The Next Stock Market Crash Will Be Blamed On Trump But It's The Fed's Fault

Tyler Durden's picture

Authored by Michael Snyder via The Economic Collapse blog,

A stock market crash is coming, and the Democrats and the mainstream media are going to blame Donald Trump for it even though it won’t be his fault.  The truth is that we were headed for a major financial crisis no matter who won the election.  The Dow Jones Industrial Average is up a staggering 230 percent since the lows of 2009, and no stock market rally in our history has ever reached the 10 year mark without at least a 20 percent downturn.  At this point stocks are about as overvalued as they have ever been, and every other time we have seen a bubble of this magnitude a historic stock market crash has always followed.  Those that are hoping that this time will somehow be different are simply being delusional.

Since November 7th, the Dow is up by about 3,000 points.  That is an extremely impressive rally, and President Trump has been taking a great deal of credit for it.

But perhaps he should not have been so eager to take credit, because what goes up must come down.  The following is an excerpt from a recent Vanity Fair article

According to Douglas Ramsay, chief investment officer of the Leuthold Group, Trump administration officials will come to regret gloating about the market’s performance. That’s because Trump enters the White House during one of the most richly valued stock markets in U.S. history.

 

The last president to come in at such valuations was George W. Bush, and the dot-com bubble burst soon afterward.

 

Bill Clinton began his second term in a more overvalued stock market in 1997, and exited unscathed. But if his timing were different by just a year, he would have been blamed for the early-aughts market crash.

This stock market bubble was not primarily created by Barack Obama, Donald Trump or any other politician.  Rather, the Federal Reserve was primarily responsible for creating it by pushing interest rates all the way to the floor during the Obama era and by flooding the financial system with hot money during several stages of quantitative easing.

But now the economy is slowing down.  Economic growth on an annual basis was just 0.7 percent during the first quarter, and yet the Federal Reserve is talking about raising interest rates anyway.

The Federal Reserve also raised interest rates in a slowing economy in the late 1930s, and that had the effect of significantly extending the economic problems during that decade.

As I noted in my article entitled “The Federal Reserve Must Go”, there have been 18 recessions or depressions since the Federal Reserve was created in 1913, and now we stand on the precipice of another one.

After this next crisis, hopefully Congress will finally understand that it is time to shut the Federal Reserve down for good, and I am going to do all that I can to make that happen.

Ron Paul is someone that I look up to greatly, and he also agrees that the blame for the coming crisis should be placed on the Federal Reserve instead of on Trump

“There are some dire predictions that say in the next year, or 18 months, we have something arriving worse than 2008 and 2009, the downturn is much worse,” Paul said in a recent interview with liberty-minded anti-globalist radio host Alex Jones.

 

“They’ll say, ah, it’s all Trump’s fault. No. It wasn’t. 08 and 09 wasn’t Obama’s fault. It was the fault of the Federal Reserve, it was the fault of the Keynesian economic model, the spending too much, the deficit. So, unfortunately, there’s nothing he can do — Trump can’t do it.”

 

Paul, a medical doctor who took a keen interest in economics throughout his celebrated career as a constitutionalist in Congress, said Trump could “help” the situation by pursuing good policies. “But you can’t avoid the correction, the correction is locked in place, because the deficits are there, the malinvestment, everybody agrees interest rates have been too low too long,” he said in the late January interview.

 

“The only thing he can do is allow the recession to come, get it over with, liquidate the debt. Politically, nobody wants that, so you’re going to see runaway inflation before you see this country wake up.”

Over the past decade, the U.S. economy has grown at an average rate of just 1.33 percent, and there is no possible way to put a positive spin on that.

And now the economy appears to be entering a fresh slowdown.  A couple of months ago, banking giant UBS warned about “a sudden slowdown in new credit”

There’s been a sudden slowdown in new credit extended to businesses over the last year, one that strategists at UBS are calling “drastic” and “highly uncommon outside of economic downturns.”

And since that time, lending has tightened up even more.  The following comes from Zero Hedge

According to the latest Fed data [7], the all-important C&I loan growth contraction has not only continued, but over the past two months, another 50% has been chopped off, and what in early March was a 4.0% annual growth [4]is now barely positive, down to just 2.0%, and set to turn negative in just a few weeks. This was the lowest growth rate since May 2011, right around the time the Fed was about to launch QE2.

 

At the same time, total loan growth has likewise continued to decline, and as of the second week of May was down to 3.8%, the weakest overall loan creation in three years.

This is exactly what we would expect to see if we were entering a new recession.  Neil Howe, one of the authors of The Fourth Turning, recently warned that “winter is coming” and I have to admit that I agree with him.

So when the stock market finally crashes, how bad could it be?

Well, one analyst that spoke to CNBC said that other historic market crashes have averaged “about 42 percent”…

“If you look at the market historically, we have had, on average, a crash about every eight to 10 years, and essentially the average loss is about 42 percent,” said Kendrick Wakeman, CEO of financial technology and investment analytics firm FinMason.

And as I have explained many times in the past, stocks would have to fall about 40 to 50 percent from current levels just for the stock market to get back to “normal” again.  The valuations that we are seeing today are absolutely insane, and there is no possible way that they are sustainable.

When the crash happens, many people will be pointing their fingers at Trump, but it won’t be his fault.

Instead, it will be the Federal Reserve that will be at fault, and hopefully this coming crisis will convince the American people that it is time to end this insidious debt-based central bank for good.

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Insurrexion's picture

Of course, Michael.

Trump is the perfect "Oswald"

There are no fucking markets in this Keynesian/Goldman managed global economy.

The lie that there are markets keeps the game afloat.

The believers in the lie keep the game afloat.

 

What we have now is an 800 lb gorilla in the casino with sluts hanging all over him.

That gorilla has infinite money to play the game, any game as long as he wants.

And no one, I mean no one argues with The Gorilla.

The players watch what the gorilla does and follow him. They make money and do not want him to die.

Others watch and wait for the gorilla to fall down dead, so the casino can get back to normal operations.

The flood of articles on ZH proves this.

The game is that fucking simple.

 

Tip: Watch for resignations at the Fed.

chubbyjjfong's picture

Where is the list Michael? I demand a list!

AVmaster's picture

People are so stupid... They'll blame the president for their fuckin hemorroids....

This happened during the great depression too...

We ended up getting fucked with FDR and his stupid bullshit includeing long since failed social security bullshit...

>_>

Troy Ounce's picture

 

 

Alpha Jolla killed Seth Rich  He is connected to the DNC.- Georg Webb

https://m.youtube.com/watch?v=OqY2QP-DNaQ

The Podestas are buying gold and art like mad. They know the game is over.

curbjob's picture

It really would have  been helpful to the gist of your argument  if Trump hadn't already taken credit for the markets recent surge.

 

rf80412's picture

Others watch and wait for the gorilla to fall down dead, so the casino can get back to normal operations.

And others want to shut down the casino completely.

MalteseFalcon's picture

The 40%  of America believe that:

Trump receives orders from Putin daily.

Trump has raped over a dozen women.

Trump lynched a black man for sport.

Trump will put the entire LGBTQ community in camps.

Trump shot MLK.

Trump is Adolf Hitler's illegitimate nephew.

So will Trump get blamed for the crash and anything else they can make up.

40% of America are Democrats.

The important thing is Trump will get to field the crisis.

Insurrexion's picture

The 40%

This is one of the reasons why my algorithm has so many of the low IQ monkeys die in the next civil war.

Fact: Latin, African and Middle Eastern countries have the most crime, violence, poverty, starvation, and birth rates because of their low IQs and the fact that most are on or near the equator. Look at the difference in the European countries. The northern countries have sustainable economies and the southern countries have bankruptcy.

One can pinpoint the exact date the US started to walk into the shithole it has become: The Civil Rights Act, signed by Lyndon B. Johnson a Democrap Texan and the "Qui Bono" of Kennedy's assassination.

MalteseFalcon's picture

BTW, your model has under 500K dead Jews.

The accurate estimate is 6 million.

Check your sums.

Joe Cool's picture

I used to think that this would happen....Now everybody and their mom has articles sayin' this....I'm back to the DOW 50,000 scenario....

lester1's picture

I can see that you Tyler's are finally listening to what I've been posting for the last 6 months. The Federal Reserve is fraudulent and not data dependent. They are run by a bunch of globalists who want to fuck president Trump.

The liberal media will blame him for any market crashes so Democrats can make a comeback in 2018 elections.

 

Peter Schiff are you taking notes? I know that you are lurking..

Joe Cool's picture

Dude...If this turd burns....Who cares about Democrats/Republicans?  Try Bread lines and Mass chaos....

During the Great Depression, this country had a more or less homogenous population (give or take)...

Now we have Nicaraguan gangs in Kansas City....

InflammatoryResponse's picture

bread lines.   bless your heart you said bread lines...

 

that is a special kind of missing the boat there Joe Cool.

 

they had to call the cops out during the obama elections because people wouldn't even stand in line to get their gift cards for helping to canvass.

 

 

in Indiana after some flooding people were nearly rioting over standing in line. and you're talking about bread lines?

 

Sudden Debt's picture

who cares who's fault it is :)

INFLATE THAT SHIT AND MAKE ME RICH BITCHES!!!!

economessed's picture

Actually, I think Richard Nixon is the only president (past, present or future) that is due some blame for giving the Fed so much rope.  His August 15, 1971 action to debase the dollar from gold made all of this possible.  So I vote we dig up Nixon, pee on his bones, and throw them in the wood chipper with every living employee of the Federal Reserve.

Troy Ounce's picture

 

 

Aargghh. I tried to upvote you 500 times but that was impossible.

If you are a lady I will kiss you on the mouth; if a guy a high five!

 

rf80412's picture

Bretton Woods failed all on its own and Nixon just happened to be president when it did.  The dollar was overvalued relative to gold, "exorbitant privilege" was on everyone's lips, and the US was caught printing dollars backed by European countries' gold reserves that had been moved to the US during WWII (De Gaulle sending the French navy to take back France's gold was the beginning of the end).  Gold wasn't working as advertised - it was distorting more than stabilizing, or proved to be itself vulnerable to distortion - and with the world threatening to take the gold and leave the dollar, Washington moved first.

gold rubeberg's picture

I think so too ... 1913 was cause, 1971 consequence.

AnimalSpirits's picture

Plus Woodrow Wilson, 1913 Fed Act.

Plus all those who've allowed the parasite to survive over 100 years now.

At the end of the day, we are all responsible.

Bad things happen when good people do nothing.

adanata's picture

 

 

.....or know nothing.

AnimalSpirits's picture

 

 

..................or think nothing.

sudzee's picture

tomorrws headline:

ALL ratings agencies downgrade US debt on inabiloty of Trump to govern.

TrustbutVerify's picture

When its the last straw that breaks the camels back, is it the last straws fault?

Making Merica Great Again's picture

The problem is... There are too many paper money printed by the FED and they are too valuable!!!

 

They can't reduce its value like they should!

Harry Lightning's picture

Nonsense. Corporate earnings have been flat since 2012, and the market still trades near all-time highs. Sure, we will get a 20% correction, the governments will intervene with the provision of new liquidity, and the equity markets will rise again. As long as consumer inflation does not rise to the same multiples as financial assets (which it won't for reasons I do not understand), this shell game will continue for as long as the eye will be able to see. It actually may be a really good thing, so don't knock it.

Just wait for the 20% pull back and BTFD.

That's what everyone's vanity license plate should read "BTFD-XXX" with the "XXX" part being the next available number that has not yet been put on a plate.

logicalman's picture

Trump was chosen for the role.

Nasty shit is not 4 years away so a fall guy was required.

The Donald fell into the trap.

Interesting times indeed.

Vlad the Inhaler's picture

Convince the American people it's the Fed's fault?  LMFOA.   The American people have become Statist Lapdogs, and the Fed is there to make sure that when the economy crashes everyone gets a Participation Trophy.  As for the MSM we all know who pulls those levers.

VWAndy's picture

 I blame MMT. Magical Money Theory.

Joe Cool's picture

I used to talk to my relatives about "The Fed"....Waste of time...Mind as well say "Gremlins"....

Atleast that provokes some sort of mental image....

otschelnik's picture

Another deep state diversion, stock market crash.  Hang on, Trumpsters!

Tonterias's picture

Thanks GOLDMAN-FED

adanata's picture

 

Goldman Fed is only a branch bank of the Bank for International Settlements; the Mother Ship piloted by the Barons de Rothschild;

the most evil scum on earth.

U4 eee aaa's picture

Keep documenting boys. That's pretty much all we can do until the coup

ironmace's picture

If by documenting you mean stocking ammo, food and water, I'm on it.

gold rubeberg's picture

Trump had better be careful about linking rallies to his performance ... taking ownership of anything stock market will only play into their hands.

And yes, it will be the Fed's fault, for kiting the market in the first place. Every serious downturn in stock prices is caused by prices being too high to begin with. All else is mere catalyst.

moonmac's picture

Trump said that because of record low interest rates from the Fed, the country's economy is "in a big, fat, ugly bubble," with debt increasing while the "only thing that looks good is the stock market."

Thus when interest rates increase, the bubble would burst and the stock market would crash.

Well that's the Biggest No-Brainer of the Century!!!

Nobodys Home's picture

All the crap we all deal with daily is the Fed's (owners) fault!

Truthseeker20's picture

Alt-market  also predicted this. Trump who is fake conservative will take blame. Trump has broken most of his campaign promises to us conservatives. Instead of draining the swamp, he filled it up. Can anyone tell me how he drained the swamp?

People will blame the conservative movement for the financial crash, but it is really the feds fault. Not sure if the fed is doing this on purpose or not. The fed increased the money supply hefore tge great depression so we got a great depression, bank failures, ww 1, and the federal reserve.

Jack Oliver's picture

There will unlikely be a market crash - unless they get their WAR - they will keep this TURD afloat - by any means possible !!

Pft's picture

Dont blame the Fed entirely, blame its Daddy the BIS in Basel Switzerland.

In 1996 it updated the Basel I accords (which had given us the crash in 1987). This set the stage for the subprime disaster allowing banks to use its own financial models. In 2004 Basel II accords set the stage for the crash with its mark to market requirement that was implemented by US banks in 2007 while the Fed opened a 2nd front raising interest rates to battle phantom inflation due to oil prices caused by financial speculation in Wall St and Dubai. Basel III in 2008 put regulations on auto pilot to begin a new round of bubbles once implemented after the crash and the new Basel IV accords coming soon will Blow it all to dust once the Fed hits the trigger with higher interest rates.

The BIS and its member banks created and prolonged the great depression and financed the rebuilding of Germanys War machine throughout the 30's till the end of WW II. Despite calls for it to be disbanded after the war the Fed was eventually allowed to become shareholders (previously prohibited by Congress although the larger banks owning the Fed could participate) and basically directs all the worlds central banks.