It’s impossible to dig yourself out of a hole by digging the hole you’re in deeper, while you’re in it.
Tragically, that’s what the Federal Reserve System’s doing to our economic and capitalist future.
By manipulating interest rates so low for so long, and by extension forcing other central banks to cut interest rates increasingly into negative territory, the Fed’s perverted all monetary and fiscal realities.
The end, when it comes, and we’ll know it’s here when a president and party in power actively pursue Modern Monetary Theory (MMT), will be economic ruin and the final conversion of the most successful and powerful capitalist democracy the world’s ever seen, into a sycophantic socialist oligarchy.
About That Bell
The sound you heard Thursday morning, the European Central Bank (ECB) announcing it was cutting its key interest rate by 0.1 percentage point, to minus 0.5%, and restarting the quantitative easing program it just ended in December by buying €20 billion ($22 billion) a month of Eurozone debt, and running the new Quantitative Easing (QE) program “for as long as necessary,” and “only ending shortly before” the central bank starts raising interest rates, was the bell signaling the beginning of the end.
Why the same old panic? Because Eurozone inflation isn’t percolating anywhere near the made-up 2% rate that’s going to make economies magically grow like beanstalks.
Just like their central banker brethren at the Fed, the ECB is selling its drastic interest rate easing and free money mantra against insufficient inflation.
As if 2% inflation means anything. It doesn’t.
It’s a made-up target central banks know we won’t get to because structural changes globally make it impossible to get to.
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All the Fed, the ECB, and central banks are doing is mitigating, by the extension of easy and free money, the effects a full deflation of assets and economies would have wrought had the salutary effects of a self-extinguishing Great Recession cleared economic debris spawned by the financial crisis.
As proof of the fake 2% panacea, a forthcoming ECB study shows negative rates since 2014 have done little to spur growth and inflation. The study showed negative rates boosted inflation by less than 0.1 percentage point a year, with only a slightly bigger impact on Eurozone economies.
“The final showdown has started with a big bang,” said Carsten Brzeski, an economist with ING in Frankfurt. “Despite all market excitement now, the question remains whether this will be enough to get growth and inflation back on track as the real elephant in the room is fiscal policy.”
The ECB’s latest leg in the great race to the bottom will force the Fed to lower rates commensurately, over whatever timeframe they decide, but it will be tit for tat for sure.
Why? Because besides facilitating fiscal fakery, lowering interest rates is a currency manipulation methodology. And the U.S. as much as it touts a “strong dollar” wants to export more and import inflation, which doesn’t happen when countries wage currency wars.
That race to the bottom drives and circuitously is driven by successive rounds of interest rate cuts.
The fake monetization of government debt and illusion of adequately capitalized economies to spur growth will eventually coalesce around the drain that is eventual stagnation and protracted recession.
If lower and lower rates aren’t the answer, and central banks drive rates deeper into negative territory, and there still isn’t enough borrowing to produce growth, central banks will be out of ammunition and the ceding of economic planning and fiscal responsibility to them will be countermanded by politicians who’ll demand they keep the game going by adopting full-fledged MMT.
We aren’t there yet, but we’re headed there.
The Market is DRUNK (and It Could Cost You Your Savings)
We all know how frat parties go – one binge follows another, and before long, you’re stumbling around with a headache and have to clean up the mess you made the night before. That’s exactly what the market has been doing as it relentlessly binges on more and more debt. Now, the debt problem has become so big that it’s set us on the road for disaster. The market’s drunken behavior is just one of the ways that the entire system itself is rigged to fail, and by Christmas, you could lose more than half of your money because of it. To learn more about how this system is rigged to fail, how to protect yourself before the incoming catastrophe, and to sign up for Critical Signals Report, click here.
In the meantime, you can make a lot of money buying long duration bond ETFs when prices dip on temporary yield spikes.
You can make money buying “value” stocks with big dividend yields that increase leverage on their balance sheets with cheaper and cheaper debt to improve their return on equity and profit margins.
You can sell puts on bond ETFs to capture eroding time premium.
And you can short or buy puts on lenders whose business is only making loans.
When the end of the game is in sight, there are a few other plays you can make, and will have to.
You’ll want to know what are the few other plays you can make.
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