Phoenix Capital Research's blog

The Fed publicly claims it wants to help the economy and Main Street. However, as we are now discovering, the Fed is more than willing to sacrifice the good of the people in order to prop up a few insolvent big banks.  

The corrupt edifice that has propped up the US big banks and financial system is beginning to crumble before our very eyes.

Over 99% of “analysts” are missing this, but it is a fact. If you ignore the ridiculous GDP numbers (which even China’s Premiere has admitted are a joke in the past) and look at more accurate metrics, it’s clear China is collapsing at an alarming rate. Case in point, Electrical consumption rose by just 2.9% in the first quarter of this year.

These are truly horrible forecasts coming after the brutal downward revision for the first quarter (from 2.4% to 1.8%). And when you consider that growth is slowing like this while the Fed is running QE 3 and QE 4, then it becomes quite clear that the Fed is fast running out of out of evidence that QE accomplishes much of anything.

Bottomline: the Chairman went rogue and did it at the precise time when stocks were in need of a major boost. This is not coincidence. And now that this is over we have to wonder what’s next.

Unfortunately for Ben, rates are already rising around the world. Rates on Portugal’s ten-year are over 7%. Rates on Greece’s ten-year are back over 10%. Japan, the country of zero interest rates has seen a spike in its rates since April. Even Treasuries are surging higher, despite the Fed buying $45 billion worth of them every month.

So, we have a jobless recovery (the unemployment ratio hasn’t budged) an income-less recovery (real hourly wages remain below June 2009 levels), and the yet somehow we have a “recovery” that will result in GDP taking off any day now?

At this point any sane person would scream, “STOP.” The driver is clearly a madman and shouldn’t be let anywhere near the driver’s seat. Moreover, he’s totally lost all credibility and isn’t to be trusted.

Wild price swings in a market of this size (that is often leveraged at 80 to 1 or even 100 to 1) mean massive amounts of wealth evaporating instantly. Historically, currencies are the first asset class to register when the system is in big trouble. These wild swings in the US Dollar are a major red flag that trouble is beginning to brew behind the scenes in the financial system.

The move is very reminiscent of the 2007 top where we had a top, a brief collapse and then a final burst higher to a new high. Within a few months however, the markets had begun to descend into what would ultimately be the worst Crisis in 100 years.

Congratulations Bernanke, you’ve created an even bigger bubble than that of 2007. Your latest statements about providing liquidity have destroyed completely destroyed your credibility as Fed Chairman. And they’ve bought you at most a brief pause before this whole mess comes crashing down.

We’ve already had an incredible record setting streak for food stamp usage. Now we can add high unemployment to the mix. The US economy just posted its 54th straight month at which unemployment was north of 7.5%.

This is the #1 reason all the talk of “recovery” and “jobs growth” is totally bogus. If you are willing to fudge numbers and adjust measurements, then sure, things look much better. But the reality is that since 2009, there hasn’t been anywhere NEAR the job growth needed to claim we’re in a recovery.

And those are just the major headline grabbing issues. Those banking on the market rallying even harder have got a lot of obstacles to overcome.

This does NOT open the door to more QE now. If the Fed tapers QE in the future then yes, it might engage in more QE later down the road. But the idea that the Fed will increase QE when it’s already running $85 billion a month is misguided.