The Federal Reserve Is Setting Up Trump For A Recession, A Housing Crisis And A Stock Market Crash?


TheEconomicCollapse

How The Federal Reserve Is Setting Up Trump For A Recession, A Housing Crisis And A Stock Market Crash

By Michael Snyder

Most Americans do not understand this, but the truth is that the Federal Reserve has far more power over the U.S. economy than anyone else does, and that includes Donald Trump.  Politicians tend to get the credit or the blame for how the economy is performing, but in reality it is an unelected, unaccountable panel of central bankers that is running the show, and until something is done about the Fed our long-term economic problems will never be fixed.  For an extended analysis of this point, please see this article.  In this piece, I am going to explain why the Federal Reserve is currently setting the stage for a recession, a new housing crisis and a stock market crash, and if those things happen unfortunately it will be Donald Trump that will primarily get the blame.

On Wednesday, the Federal Reserve is expected to hike interest rates, and there is even the possibility that they will call for an acceleration of future rate hikes

Economists generally believe the central bank’s median estimate will continue to call for three quarter-point rate increases both this year and in 2018. But there’s some risk that gets pushed to four as inflation nears the Fed’s annual 2% target and business confidence keeps juicing markets in anticipation of President Trump’s plan to cut taxes and regulations.

During the Obama years, the Federal Reserve pushed interest rates all the way to the floor, and this artificially boosted the economy.  In a recent article, Gail Tverberg explained how this works…

With falling interest rates, monthly payments can be lower, even if prices of homes and cars rise. Thus, more people can afford homes and cars, and factories are less expensive to build. The whole economy is boosted by increased “demand” (really increased affordability) for high-priced goods, thanks to the lower monthly payments.

Asset prices, such as home prices and farm prices, can rise because the reduced interest rate for debt makes them more affordable to more buyers. Assets that people already own tend to inflate, making them feel richer. In fact, owners of assets such as homes can borrow part of the increased equity, giving them more spendable income for other things. This is part of what happened leading up to the financial crash of 2008.

But the opposite is also true.

When interest rates rise, borrowing money becomes more expensive and economic activity slows down.

For the Federal Reserve to raise interest rates right now is absolutely insane.  According to the Federal Reserve Bank of Atlanta’s most recent projection, GDP growth for the first quarter of 2017 is supposed to be an anemic 1.2 percent.  Personally, it wouldn’t surprise me at all if we actually ended up with a negative number for the first quarter.

As Donald Trump has explained in detail, the U.S. economy is a complete mess right now, and we are teetering on the brink of a new recession.

So why in the world would the Fed raise rates unless they wanted to hurt Donald Trump?

Raising rates also threatens to bring on a new housing crisis.  Interest rates were raised prior to the subprime mortgage meltdown in 2007 and 2008, and now we could see history repeat itself.  When rates go higher, it becomes significantly more difficult for families to afford mortgage payments

The rate on a 30-year fixed mortgage reached its all-time low in November 2012, at just 3.31%. As of this week, it was 4.21%, and by the end of 2018, it could go as high as 5.5%, forecasts Matthew Pointon, a property economist for Capital Economics.

He points out that for a homeowner with a $250,000 mortgage fixed at 3.8%, annual payments are $14,000. If that homeowner moved to a similarly-priced home but had a 5.5% rate, their annual payments would rise by $3,000 a year, to $17,000.

Of course stock investors do not like rising rates at all either.  Stocks tend to rise in low rate environments such as we have had for the past several years, and they tend to fall in high rate environments.

And according to CNBC, a “coming stock market correction” could be just around the corner…

Investors are in for a rude awakening about a coming stock market correction — most just don’t know it yet. No one knows when the crash will come or what will cause it — and no one can. But what’s worse for most investors is they have no clue how much they stand to lose when it inevitably happens.

“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.

If stocks start to fall, how low could they ultimately go?

One technical analyst that has a stunning record of predicting short-term stock market declines in recent years is saying that the Dow could potentially drop “by more than 6,000 points to 14,800″

But if the technical stars collide, as one chartist predicts, the blue-chip gauge could soon plunge by more than 6,000 points to 14,800. That’s nearly 30% lower, based on Friday’s close.

Sandy Jadeja, chief market strategist at Master Trading Strategies, claims several predicted stock market crashes to his name — all of them called days, or even weeks, in advance. (He told CNBC viewers, for example, that the August 2015 “Flash Crash” was coming 18 days before it hit.) He’s also made prescient calls on gold and crude oil.

And he’s extremely concerned about what this year could bring for investors. “The timeline is rapidly approaching” for the next potential Dow meltdown, said Jadeja, who shares his techniques via workshops and seminars.

Most big stock market crashes tend to happen in the fall, and that is what I portray in my novel, but the truth is that they can literally happen at any time.  If you have not seen my recent rant about how ridiculously overvalued stocks are at this moment in history, you can find it right here.  Whether you want to call it a “crash”, a “correction”, or something else, the truth is that a major downturn is coming for stocks and the only question is when it will strike.

And when things start to get bad, most of the blame will be dumped on Trump, but it won’t primarily be his fault.

It was the Federal Reserve that created this massive financial bubble, and they will also be responsible for popping it.  Hopefully we can get the American people to understand how these things really work so that accountability for what is coming can be placed where it belongs.

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Say What You Like About The Fed Or The Central Banks, The Bank$terS Are Above Governments


FT

Fed on ropes as Yellen seeks to fend off Trump blows

Populist attacks from all sides make central bank vulnerable to calls to rein it in, say analysts

After a fusillade of excoriating and in many ways unprecedented attacks on the Federal Reserve by the Republican presidential candidate, Janet Yellen, the US central bank’s chair, finally hit back.

Ms Yellen last Wednesday dismissed as emphatically wrong Donald Trump’s claims that she and her institution were keeping short-term interest rates low at the behest of the Obama administration. “Partisan politics play no role in our decisions,” she declared.

Mr Trump is throwing punches at a time when the US central bank is under assault from both sides of the partisan divide, and at a time when polling suggests public confidence in its leadership has declined during a subpar economic recovery.

Some experts say the Fed is vulnerable and that the populist attacks could fuel demands by politicians for tighter constraints on its policy freedoms. Mr Trump “is tossing a lot of fuel on the fire”, says Sarah Binder, a professor of political science at George Washington University. “It intensifies the partisan criticism of the Fed and keeps the Fed in the politicians’ crosshairs.”

Mr Trump’s interventions by no means mark the first time the Fed has been turned into a political punching bag. Previous Fed chairs have been the subject of barbs during presidential campaigns — including in 2011 when Republican candidate Rick Perry accused former Fed chair Ben Bernanke of “treasonous” behaviour by conducting quantitative easing. Past administrations have seen outbreaks of tension with Fed chiefs, including under presidents George HW Bush and Richard Nixon.

Ms Yellen herself has become accustomed to fielding hostile questions from lawmakers during often fractious Capitol Hill appearances.

Mr Trump has, however, set a new standard for anti-Fed invective — at least when it comes to presidential nominees. He has said in recent weeks that Ms Yellen should be “ashamed” of what she is doing to the country, accusing her of creating a false stock market with low rates and setting policy to bolster President Barack Obama’s fortunes…

Read further


Central banks: Peak independence

http-com-ft-imagepublish-prod-s3-amazonaws-com-cf449596-84a9-11e5-8e80-1574112844fd

After a post-crisis surge in central bankers’ power, some politicians want to rein in their role


Yellen To Trump: The Fed Is Above The President

CorbettReport.com


Trump goes after Fed Reserve’s Yellen, claims she’s ‘more political’ than Clinton – Fox

“We are in a very big, ugly bubble,” Trump said Monday. “The Fed is not doing its job. The Fed is being is more political than Hillary Clinton.”


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“The Committee to Destroy the World” Just Tipped Its Hand


The Road to Roota Theory postulates that there is a group of people in the United States as well as around the world that are working to remove and destroy the financial banking powers that have secretly controlled all aspects of our lives for hundreds of years. The original idea of this group sprang from the mind of Alan Greenspan and involved rigging markets with computer programs that he had invented in the 1960’s.

The ongoing financial crisis is nothing but a planned collapse by Alan Greenspan’s “Golden Agenda”


MoneyMorning

The Federal Reserve Board is largely made up of tenured economics professors who are long on theory and short on practical. So it’s not surprising that their dot plots rarely reflect anything close to a realistic, well-reasoned forecast. A 3.25% short-term rate prediction, for instance, is pure science fiction.

dot-plot-graphic

Central Banks Are Willfully Destroying This Critical Market Function

Michael E Lewitt

With central banks owning $25 trillion of financial assets and sovereign wealth funds owning countless trillions more, it is time to ask whether capitalism as we know it is a thing of the past.

These non-economic actors have different motivations than traditional investors who buy assets in order to earn a profit over a reasonable period of time.

Central banks are buying stocks and bonds in order to monetize government debt and keep afloat the endless Ponzi schemes required to finance massive entitlement promises to their constituents.

Sovereign wealth funds are looking for places to park their cash for extremely long periods of time and often focus on assets with trophy or strategic value.

But the most important thing these two types of buyers have in common is that they don’t have to sell, which means that their ownership can inflate the value of what they own for prolonged periods of time.

This destroys the price discovery mechanism that markets are supposed to provide. And without price discovery, markets cease to function properly.

Then the destruction starts in earnest…read further

 

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NIRP: A Tax in Sheep’s Clothing


TheDailyBell

Negative Rates and Cash Bans: The Chaos Continues at Jackson Hole

Negative Interest Rates: A Tax in Sheep’s Clothing … A negative interest rate is just a tax on the banks’ reserves. The tax has to be borne by someone: The banks can choose not to pass it on and just have lower after-tax profits. This will depress the share price of banks and weaken their balance sheets by having lower equity values.

central-banking-dollars

Negative rates should be integral part of central bank policy options … Central banks should make negative interest rates a fully integrated part of monetary policy in order to respond effectively to future recessions, according to an academic paper presented on Friday to some of the world’s top central bankers.  “It is only a matter of time before another cyclical downturn calls for aggressive negative nominal interest rate policy actions,” concludes Marvin Goodfriend, a professor of economics at Carnegie Mellon University and a former policy adviser at the Richmond Federal Reserve bank.  – Reuters

The Federal Reserve meeting at Jackson Hole has been covered by the mainstream media in ways that gave the impression that policy discussions were a kind of theoretical exercise.

Papers were presented on such issues as negative interest rates (see excerpt above) that emphasized an academic context. The idea that comes across is that those involved were earnestly striving to combat US economic dysfunction and current unnaturally low interest rates.

The larger issue here is one that we didn’t find written about: the assumption of the inherent right of policymakers to do what is “necessary” to make the US economy “healthier.”

The debate is certainly cast in theoretical terms but the results will inevitably involve the use of force.

The assumption is that involved in the “monetary debate” will come to a reasoned conclusion that society as a whole will be impelled to adopt. Those who do not wish to adopt such a solution – and who actively resist – may be prosecuted or jailed.

A few days ago, in a lead-up to the conference, the Wall Street Journal published a longish editorial by Dr. Kenneth Rogoff, the Thomas D. Cabot Professor of Public Policy at Harvard University.

Rogoff was also the former chief economist of the International Monetary Fund and the article was taken from an upcoming book, “The Curse of Cash,” to be published in September by Princeton University Press.

Here’s an excerpt:

Money fuels corruption, terrorism, tax evasion and illegal immigration—so the U.S. should get rid of the $100 bill and other large notes … When I tell people that I have been doing research on why the government should drastically scale back the circulation of cash—paper currency—the most common initial reaction is bewilderment. Why should anyone care about such a mundane topic?

But paper currency lies at the heart of some of today’s most intractable public-finance and monetary problems. Getting rid of most of it—that is, moving to a society where cash is used less frequently and mainly for small transactions—could be a big help.

There is little debate among law-enforcement agencies that paper currency, especially large notes such as the U.S. $100 bill, facilitates crime: racketeering, extortion, money laundering, drug and human trafficking, the corruption of public officials, not to mention terrorism

The necessity for this sort argument has to do with the inevitable results of the imposition of negative interest rates. Cash will have to become more difficult to obtain and use because people won’t want to pay banks for placing cash in savings accounts. They might instead wish to hold cash at home so they don’t have to pay a fee.

As stated, the larger issue here is one of compulsion – and its presentation within an academic context. The Wall Street Journal editorial, for instance, is part of a book that will shortly be issued. The discussion of negative interest rates in Jackson Hole was accompanied by a white paper produced by a professor of economics.

The underlying reality is that these astonishingly comprehensive solutions don’t provide a choice. Even negative interest can be seen not as a monetary/policy response but as a kind of tax. An article by Christopher J. Waller (here) characterizes low rates as nothing more than a disguised money grab:

Negative Interest Rates: A Tax in Sheep’s Clothing … A negative interest rate is just a tax on the banks’ reserves. The tax has to be borne by someone: The banks can choose not to pass it on and just have lower after-tax profits. This will depress the share price of banks and weaken their balance sheets by having lower equity values.

This is true – and is an outcome of the way the Fed works. Imposing rates via monopoly authority always constitutes a tax, though this is not something regularly discussed when it comes to Fed “policy.”

Generally speaking, mainstream media coverage wants to present monetary discussions in ways that emphasize its theoretical aspects. But the bottom line is that what’s being discussed is not going to end up as suggestions. Whatever is decided on will have the force of law.

And if we look beyond “theory” to reality, the outcome of these kinds of discussions is invariably bad. Central bank monetary mayhem is everywhere you look. The West – the world, really – is locked into a quasi-depression as a result of a century of failing policies and monetary manipulation.

In the US, Janet Yellen wants to pretend that a “recovery” is ongoing. But if so, it one that does without some 90 million potential workers who choose not to participate – either because they cannot or because they wish to participate outside of the formal economy.

We recently posted an article entitled “Is the Fed Being Torn Down in Order to Create a New, Powerful Global Entity?” (here). When one examines the behavior of the Fed, and of central banks generally, it’s hard to conclude that their real mission is the one presented to us.

Step back far enough to contemplate a century’s worth of results and the reality is clear: Central banks are supposed to destroy the economies they supposedly serve. Ironically, the destruction then provides the opportunity for them to expand.

Giving a small group of individuals the power to decide on the value and volume of money is a ludicrous concept from any standpoint. But he problem is abetted by the mainstream narrative that never discusses the underlying lack of logic.

And so we observe Jackson Hole, which is presented to us as a conclave of elite thinking but which is actually nothing more than high-brow propaganda for a system that has already failed and – as compensation for its failings – now contemplates even more radical “solutions” that will give rise to even worse problems.

Conclusion: The mechanism of central banking is purposeful ruin. The end-result of this ruin is global governance. In the short-term this goal is disguised by an academic patina. But the long-term goal, an increasingly apparent one, is a brutal restructuring of the lives of seven billion people to benefit a handful of elite controllers.

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Work or Die


FEE

by Douglas French

oldmantech_mini

The Federal Reserve is giving us a choice – work forever, or make sure to die before running out of money.

The New York Times just featured a spry 71-year old Judith Lister who is teaching kindergarten in Pahrump, Nevada. While Ms. Lister enjoys teaching, she admits she can’t live on her Social Security checks and needs her teacher’s pension, which she can’t collect for three years.

The Times’ Paula Span explains that Ms. Lister is not alone, writing, “Over 16 years, employment rose not only among 65- to 69-year olds (close to a third now work), but also among those 70 to 74 (about a fifth). In the 75-plus population, the proportion still working increased to 8.4 percent from 5.4 percent.”

For seniors who want to work or have to work, it’s great when they can find a job. Ms. Lister’s prospects are, and will continue to be, good. Nevada is so short on teachers that this year the state’s governor, Brian Sandoval, declared the shortage an emergency, allowing school districts to take drastic measures (by government standards), for instance, like allowing school districts to hire teachers licensed in other states before they obtain a Nevada license, or hiring teachers in their 70s.

However, seniors who can’t find work sometimes look for a quick exit.

According to Healthline, suicide rates amongst baby boomers has increased by 40 percent because of the economy. “Our findings suggest that awareness should be raised among human resource departments, employee assistance programs, state and local employment agencies, credit counselors — those who may come into contact with individuals suffering from personal economic crises,” Julie Phillips, a sociology professor at Rutgers University told Healthline. “Just as we provide crisis counseling during emergencies such as natural disasters, we should probably be doing the same in economic crises.”

So Much for Retirement

The financial crash decimated the finances of many individuals. According to the Center for Retirement Research at Boston College, “for working households nearing retirement, median combined 401(k)/IRA balances actually fell from $120,000 in 2010 to $111,000 in 2013,” and “about half of all households have no 401(k) assets at all.”

But the ZIRP and NIRP policies of central banks are not just putting individuals between a rock and hard place, but are devastating pension funds and insurers as well. William Watts writes for MarketWatch,

Pension funds and life insurers “are feeling the pressure to chase yield themselves, and to pursue higher-risk investment strategies that could ultimately undermine their solvency. This not only poses financial sector risks, but potentially jeopardizes the secure retirement of our citizens,” said OECD Secretary-General Ángel Gurria in a speech.

The California Public Employee Retirement System (CALPERS) just announced it earned all of .61% during its year, ending June 30, 2016. That’s way short of the 7.5% it actuarially assumes it will earn to payout what it has promised its retirees. Currently, it’s 68% funded, again, assuming it can earn 7.5% a year going forward.

CALPERS is not alone with many public and private plans being under water. As for Social Security, its annual report indicates that “the Trustees project that the combined trust funds will be depleted in 2034.” After that, Trustees believe the fund can pay “about three-quarters of scheduled benefits through the end of the projection period in 2090.”

Bond guru Bill Gross writes in his monthly letter, “the return offered on savings/investment, whether it be on deposit at a bank, in Treasuries/ Bunds, or at extremely low-equity risk premiums, is inadequate relative to historical as well as mathematically defined durational risk.” In other words, savers, sophisticated or not, are stuck receiving return-free risk.

Less Than Zero

What central banks are doing, with 40 percent of the European sovereign debt market yielding less than zero and Janet Yellen considering the same for the U.S., is not just unprecedented, but dangerous. However, amongst average folks, the machinations of central banks doesn’t inspire talk around the water cooler. Meanwhile, most people believe themselves to be very savvy about finances, while studies show, and the numbers reflect, that the typical citizen is ignorant in the ways of money and investing.


Knowledge may be a problem, but self esteem isn’t.


Jeff Sommer writes in his “Your Money” column in the NYT about FINRA’s study of financial literacy. Six easy finance questions were asked of 25,000 people and most people only got half right. Of course, that complicated brain teaser, “How do bond prices respond when interest rates rise?” was missed by 72 percent of test takers.

Knowledge may be a problem, but self esteem isn’t. “Americans tend to have positively biased self-perceptions of their financial knowledge,” the study said. More than three quarters of the test takers rated their financial knowledge “very high.” Even after the financial crash, 67 percent of those participating in the study rated their finance know-how as “very high.”

The “global economy has been powered by credit – its expansion in the U.S. alone since the early 1970s has been 58 fold – that is, we now have $58 trillion of official credit outstanding whereas in 1970 we only had $1 trillion,” Gross explains. The result is an economy of slow growth punctuated by asset booms and busts laying waste to financial portfolios and any semblance of retirement savings and security.

We can look to Japan as an example of the deadliness of continuous Keynesianism. The Bank of Japan just announced its 26th stimulus plan in the last twenty years. Meanwhile, the country continues to have one of the highest suicide rates in the developed world. It’s no coincidence the numbers started to rise after Japan’s financial crash of 1998 and the numbers rose again after the crash of 2008, the BBC reports.

Killing Ourselves

The fastest-growing age group for suicide is young men. “It is now the single-biggest killer of men in Japan aged 20-44,” reports Rupert Wingfield-Hayes. One of the primary reasons being that “nearly 40% of young people in Japan are unable to find stable jobs” despite the BoJ holding its rate at 0%, for the most part, since 1999.

Here in America, Baby Boomer men are aging into a dangerous time. Suicide risk is highest amongst males over 65. “They lose friends on a continuous basis. Their heart and blood pressure medications [can] cause symptoms of major depression,” says Lara Schuster Effland, a clinical therapist. She also mentions that loss of money due to poor financial decisions, lack of savings or social security, and chronic illness, as negatively impacting quality of life.

Ms. Lister likes teaching young kids because “it keeps my brain engaged. It connects me to a younger generation.” And, after teaching is over for her, she might try real estate sales.

Lord Keynes famously said, “In the long run we are all dead.” He should have added, “or lucky to have a job.”


Related

Young Germans will have to work till 69, Bundesbank warns

Central bank’s calculations counter government claims that retirement age of 67 will be sufficient

Read more…

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Memories of a Reserve Currency Collapse


Penang Monthly

By N. Balakrishnan

If the history of global capitalism is anything to go by, massive social unrest can be only one financial event away.

currency1

Mobs attempting to overturn a bus.

As the ringgit tests multi-year lows and I hear people talk about the coming collapse of the US dollar as the world’s reserve currency, I look back to my time in Penang in 1967 when I witnessed first hand the severe social consequences that a sudden collapse in a reserve currency can bring.

Malaysia in November 1967 was just about four years old – though it had existed as independent “Malaya” since 1957. The country had a currency board system with the Malaysian dollar backed by the British pound sterling which then was in widespread use in former British colonies.

The Malaysian government was in the process of issuing its own currency backed by its own Central Bank to replace the currency issued by the Board of Commissioners of Currency of Malaya and North Borneo set up in 1938 and backed by the sterling. This Currency Board system had been able to provide a level of monetary stability and prosperity to Malaysia, Singapore and Brunei which other Asian countries – including giants such as China and India – could not even dream of.

In June 1967 the Malaysian dollar, issued by the new central bank, Bank Negara Malaysia, replaced the Malaya and British Borneo dollar at par and both currencies were allowed to circulate, with the Board’s currency backed exclusively by sterling and the Malaysian dollar by the Malaysian Central Bank. The plan was to withdraw the Board’s currency eventually, but no one was in a hurry to do that, what more with a currency note backed by the mighty sterling of a former colonial power.

But then came November 1967. Five months after the introduction of the Malaysian dollar, the pound was suddenly devalued by 14.3%. The new currency issued by Malaysia was not affected but the Malayan and British Borneo dollar were still pegged at 8.57 dollars per pound, and these reduced in value overnight by 15%. Since the devaluation of the sterling was unexpected and even the Malaysian government was not told about it by the UK, Malaysia found itself in a strange situation with two currency notes in circulation as legal tender – and one worth 15% less than the other! Malaysia’s then-Finance Minister was the capable Tun Tan Siew Sin, who definitely could not be blamed for not anticipating this turn of events.

The irony was that many Malaysians, conditioned to think of Britain as a strong power and to be sceptical of the financial abilities of fledgling states like their own, had been storing up on the “old British” notes. Malaysia at that time was underbanked, and most people, especially the poorer ones, literally kept their savings in large denomination notes under their mattresses.

Their savings suddenly lost value and, naturally, they were deeply angered.

Malaysia in those days had legitimate socialist parties such as the Socialist Front, which had deep support from smaller businessmen and workers. Huge demonstrations were organised asking for the government to offer compensation to holders of the old notes. The demonstrators had a point, since the government had told the public not to rush to the banks to convert to new notes and that both currencies were backed by the government equally. No one was in the mood to listen to the arcane explanations of the government about how the notes were actually backed differently.

The Socialist Front was particularly strong in George Town at that time, and had elected Members of Parliament and a good political infrastructure.

Unsurprisingly in a nascent post-colonial nation with large ethnic ghettoes, the anti-government demonstrations soon took on a racial dimension. Dozens of people were killed and a curfew was imposed for several days.

Though Indian, my family lived on Lebuh Cina, which was populated mostly by the Chinese. It was not far from where many inter-ethnic clashes took place between marauding youths from all ethnic groups. In my mind, I can today still sense the acrid smell of tear gas coming from canisters that the passing police vans threw – to our eyes, rather randomly and callously – along the streets.

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The use of tear gas to disperse the mobs.

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The deserted streets of the once-holiday island of Penang.

It was also the first time and fortunately only time I saw men being knifed and blood running in the streets. The victims were unlucky, being of the wrong ethnic group in the wrong place at the wrong time. Eventually the situation returned to normal but two years later in May 1969, more interethnic clashes broke out, this time largely in KL following a bad showing by the ruling Alliance coalition.

But it was the 1967 riots and killings in Penang that left a deep impression. I was too young to understand the economic and monetary dimensions of it. Those revelations came to me later, in 1980 when I was working as a rookie reporter for a news agency based at the World Trade Center in New York. Cigar-chomping Paul Volcker was in charge of the Federal Reserve then. The prime interest rates were in the high teens, and the gold price was rising rapidly. In fact, the Aden Sisters, based in Costa Rica, were predicting that the gold price would reach US$5,000 an ounce.

The markets and the market gurus of that time were fixated on the narrow money supply – “M-1B” – and were watching it diligently. If it went up, then the high interest rates were there to stay, and if it went down then there was hope for lower rates. Despite some economic training from a very good American college, it was a shock for me to see billions changing hands on the basis of this one number!

Those were pre-Internet days and I was the youngest of half a dozen reporters invited to the briefing every Friday afternoon at in the New York Federal Reserve on Liberty Street. The numbers were released to us at 4pm but we were only allowed to use the fixed line phone to call our offices at 4.10pm. So for a precious ten minutes, I was in possession of a number that could have made a lot of money for anyone who knew them in advance!

The Federal Reserve briefings went on for about 30 minutes, detailing “wire problems” and various problems afflicting the US banking system. Any faith I had that bankers and banks knew what they were doing with all that money evaporated then. I also have fond memories of the fluffy folded hand towels that adorned the men’s room at the New York Fed. I doubt whether there were women’s rooms then, and if there were, whether they had fluffy towels in them.

But the expected Weimar Republic of America scenario never happened, and the conservatives in America triumphed in convincing the populace to swallow immediate sharp pain for the long-term good. Today, the Liberty Street crowd seems instead to want the Federal Reserve to not only increase the money supply but print more and more money to make the markets go up. Some are even proposing negative interest rates!

Is this a new era where lax money does not matter anymore, or is it just the calm before the storm? Will what happened in Penang in 1967 happen on a global scale soon, with the masses taking to the streets when they finally realise that the “currency” in their pockets is not worth what they were told? Having seen how sudden changes can come about in 1967 Penang and 2008 New York, I am no longer reassured by “expert” assurances that things are all right on the monetary front.


N. Balakrishnan is an entrepreneur with diverse interests who has been based in Hong Kong for more than 20 years. He grew up in Penang and attended Penang Free School. More information about him can be found at http://www.coolinvestor.biz

Related

Penang’s forgotten protest – The 1967 Hartal

For almost two months in 1967, Penang erupted in violence and bloodshed. To many, the incident has been largely forgotten, but what inspired the 1967 Hartal, and how did it descend to chaos?

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The Fed’s Interest Rate Decision Makes No Difference


Road to Roota

Bix Weir


The Fed will decided whether or not to raise interest rates today. Oh Boy! Will they or Won’t they?…the whole financial world depends on this decision…and yet nobody knows how the markets will react after the decision.

HA! It makes no difference if they raise the rates a quarter point or a half point or a full point or even 20 points – the markets will be “steered” to where the US Fed and Treasury WANT them to go.

It makes 0% difference.

The answer lies in the QUESTION…”Where does the Fed and Treasury want the markets to go?”

My take, they want to destroy the US Dollar by September so watch for a bit of “Forced Volatility” this week leading into the “Unforced Massive Volatility” surrounding the BREXIT Vote next week (June 23rd).

NOTE: Lookout for another “False Flag Attack” in London around the time of the BREXIT Vote. In my 2016 Economist Analysis from Book 3 the only “arrow” that found a target in the Calendar Artwork was on a political podium with the word “London” on it. We all know what happened in Orlando related to the “Rainbow Flag” featured so prominently on the front cover of the Economist’s “Year in 2016″…

economist

The World in 2016

I will cover the Orlando attack in this week’s Friday Road Trip.

There are rumors that the “Black Lives Matter” group have been instructed by US Attorney General, Loretta Lynch to create “The Summer of Chaos” by disrupting the July Political Conventions. I would add that this would be only ONE of the many chaotic events planned for this summer.

The game continues and the battles are heating up.

May the Road you choose be the Right Road.

Bix Weir
http://www.RoadtoRoota.com