Back Better Plan” then expect even more price inflation as infrastructure projects turn into helicopter money much like the covid lockdowns turned into months of covid checks. This stimulus only served to undermine the labor market (To this day many states still have some covid welfare programs in place on top of regular unemployment benefits, which has fueled worker shortages – Only in the past month are all benefits starting to run out).
Helicopter money also leads to an explosion in demand for goods which then leads to higher prices as manufacturing cannot keep up. That is to say, more dollars chasing less goods leads to higher prices.
Furthermore, the central bank is the largest investor in US bonds. If the Fed raises interest rates into weakness and tapers asset purchases, then we may see a repeat of 2018 when the yield curve started to flatten. This means that short term treasury bonds will end up with the same yield as long term bonds and investment in long term bonds will fall. A dumping of long term bonds causes a decline in currency value and a flood of dollars back to the US. Result? Inflation.
No matter what the Fed does the consequence will be inflationary/stagflationary. The only difference is that if they taper there will also be an immediate decline in stocks and the overall crash will happen faster. The presumption by some is that a reversal in stocks will lure more money into the dollar, and this might happen for a short period of time. However, as mentioned if the yield curve flattens or there is instability in Treasury bonds there will be no saving the dollar either.
The bigger question is, why would the central bank trigger this crisis deliberately?
The Fed does not serve the purposes of the US, it serves the purposes of international banks and the agenda of globalism. It is openly admitted that national central banks take their marching orders from an entity called the Bank for International Settlements, and this includes the Fed. The BIS is a consortium of central banks from around the world that dictate overall central bank policy. If you have ever wondered how it’s possible for most national central banks to change policy in unison the way they tend to do instead of all of them reacting differently to economic problems, this is how.
There is a very interesting article published by Harpers Magazine in 1983 called ‘Ruling The World Of Money’ which I recommend people read if they want more insight into how the BIS operates and controls the decisions of regular central banks.