The Fed's Frankenstein Policies Are About To Turn On Their Master

The financial media is finally catching on to something we’ve been screaming about for years…

That the Fed’s preferred metric for measuring inflation is a complete joke.

Making matters more difficult, the Fed’s preferred inflation gauge does a pitiful job of capturing the quandary facing many households that live paycheck to paycheck. The so-called core PCE is the central bank's go-to inflation metric. It is derived by netting out the necessities of food and energy from personal consumption expenditures. But the core PCE also minimizes the weight of rent and over-emphasizes health care due to Medicaid and Medicare’s inputs.

Source: Bloomberg

What the article doesn't understand is that this scheme is intentional.

The reality is that since the US abandoned the Gold Standard in 1971, the Fed has effectively been “papering over” declining living standards in that the actual “cost of living” in the US has soared relative to real incomes.

This fact stares all of us in the face every day. Back in the late ‘60s / early ‘70s, one parent worked and most Americans had a decent quality of life. Today both parents typically work and are one financial emergency away from being broke.

The Fed masks this by understating inflation and by providing an endless stream of easy credit/ debt. This is why the Fed's continuous “gosh, inflation is just too low… we better keep on printing money forever,” shtick is so ridiculous.

However, like the famous Frankenstein monster, the Fed’s inflationary policies are about to turn on their master.

The fact is that inflation is actually clocking in well over 3%. And it’s about to blow up the Everything Bubble.

Bonds trade based on inflation.

If inflation rises, so do bond yields.

When bond yields Rise, bond prices FALL.

And when bond prices FALL, the massive debt bubble begins to burst.

On that note, the yield on the most important bond in the world: the 10-Year Treasury, has already broken above its 20-year trendline.

US Treasury Yields Rise

The US is not alone… the yield on 10-Year German Bunds has also broken its downtrend.

German Bund Yields Rise

Even Japan’s sovereign bonds are coming into the “inflationary” crosshairs with yields on the 10-Year Japanese Government Bond just beginning to break about their long-term downtrend.

Japanese Bond Yields Rise

Globally the world has added over $60 trillion in debt since 2007… and all of this was based on interested rates that were close to or even below ZERO.

All of this is at risk of blowing up courtesy of this spike inflation. And it's going to collapse most asset classes in ways we haven't seen since 2008.

On that note, we are putting together an Executive Summary outlining all of these issues as well as what’s in terms of Fed Policy when The Everything Bubble bursts.

It will be available exclusively to our clients. If you’d like to have a copy delivered to your inbox when it’s completed, you can join the wait-list here:

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research


jafo2me Mon, 01/22/2018 - 09:50 Permalink

IF you don't know inflation exists you are either making WAY TO MUCH money to notice or you haven't been to the Safeway in the last 5 years...

HamSolo Mon, 01/22/2018 - 10:12 Permalink

I thought the price of Ramen and Koolaid was supposed to increase 100% per year. How the hell else are we going to starve off all of these useless eaters

gerryscat Mon, 01/22/2018 - 11:23 Permalink

They know exactly what they are doing. The purpose of their inflation metric is to understate inflation, otherwise people might wake up to the con. Everything they do is to further enrich the rich, at everyone else's expense.

tunetopper Mon, 01/22/2018 - 11:57 Permalink

Hedonics my friends....its called hedonic adjustments.  With the advent of the TV remote control, the Bureau of Labor and Statistics began to meassure these "step savers" as adjustments to price.  So even though a PC costs about the same as it did last year- since it probably has a few extra features, the BLS says it went down in price.   Only a very few years back they introduced drugs and health care to their hedonic modelling.  So if a drug can be bought at the same price but (for instance) its now available in Extended Release formula for a few pennies more- the BLS says the price went down-considerably.  It is by this arbitrary method of price adjustment that those elderly on a fixed retirement get their COLAs adjusted.  So Sad!

Rex Andrus Mon, 01/22/2018 - 12:00 Permalink

You still don't understand what the fed is. The fed is privately owned CB, usurers in control of the nation's currency. Read their history. They inflate the money supply to force people into credit just to eat, then they intentionally contract the money supply, stop lending and call in loans  to bankrupt people in order to buy up their property for next to nothing. They use government force to enforce these crimes against humanity. They cause wars and lend to both sides. They are Pure Evil.

You're a fucking moron if you think they are there to do any good. They aren't. Their Frankenstein isn't going to eat them. This is their plan. Cry "It's not our faulty! We didn't mean to! It was a mistake!" while plundering everything they can shake loose, and getting fraudulent mortgages on everything they can't. Look at their track record back to William of Orange.

Golden Phoenix Mon, 01/22/2018 - 12:06 Permalink

...And idiots think Bitcoin is the tulips. It's just one of the few escape routes from the Fed reverse Ponzi. Those buying gold have made other choices but they are awake too.

Losingbear Mon, 01/22/2018 - 12:37 Permalink

Is this guy one of the founders of ZH?


The quality of his notes are sub-standard and doesn't add any value. I assume most readers of this website already know all points he makes which are so repetitive and there is nothing new. The one thing he is really consistent about is his pitch for buying gold and get his free report.

gm_general Mon, 01/22/2018 - 13:24 Permalink

We all know the CPI is a joke. What is an even bigger joke is the even more muted inflation adjustment applied to the GDP. I tried to read how its calculated but I need a few more degrees to be able to digest it. If we apply real inflation to the GDP we see it is YOY change has been negative for the past 18 years, and the gap between reported numbers and real numbers is widening.

undercover brother Mon, 01/22/2018 - 14:32 Permalink

If the fed decided tomorrow to unwind their $5.5 trillion balance sheet via runoff over the next 10 years, and take that currency out of circulation at maturity, what would happen to the stock and bond market?   That's right, it would tank by 50% in the next 30 days.   The Frankenstein monster is already out of control and they can't get it under control without blowing up their most recent asset bubble, which if they did, would subject them to congressional review and put their very existence in jeopardy.  If bonds continue lower, thus forcing rates higher to a point where it could trigger a flight out of stocks, the fed would simply step in and buy the crap out of bonds to stem the tide.  A real mess. 

JailBanksters Mon, 01/22/2018 - 15:57 Permalink

If you control the Money supply and control the Information then you can define the rules what inflation is and how it's measured. Which means, the FED can still say the Inflation is zippo.

libertyanyday Tue, 01/23/2018 - 06:15 Permalink

how much more currency depreciation can we stand before our currency goes negative.............1971 was our republics death knell...........we just didnt realize it at the time