Party While You Can - Central Banks Are Ready To Pop The 'Everything' Bubble

Authored by Brandon Smith via Alt-Market.com,

Many people do not realize that America is not only entering a new year, but within the next month we will also be entering a new economic era. In early February, Janet Yellen is set to leave the Federal Reserve and be replaced by the new Fed chair nominee, Jerome Powell. Now, to be clear, the Fed chair along with the bank governors do not set central bank policy. Policy for most central banks around the world is dictated in Switzerland by the Bank for International Settlements. Fed chairmen like Janet Yellen are mere mascots implementing policy initiatives as ordered.  This is why we are now seeing supposedly separate central banking institutions around the world acting in unison, first with stimulus, then with fiscal tightening.

 

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However, it is important to note that each new Fed chair does tend to signal a new shift in action for the central bank. For example, Alan Greenspan oversaw the low interest rate easy money phase of the Fed, which created the conditions for the derivatives and credit bubble and subsequent crash in 2008. Ben Bernanke oversaw the stimulus and bailout phase, flooding the markets with massive amounts of fiat and engineering an even larger bubble in stocks, bonds and just about every other asset except perhaps some select commodities. Janet Yellen managed the tapering phase, in which stimulus has been carefully and systematically diminished while still maintaining delusional stock market euphoria.

Now comes the era of Jerome Powell, who will oversee the last stages of fiscal tightening, the reduction of the Fed balance sheet, faster rate increases and the final implosion of the 'everything' bubble.

As I warned before Trump won the election in 2016, a Trump presidency would inevitably be followed by economic crisis, and this would be facilitated by the Federal Reserve pulling the plug on fiat life support measures which kept the illusion of recovery going for the past several years. It is important to note that the mainstream media is consistently referring to Jerome Powell as "Trump's candidate" for the Fed, or "Trump's pick" (as if the president really has much of a choice in the roster of candidates for the Fed chair). The public is being subtly conditioned to view Powell as if he is an extension of the Trump administration.

This could not be further from the truth. Powell and the Fed are autonomous from government.

As Alan Greenspan openly admitted years ago, the Fed does not answer to the government and can act independently without oversight.

So, why is the media insisting on misrepresenting Powell as some kind of Trump agent? Because Trump, and by extension all the conservatives that support him, are meant to take the blame when the 'everything' bubble vaporizes our financial structure. Jerome Powell is "Trump's guy" at the Fed; so any actions Powell takes to crush the recovery narrative will also be blamed on the Trump administration.

 

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But, is it a certainty that Powell will put the final nail in the coffin of "economic recovery?" Yes. Last Friday the Fed finally released the transcripts of its monetary policy meetings in 2012, and in those transcripts are some interesting admissions from Powell himself. After reading these transcripts I am fully convinced that Powell is the man who will stand as the figurehead of the central bank during the final phase of U.S. decline.

Here are some of the most astonishing quotes by Powell from those transcripts along with my commentary. These quotes are yet another piece of evidence that vindicates my position on the Fed as an economic saboteur and my position on the historic market bubble the bank has created:

Powell: "I have concerns about more purchases. As others have pointed out, the dealer community is now assuming close to a $4 trillion balance sheet and purchases through the first quarter of 2014. I admit that is a much stronger reaction than I anticipated, and I am uncomfortable with it for a couple of reasons.

First, the question, why stop at $4 trillion? The market in most cases will cheer us for doing more. It will never be enough for the market. Our models will always tell us that we are helping the economy, and I will probably always feel that those benefits are overestimated. And we will be able to tell ourselves that market function is not impaired and that inflation expectations are under control. What is to stop us, other than much faster economic growth, which it is probably not in our power to produce?"

Assessment: By all indications the Fed did do more, MUCH more. Including QE3, various stimulus packages and incessantly low interest rates for years, the Fed has essentially stepped in every time stock markets in particular were about to crash back to their natural state of decline. Powell is being rather honest in his estimation here that these stopgaps are in fact temporary and that the Fed cannot produce true economic growth to support the market optimism they have created through their interventions. He is stating openly that markets will only remain optimistic so long as they are assured that the Fed will continue to intervene.

This is probably why it took almost six years before these transcripts were released.

Powell: "When it is time for us to sell, or even to stop buying, the response could be quite strong; there is every reason to expect a strong response. So there are a couple of ways to look at it. It is about $1.2 trillion in sales; you take 60 months, you get about $20 billion a month. That is a very doable thing, it sounds like, in a market where the norm by the middle of next year is $80 billion a month. Another way to look at it, though, is that it's not so much the sale, the duration; it's also unloading our short volatility position."

Assessment: And here we have Powell's shocking admission, clarifying his previous point — the "strong response" that Powell is referring to is a market reversal, or bubble implosion. He even admits the existence of the Fed's "short position on volatility." This explains the strange behavior of the VIX index, which has plunged to record lows as "someone" continually shorts VIX stocks in order to interfere with any decline in markets.

This interference in the VIX has conjured an aberration, a market calm and investor confidence that is artificial. Such overconfidence, when optimism turns into mania, has happened before. In fact, the end of the Greenspan era was awash in such exuberance. And this delusion always ends the same way — with crisis.

I would also like to mention here that I have seen some disinformation being planted on Powell's statements in 2012, asserting that he was "not talking about stock markets" specifically. Obviously he is, as you will see in other parts of his statement, but to reinforce the point, here is a quote from another Fed member who spilled the beans, Richard Fisher:

"What the Fed did — and I was part of that group — is we front-loaded a tremendous market rally, starting in 2009.

It's sort of what I call the "reverse Whimpy factor" — give me two hamburgers today for one tomorrow."

Fisher went on to hint at his very reserved view of the impending danger:

"I was warning my colleagues, Don't go wobbly if we have a 10 to 20 percent correction at some point... Everybody you talk to... has been warning that these markets are heavily priced." [In reference to interest rate hikes]

So, what happens when the Fed stops shorting volatility and ends the easy money being pumped into markets? Well, again, I think Powell and Fisher have just told you what will happen, but let's continue.

Powell: "My third concern — and others have touched on it as well — is the problems of exiting from a near $4 trillion balance sheet. We've got a set of principles from June 2011 and have done some work since then, but it just seems to me that we seem to be way too confident that exit can be managed smoothly. Markets can be much more dynamic than we appear to think.

When you turn and say to the market, "I've got $1.2 trillion of these things," it's not just $20 billion a month — it's the sight of the whole thing coming. And I think there is a pretty good chance that you could have quite a dynamic response in the market."

Assessment: The Fed balance sheet is being reduced NOW, and Powell as chairman will only continue the process if not expedite it. Some people may argue that Powell is displaying an attitude that would suggest he is not on board with tightening policies. I disagree. I believe Powell will make the argument that the band-aid must be ripped off and that stock markets need some "tough love".

In fact, Fed members including Yellen and former member Alan Greenspan (is there such a thing as a "former" member of the Fed?) have already been fielding the notion that stock markets are suffering from "irrational exuberance" and that something must be done to "temper inflation."

Powell is also acknowledging the mass-psychological aspect of investors, now trained like Pavlovian dogs to salivate over stock tickers instead of thinking critically on the implications of equities that "can't lose".  When they finally begin to realize that equities can indeed lose, and that the Fed is going to let them lose, what will the result be, I wonder?

Powell: "I think we are actually at a point of encouraging risk-taking, and that should give us pause. Investors really do understand now that we will be there to prevent serious losses. It is not that it is easy for them to make money but that they have every incentive to take more risk, and they are doing so. Meanwhile, we look like we are blowing a fixed-income duration bubble right across the credit spectrum that will result in big losses when rates come up down the road. You can almost say that that is our strategy."

Assessment: Wow! And there you have it. The new Fed chair's own prognostications. He even used the dreaded "B" word  bubble. Yes, as I have been arguing for quite some time, the Fed will continue to raise rates and cut off the low cost money supply to banks and corporations that has helped boost stock markets as well as numerous other asset classes.  And now we discover after six years a Fed official, soon to be the Fed chairman, telling you EXACTLY what is about to happen within American markets, reinforcing my long held position.

Powell even mentions that "this is their strategy." Now, that could be interpreted a few ways, but I continue to hold that the Fed plans to deliberately crash markets and that this will be a controlled demolition of the U.S. economy.

Trump may actually clash with Powell over these measures in the near future, considering Trump has thoroughly taken credit for the insane stock market rally that has dominated since his election. But, this will only add to the fake drama. Imagine, the very man Trump "picked" as the new head of the Federal Reserve undermining the market bubble which Trump boasts about on his Twitter account. The Kabuki theater will be phenomenal.

All the while, the true culprits behind the bubble and the crash, the international financiers and banks, will escape almost all scrutiny as the public mindlessly follows the political soap opera played out in the mainstream media.

Comments

Squid-puppets … 07564111 Thu, 01/11/2018 - 04:03 Permalink

1) Trump uses his executive order from 23 Dec authorising the international seizing of assets of human traffickers to appropriate the Rothschild fortune

2) Trump uses that to issue global debt jubilee, avoiding the otherwise inescapable decade long depression

3) the USA thereby arrests its comparative economic deterioration vis-vi China , enters a new golden age, and 

4) Trump is cemented as the greatest POTUS in US history

 

i also bought a lottery ticket today

In reply to by 07564111

SoDamnMad runningman18 Thu, 01/11/2018 - 04:58 Permalink

BIS will come out with their SDRs that no one will be able to figure our how their old money equates to an SDR.

With so many in debt to the hilt but figuring they have a fortune in stawks they will be shaken when brokerage companies go under and freeze all accounts because the margin people can't and won't pay for their repeated calls.

Liquidity will disappear and all hell will break loose.  This time the stock broker/ financial wizard "paratroopers" will not be jumping out of windows, they will instead be sneaking off to their Costa Rican hideaways while Rome burns.

In reply to by runningman18

J J Pettigrew FullHedge1 Thu, 01/11/2018 - 06:18 Permalink

In the WSJ yesterday, the Swiss Central Bank boasted of all the money they made buying stocks...

Is that not the ultimate insider trading scheme?  Buying infront of central bank annoucements....policy decisions...etc.

Did the Federal Reserve do the same thing?  And through the New York Fed so the insiders could share the info?

Can we find out?  Now there is a great reason to AUDIT THE FED. 

In reply to by FullHedge1

GreatUncle FullHedge1 Thu, 01/11/2018 - 06:36 Permalink

If confidence is lost they will have to pay even larger amount than the last time to stop the collapse.

As it started to drop around 2008 when the DOW hit 6000 or so they had to prop it up.

If it had broken that it was breaking the trend of the straight line from the 80's.

Next one to pop after that was the straight line trend from the 70's to around 3000.

Take the 100 year DOW chart, drop off the log function and see their puts into the economy that were really FIAT popping bubbles.

In reply to by FullHedge1

HRH of Aquitaine 2.0 Wed, 01/10/2018 - 23:10 Permalink

Excellent article.  I read this a few hours ago.  Trump was stupid for acting like he was the reason the stock market has increased.  Building him up to take him down.  

How many of us expected this to happen?  What goes up must come down.  At least this time I am ready and it won't be a surprise, for me.

Giant Meteor HRH of Aquitaine 2.0 Wed, 01/10/2018 - 23:18 Permalink

Trump has another ace in the hole not considered ..

Things turn to shit, he'll simply pull out the pre-election tapes, where clearly he did state, you see folks I told you it was a bubble all along, everything is rigged, and I was right again as you see!

And believe me, he would plainly state this with a straight face and no visible sign of tongue in cheek ..

Thaaaat's showbiz folks !

In reply to by HRH of Aquitaine 2.0

Giant Meteor whatswhat1@yahoo.com Wed, 01/10/2018 - 23:56 Permalink

To be honest, it's a tough call. Plain talk, when juxstaposed against Greenspans famous utterances of obfuscation .. until the great mystery of Oz finally revealed ..

From 60 minutes transcript

“I would engage in some form of syntax destruction, which sounded as though I were … answering the question, but, in fact, had not,” Greenspan admits, with a chuckle.

At one hearing, Greenspan said, “Modest pre-emptive actions can obviate the need of more drastic actions at a later date, and that could destabilize the economy.”

“Very profound,” Greenspan says, after listening to his testimony.
Greenspan personally worked on these “profound” comments.

“But what would often happen is you’d get two newspapers with opposing headlines, coming out of the same hearing,” (Lesley) Stahl remarks.

“I succeeded. I succeeded,” Greenspan says.

And folks hung on every word as if the greatest secrets of the universe were just revealed!

That is some kind of super powered bullshit they've got eh ?

May the farce be with them (all)

 

 

In reply to by whatswhat1@yahoo.com

ebworthen Wed, 01/10/2018 - 23:17 Permalink

Yup, 10 years since the last cleansing, now that retail is "all-in" time to rake their chips off the green felt just like 2008, 2001, etc.

Serial FED blown bubble economy to enrich the Elites and banks/corporations/insurers.

If you are invested in this "market" as an individual you are a God-damned fool.

JailBanksters Wed, 01/10/2018 - 23:25 Permalink

They had the perfect excuse when Trump was selected, and they blew it.

The longer it goes, the less likely they can blame it on Trump.

Which means there ain't nobody to blame except Central Bankers, which means Print Baby Print, which means it ain't gonna pop.

USofAzzDownWeGo JailBanksters Wed, 01/10/2018 - 23:29 Permalink

If they crashed it when he won, how could they blame it on him? He wasn't there doing anything yet.. But now, after a year.. year and a half... maybe even two with him boasting on twitter about how he has the records in all markets under him... the media will go back and bombard us with every single thing he boasted about with his stock market... I can just see it now, they will make him the most hated man in history.. even more than hitler. The kikes use the goy, use and abuse him.. make a mockery out of him.. hell they've been doing that nonstop on the TV. I can't walk in any reataurant, bar, gym.. without seeing the tv blast trump about something.. They're setting up the biggest fall ever and it's gonna be blamed on the ugly white man... they're number one hated enemy. 

In reply to by JailBanksters

OverTheHedge Billy the Poet Thu, 01/11/2018 - 02:15 Permalink

More of my morning entertainment - the BBC are running a little piece asking the general public around the world what they think of Donald Trump. The only person they could find who thought Trump was outstanding, was some rabid Israeli banging on about their 3,000 year right to ownership of Jerusalem - all the others mentioned Russiagate, The Paris Climate thing, his haircut - the usual propaganda. But this is on BBC World, which goes to every country in the World, and has an audience of lots, apparently: https://www.theguardian.com/media/2015/may/21/bbc-global-audience-passe…

As a propaganda tool, it is becoming more and more unsubtle, to the extent that (I hope) people may actually pick it up for themselves, especially those from countries with a history of prejudiced media.

I was wondering, naively, if a law to clean up the media might be along the lines of: publish whatever you want, but everything MUST be provable fact. Any fact proven wrong must have the same coverage for the retraction as the original error: for the same time as the original publication, in the same font, same size, same advertising, same everything. No government heavy-handedness needed, and self-policing would be de rigueur, if there were consequences. Imagine the news for the next 18 months, once the Russiagate thing falls over.....there wouldn't be any viewers left after "Here is the news - we were wrong. We apologise. We said Trump connived with the Russians, but it was not true. I have another ten minutes of explaining to you, for the ninety third day, that we were wrong. The Simpsons are on the other channel, if you are interested." How not to gain viewers. Of course, it would never come to pass, as laws are made by corporations, for the "benefit" of people.

In reply to by Billy the Poet

BigPunny USofAzzDownWeGo Thu, 01/11/2018 - 02:47 Permalink

You just admitted that Trump is the one to blame for the mess that's about to be created. 

Not only has he pushed this artificial bubble and boasted about it, but he pushed, shoved, and crammed a shitty tax bill down everyone's throats. 

Yet here you are, trying to defend him from something that will be HIS fault. 

So funny. Can't blame Obama for it, so now you're just gonna' go with the tried'n'true "deep state" bullshit. 

What a bunch of dumbasses. 

In reply to by USofAzzDownWeGo

HRH of Aquitaine 2.0 thinkmoretalkless Thu, 01/11/2018 - 00:02 Permalink

The end of May. Uranus moves from Aries into Taurus. Taurus is an earth sign and rules the physical realm. Saturn moved from Saggitarius into Capricorn on Deccember 19th. That is a similar position to 1929. I highly suggest people have physical possession of money, metals, real estate. If you don't own it, good luck, see you on the other side.

In reply to by thinkmoretalkless

Implied Violins Dr. Engali Thu, 01/11/2018 - 00:35 Permalink

Whether or not there is any truth to it, the elite do use astrology and numerology to make their plans.  That alone makes it worthwhile to know about it.

Don't believe it?  Check out this speech on the numerology of the number 7 by Christine Lagarde of the BIS:

https://www.youtube.com/watch?v=QYmViPTndxw

Why spend time even talking about this stuff, especially while giving a public speech?

In reply to by Dr. Engali

bloofer HRH of Aquitaine 2.0 Thu, 01/11/2018 - 12:07 Permalink

Saturn entered Capricorn in 1929. Saturn has a cycle of approximately 30 years. Saturn also entered Capricorn in 1959, and again at the end of 1988.

If I were going to try to characterize the significance of Saturn, I think I would look at Saturn's entry into the "obscure sector" of the US chart in 2016 and continuing until early 2026.

A previous "obscure sector" transit of Saturn coincides pretty closely with much of the Viet Nam War era: 1957-1967. Another previous obscure sector transit was from late 1986 through mid-1996. I don't know what to make of that one.

Normally--for most people, as well as presumably most nations--an obscure transit of Saturn signifies a pretty rough ride for several years.

The "rough ride" often seems to begin with a significant break from the past, where a person sets out in a significantly different direction, likely spending the next few years undergoing a metamorphosis into a different kind of person, leading a different kind of life. It's kind of like a cocoon phase. The previous life organization dissolves and changes, reorganizing itself into an entirely different life form. It's not much fun. It's kind of like being awake through major surgery.

I would say the '57-'67 era was transformative in this way. I don't think I see this in '86-'96.

I can see 2016-2026 shaping up into a period of major transformation.

Oh--the obscure sector transit prior to the '57-'67 one was from 1928-1937, so most of the period of the Great Depression.

 

In reply to by HRH of Aquitaine 2.0

CatInTheHat Wed, 01/10/2018 - 23:30 Permalink

Honestly, I think I know what this means for the markets and perhaps I'm a bit naive, but what happens to the average or poor American, when the next bubble pops???

Is this why Deagal.com is projecting the US population at just 54 million by 2025?..  

Twee Surgeon CatInTheHat Thu, 01/11/2018 - 00:24 Permalink

A surprising amount of people are going to be quite familiar with being 'Up Shit Creek without a paddle.'

It's the well insulated types that are going to be most affected. The great depression yarn of Bankers jumping from Sky Scrapers and all that, It really happens because the well insulated have not a clue how to start again from less than zero and know no reason why they should anyway. I doubt this fantasy happens but if it were to, it will not be Joe Average slug offing himself, he will be far to busy catching Groundhogs for the Taco stand. I know a lot of white folk will thrive if shit actually went Mad max.

Many others.....not so much. Often misquoted, Confucius left us this Gem of wisdom...."May ye be blessed to live in dull times."

Not much ugly happens in 'Dull' times, hence his good wishes for all. The rape of Nanking or the bombing of Dresden, the Civil war or the French Revolution, none of those times were Dull, nay, exciting and challenging they were. We have been in Dull times for decades (excluding people in the military) and most peoples lives have been prosperous, predictable and padded with puffy pillows.

When that fiction ends, then you can figure out who the casualties are , bitchez.

 

In reply to by CatInTheHat

ouropreto7 Twee Surgeon Thu, 01/11/2018 - 01:22 Permalink

Agreed. Most people can't even comprehend how to function in their day without 'Alexa', gps and 'apps' to do their thinking for them. They don't even know how to use a needle and thread to sew on a button, wouldn't know what to do with a gun let alone a hammer and nail. Many of us were raised by parents who went through the Great Depression as children. We also learned how to make do and to re-utilize items during tighter $ times and that makes us tough, resourceful and resilient as Americans. I know how to hit the ground prepared on foreign soil come what may whether disease, rioting or whatever else life can throw at me. The 'puffies' are gonna learn this here the hard way, but hope it never comes to that.

In reply to by Twee Surgeon

Twee Surgeon ouropreto7 Thu, 01/11/2018 - 02:08 Permalink

Exactly. Having a broad skill set and some experience with adversity is a winning formula in any historical reset.

Knowing how to remove chewing gum from velour upholstery and get 10% off the grocery bill is all well and good but if it ever gets down to having to survive 3 nights in the freezing cold or a week or two without WalMart, a lot of bunnies are going to lose their shit. I meet people all the time that do not know how to take a bus, put gas in a car, boil an egg, use a wrench or what they would wipe their asses on if the paper ran out. We are living inside a recipe for disaster. The 'Puffies' be doomed in such a scenario that will hopefully not happen, but if it does....yikes. Mega Death by the plague of stupid.

In reply to by ouropreto7