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Why The Fed Can't, And Won't, Let The Stock Market Crash
When it comes to the stock market, while the biggest, and according to many only, beneficiary of the Fed's ZIRP/QE policies of the past 6 years has been the wealthiest 1%, the reality is that said top crust of US society no longer needs the S&P to continue its relentless, manipulated and centrally-planned levitation.
Between a third Hamptons residence, a 5th Ferrari, and a 7th French villa, not to mention a few tons of gold, the super wealthy have long since booked their paper profits, and transferred their "wealth" out of the intangible and into actual, physical assets.
Therefore it is not the 1% that would suffer the most should the S&P have a post-Lehman like 50%+ wipe out, which also means that the Federal Reserve's only mandate of pushing asset prices to ever higher levels while pretending it does so to boost employment and keep inflation at 2% is no longer for the benefit of the uber-wealthy.
So why can't, or rather won't, the Fed let the bubble market collapse once again? Simple - as the following chart shows, the illusion of wealth is now most critical when preserving the myth of the welfare state: some 50% of all US pension fund assets are invested in stocks and only 20% in Treasurys. This compares to less than 10% for Japan which also explains why for Abe, the only lifeline left is pushing pension funds out of their existing asset allocation sweet spot and forcing them to buy stocks. Whether this gambit will work is unknown.
What, however, is known is that in a country like Germany between 2005 and 2012 the Pension funds asset rotation out of stocks and into bonds has been truly unprecedented, with stocks plummeting from 30%+ of total exposure to less than 5%! It also explains why Germany was, is and always will be leery of allowing the ECB to pursue asset bubble-inflating policies which would barely benefit pension funds on the equity side, while any rising inflation would crush the mark-to-market value of bond holdings.
But back to the US: while the 1%'s paper fungible, market-driven wealth has been long converted into other hard asset formats, it is the paper gains for the future retirees that are on the chopping block should the S&P 500 "get it." As such, it is the fate of future retirement funds, and in fact, the very core of the US welfare state that is at stake should there be a massive market crash. In which case what happened in Ferguson will be a polite stroll in the park compared to the chaos that would ensue should another generation of Americans wake up with half or more of their paper wealth wiped out overnight.
None of which touches on the most important question: will the Fed be able to avoid a market crash?
The answer of course is no. But while we have explained countless times why central-planning always fails in the end, we will give the podium to Fred Hickey, aka the High-Tech Strategist, who gives a very poetic summary of what the Fed's endgame will look like:
The Fed hasn't made the world a better place with its interventions. It has created moral hazard, encouraged the formation of asset bubbles that eventually pop (leaving economic messes), widened the wealth inequality gap to record levels, discouraged savings and investment, severely penalized retirees on fixed incomes, encouraged spending, funded massive government deficit spending by monetizing the debts, lengthened the recession and likely reduced the number of jobs that would have been created if the economy had been allowed to take its normal course. Eventually the Fed's policy interventions will also have created debilitating, widespread consumer inflation, the "cruelest tax" against the poor and middle classes.
And the final nail in the failed Keynesian school of economic thought's coffin, will come when a hundred million current and future retirees wake up one day, realize that the welfare state dream is over, and suddenly realize they have nothing left to lose.
It is only then that the 1% will be truly in peril, as one after another revolution in the history of the world has shown all too clearly.
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I recieved calls from stock boiler rooms about hot stocks so you know we are is a huge bubble.
Just a matter of how much longer the big money on Wall Street want to keep expanding is bubble.
<<< Long S&P
<<< Short S&P
What's your position (if you play)? A little poll
<<< Long USD
<<< Short USD
Long silver, lead. Short debt.
I agree, best is not to play and short fiat, but what do the ones that do play the paper shuffle?
It's nothing more than a fountain of cash for the supe wealthy. They all knew to do stock buy backs then resell to the muppets at higher prices. It flushes an obscene amount of money into the super wealthy thereby maintaining their control of the economy without doing any real busisness and absolutely not having to participate in the laws of a competitve society where the most efficient survives and the weak die off. It is an absolute perversion of capitalism nothing more nothing less and now they want to sell you the same stocks they bought back with government money at a higher price. Only a fool would participate in that ponzi. They will print until the dollar is worthless or riots in the streets stop them but the deal is done and now the rest of the country is about to be handed the bill for this government con game.
FED since inception has blows a bubble for 8 years or so then crashes the same bubble over 3 years. They fleece you on the way up and on the way down all cyclical and possible if you control the money supply. This is the game they played always remaining on top as kings so to speak the rest of us just serfs.
They cannot blow the bubble forever though , if thery did they would move to a hyperinflation model. So that 3 year burn is needed a block to the hyperin flation model. How does the hyperinflation model work though, personally feel it is the GOOD / BAD debt issue whereby BAD DEBT WILL NEVER REPAY ITSELF EVER.
f you can see, during the decade or so prior to 2008 and was extended they built up a load of debt good and bad but in 2008 the economy reached the point where the bad debt they created needed removing one way or the other. Scared shitless they bailed and now all they do is service debt but these two points to consider what is being serviced.
1.) Good? No problem! OR AND AS NOT CLEANSED AS NEEDED 2.) the Bad? Oh shit.
Now since the post 2008 attempted boom they ended up growing that bad debt even bigger but running out of time and NEXT TIME THEY WILL BE IN EXACTLY THE SAME POSITION! Too fucking afraid to call the bad debt and cleanse the system. This is what Japan needed to do years ago instead they just keep bailing and now you hit 250% debt of GDP! WTFG = WAY TO FUCKING GO not WHAT THE FUCK!
THAT 250% debt to GDP is now PRIMARILY THE BAD DEBT GROWING AND YOU JUST STOKED IT UP WITH ALL THE QE. Keynes and the game they played is broken for any moderate use now because once you start trying to play it ASSHOLE CENTRAL BANKERS you are feeding that awesome bad debt!
In reality now they attempt to stimulate the economy but it only serves to grow that bad debt at least at the same speed as the economy or in many cases even faster. QE they are sll starting to admit did not work, lol too late because you sure juiced up the bad debt. Good debt, secured in value gets destroyed in the final frenzy as many try to minimize losses.
and .gov uses the term 'invest' to spend money....usually bad debt, that in turn gets sloshed around the system with everyone taking their cut. this is not a good system.
the problem with all of these systems is .gov and trying to remove 'risk' from the system. properly assessing risk is what builds a stable system.
Of course the 1% know the angry masses are going to be looking for them for fk'n over their world so the 1% is pulling out all the stops in trying to disable the fertility, energy and clear thinking ability of the masses to lessen the revenge.
In fact they would like to reduce the numbers but that strategy is a little late. The practical policy has degenerated into disabling the masses health with toxic injury and distraction with false flag attacks.
I would like to see the our hidden ruler's Jesuit gold (estimated at 60,000 tons) confiscated from their Rothschild agent banks. I would also like to see their 43,000 corporations sold and their proceeds confiscated This is the basis of their domination.
Finally I would like to see these sick perps arrested and tried for their crimes and that includes WW1 & 2, causing the 30s Depression by stealing America's gold and sending it to Hitler,
causing 9-11 and the Vietnam and Afghanistan wars to control the heroin trade and all the other false flag attacks from Gulf 1 & 2 to Bali and many more. We need to rid the world of this organized crime scourge.
Can't wait to read all the comments here... Looks like the most robust thread in awhile. Like this high tech strategist's comments --almost sounds like something I'd right, only lacks that the adjustment of relative currency values is inevitable, but rather than controlling the path (which the Fed could have done by using $to buy the gold its owners were short), it ceded strategic control to China, which has led to many more years of domestic production atrophy while the inevitable unfolds.
People, convert all float scam stocks to physical cash and gold. INVEST LOCALLY, in people you know and trust, especially those that are rebuilding our productive capacity as rebuilding our self sufficiency will be the "secular growth" opportunity for the next few decades...
techstrategy Looks like the most robust thread in awhile.
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I guess you overlooked all the posts about Ferguson.
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techstrategy but rather than controlling the path (which the Fed could have done by using $to buy the gold its owners were short), it ceded strategic control to China, which has led to many more years of domestic production atrophy while the inevitable unfolds.
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Having PMs is a way of maintaining a store of value. It does not lead to production and increased wealth. It does however, fight the erosion of wealth of fiat currency.
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INVEST LOCALLY, in people you know and trust, especially those that are rebuilding our productive capacity as rebuilding our self sufficiency will be the "secular growth" opportunity for the next few decades...
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Great idea but have you thought about this thoroughly? Very few people, companies are actually in manufacturing. For example, I can invest in a local auto repair shop. But guess what? They depend on national or international companies for parts. Same goes for my AC, my heater, etc.
What basic things I need, well, hell. I can get them myself.
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I posted on the Ferguson thread. Most of it is wasted energy or counterproductive. We need to invest in sustainable communities (and that means economically sustainable / increasingly self sufficient, not just the overused environmentally sustainable concept), which entails domestic/local productive capacity.
Too few are focused on making anything anymore. That's part of the imbalance of our consumption driven economy (mock China all you want, but it is better to invest in excessive production capacity than to "invest" in consumption, which is what our malinvestment paradigm does...).
I've dedicated my only scarce resource, my time, to building new technology based distribution energy generation/production and manufacturing companies. Been a hard ride because everyone is "investing" in yoga gear, fast casual restaurants and the like. But, when China decides that our middle class is fine and that we no longer have the capacity to consume its output and that the best mechanism to increase stability in China is to let the currency appreciate, our folly will become painfully clear to all. Those of us who took the contrarian path to invest in our productive capacity when consumption was the rage will win in the long run.
I assure you there are many would be entrepreneurs trying to do the same as me where you live. I know hundreds of nanotechnology startups around the country. If you care or are interested, email me at techstrategy@yahoo.com and I'd be happy to help connect you.
concept of stock and flow
People don't eat stocks. They eat profits
Economy is collapsing precisely due the order from congress and white house to not allow a financial wipeout.
Economy is not producing flow because nobody cares to as long excess reserves recycle into stocks.
QE has created the misery the economy is in
Congress and Obama take orders from the Fed, they don’t give orders.
Congress is nothing but the trained fleas of the bankers - they are brainless, mob-voter elected and directed fools bought and paid for by the international bankers.
Congress gave its money-creating power to these private bankers in 1913, and, thus, gave away America's system of representative government.
If the interest on the money the Fed creates out of nothing to buy bonds from Congress is not paid by the taxpayers and inflation (without a continuous deficit the economy will collapse for lack of money) the Fed's money scam will fold, because to retire the bonds means the money disappears from circulation. With a shortage of money, recession and/or depression follow.
And so, The Creature from Jekyl Island, the Fed, continues to suck the blood from America's remaining economy while its host’s standard of living weakens and producitive middle class disappears.
If the people are to regain representation in America and take their country back, they must elect or install a new Congress that will reinstate its constitutional duty to create the nation’s money under Article 1, Sec. 8 of the Constitution and lend it interest-free for the good of the people and the nation.
Not so. Fed is a bunch of academics nobody cares about.
Bank lobby owns congress and white house, which are ordering the Fed to print money for them.
Until early 90s it was military complex owning the Fed because they owned congress and white house.
The big banks do not need a lobby. They have the Federal Reserve System, established 1913 (you can look it up). Why bother to lobby Congress when you can control the currency, how much is printed, who gets it and who doesn’t.
Perhaps there is no better explanation of what this money created out of nothing and owned by the Federal Reserve is buying than is provided by G. Edward Griffin, author of the famous Federal Reserve revelation, The Creature from Jekyll Island.
On the Fed money:
“You are led to the question of where is this river flowing? Where's it going? … They're not accumulating it at all. What are they spending it for? The answer may surprise you. They're not buying more yachts and mansions with this money; they've already got all of those they possibly want. … That's not it. When a person has all the wealth that you could possibly want for the material pleasures of life, what is left? Power. They are using this river of wealth to acquire power over you and me and our children.
“They are spending it to acquire control over the power centers of society. The power centers are those groups and institutions through which individuals live and act and rely on for their information. They are literally buying up the world but not the real estate and the hardware, they're buying control over the organizations, the groups and institutions that control people. In other words, to be specific, they are buying control over politicians, political parties, television networks, cable networks, newspapers, magazines, publishing houses, wire services, motion picture studios, universities, labor unions, church organizations, trade associations, tax-exempt foundations, multi-national corporations, boy scouts, girl scouts, you name it…this is where those people have been for many decades spending this river of wealth to acquire operational control particularly over those institutions and individuals, those organizations that represent opposition to themselves….”
http://www.bigeye.com/griffin.htm
You assume there is rule of law among ultra elite.
No there isn't. They simply rule.
Other lobbies would never allow bankers to rule, hence military complex took power in early 60s and ruled over all other lobbies.
Who has the guns rules, period. Again, rule of law does not apply to ultra elite.
They cut deals with bank lobby in the early 90s, which it's clear now that bank lobby backstabbed them.
Now there is civil war among ultra elite to control the Fed. Either surrender or death.
This will not end well
War costs money. “It comes down to this. If you hate war, oppose the Fed.” Lew Rockwell
Prince Montecuccoli: “To wage war, you need first of all money; second, you need money, and third, you also need money."
Abraham Lincoln: “I can make more generals, but horses cost money.”
Lew Rockwell: “The US central bank, called the Federal Reserve, was created in 1913. No one promoted this institution with the slogan that it would make wars more likely and guarantee that nearly half a million Americans will die in battle in foreign lands, along with millions of foreign soldiers and civilians.
“No one pointed out that this institution would permit Americans to fund, without taxes, the destruction of cities abroad and overthrow governments at will. No one said that the central bank would make it possible for the United States to be at large-scale war in one of every four years for a full century. It was never pointed out that this institution would make it possible for the US government to establish a global empire that would make imperial Rome and Britain look benign by comparison.
“You can line up 100 professional war historians and political scientists to talk about the 20th century, and not one is likely to mention the role of the Fed in funding US militarism. And yet it is true: the Fed is the institution that has created the money to fund the wars. In this role, it has solved a major problem that the state has confronted for all of human history. A state without money or a state that must tax its citizens to raise money for its wars is necessarily limited in its imperial ambitions….”
George Orwell: “War against a foreign country only happens when the moneyed classes think they are going to profit from it.”
The cost: Cruise Missile, $830,000; Abrams Tank, $6.2M; B-2 Stealth Bomber, $1.01 billion; Gerald Ford Class Aircraft Carrier, $13.5 billion; U.S. Nuclear Weapons Programmed Spending per year, $52 billion.
The ones who have the guns can create and control all the money in the world
JR: this as been going on for the last 2500 years. Those who can define what "money" is, create said "money", and regulate the system of "money" of any civil society have the real power. In America this group is the Federal Reserve. (nothing "Federal" about it)
That really depends what your belief system is, if you want the population to be dependent on government suck up all their money into the market and then lock the exits.
The system is on the verge. Fed can't do shit when the real market forces take hold. For now they can do all the house of card stuff using derivatives to prop things etc. Plus the Fed really dun give a rats as they don't work for America. America works for the Fed people. When its about time to blow you can bet your arse they will be ready to reap the huge wind fall. Only the serf American public that has been dumb down think otherwise.
vyeung The system is on the verge. Fed can't do shit when the real market forces take hold. For now they can do all the house of card stuff using derivatives to prop things etc. Plus the Fed really dun give a rats as they don't work for America. America works for the Fed people. When its about time to blow you can bet your arse they will be ready to reap the huge wind fall. Only the serf American public that has been dumb down think otherwise.
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I agree with you. Most everyone bashes the FRB system for good reason but they fail to realize that in order for the FRB to achieve its goals, it must have willing participants.
It is on the verge and that verge is when the participants no longer cooperate. When? Well that is why it becomes a surprise and a market crash.
My best guestimate is it won't happen for months from now. The participants have to view that cooperating with the FRB isn't in their best interest anymore. Watch the bond market for clues as to when that collusion has ended.
bonds and USD
the really sad thing is people still dunno the Fed is private and not a government institution. Its real mandate is to serve its stockholders and they are banks like B of A, JPM, Barclays etc. The American people need to rise and take back their nation that has been stolen from them since 1913. Everyone pays taxes and contrary to popular belief, there is no law that requires American citizens to pay tax, plus the really bad thing is close to 90% of that is used as debt repayment (to the Fed). You basically pay interest and debt on money that American's created, not the Fed, but they have this scheme in place that requires by law that the Federal government is indebted. Farking scam and its horrid, really horrid.
agreed - the bond market will show stress first I believe. No one is buying US treasuries except the Fed, Japan (with a gun to its head), UK/EU (as they are part of the global Fed system) and a few puppet states. The really big creditors have ceased purchases quite awhile back. The TIC report is a lie, you can be sure of that. I'm not sure what the trigger will be, but my guess is the people that control the Fed may do the honors themselves. Russia/China and the BRICS are not fully setup yet, so they don't want it to go up in smokes yet, plus they really don't want the psychos in DC declaring war on them. You have to hand it to the cabal for keeping it going for this long. They are indeed master criminals. But when it ends, the American people will suffer. I just hope they don't create too much chaos out of this. Contrary to popular belief, the BRICS nation have no interest to see a destroyed US. Remember they have much investments in the country. The only obstacle will be those criminals in power. They want war and everyone at each others throat. As people of the planet, we must not let this happen. They are doing this with the Gaza situation where people are rallying against the Jews. This isn't right, the criminals are the cabal who are Zionist and they are the evil!!! Just like DC, the neocons = fascist/nazis. If we repeat the ignorance of the 1900's we will not have made any progress regardless of the all the tech we have developed.
Well first I'd quibble with the idea that that 1% or 0.01% are no longer in stocks, but the better argument is that their portfolios are so inflated here that if they are impacted, so what.
Second we have the spectacle of bonds soaring, bond yields tanking, AND ITS NOT THE FED DOING IT! A big fat LOL, I guess. But this is working contra to the Fed's plan. They should get Treasury to move the US debt into long bonds NOW! And cut back the ZIRP a little sooner.
That Europe is now paying negative interest even on two-year money, not just overnight/cash, is probably a big factor.
So then what about stocks? Dunno. From one view these tanking bond yields should force stock prices up dramatically so growth and dividends are equally discounted. But isn't The Correction Coming? I dunno. Ask Europe, maybe.
Nothing goes up forever.
The best the Fed can hope to achieve is some kind of equilibrium / stagnation at these artificially elevated levels.
But trying to hold ground could prove even harder than initially pumping the stock market up as momentum stalls and tail risk ratchets up.
whats going on in ferguson now is why i could care less about any fed., state, city, public, or private sector union pensions disappearing.
every two years these are the people that ensure america keeps marching into socialism, communism, facism, and the most destructive pc policies, through the ballot box, BUT it also guarantees them their well paid jobs, (and free porn).
well their about to get their own personal detroit, ( america ) they community organized, (on the tax-payers money), and voted for.
as seen by many, zh pointed out, (thanks), the fed. and many of the most powerful cb's in the world are just players in the master BIS globalist agenda.
america, and americans were fully screwed a few years back, the govt. declared publicly the economy was a very real national security risk,(crisis), so in their a couple votes away from mandatory asset confiscation, the (myra'a, and the mmf gates), that are coming are for your good, not the BIS.
when the bis formed the EU, the AMERICAS were on the table also, (s. america, latin america, n. america, and canada ), and as you can see that is still moving ahead.
people say there is going to be ww111, i say were seeing it now, how many countries in the world are their citizens free?
the fed. and all cb's under the BIS are confiscatating citizens assets, and citizens without assets are anything but free.
It didn't seem to bother them much in 1929 when they withdrew the money supply...
You report:
“some 50% of all US pension fund assets are invested in stocks”
This is not quite correct; “all US pension fund[s]” should read, “all Public Employee Retirement Systems” (PERS); for, there are no PRIVATE retirement pension funds apart from Social Security; and it is invested entirely in US Treasuries.
And, wow! Are there ever differences… major differences?
PERS are structured much like the PRIVATE workers’ retirement system; that is, Social Security. In both, contributions are usually paid equally by employee and employer.
In PERS a grunt bureaucrat can retire after 20 years with $3,000 to $6,000 monthly checks ($15,000 to $25,000 per month for department heads) for the rest of his life. Under the SS system, a private worker must wait till he is 65 to retire with full retirement checks of $1,500 to $2,000.
In PERS, some public workers contribute nothing; thus, the employer (that is, taxpayers) contribute the full amount. Actually, taxpayers finance everything: salary of the public employee (actually, a chair warmer), his dozen or so kinds of benefits (vacation, sick leave, jury duty, travel expenses, health insurance, per diem while attending “conferences” in Las Vegas et cetera)
Something seems wrong here; give me a few weeks while I figure this out.
And here we deal only with a stash (pension fund) entirely financed by taxpayers.
Then, there are other surpluses hidden from taxpayer view.
Several years ago I discovered Comprehensive Annual Financial Reports. These are issued by cities, counties, states and the federal government. It took me several months of study to understand what I was looking at. I eventually learned the message in these CAFR’s: the governments and special districts of California had amassed surpluses that divided out to $20,000 for every man, woman and child in the state. These surpluses were held in the form of cash instruments, stocks, bonds and real estate – both domestic and international.
When I factored in data contained in footnotes, these surpluses ballooned to $40,000, possibly $60,000, for every man, woman and child in the state.
In other words, these surpluses represent taxes collected over and above ordinary needs of state governments.
So, when bureaucrats start complaining that they need to raise taxes, perhaps we should ask why they don’t dip into surpluses they’ve been collecting all these years.
Better yet, perhaps we should recover taxes we have wrongly paid.
Wait, there’s more. It has recently been disclosed that some $9-$11 trillion has gone missing from the federal agencies Department of Defense, HUD, SSA among others.
So, next time Congress debates raising the debt limit, perhaps we should suggest recovering these missing trillions.
Oh, silly me. Who with a brain would expect those guilty of plunder on an unprecedented scale would punish themselves for it?
If we are to recover this booty, we will have to do it ourselves; and here’s an introduction as to how it can be done – the only historically-proven method that has ever obtained reasonable redress.
(Follow my other comments: click my name, thanks.)
Anyone who has a pension plan which is of the defined contribution variety (vast majority) know that one has only a selection of LONG equity and bond funds and one ONE fixed money market type option, in which the Feds have already decided that the dollar may be broken at will with NIRP. Convenient that they should cite the vulnerability of a pension system they have designed to make sure the "people" will support them in their mandate of eternal pumpitude.
Venezuela's stock market is at an alltime high if you don't account for their currency devaluation. So there is no reason the DOW can't go to 20,000 if our dollar loses half it's value. Which it does every 5-10 years.
One word is enough: Albania.