The Bailout Gravy Train is Over
As I’ve noted in previous articles, Bernanke is finished as Fed Chairman and will be stepping down within 18 months.
The reason is simple: he’s become politically toxic (even Obama won’t be backing him) and will be facing legal troubles in the future.
Regarding the legal troubles, as the Great Crisis gets underway, the lawsuits are going to come fast and furious. We’ve already seen Goldman Sach’s CEO hire a defense attorney. A lot more of the big shots on Wall Street will be doing the same. And when push comes to shove in the courtroom, they’re going to pin their crimes (the ones committed during the 2008 collapse) on Bernanke with a “the Fed pressured me into doing it,” defense.
We’ve already seen one round of this with Ken Lewis of Bank of America. The only reason Bernanke got away on that one was because the political and social landscape still viewed him as the savior of capitalism and the economy.
This time around, the Fed is fast becoming politically toxic (see recent GOP presidential candidate’s comments on the Fed), QE 2 caused inflation in the US, and we’re learning that the Fed secretly funneled trillions to Wall Street during the 2008 Crisis.
Put another way, the political and social climate are increasingly anti-Fed and Bernanke. So any lawsuit he might face will be far more difficult for him to navigate (also, remember the REAL power at the Fed is the primary dealers like Goldman Sachs, NOT the academics on the Fed’s board).
So Bernanke’s going to be in big trouble going forward. And the chances of another QE or major policy being enacted without a systemic collapse grow slimmer by the day. The days of the Fed acting simply for the sake of it are over. Going forward the Fed will only be reacting to Crisis.
Regarding QE, the markets largely rallied/held up over the last few months on the notion that the Fed will enact QE 3 OR that the EU will expand its bailout of Greece and other bankrupt European nations.
Neither of these will happen. QE 3 hasn’t been likely for months (at least since July). The Operation Twist move was symbolic and little else. This is why Gold and Silver and other items have collapsed in the last week: they had gotten WAY overbought on hopes for QE 3 hitting.
Regarding Europe… Germany is no longer backing up the bailouts. Forget any BS rumor being spread by CNBC, what Germany says is the deal. No German backstop, no bailouts, no EU, end of story.
My primary point with all of this is that the bailout/ intervention gravy train has come to an end. Indeed, while the lemmings pile into stocks believing in this nonsense, smart investors are already preparing for the next leg down in the markets. The reason is simple: last week’s sell off is JUST the beginning of what's coming.
This is no mere correction nor is it just a brief hiccup for the financial markets. This is the GREAT COLLAPSE and the markets will be going to new lows (below the March 2009 lows) in the coming months.
We're also going to be seeing major banks go under, market crashes, food shortages, government shutdowns, and SYSTEMIC FAILURE.
Yes, I believe that before this mess ends, the financial system as a whole will have collapsed. What's coming is going to make 2008 look like a joke.
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