The Real Threat Remains - Brandon Smith Warns "Do Not Be Fooled By The Fed's Magic Show"

Tyler Durden's picture

Authored by Brandon Smith via Alt-Market.com,

I remember back in mid-2013 when the Federal Reserve fielded the notion of a "taper" of quantitative easing measures. More specifically, I remember the response of mainstream economic analysts as well as the alternative economic community. I argued fervently in multiple articles that the Fed would indeed follow through with the taper, and that it made perfect sense for them to do so given that the mission of the central bank is not to protect the U.S. financial system, but to sabotage it carefully and deliberately. The general consensus was that a taper of QE was impossible and that the Fed would "never dare." Not long after, the Fed launched its taper program.

Two years later, in 2015, I argued once again that the Fed would begin raising interest rates even though multiple mainstream and alternative sources believed that this was also impossible. Without low interest rates, stock buybacks would slowly but surely die out, and the last pillar holding together equities and the general economy (besides blind faith) would be removed. The idea that the Fed would knowingly take such an action seemed to be against their "best self interest;" and yet, not long after, they initiated the beginning of the end for artificially low interest rates.

The process that the Federal Reserve has undertaken has been a long and arduous one cloaked in disinformation. It is a process of dismantlement. Through unprecedented stimulus measures, the central bank has conjured perhaps the largest stock and bond bubbles in history, not to mention a bubble to end all bubbles in the U.S. dollar.

Stocks in particular are irrelevant in the grand scheme of our economy, but this does not stop the populace from using them as a reference point for the health of our system. This creates an environment rife with delusion, just as the open flood of cheap credit created considerable delusion before the crash of 2008.

Today, we find our economic fundamentals in complete disarray, but the overwhelming fantasy within stocks still remains. Why? Because yet again, for some reason, no one is ready to accept the reality that the Fed is pulling the plug on America's fiscal life support. Nary a handful of economists in the world think that the Fed will raise interest rates one more time this year if ever again, and the threat of a balance sheet reduction is the furthest thing from everyone's mind. Daytrading investors are utterly convinced they have the Fed by the short hairs. I say, the situation is actually in reverse.

The minutes from the Fed's July Open Market Committee Meeting indicate that while the central bank has been the savior of stock investors for several years, the party is about to end. Comments on the risks a bull market might pose to "financial stability" have been more frequent the past couple of months

Only a few weeks ago, former Fed chairman Alan Greenspan commented that bond markets could collapse and bring stocks down with them do to overvaluations and increasing interest rates.

Recent spikes in markets despite a steady stream of natural disasters, threats of war with North Korea, as well as "increased inflation" (according to Fed models) due to the damage wrought by Hurricane Harvey suggest that the Fed will indeed continue hiking rates into our ongoing financial collapse.

The next FOMC meeting will conclude on the 20th of this month, and the question is, will the Fed surprise with a rate hike and/or balance sheet reduction program? I believe the odds are much higher than many people seem to think. [ZH: we now know that The Fed did announce the start of the balance sheet reduction program as Brandon forecast]

First, let's be clear, historically the Fed's predictable behavior has been to skip major policy actions in September and then startle markets with renewed and aggressive actions in December. People placing bets on a Fed rate hike in September would look at this pattern and say "no way." However, the narrative I see building in Fed rhetoric and in the mainstream media is that stock markets have become "unruly children" and that the Fed must become a "stern parent," reigning them in before they are crushed under the weight of their own naive enthusiasm.

In my view, the Fed will continue to do what it says it is going to do — raise interest rates and reduce and remove stimulus, and that the mainstream narrative will soon be adjusted to suggest that this is "necessary;" that stock markets need a bit of tough love.

If the Fed means to follow through with its stated plans for "financial stability" in markets, then the only measure that would be effective in shell-shocking stocks back to reality would be a surprise hike, a surprise announcement of balance sheet reduction or both at the same time.

If the Fed intends to continue cutting off life support to equities and bonds in preparation for a controlled demolition of the U.S. economy, then there is a high probability at the very least of a balance sheet reduction announcement this week with strong language indicating another rate hike in December. I also would not completely rule out a surprise rate hike even though September is usually a no-action month for central banks.

This would fit the trend of central banks around the globe strategically distancing themselves from artificial support for the financial structure. Last week, the Bank of England surprised investors with an open indication that they may begin raising interest rates "in the coming months." The Bank Of Canada surprised some economists with yet another rate hike this month and mentions of "more to come." The European Central Bank has paved the way for a tapering of stimulus measures according to comments made during its latest meeting early this month. And, the Bank of Japan initiated taper measures in July.

Even Forbes is admitting that there appears to be a "coordinated tightening of monetary policy" coming far sooner than the mainstream expects. If you understand how the Bank for International Settlements controls policy initiatives of national central bank members, then you should not be surprised that central banks all over the world are pursuing the same actions and the same rhetoric. The only difference between any of them is the pace they have chosen in taking the punch bowl away from the party.

The point is, when it comes to the fiat peddlers, there are indeed a few sure things, but continued stimulus is not one of them. One thing that is certain is that they will act in concert as they are clearly doing now in terms of policy tightening. Another thing that is certain is that if they plant a notion in the mainstream media — such as the notion that they are "worried about overvaluations in stocks" and that interest rates must rise, then they will follow through as they always have. Perhaps not at the pace the mainstream expects, or the pace I expect, but certainly somewhere in-between.

Finally, it behooves me to mention again that the Fed has done all of this before. In the lead up to the stock market crash of 1929, the central bank bloated stocks with easy credit measures and low interest rates, only to hike rates in the name of "quelling inflation." This hacked the legs out from under markets with a machete, and the rest is history. The hidden purpose behind this tactic is extraordinary centralization on a global scale. The Fed is not interested in the health of the U.S. economy, it is interested in total globalization of all economies under one totalitarian umbrella. To make an omelet, you have to break a few eggs.

Of course, the Fed will not engineer a market crash in a vacuum. It is my suspicion that the next Fed meeting will be followed by a geopolitical distraction — the most likely candidate being increasing conflict with North Korea.

Do not be fooled by the magic show. The real threat to us all is the central banking and international banking apparatus, including the BIS and the IMF. From now until the end of this year, remain vigilant.

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Father ¢hristmas's picture

Eternal Paradox:

I do not trust financial articles written by Jews.

But I instinctively and reflexively doubt the credibility of financial articles penned by the goyim.

*chuckle*

Manthong's picture

 

As Mitch Feierstein has long said, “You cannot taper a Ponzi.”

I say that you can try to, but it will not end well. 

 

thunderchief's picture

Don't really agree with the North Korea event.  War with China, Maybe Russia and probably destroying or making Japan, Korea, the Pacific unlivable with many Fukashimas doesn't seem like a good idea.   But then again,  these people are pretty much psychopaths.

old naughty's picture

let's just say, you might not be cheering "ho, ho, ho" come december, hummmm?

Father ¢hristmas's picture

I'm rooting for the dark horse doomsday candidate, which is the Executive branch being ousted via a military coup before they can initiate a first strike, with said military working in conjunction with United Nations peacekeeping troops to enslave American plebes and eventually chip us all.

I like to get high and imagine this all breaking on the news over a single day, like beginning one winter Sunday morning, you turn on NBC to get that hard-hitting, uncompromising, factual and unbiased reporting on American politics, and you see Lester Holt in DC all day reporting on how the military is pursuing the gubmint trying to stop a nuclear war.

phantom blot's picture

god you racist wankers are boring - go shoot yourself already

Father ¢hristmas's picture

Jews are not a race, you dumb motherfucker lol. You really don't want to establish that precedent, top hat.

Unless you want to bring the entire Western gubmint and military over the past twenty years before the Hague for war crimes for all those peace loving Muslims we whacked out since 9/11 on the grounds that it is a racial genocide aka ethnic cleansing aka a Holocaust ROFLcopter

And my paradox is no different from the Chinese take-out paradox.

You go into a Chinese take out joint, and briefly wonder if you're eating cat or some other bullshit.  And if you go in and don't see any Asian people working, you immediately doubt the food will really be "Chinese" aka worth a shit.

Besides, what the fuck, are we supposed to discuss how the financial system is just about to any day or minute now blink and you'll miss it implode for the 60th time today?

Or I suppose we should do like you and discuss how the American economy is being intentionally driven into the ground by Quakers and Irish bankers lol

Those goddamn fucking Quakers and micks!  They have been expelled from every country they ever set foot in for their deviously brilliant financial shenanigans they are sworn to engage in per their sacred holy books that also prophesy their being chosen by God© to rule the world forever and ever.

We are going to need a final solution to deal with this insidious Quaker-Irish problem.

GUS100CORRINA's picture

My response: IT IS CALLED THE NEW WORLD ORDER.

new game's picture

CB's, IMF, Int Bank of Settlements. Now this the true club. The true enemy of the common peoples.

I can't help but cheer on china, russia, iran and even NK for their fight to survive this onslaught of financial control via fiat ponzi scheming and the MIC to back it.

for every force there is another evolved force. just national survival in this case.

simple shit maynard, SSM.

now, we can predict living conditions if the CBers win as we are living the nightmare.

as far as the brics coming out on top, not so certain that will be better.

stay tuned, prepped and corned up.

there are some great deals on comfy chairs on CL.

just sayin...

 

Implied Violins's picture

I'll repost this here, since it applies just as well:

The destruction of the dollar was the plan ever since 1913. Inflation has made it worth about 1% of what it was then, so that job has already been accomplished.

Beyond that, Nixon taking us off the gold standard then going to China was an acceleration of US decline. You can actually see as American industries were transferred there, so too did the Chinese economy rise and the US tank. This was PLANNED.

The next step is to transfer the reserve currency from US control to an interim BRICS control (which is why the Chinks have bought so much gold), with an eventual one world currency, as the Rothschild rag the Economist outlined in 1988.

Why is this not obvious to so many here? The USA and the dollar were set up for vilification in every way possible by the (((elite))) so that the transfer of control will be met with APPLAUSE. They WANT us to be happy that the evil west is dead - but THEY ARE THE ONES WHO DID THIS SHIT.

The international bankers are the ones to watch. They set us up to be dispatched. They should be the ones to reap the karma, along with US and western leaders who did their dirty work.

GreatUncle's picture

And we are all slaves in this NWO contructed by design and for that purpose.

When the populations finally wake upto being a slave going to be all hell to pay for those that constructed this.

So do you have free will and freedom of speech or are you a slave?

ClowardPiven2016's picture

Well...I guess we'll have to wait for some "aggressive" December action like a 25 basis point hike. Real aggressive considering we are still have a historically low interest rate 8 years into the "recovery"

Professorlocknload's picture

25 basis points a year, for the next 10 years. Slow drying paint.

new game's picture

the paint will be peeling before it dries....

TahoeBilly2012's picture

Gold chart here in potential wave 3 is what matters. We will know next 48 hours if wave 3 is a go.

GoldHermit's picture

The Federal Reserve is a cartel and they are going to raise rates because the cartel is not making enough money. They don’t give a shit about the economy because they play it both ways. They will just take short positions if the economy is tanking and they will know well in advance which way it’s going because they will be the cause. When the market tanks – just watch the trading profits of the cartel banks about 3 to 4 months hence.

HRClinton's picture

Your argument is not internally consistent:

It makes no sense to say "the cartel is not making enough money", when they are the ones who create it out of thin air. You mull that one over.

Their only logical intent HAS to be:

     Pretend & Extend.  I.e., maintain their Global-Lust Magic Money Cartel, to maintain the lifestyle of their families. By any and all means.

hllnwlz's picture

Open a book.  They know their gains are inflationary. They know they've created the mother of all bubbles in assets.  They ate going to liquidate and buy BTMFD  of all dips.  Best to prepare so that you can too. Either that or lock and load.  Preferably both. 

GreatUncle's picture

This I think is what has happened as a concept.

Not about making enough money it is about being correctly positioned.

In 2008 if the plug had been pulled then so many of the 1% would have been flushed in the economic reset.

Now, today they have respositioned themselves to preserve themselves in any economic downturn.

Then look at the state of the economy, if it continues as it has the last decade without reset you have become Japan and the power of FIAT dies.

So now you are forced to implement actions to preserve the economy that is so good for the 1% because now they are positioned correctly.

1.) Interest rates up.

2.) Withdraw stimulus.

They now create the crunch the preserve their beloved economy and their position within it.

All to put the economy back into a position that is safe for the 1%, keep power from wealth, etc. although many around the world will be economically destroyed by this and they know it.

mkkby's picture

Brandon Smith recycles this same boring bullshit over and over again. He sucks goat balls by the dozen.

SlothHedge's picture

He is the diversion for the others.  They are all in on it.  Just read Shepwave.  Their analysis is too exact to be just good analysis for coincedence.

http://www.shepwave.com/blogs/

oDumbo's picture

So anyways, I was on shlepwave last week. Looked pretty good, but then I lost all my money, all Penny Anny’s money and all the school money for the blind center in town. Darn shlepwave, they really did a number on me. Oh well, better luck next time I guess. Which wave is a sure thing this week shlepwave? I’m investing the retard money this week and I sure could use a ten bagger!

OverTheHedge's picture

The good news is, right it wrong, we will know by Christmas.

Will the SNB be selling into strength, or buying the dips? It's all getting more surreal by the minute. BTW, my neighbours think barbecued goats balls are a particular delicacy. Is that good or bad - so hard to tell, these days. They are also fond of eyeballs. Takes all sorts.

BadSpybot's picture

Several years ago a "friend" tricked me into taking a couple bites of what he called Rocky Mountain Oysters. He was laughing hysterically while watching me. He announced it was goat balls. GAG! I could never trust the son-of-a-bitch after that.

runningman18's picture

Smith is almost always right in his predictions.  Who are you again...? 

stecha's picture

To Whom it May Concern,

As of my last opiate OD i currently and not for any fore seeable future will not participate in the American Dream..

The Duke of New York A No.1's picture

The FED's trading desks will be doing everything they can to levitate this market (buying futures & slamming the VIX) - they can't be having a stock market meltdown while trying to shrink their balance sheet.

 

 

 

SlothHedge's picture

In all years on Zerohedge I honestly think that the only good market advise is from the ShepWave group.  Thanks.

 

http://www.shepwave.com/blogs/ 

OverTheHedge's picture

Let's apply some logic, shall we? If Shepwave worked, you wouldn't have to spam here to try to drum up traffic. It would be secret, and you would be a gazillionaire. Yet here you are. Quad erat demonstratum, as they say inGermany.

navy62802's picture

While the Fed is important, you should be much more worried by the Obama-led coup that is in progress right now in Washington. This action alone has the ability to upend any investment that you may have confidence in.

BingoBoggins's picture

agree. vigilance is next to godliness. or was that vengence?

ilovetexas's picture

great article! Bravo!

Drop-Hammer's picture

I took the Red Pill, awoke from The Jew Matrix, and am now totally awake and aware.  I will never again be fooled by the Christ-killers' magic show.  

Dragon HAwk's picture

When they engineer this crash, too many people are going to know they did it... Hey a Guy can Dream.

OverTheHedge's picture

You should get yourself a new scrapbook, so you can keep all those "Nobody saw it coming" articles for posterity. Because it will, I promise you, be a huge shock to (((everyone)))

GreatUncle's picture

Yep ... the CB's engineered everything together wherever they are.

All in it together for if one falls so do the rest.

TheNuclearGenie's picture

As far as I can tell, the only one who has been fooled is zerohedge. Everything you have been predicting has gone wrong. First you said the Fed cannot raise rates without crashing the market. Well, they did and stock markets are making new highs. You said the Fed would never be able to shrink their balance sheet. Now they will do that too and the markets wont drop because we get tax cuts from Trump next. Is it maybe time for all you morons to admit you have been wrong since the beginning? You are all so wrapped up in your own doom fantaasy that you have missed every single bullmarket there is. Unable to accept responsibility for your own failure, you then blame "market manipulation" "BTFD" "ALGOS THIS AND THAT" and everything else except yourself. I have been making a killing in the market since 09-10 by just buying the SP500 and collecting dividends. It has been a pleasure to watch your misery. Good luck and let me know how it has worked out in another 9 years.

booboo's picture

Ha! Stawks, real killings are made outside the "markets" during times like these. Only lazy fucking duffers that don't have the common sense to pour piss out of their boots if the instructions were on the soles still invest in that carnival side show. As an added benefit one can still keep their doom helmet chin strap firmly secured. Here's to doom and real profits earned by hard work and not by pole smoking yids selling snake oil.

BingoBoggins's picture

That wasn't nice. Inspirational, yes. Keep up the good work.

MarketWizard's picture

Brandon Smith has his own magic show!....beat Piker!

ds's picture

Debt levels and the gowth of debts matter. Each of the high debt economies has different domestic concerns unemployments, etc that affect votes. The Politics will push them to short term fire fights to stabilize their economies. Loong term, they push their economies to become debt zombies like Japan. The Globalists are watching in glee to see nations existing as debt zombies, irrelevant wastelands except for their commodities.

Those anointed to be the Matrix habitats (they still need physical space to live, play and operate as headquarters), will be the safe spaces only for the serfs needed fot the growth and maintenance of the Matrix. The unwanted only have to rely on their Gods. 

What is there to be vigilant if you can see the hopeless trajectories of nations/economies and their poitical plays for largely their local Predators. Divided tribes across the planet who cannot agree that Matrix has to be taken down as a priority will be culled. 

MarketWizard's picture

Brandon Smith has his own magic show....beat it Piker!

MarketWizard's picture

Brandon Smith has his own magic show....beat it Piker!

JailBanksters's picture

Fool me once...Fool Me.....Can't get fooled again.

In any case, there is NO such thing as Magic, there is an Illusion though/

Which makes the Feral Reserve Illusionists, after all they can just conjure money up out of nothing, and that's magic.

Maybe they are also Hypnotists, hypnotising sheep into believing what they can conjure up is actually worth something.

But they must really get kick out reading stuff like this, because they know it's a Giant Scam, and we know it's a Giant Scam, in fact I doubt there is anybody that doesn't know it's a Giant Scam, and yet it continues. They literally are laughing all the way to the Bank.

 

 

GreatUncle's picture

Too many believe it will never affect them if they keep out of the way / silent.

They are positioned slightly better of than many so fear losing their little gains.

Oh for a rdue awakening coming soon.

 

JailBanksters's picture

I think a lot of people, as long as they get a wage or get free food, they don't give a rats.

They keep voting for the same morons and keep expecting different results each time, it's like they want things to change, but they don't want anything to change.

But ... If the Food subsidies, Fuel Subsidies, Power Subsidies ever ran out, then they'd care then their would be rioting.

As long as the Government can keep loaning money into existance to pay for all these subsidies, they don't care.

Is time running out ? or will it go on forever ?, and I'm leaning towards it will go on forever.

 

 

Father ¢hristmas's picture

Why Americans are ripe for the coming buttfucking they so richly deserve:

In a country where 4% of the world's population consumes 25% of the world's resources, the citizenry believes they are not getting a fair shake, and want a bigger piece of the pie.  The President also believes his country is not getting a fair shake in trade deals with other countries, and wants a bigger piece of the pie.

Which would consequently result in the other 96% of the world either being forced to scrap harder for increasingly smaller pieces of said pie.

Or

Getting rid of a stupid fucking regime that can't understand basic mathematics in relation to sustainability, and chipping its  spoiled ass overweight, diabetic electorate.