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.

..

Advertisements

Good Riddance To QE – It Was Just Plain Financial Fraud


CONTRA CORNER

usd

QE has finally come to an end, but public comprehension of the immense fraud it embodied has not even started. In round terms, this official counterfeiting spree amounted to $3.5 trillion— reflecting the difference between the Fed’s approximate $900 billion balance sheet when its “extraordinary policies” incepted at the time of the Lehman crisis and its $4.4 trillion of footings today. That’s a lot of something for nothing. It’s a grotesque amount of fraud.

The scam embedded in this monumental balance sheet expansion involved nothing so arcane as the circuitous manner by which new central bank reserves supplied to the banking system impact the private credit creation process. As is now evident, new credits issued by the Fed can result in the expansion of private credit to the extent that the money multiplier is operating or simply generate excess reserves which cycle back to the New York Fed if, as in the present instance, it is not.

But the fact that the new reserves generated during QE have cycled back to the Fed does not mitigate the fraud. The latter consists of the very act of buying these trillions of treasuries and GSE securities in the first place with fiat credits manufactured by the central bank. When the Fed does QE, its open market desk buys treasury notes and, in exchange, it simply deposits in dealer bank accounts new credits made out of thin air. As it happened, about $3.5 trillion of such fiat credits were conjured from nothing during the last 72 months.

All of these bonds had permitted Washington to command the use of real economic resources. That is, to consume goods and services it obtained directly in the form of payrolls, contractor services, military tanks and ammo etc; and, indirectly, in the form of the basket of goods and services typically acquired by recipients of government transfer payments. Stated differently, the goods and services purchased via monetizing $3.5 trillion of government debt embodied a prior act of production and supply. But the central bank exchanged them for an act of nothing.

Contrast this monetization process with honest funding of government debt in the private market. In the latter event, the public treasury taps savings from producers and income earners and re-allocates it to government purchases rather than private investments. This has the inherent effect of pushing up interest rates and, on the margin, squeezing out private investment. It is a zero sum game in which savings retained from existing production are reallocated.

To be sure, the economic effect is invariably lower investment, productivity and growth down the line, but the process is at least honest. When the public debt is financed from savings, government purchase of goods and services are funded with the fruits of prior production. There is no exchange of something for nothing; there is no financial fraud.

And it is the fraudulent finance of public deficits which is the real evil of QE because the ill effects go far beyond the standard saw that there is nothing wrong with central bank monetization of the public debt unless is causes visible inflation of consumer prices. In fact, however, it does cause enormous inflation, but of financial asset values, not the CPI.

Despite the spurious implication to the contrary, central banks have not repealed the law of supply and demand in the financial markets. Accordingly, their massive purchases of the public debt create an artificial bid and, therefore, false price. Moreover, government debt functions as the “risk free” benchmark for pricing all other fixed income assets such as home mortgages, corporate debt and junk bonds; and also numerous classes of real assets which are typically heavily leveraged such as commercial real estate and leased aircraft.

In short, massive monetization of the public debt results in the systematic repression of the “cap rate” on which the entire financial system functions. And when the cap rate gets artificially pushed down to sub-economic levels the result is systematic over-valuation of all financial assets, and the excessive accumulation of debt to finance non-value added financial engineering schemes such as stock buybacks and the overwhelming share of M&A transactions.

Needless to say, the false prices which result from massive monetization do not stay within the canyons of Wall Street or even the corporate business sector. In effect, they ride the Amtrak to Washington where they also deceive politicians about the true cost of carrying the public debt. At the present time, the weighted average cost of the $13 trillion in publicly held federal debt is at least 200 basis points below a market clearing economic level—–meaning that debt service costs are understated by upwards of $300 billion annually.

At the end of the day, the fraud of massive monetization makes the rich richer because it drastically inflates the value of financial assets—–roughly 80% of which is held by the top 5% of households; and it makes the state more bloated and profligate because its enables the politicians to spend without imposing the pain of taxation or the crowding out effects which result from honest borrowing out of society’s savings pool.

In the more wholesome times before 1914, the Federal government didn’t borrow at all. During the half-century between the battle of Gettysburg and the eve of World War I, the public debt did not rise in nominal terms, and amounted to just $1.5 billion or 4% of GDP at the time of the Fed’s creation.  Even then, the Fed was established as only a “bankers bank” which could not own a dime of public debt, but instead existed for the narrow mission of liquefying the banking market by means of discounting solid commercial paper on receivables and inventory for ready cash.

The modern form of monetization arose in the service of financing war bonds, not managing the business cycle, levitating the GDP or boosting the labor market toward the artifice of “full employment”. These latter purposes reflect a century of “mission creep” and the triumph of the statist assumption that governments can actually tame the business cycle and elevate the trend rate of economic growth.

But history refutes that conceit. In the early post-war period, central bank interventions mainly caused short term bouts of unsustainable credit growth and an inflationary spiral which eventually had to be cured by monetary stringency and recession. In the process of repetition over several decades culminating in the 2008 crisis, the household and business leverage ratios were steadily ratcheted upwards until the reached peak sustainable debt.

Now the credit channel of monetary policy transmission is broken and done. The Fed’s most recent massive monetization and “stimulus” has therefore simply inflated financial asset values—-meaning that the Fed has become a serial bubble machine.

There is a better way, and it contrasts sharply with the systematic fraud of QE. That alternative is called the free market, and at the heart of the latter is interest rates which are “discovered” by the market, not pegged and administered by the central bank. Stated differently, the free market requires that all debt and other forms of investment be funded out of society’s pool of honest savings—-that is, income that is retained out of production already made.

Under that regime there is no fraudulent bid for public debt and other existing assets based on something for nothing. Markets clear where they will, and interest rates are the mechanism by which the supply of honest savings and the demand for investment capital, including working capital, are balanced out.

Needless to say, free market interest rates are the bane of Wall Street speculators and Washington spenders alike. They can spike to sudden and dramatic heights when demand for funds to finance government deficits or financial speculation out-run the voluntary pool of savings generated by society. So doing, they bring financial bubbles and fiscal profligacy up short.

In stopping QE after a massive spree of monetization, the Fed is actually taking a tiny step toward liberating the interest rate and re-establishing honest finance. But don’t bother to inform our monetary politburo. As soon as the current massive financial bubble begins to burst, it  will doubtless invent some new excuse to resume central bank balance sheet expansion and therefore fraudulent finance.

But this time may be different. Perhaps even the central banks have reached the limits of credibility—- that is, their own equivalent of peak debt.

“I think QE is quite effective,” Boston Fed President Eric Rosengren said in a recent interview with The Wall Street Journal, describing the approach as an option for dealing with an adverse shock to the economy.

.

home
..

Federal Reserve ends quantitative easing bond-buying program


RT

…so what’s next? … QE4 / the dreaded Bail-ins / system collapse ? … whichever, the end is nigh…really nigh…

“I don’t think it’s possible” for the Fed to end its easy-money policies in a trouble-free manner…” – Alan Greenspan

jy

The Federal Reserve has officially announced an end to its quantitative easing bond-buying program, but economists are split over whether the central bank’s decision will help or hinder post-recession recovery.

As expected, the Fed said Wednesday afternoon that it’s third and most recent round of quantitative easing, QE3, would come to an end.

“The Committee judges that there has been a substantial improvement in the outlook for the labor market since the inception of its current asset purchase program. Moreover, the Committee continues to see sufficient underlying strength in the broader economy to support ongoing progress toward maximum employment in a context of price stability. Accordingly, the Committee decided to conclude its asset purchase program this month,” reads part of a statement released by the Fed on Wednesday. “The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.”

The confirmation surprised few since the Fed was largely reported ahead of Wednesday’s decision to be considering making such an announcement. As far as what the result will be, however, is up for debate as economists weigh potential outcomes ranging from outright optimism to doom and gloom.

Combined, the three rounds of QE undertaken by the Fed since 2008 have generated trillions of dollars for the American economy through a process in which the central bank has perpetually pumped money into long-term government bonds and bonds backed by home mortgages. But David Wessel, the director of the Hutchins Center at the Brookings Institution, told NPR recently that the three-and-a-half-trillion dollars’ worth of bonds purchased during that six-year span has been “far more than anybody inside or outside the Fed expected when this all began.”

usd

Indeed, the Fed has twice announced an end to its bond purchasing programs, only to soon after start again when it was realized that the desired effect failed to be achieved. Six years later, though, the end to QE3 might once and for all be the final nail in the program’s coffin.

In 2009, Ben Bernanke, then the chairman of the Fed, said that quantitative easing would only end “when credit markets and the economy have begun to recover,” at which point the central bank would resume business as usual.

“As the size of the balance sheet and the quantity of excess reserves in the system decline, the Federal Reserve will be able to return to its traditional means of making monetary policy–namely, by setting a target for the federal funds rate,” he said. “In considering whether to create or expand its programs, the Federal Reserve will carefully weigh the implications for the exit strategy. And we will take all necessary actions to ensure that the unwinding of our programs is accomplished smoothly and in a timely way, consistent with meeting our obligation to foster full employment and price stability.”

Today, the American economy is statistically sounder than six years ago: not only have three rounds of QE allowed faltering banks to get boost after boost from the government, but, partially as a result, jobless claims are down drastically from post-recession figures.

Nevertheless, optimism isn’t universal when it comes to what ending QE3 means for the world economy.

“Well there are some improvements, but we can’t say that it is recovering as everyone hoped,” Nour Eldeen Al-Hammoury, a chief market strategist at ADS securities in Abu Dhabi, told Euro News recently. “GDP is growing based on the inventories, which doesn’t mean that sales are increasing. The slack in the economy remains and so far there is no clear strategy on how this slack will be resolved. Moreover, the slowing down in Europe and Asia will be something to consider as the US economy is unlikely to grow on its own.”

…To some, the outcome is even drearier. “Without another dose of stimulus, the US will likely slide into recession,” Worth Wray, chief strategist at Mauldin Economics, predicted to Equities earlier this month.

Read more…

.

home
..

The global economy resembles a knackered old V8 engine which is now only firing on one cylinder


MISH’S
Global Economic
Trend Analysis

“Will These Central Bank Morons Ever Learn?” asks Albert Edwards at Societe General

Central Banks and the Business Cycle

I like it when someone besides a few financial bloggers takes the gloves off and starts asking some hard-hitting questions.

In Cross Asset Research last week, Albert Edwards at Societe General did just that. Emphasis in italics is mine.

Fragile and vulnerable in itself, the US recovery now battles against the rest of the world, which like a horror movie is dragging it down into a hellish Ice Age underworld. The problem is that at these stratospheric valuations, the market does not need to suffer an ACTUAL recession to see a crash. Like October 1987, just the fear of recession will be enough to trigger a massive market move.

On these pages we have a very simple thesis as to what will bring an end to this grotesque, QE-fueled market overvaluation. Simply put, the central banks for all their huffing and puffing cannot eliminate the business cycle. And they should have realised after the 2008 Great Recession that the longer they suppress volatility, both economic and market, the greater the subsequent crash. Will these morons ever learn?

The problem is that most risk assets, and especially equities and corporate bonds, are very expensive and priced for a long cycle. Meanwhile, this recovery has failed to generate any cyclical upward pressure to inflation – indeed quite the reverse. The global economy resembles a knackered old V8 engine which is now only firing on one cylinder (US). Hence, any data suggesting that the US economy is now also flagging were always likely to cause a meltdown as investors feared the imminent arrival of Japanese-style outright deflation. We note with interest that US 5-year inflation expectations in 5 years’ time have not fallen anything like as quickly as 5y expectations (see chart below). This suggests to me a continued misplaced market (over)-confidence about central banks’ ability to control events.

Only one day before last Wednesday’s flash crash, Guy Debelle, head of the BIS market committee, said investors had become far too complacent, wrongly believing that central banks can protect them, and many staking bets that are bound to “blow up” at the first sign of stress. A market loss of confidence in policy makers’ ability to control events has always been part of our Ice Age thesis. US inflation expectations in particular will fall an awful long way if investors fear the US cycle is about to fail.

I have always thought that this would all end the way Christopher Wood explained in his GREED and fear publication last November: “The key issue is what might trigger a market correction . The market consensus continues to focus on the tightening in financial conditions triggered by “tapering”. Still such a hypothetical correction is not so big a deal to GREED & fear, since any real equity decline caused by tapering is likely to lead, under a Fed run by Janet Yellen, to renewed easing. The real threat to US equities is when the American economy fails to re-accelerate as forecast”. Certainly, in my view , at these elevated valuations, it will not take much to bring down the entire ‘pyramid of piffle’.

Other Economic Illiterates

Just two days before Albert penned the above, a reader sent me a link to the Salon article America’s ugly economic truth: Why austerity is generating another slowdown by David Dayen.

Austerity amid recovery has been a disaster everywhere it’s been tried, and the fact that America’s course looks better right now than the more calamitous policy choices in Europe or the rest of the world brings little comfort. Anyway, a global slowdown, which appears to be the current path absent concerted action, will inevitably hit us at home.

David Wessel of the Brookings Institution is right to say that this terrible outlook for economic growth represents a choice by policymakers. With borrowing costs once again near historic lows, Congress could simply decide to finance some more investments. Europe could finally put an end to the economic straitjacket it’s chosen to wear for over half a decade. That dreaded dirty word – “stimulus” – could be employed once again.

US vs. Europe

For starters, austerity has never been tried. Deficit spending is still rampant in Europe.

Dayen never mentions the structural problems with the euro itself, Europe’s demographics, or productivity differences between France and Germany (mainly stemming from socialism and inane work rules).

Instead, like most economic illiterates, Dayen believes Europe can spend its way out of trouble. The fact of the matter is fiscal stimulus adds to deficits and any alleged improvement comes at enormous expense down the line. Then, as soon as the stimulus stops, guess what happens.

Compounding the problem, union work rules add to the cost of stimulus. Europe and the US both need to address massive overpayment of government workers vs. the private sector.

Fix the structural problems and most of the rest will take care of itself.

Dayen cheers the U.S. recovery vs. Europe. He overlooks the massive bubbles in stocks and corporate bonds.

US vs. Japan

Dayen wants more stimulus. Pray tell, what the hell do you call interest rates at zero and trillion dollar deficits for years?

Dayen is too bleeping blind to see that Japan tried things his way and failed. All Japan has to show for decades of deflation fighting is debt to GDP over 250%, the highest of any major county, by far.

He also fails to note the housing bubble is a direct result of the Fed not taking its medicine in 2000 and 2001.

Academic Wonderland

The idea that the Fed can eliminate the business cycle is clearly idiotic (bubbles of increasing magnitude in 2000, 2007, and now should be proof enough).

Nonetheless, that is precisely what the vast majority of economic writers believe. The writers all live in Academic Wonderland after years of Keynesian teaching.  Only those who believe in voodoo can get a job at a central bank.

In contrast, the average seventh-grader can see that building bridges to nowhere and overpaying for labor on top of it is doomed to fail.

Taught to be Stupid

You have to be taught to be stupid!

I have discussed these points before, most recently in James Grant Conference Video: Inflation Expectations, Growth, Policy Problems; Europe Has Become Japan.

On October 19, I wrote Challenge to Keynesians “Prove Rising Prices Provide an Overall Economic Benefit” in response to an article in the Financial Times.

Will the Morons Ever Learn?

Albert Edwards asked “Will These Morons Ever Learn?” I added the implied words “Central Bank“, but need to remove them.

Just three days ago Hillary Clinton stated “Don’t Let Anyone Tell You It’s Corporations and Businesses that Create Jobs“.

How moronic is that statement?

Keynesian and monetary fools are in complete control of academia, central banks, and most media.

Will the morons learn? Unfortunately, no. Why? Because they are morons, and by definition they can’t.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

Read more at http://globaleconomicanalysis.blogspot.com/2014/10/will-these-central-bank-morons-ever.html#RreZpSjPAUdfJuSi.99

.

home
..

Central Bank Monetary Heroin: The 3rd Dose May Kill


CONTRA CORNER

.

The additional sets of problems added as “solutions” only guarantee
that the third and final crash of asset bubbles just ahead will be
far more devastating than the crashes of 2000 and 2009.

.

The conventional view tacitly assumes the global economy is dealing with one problem: recovering from the Global Financial Meltdown of 2008-09. Stimulating a “recovery” has been the focus of central banks and states everywhere.
.
Short-sighted political expediency is a hallmark of the modern state’s reaction to crisis, but political expediency isn’t the only flaw in the central banks/states’ obsessive focus on “recovery;” it’s not even the primary flaw.
.
The real flaw is the central banks/states don’t even recognize that we face three interlocking sets of problems, not one. Each set of problems is layered on top of the previous layer, and each sets reinforces the other two. In other words, the entire problem set is more than just the sum of the three problem sets.
.
1. Financialization of the economy. As the post-industrial funk of the 1970s dragged on, the neoliberal ideology of liberalizing credit markets and eliminating the regulatory wall between investment banking and commercial/mortgage banking was presented as the fundamental fix to post-industrial stagnation: free up credit, leverage and speculation, and the results would be an expansion of asset prices and growth.
.
The first wave of financialization in the 1980s did indeed boost asset valuations and growth, but it did so by eroding the productive economy and the middle class that arose from gains in productivity. Financialization substitutes finance for productive investments, such that financial games such as originating subprime home mortgages become far more profitable than non-financial capital investments.
.
I’ve covered the immense structural damage wrought by financialization for years. Here is a small sample of essays from the 10+ pages of links available in the archives:
.
Why have the central banks and central states allowed financialization to hollow out the real economy? Because they have no choice. As I explained in Why the State Has Failed to Reform Our Broken Financial System (October 16, 2014), extreme financialization is the last source of the monumental profits the state needs to fund itself, and the last source of economic “growth” in an economy gutted by previous rounds of financialization.
.
2. Extremes of credit, leverage, risk and speculation. As conventional financialization failed to reflate the asset bubbles of the late 1990s that crashed in 2000, central banks and states opened the doors to extremes of credit expansion, leverage and risk. Financial fraud and embezzlement became the models of choice as lenders and borrowers alike engaged in a monstrously profitable churning of securitized mortgages, liar loans, initial public offerings of companies with no hope of generating profits, and all the other tricks of the finance trade.
.
The inevitable result of these extremes of supposedly low-risk leverage and sleight of hand was the Global Financial Meltdown of 2008-09, when bubbles in credit, risk, stocks and real estate popped.
.
3. The central bank/state “solutions” to the Global Financial Meltdown are the third set of problems. The monetary/fiscal solutions–dropping interest rates to zero, printing trillions of dollars, yen, euros and yuan out of thin air and giving banks and financiers free access to all this loot, with the implicit promise that any bets that went bad would be backstopped by the taxpayers–have not only done nothing to repair the damage done by the first two problem sets but have unleashed even more destructive dynamics.
.
The analogy I have used is monetary heroin: the first hits of quantitative easing had an immediate effect on moribund assets. But each successive wave of monetary heroin has had diminishing effects as the addict became habituated to the endless stimulus.
.
The central bank solution to this habituation is to increase each new dose of stimulus. Unfortunately, at some point the dose becomes large enough to kill the addict: The Fed’s Failure Complicates Its Endgame (July 30, 2014)
.
Each monetary/fiscal “fix” inflated a bubble that crashed. Rather than face the harsh consequences of financialization and successive waves of monetary extremes, central banks and states have elected to reflate the bubbles as the politically expedient solution that leaves the crony-cartel-state status quo intact.
.
But the additional sets of problems added as “solutions” only guarantee that the third and final crash of asset bubbles just ahead will be far more devastating than the crashes of 2000 and 2009.
.

.

home
..

The circus leaving town?


RT

Bankocalypse drill: US and UK to run ‘too big to fail’ collapse simulation

banksters

Britain’s Chancellor of the Exchequer George Osborne (R) speaks to U.S. Treasury Secretary, Jack Lew.

.

The US and UK will stage a comprehensive simulation next week check whether the countries’ financial and banking sectors are still vulnerable to the problem of the ‘too big to fail’ institutions and coordinate their actions in case of such collapse.

Government financial leaders from Britain and US will simulate a failure of a large banking institution on Monday in Washington, DC, to test the effectiveness of each county’s banking regulations.

They hope the simulation – which will not mimic the collapse of any particular ‘too big to fail’ institution – will demonstrate what the officials have learned from the financial crisis about their respective roles, and how new practices should shield taxpayers from further bailouts. The simulation will run through procedures if a large UK bank with US operations failed, and those for a US bank with a British presence.

We are going to make sure we can handle an institution that was previously regarded as too big to fail,” said UK chancellor, John Osborne, speaking to journalists at an International Monetary Fund meeting in Washington on Friday. “This demonstrates the distance we have come over the last few years to build resilience and learn the lessons of the financial crisis.”

chain

READ MORE: ‘Too big to fail’ status gives US banks ‘free pass’ – Fed study

Participating in the “war game” along with Chancellor Osborne will be US Treasury secretary Jack Lew, head of the Federal Reserve, Janet Yellen, and the governor of the Bank of England, Mark Carney, with senior officials from both countries.

The purpose of the simulation was to make sure every player, including politicians, knew their own responsibilities and who needed to act, which creditors would take a hit, and how to communicate the authorities’ actions to the public,” Osborne told the Financial Times.

the only winning move is not to play RT @vgmac On Monday, US and UK regulators will “war game” a big bank failure. http://t.co/b7RWCsngYU – Matthew Zeitlin (@MattZeitlin) October 10, 2014

It has been six years since the 2008 financial crisis when $700 billion in taxpayer dollars was used to shore up failing institutions, besides the cost of other bailout programs such as for Fannie Mae and Freddie Mac that totalled at least $135 billion more. The financial crisis lead to mass unemployment, drastic cuts to US government social programs, and contributed to the economic downfall of several European states.

READ MORE: JPMorgan ‘agrees’ to tentative $13 billion penalty for role in 2008 financial crisis

Since then regulations have passed in the US – the Dodd Frank Act of 2010 that forced banks to have in place capital and to draw up plans of how they would go through an ordinary bankruptcy and which groups would be paid off first.

Next week’s simulation, the results of which are expected to be released to the public, is designed to reassure the taxpayers in both UK and the US that their money will not be misused next time when a large financial institution turns out to be not that big to fail.

READ MORE: Record global debt risks new crisis – Geneva report

A Note from Bix Weir:

Many people have sent me the following article related to a huge meeting next week with the heads of the US and UK financial regulators. The meeting has to do with the ability to wind down large “Too Big to Fail” banks. Here’s one of the articles:

U.S. and UK to test big bank collapse in joint model run

http://www.reuters.com/article/2014/10/10/banks-regulations-collapse-idUSL2N0S52LK20141010

“Treasury Secretary Jack Lew and the UK’s Chancellor of the Exchequer, George Osborne, on Monday will run a joint exercise simulating how they would prop up a large bank with operations in both countries that has landed in trouble.”

“Also taking part are Federal Reserve Chair Janet Yellen and Bank of England Governor Mark Carney, and the heads of a large number of other regulators, in a meeting hosted by the U.S. Federal Deposit Insurance Corporation.”

END

On the face of it it doesn’t seem like such a big deal but how many times have we heard of “exercises” and “simulations” being scheduled and run the very same day as an actual false flag event happens??

Many times!!

Pre-Planned 911 Exercises

http://en.wikipedia.org/wiki/United_States_government_operations_and_exercises_on_September_11,_2001

Pre-Planned Boston Bombing Bomb Drill

http://www.sott.net/article/260912-Coincidence-Bomb-sniffing-dogs-and-spotters-on-the-roofs-were-at-start-finish-lines-for-drill-at-Boston-Marathon-bombing

Pre-Planned London Tube Drill

http://www.globalresearch.ca/7-7-mock-terror-drill-what-relationship-to-the-real-time-terror-attacks/821

…and there are many more. Turns out that planning drills during life altering events is more the rule than the exception!

So be AWAKE and AWARE next week as I don’t think this meeting between the Wizards Pulling the Levers is just a simulation…

ALL THE PIECES ARE IN PLACE.

May the Road you choose be the Right Road.

Bix Weir

More info at www.RoadtoRoota.com

..

Read some of the writings on the wall:

.

home

..

Janet Yellen said WHAT!


Most economists today, however, have sold themselves to the enemy. They work for government agencies such as the IMF, OECD, World Bank, central banks, or academic institutions where their research is heavily subsidized by government agencies. To succeed they have to “toe the line.” You don’t bite the hand that feeds you. – The Sad State of the Economics Profession

Ronmamita's Blog

comics-sheep-wolf-disguise-553070

Janet Yellen Is An Insult To Americans

By Raul Ilargi Meijer of The Automatic Earth

Janet Yellen is not talking to you. But she IS talking about you.

janet-yellen-2.png
Janet Yellen Is An Insult To Americans

Via: Zerohedge.com

If you’re a girl and you’re old and you’re grey and you’re the size of a hobbit, who’s going to get angry at you? If your predecessor had all the qualities anyone could look for in a garden gnome, and his predecessor was known mainly as a forward drooling incoherent oracle, how bad could it get? Think they select Fed heads them on purpose for how well they would fit into the Shire?

Janet Yellen has a serious problem: the story no longer fits. The Fed under Bernanke said in its forward guidance that it would taper if certain job market conditions were met. And now they have been, at least on paper…

View original post 1,741 more words