The Fed has lost control of the Market
What happens when the Federal Reserve goes bust that will be the single biggest bubble of them all
America’s Housing market is going back to the future which is in 2008. Because it was in 2008 that the Housing market crashed along with the rest of the stock market. We are about to repeat that phase of history again with another housing correction as the Fed loses control of the fight inflation with interest rate monetary theory.
Last time we spent $700B to bail out Wall Street, but that money sounds like a joke compared to the increased size of the unsecured debt load size and because the Fed was buying up all debts and cleaning the books artificially.
If the Fed wasn't prepared to stop inflation, they're surely not prepared to fight inflation, because what they would have to do now would result in so much more damage to the economy than the damage that they didn't want to do when they had the opportunity.
So all of this is just a bluff. The markets haven't figured it out. Now the bond market is continuing to fall. In fact, all of the yields hit new highs across the board on treasuries.\
- Peter Schiff
Here is a quick history of the crash;
For decades afterward, such restrictive regulation ensured, as the adage went, that bankers had only to follow rule 363: pay depositors 3 percent, charge borrowers 6 percent, and hit the golf course by 3 p.m.
This steady state persisted until the latter 1970s, when politicians hoping to jolt a stagnant economy pushed deregulation. Over several decades, policymakers eroded Glass-Steagall separations.
Most of what remained was repealed in 1999 by act of Congress, allowing big commercial banks, flush with the deposits of savers, to lumber into parts of the financial business that had, since the New Deal, been the province of the smaller, more specialized investment banks.
Investment banks jumped neck-deep into risk
These nimbler firms, crowded by bigger brethren out of deals they might once have made, now had to seek riskier and more complicated ways to make money. Congress gave them one way to do so in 2000, with the Commodity Futures Modernization Act, deregulating over-the-counter derivatives—securities that were essentially bets that two parties could privately make on the future price of an asset.
Like, for example, bundled mortgages.
stage was now set for investment banks to reap immense near-term profits by betting on the continuing rise of real-estate values—and also for such banks to fail once the billions on their balanced sheets proved illusory because ultimately, overextended American borrowers— who had been sold more debt than they could afford, secured on ephemeral assets—began to default.
In an ever-speeding spiral, the bundled mortgage securities lost their AAA credit ratings, and banks fell headlong into bankruptcy.
If you have forgotten that timeline here is a quick reminder of life in 2008 and the world of CDOs and “Credit Rating whores” from the film The Big Short made in 2015. It took that long for the average American to finally figure out what happened in 2008 with Lehman Brothers and Housing Market. The Fed is now holding all the Dog Sh$t.
Now the Fed has not control of the market and therefore a 2008 style bail out may turn into a bail in. A bail in is when the banks at the government’s request seize part of your bank account to balance their books. And the size of their books is worse than 2008 several times over. According to Wall Street Analyst Peter Schiff the Fed is out of bullets and the what is the value of a gun with no more bullets?
Either hike is inadequate for the task at hand. It doesn’t matter. It’s too little, too late. Fifty, 75, 100 — the Fed is not in a position to raise interest rates anywhere near enough to slow down inflation. But any attempt to raise interest rates, even slightly, will prick the bubble, which it’s already done, and the air is coming out. So, the Fed will succeed in killing the economy, but it will not kill inflation.
The technical picture is bleak and the fundamental picture is even bleaker.
Think back to 2008. In retrospect, we know the Great Recession started in December of 2007. But in early 2008, all of the pundits were insisting we weren’t in a recession and everything was going to be OK.
If I’m right, and we’re already in a recession now, this recession is going to be worse than that one. In fact, this may not be the worst recession since the Great Depression. This will be the worst recession including the Great Depression because it will be accompanied by very high inflation.
https://www.zerohedge.com/markets/peter-schiff-fed-has-already-lost-inflation-fight
Since this rate hike in May we had another one in June of 0.75 basis points and we are expecting a 2.00 basis point increase by the end of the year 2022.
Monetary policy is the key policy employed (changing interest rates). There are however several instruments to manage inflation in theory, including: Monetary Policy: Higher interest rates decrease the economy’s demand, resulting in lower economic growth and lower inflation.
https://debtinflation.com/how-might-monetary-policy-be-used-to-combat-inflation-fears/
The Fed has lost control and cannot admit it because then the entire financial house of cards ponzi scheme implodes and America becomes a new Venezuela.
There is no reason to believe this rally off the lows would constitute a bottom, we're nowhere near a bottom, we're so much closer to the top than the bottom unless the Fed does a complete about face, which it might do in order to stop the carnage.
But as long as the Fed is going to continue to pretend that it's going to fight inflation, the market is going to keep going down. Now, at some point, maybe the markets will figure out that the Fed is pretending. But clearly they haven't figured that out yet.
They believe the Fed is going to do what the Fed claims is going to do, even though what it claims is impossible, especially given what it's saying it's going to do, which is maybe raise interest rates up to two and a half three percent.
Even if they do that is wholly inadequate to bring down an inflation rate that officially is eight or 9%.
But unofficially in reality is probably closer to twice that level, there is no way the Fed is going to be able to succeed, but what it is succeeding and doing by pretending it can fight inflation is crashing the stock market.
- Peter Schiff
This interview is from May 2022 and since then we have had Crypto Carnage as Bitcoin has fallen more than 33% in price and is currently hovering around $20k. What has happened in the Crypto Market is the type of bloodbath that will happen on Wall Street with Stocks. The Crypto Market is a leading indicator of those price drops.
But the stocks are a clear leading indicator, a crash is imminent in crypto, including Bitcoin, it's just a matter of time. And it's not going to be a lot of time. And in fact, this sector being so weak is really starting to reveal all of this investment as malinvestment, all of these companies that started up in blockchain and crypto, almost all these companies are going to go out of business, all of their workers are going to get laid off.
And when they do get laid off, how are they going to pay the bills? Well, they're going to sell their crypto, because I think most of the people who work in blockchain related companies, they've totally drank the Kool Aid, they're all in, they work in crypto, they keep all their money in crypto, they're going down with the ship, and when they lose their jobs, and now they have to figure out how to pay their bills.
And the only thing they have to sell are Bitcoin and other tokens? Well, that's what they're gonna sell. So this whole thing is going to unravel.
- Peter Schiff
Imagine putting your trust and financial future in an insitution that was not a really Federal government Agency, but rather a privately held Hydra like corporation, which held no Reserves, was not even a Bank, had never been audited and was not within the control of the President or Congress. A true American recipe for financial slavery.
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