The Fed’s Gone “ALL IN”… Here’s What’s to Come

Phoenix Capital Research's picture

Well, it’s
official, Ben Bernanke has officially gone “all in” regarding currency
devaluation in the name of pumping the stock market. I have to admit, even
though I knew this was going to happen, I’m still in shock. After all, it’s not
every day that you see a superpower collapse and lose its reserve currency
status courtesy of a deranged mad man.


of your feelings on the matter, these are the cards the Fed has dealt us, so
rather than devote space to critiquing our insane and corrupt Fed Chairman, I
thought it better to devote today’s article to detailing what is to come as a
result of the Fed’s policies.


QE 1
Failed, so Will QE 2= The Fed Doesn’t Have a Clue


This is the most obvious, but most commentators
seem to be missing it. We were all sold on QE 1 as being an emergency measure meant to keep the
financial world afloat. Now we find out that the Fed considers this formerly
emergency measure to be one of its normal tools (it’s not yet been a year since
QE 1 ended and we’ve already got QE lite and QE 2).


In plain terms, the Fed’s decision to
implement QE 2 proves not only that QE 1 FAILED but that the Fed doesn’t really
have a clue on how to fix the financial system. Bernanke is literally making it
up as he goes, which is truly horrifying if you consider the implications of


In light of this, you can bet that the
Financial Crisis is nowhere near over. QE 1 failed. QE 2 will fails as well.


Moreover, you can bet that additional,
GREATER systemic risks will be playing out in the next year. The problems that
caused the 2008 disaster are still out there. The only difference between now
and back then is that we’re running out of band-aids to cover them up.


intervention, trade wars, and volatility will become the norm


Currencies are relative, meaning their
values move relative to each other (you can’t have the Euro, Yen AND Dollar go
to ZERO at the same time). In light of this, the Fed has officially challenged
the major currencies’ central banks to a game of “devaluation chicken.” Expect
to see most world central banks, especially the Bank of Japan, European Central
Bank, and China’s central bank engage in similar practices of their own. All of
these guys have a choice, devalue or kill exports. They’ve all proven to choose
the former time and again.


Expect to see trade wars break out in
a major way as this game progresses. We’ve already had a hint of this with
China’s decision to cut rare earth elements exports. However, this is just the
tip of the iceberg. Things are going to be getting very messy going forward.
Expect to see capital controls, tariffs, and outright trade wars break out. As
a result, prices of various goods will skyrocket (remember the rice scare in
2008?). Which brings me to the final point…


is coming sooner rather than later


The cost of just about everything is
going to be going up… a LOT.  In
fact it already has. Most commodity prices are up double digits in the last
year. This is just the beginning. Combine currency devaluation with trade wars
and you’ve got a recipe for MASSIVE spikes in the price of goods.


In plain terms, the cost of living in
the US will be going up sharply in the coming months. Oil is already at $86 a
barrel. Food costs are rising. In fact, virtually everything but housing prices
has risen in the last year. Forget future inflation, inflation is coming NOW.
We’ve already seen the Dollar lost 15% of its value in the last six months.


What will this do to a middle class
whose savings have already been eviscerated by two stock Crashes, no private
job growth, and a 37% decline in the US Dollar in the last ten years?


Also, what will this do to corporate
profits? Companies will either try to pass their increased costs off on
consumers (good luck with that) OR will eat the costs themselves. Either way
profit margins will shrink. I’m guessing the “stocks are cheap” crowd didn’t
bother considering whether those future earnings projections were illusory.


The simplest
forecast from this would be a portfolio emphasizing commodities particularly
precious metals and agriculture: the former will be the largest beneficiary of
ongoing currency debasement while the latter is one of the few areas in the
investment world where an argument for “value” can be made.


Stocks will
also benefit from all of this in the near-term. But in the long-term look for
pronounced weakness, particularly as trade wars and increased costs bite into
profit margins.


Also, on a
final note, it’s a good time to stockpile on food and other items that are
sensitive to price increases. I suggest having 3 months worth of supplies on
hand at all times. The worst thing that can happen is everything turns out fine
and you eat the food anyway.



Graham Summers


PS. If
you’re worried about the future of the financial markets and have yet to take
steps to prepare for the Second Round of the Financial Crisis… I highly suggest
you download my FREE Special Report specifying exactly how to prepare for
what’s to come.


I call it The Financial Crisis “Round Two” Survival
. And its 17 pages contain a wealth of information about portfolio
protection, which investments to own and how to take out Catastrophe Insurance
on the stock market (this “insurance” paid out triple digit gains in the Autumn
of 2008).


Again, this
is all 100% FREE. To pick up your copy today, got to
and click on FREE REPORTS.







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Grand Supercycle's picture

Daily and weekly overbought charts are now at an extreme level. Similar extreme conditions were detected before the correction started in mid 2007.

Shylockracy's picture

It is a deadly mistake to think that the FED or their political stooges are good-willed but incompetent.

They are neither.

John_Coltrane's picture

Its only 2-3 months until the debt ceiling will need to be raised overwise treasurey won't be able to issue any new debt for the FED to buy.  And Rand Paul has promished a filibuster and there won't be 60 votes to end it (I expect him to read Atlas Shrugged in full).  So, this QE may not really go beyond Jan or Feb.-has the market factored this in?  I think not.  Meanwhile his dad will be annoying Ben weekly in the house as he now runs the oversight committee on monetary policy and the FED.  Should be a lot of fun to watch.

Kina's picture

What is on the horizon is a China black swan event. It has been all beer and roses so far, and hype of the ever growing China economy. It is inevitable that some sizeable hiccup will emerge. China will come to a point where it HAS to deal with some problems created over the past 5 years. Don't know what it will be ... but that shoe has to drop some time.

That could be a domino maybe that sets things moving.


Snidley Whipsnae's picture

As trade barriers and currency controls are imposed there is a very real possibility that more countries will be unwilling to settle in dollars.

The SCO member countries and observers are already circumventing dollar settlement in favor of local currency settlement.

The BRICs that are not SCO members are going in the same direction. Brazil/China, for instance.

A world wide trade war, if it does not morph into a shooting war, will not help the dollar's case for remaing the world settlement currency, imo.

The key to watch is oil settlement currency.

Fraud-Esq's picture

Do you really think the U.S. will lose its reserve currency status bc of this? I don't see it YET. We're talking US military and petrodollar, every other possible reserve currency wired to blow. Gold and Silver, sure, absolutely. But - I don't see this as the end of dollar hegemony. We're years away from that fork, IMHO. I'm rooting for success but hedging with metal. I truly believe failure means more war and misery for everyone, as we impose the Dollar regime across more resources.  

Gloomy's picture

Tonight:  Oil now over 87. Silver still rising. Nikkei up over 3%. We are in the teeth of the storm now.

MGA_1's picture

When QE2 doesn't work, the fed will do QE3, then QE4.  There's no way they can stomach a crash in the market and the resulting economic down turn.  Inflation is coming - get prepared.

jeff montanye's picture

could all this "the fed won't let the stock market go down" be what lets sentiment get "bullish" and so, finally, lets the stock market go down convincingly, ending this bear market rally?

Client 9's picture

Bernanke is all-in to pump up the flailing economy and job market. Not to pump stocks. Please understand his motives, misguided as they may be.

Fraud-Esq's picture

That can't be true. The best thing for rapid recovery in jobs was a painful purge of the richest people and bondholders in society, those who made bad bets. You'd have a wild employment boom filling in that vacuum.This is, by definition, a zombie economy. It has that name for a reason. Creating jobs is certainly not the priority of those CHOOSING a zombie economy, it's PRESERVING wealth.  

jeff montanye's picture

so true.  it can't be said too often.  it is the clearest indication of the malign intent and incompetence of the bush and obama administrations and their bosses.

Everyman's picture

I think Christmas will be the black swan.  I base this on TV sales and price cuts even before we get to Christmas sales.  Nobody is buying them and that is probably the most purchased piece of consumer commidity there is.  A flat panel TV is the bellweather consumer purchase, and the distributors are all cutting prices before Christmas.

I think the sales numbers will be straggeringly bad, and will usher in the inflation of groceries, gas, and energy.  Then the pitchforks will be replaced by pissed off armed citizens wanting Bernake's Blood

Gloomy's picture

You are dead wrong. Weak economy and corporate profits=more money printing=more partying like its 1999,

Caviar Emptor's picture

Here's a tell: try this one for size: Americans are cord cutting in droves:

Over 500,000 people quit cable last quarter 

Caviar Emptor's picture

I think today was a game changer. The economic calculus changed materially and palpably. And the table stakes were raised to levels that can best be described as spooky. The rallies that we saw across the globe were more akin to hysteria than just the usual free-money cattle call. Everything must skyrocket or else be considered irrelevant. 

More than anything what stands out is that the Fed is now gambling with the rent money. If QE fails, the distortions in the economy don't just get a little worse. The cost of each policy mistake has gone up dramatically. And black swans are in spawning season everywhere you look. 


jeff montanye's picture

as daneric observes today, the last three times the bollinger band got ripped upside like today were right before significant legs down in the fall of '08 (and not right before the bottom either).  check out the graphs of bullish and bearish sentiment there.  unique spread.  imo the equity market is weak as a sick kitten now.

Founders Keeper's picture

That's just great.  Rising assets prices, i.e. stock prices. A melt up.

Now how am I suppose to convince family and friends their savings and retirement are in grave danger.  My family and friends know little to nothing about banking, credit, fiat currency, inflation, the Fed, etc.  For two years I've been sounding the alarm.  Sometimes subtly.  Sometimes emphatically.

Now, I look like the fool. Anymore "alarm" coming from me will fall on deaf ears. 

It distresses me, that my family and friends are unprepared for the financial/economic/political storm now unfolding.

StychoKiller's picture

All ya gotta do is force them to answer a coupla quick questions:

1.  Can you spend your way out of debt?

2. If the answer is no, then what makes you THINK that the Govt can?

ReeferMac's picture


Do you take a cash-advance on your credit-card every month to make the minimum payment on said card? Of course not, that's lunacy. Ben and Timmy do it every week, however.....

Azwethinkweiz's picture

One more peep about Austrian economics coming from me around family or friends and I'm likely to be locked up in a padded cell fashioning a straightjacket. The higher the market goes, the more fool I look. Only the insane are sane really almost have to be crazy to see through the distorted shades of misconception which have for so long been reality.

Snidley Whipsnae's picture

I use the simple tactic of showing people how the equities markets have done the past ten years when priced in gold or other PMs.

A simple chart will do, and they seem to grasp the comparison.

If people fail to act after they understand how stocks have performed priced in gold, then there is little else one can do. Of course, most of the people do not want to pay the large tax burden and penalties for the initial withdrawal from various retirement scams.

akak's picture

That's just great.  Rising assets prices, i.e. stock prices. A melt up.

Now how am I suppose to convince family and friends their savings and retirement are in grave danger. 

Maybe they will get it when food prices are up 20 or 30% in one year, and the price of a gallon of gas tops $6.00, all while their incomes remain flat (or fall).  Maybe.

Cleanclog's picture

I feel your pain.  In a similar boat.

Q.  If the Fed is composed of member banks - how does it expand its balance sheet by so much without additional contributions of said member banks (many of which were bk in essence 2 years ago, and some would argue are still bk today?)

rukidding's picture

Google is the evil it seeks not to be

1. The misinformation on MSM is widespread. Views represented here are systematically silenced on MSM. What does it say of a world renown newspapers publishing views from a ill-educated, Nobel laureate economist?

2. The spread of such misinformation is in no small part due to search engines. Google has the lion's share of the market and therefore the most guilty.

Search engines ranked their results by context and popularity. However, this method perpetuate popular half truths and lies framed in the right context. Since MSM is prevailing and therefore "popular", views from alternative media tend to be buried on the 100th page of a Google search. A Google news search on "QE2" renders none of the criticism seen here. Tipping the scales further against our favour, a similar search of "QE2 criticism" shows some sanctioned, mild disapproval.

I am no computer scientist and I have no idea how this could be averted. However, we went to the moon and back (or did we?). This should be a piece of cake for the elite brains.

Coldfire's picture

"...the Fed doesn’t really have a clue on how to fix the financial system."

Like it's one system.

Everyman's picture

"Well, at least there is no longer any doubt whatsoever who has the real power in the USA and the Western world. It's right there for all to see."

That is true, but we also know who the ENEMY is as well.  These people committed crimes against the Citizens of America, and they need to go down, legally or beyond legality, justice must be served.  If things go as Mr. Summers says, there will be civil unrest and spiking crime, anyway.  What everyone forgets is the erosion of society during economic downturns.  Theft, con games, and robberies all occur more frequently as well as assaults, divorce, rapes, and chemical abuse.  These are the legacies of Ben Bernake's policies.  Save the stock market for the elites and let the rest of America suck shit. 

This is why I say BEN BERNAKE should  DIE for the pain he has caused and the additional pain yet to come with his buddies The oompa lumpa Alfonz Mizilo, Hank Paulsen, Timmy Geitner, Lord Blankfiend all should die as well for their crimes against humanity for a few god damn bucks.

I mean c'mon, are these really any kind of "great men" or are the ones that silence them the great men?  These "great men" are not captians of industry, they are thieves, and not even very creative ones at that.  The only theivery they commit is totally without risk or sport, and they only play in a rigged casino, screwing the rest of us.

We are in those times people, choices will need to be made, actions need to be taken.  YOU WILL need to decide what side you are on and just how far you are willing to go to fight evil incarnate.

I have been writing emails, ascking for convictions, ionvestigations, what action must I take?  Do we let them push us to violent opposition, or do we cower and accept their " criminal aristocracy"?

IS THERE ANOTHER WAY?  I would love to see one.  But we will see if voting works.  Hopefully Ron Paul will investigate and take this corrupt organization called the Federal Reserve down.  I have checked out a lot of blogs, and what I have written here is TAME compares to the outright threats I have read on other blogs.  I just wish these people Karmic will, and really hope bad thing befall these assholes.


That is the question.  How do each of us chose to respond to this corrupt arrogant asshole?

PrDtR's picture

Annex the FED, audit it then shut it down.. send in the TANKS!   Stick 'em with the payment of their own insanity..

DoChenRollingBearing's picture

That was a great rant.  I hope the ripples go far and wide...

Hang The Fed's picture

Currency devaluation only serves one purpose, destroy the meager wealth of the many for the benefit of few who have amassed a sufficient amount so as to render the relative devaluation insignificant.  If a devaluation/trade war breaks out, then it will be a near-certainty that the big boys at the table are calling in their chips..."The Masque of the Red Death" is a great allegory for how lizards like the Fed and their ilk behave.

Rhodin's picture

Corrupt, yes. Insane, maybe.

Ben creates megabucks out of nothing. His employers, the banksters get free money, the taxpayers get to pay them interest on their free money, so the politicians can spend to pay off their contributors (mostly those same banksters) and almost everyone gets a pay cut in purchasing power.  Then they do it again. BOHICA Amerika!

SO  How long can they get away with this?  Are they actually planning a collapse?  Sure they enjoy the big rip-off, but it looks to end badly for all, including them.  They might plan a surprise or two, but creating millions of unemployed, broke, angry people, with more ammo than food, cannot be good for anyone.




Everyman's picture

"SO  How long can they get away with this?   They might plan a surprise or two, but creating millions of unemployed, broke, angry people, with more ammo than food, cannot be good for anyone."

How long until one of those people you speak of get pushed down so far they lose it, and take matters to a "final solution" to assuage their despair, depression, and pain?

Benny just put a big target on his head for those menatly unstable people driven to extremes by this depression from the lies and corruption.



Hang The Fed's picture

I would surmise that they can get away with it forever, so long as they can find squirming, easily-corrupted, self-important lackeys to do the wetwork.  Look at the fucking TSA...have you ever seen a bigger batch of morons with such an ability to disregard any of your civil rights?  America has "the greatest military in the world."  Okay, why do we suddenly need all of these departments that hire DMV rejects, arm them, and then dispatch them in a contextual framework in which they can ride roughshod over ordinary citizens?

If the bullets do start flying one day, don't think that it'll be storming the castle with rams and torches and pitchforks while the fobs within cower and gnaw on their fingernails.  Charles Manson proved that some of the most sadistic and self-delusional assholes born can inflict a tremendous amount of damage without having to pull the trigger themselves.  Hahaha, even sociopathy and mayhem can be "outsourced."

akak's picture

Where is The Troll Formerly Known as JohnnyBravo to tell us how all this government/central bank insanity is somehow "for our own good"?  Yeah, that, and also that the price of gold is imminently going to fall to $1.45 as the dollar skyrockets in value in the midst of the first ever fiat currency hyperdeflation.  What an imagination that boy had!

DoChenRollingBearing's picture

Bravo was fired by his sort of foil JonNadler, Sr. VP at JPM.

ZH-er JonNadler is still around and has a great sense of humor.  Look for him in gold & silver threads!

Actually, I think Bravo dropped out because he got run over by the gold train.  He said something like if gold gets to $1300 he was gone.  And he is.

IMO, we NEED articulate (but well mannered) gold bears to help us rethink our positions all the time.  But, even someone REAL GOOD at dissing gold is not going to change what I do: buy precious metals!

StychoKiller's picture

When the Politicians seriously start jawboning phasing out Social Security, Medicare/Medicaid, closing military bases, and ACTUALLY CUTTING the size of Govt, then there might be cause to be concerned for the price of PMs to go down, but not until.

jeff montanye's picture

that and unruly, currency-waving crowds outside bullion dealers being refused entrance (inverse bank run).  

akak's picture

I agree with you, actually --- an echo chamber serves nobody's best interests.  But Jonny, unlike Jon Nadler (the real one, not the poster here) was not particularly articulate, although his arguments were just as flimsy, disingenuous and irrelevant as those of the real Nadler.  An intelligent, honest, civil goldbear would be most welcome here --- but in the current climate, the possession of intelligence and honesty might very well preclude the very existence of such a person in the first place.

strannick's picture

Yo AK in AK;

Did you notice how the Senior Analyst failed to address the rises in the metals today as he opted instead for a montage of gold seminar speeches?

I've been expelled from KitcoLand for having the termidity to question Y2KNOT's interpretation of Censorship v. Editting.



jeff montanye's picture


DukkButt's picture

Robert Prechter makes the argument for deflation from the point of view that credit is a part of the total money supply and that there is going to be huge credit destruction and default. The mortgage mess and all the (highly leveraged) credit derivatives that are out there are two of the obvious cases that come to mind. If he is right (admittedly a big if) then the destruction of all that credit and the resultant margin calls (or the equivalent for whatever market is involved) would be highly deflationary as assets are sold to cover the margin calls/credit defaults. The big question is can the central banks keep pumping hard enough to cover the deflationary pressures. They have so far. Consider what you would have said 5 years ago if someone had predicted the current state of government debt and Fed QE. You (and me, certainly) would have said we would be gripped by massive inflation and a collapsing dollar. The fact that it hasn't happened is testament to the powerful deflationary forces that are at work. Since the correlation between markets is so high, gold would sell off, just like all the other assets as raising cash became the paramount necessity. Hopefully, this qualifies as an intelligent, honest and civil goldbear post.

Sespian's picture

The fact that it hasn't happened is testament to the powerful deflationary forces that are at work.

Don't you mean powerful "fraudulent" forces that are at work?

strannick's picture

Pretcher doesnt address the fact that all that Bank cash got 'sterilized' as they used it to buy Treasuries, instead of lending it out into the economy where it would buy stuff.

akak's picture

Dukkbutt, your response was indeed eminently intelligent, honest and civil.

I do understand Prechter's argument as you summarized it, and although I am certainly no economist, there is something about it that just strikes me as fundamentally and profoundly .... well, wrong.  If in fact credit is functionally equivalent to "money" within thet economy, and if its destruction is significantly deflationary, then the creation of all that credit should have been radically inflationary ---- and yet I seemed to have missed the massive inflation that accompanied its creation.  Sure, house, real estate and stock values rose throughout the 90s and 2000s, but taken as a whole (as the combined value of all US real estate is vastly more than the combined capitalization of Wall Street) their values did not rise the many multiples that overall credit did during those years.  Something very important is missing in what I see as that woefully simplistic and incomplete analysis of Prechter, among others.

This also ignores the fact that NO fiat currency regime has EVER experienced a meaningful degree of deflation, but there are countless examples of such monetary regimes overspending as we are today, going deeper into debt, and then experiencing high levels of "inflation" (currency debasement) or even hyperinflation as a result.  Not only is Precter et al asking us to believe that we are going to be the exception to the rule, he is asking us to believe that "this time it's different!", and that are going to economically and monetarily suffer something which history has NEVER seen before.  Let's just say I am skeptical.

gwar5's picture

Well, at least there is no longer any doubt whatsoever who has the real power in the USA and the Western world. It's right there for all to see. 

This is why the Federal Reserve Act needs to be abolished. End the Fed. This is pretty unbelievable. We don't need the nasty bastards, we can print our own money.

jeff montanye's picture

daneric has a good read today, especially the observations about the last three equivalent upside rips of the bollinger band (vs. today's).  also quotes prechter to the effect that when stock prices go up the fed seems in control, when they go down it seems the fed has lost control.  both are illusions.