Below we look at Fed fraud masquerading as a Fed rescue.
First—The Newest Data from DC
Bloomberg’s Rich Miller recently announced that numerous analysts are predicting the Fed to more than double its current $4.7 trillion balance sheet to levels as high as $9 to $10 trillion in order to help the US economy survive the coronavirus shutdown.
Given that the Fed’s balance sheet was less than $1 trillion on the eve of the 2008 Crisis, we are now looking at the possibility of a 10X expansion, which would (unbelievably) look like this:
Obviously, such an aid package (QE plus deficit spending from Congress) would dwarf the unprecedented “stimulus” offered by the Fed in the post-2008 disaster and thus underscores the true economic seriousness of the current crisis.
The Fed is terrified of rising rates, a broken bond market or a tanking stock market. They are now acting pre-emptively, tossing more debt and money around than ever imagined.
Folks, every debt bubble pops, and every debt cycle, is followed by a massive deflation (i.e. painful fall in stocks and other financial assets) followed in tow by massive inflation (thanks to the money printing mania and Fed fraud we are currently seeing).
Given that we are currently seeing a combination of the greatest debt/credit and money printing expansion ever imagined by homosapiens, the crash we are postponing today will be devastating tomorrow—it’s simply a matter of math, history and cycles, which apparently the Fed has forgotten.
As JP Morgan’s chief US economist, Michael Feroli observed, “The Fed has effectively shifted from the lender of last resort for banks to a commercial banker of last resort for the broader economy.”
Our take-away from this observation, however, hinges on the operable words “last resort,” for this is INDEED it folks—”our country’s last resort.”
As the Fed moves towards extreme fiat money creation, we are literally going from a Twilight Zone market of Fed “over-intervention” into a Danger Zone of effective centralized Fed fraud control over the entire economy.
Naturally, some will legitimately and understandably argue that we have no choice—that our country is under an invisible attack and we need to do “whatever it takes,” to win this viral “war.”
We get this. Truly. We do.
But we need to look deeper at this and other issues (below) before we resign ourselves to such a thesis.
Fed-Speak, Fed Fraud
In the meantime, Fed Chairman Jerome Powell said just yesterday that he has no concern about “running out of ammunition” (money printers technically never run out of ink), telling NBC’s Today Show that the Fed will act as an heroic and necessary “bridge” during this time of crisis so that by Q2, the US can see “a resumption of growth.”
As our subscribers know by now, however, the Fed’s words have more than one face, and more than one motive, the controversial truth of which we will discuss at greater length.
For now, however, I’d simply like to ask Mr. Powell what “resumption of growth” is he referring to?
Factually-speaking…the US has not seen any growth or real productivity in years, as the following chart of 2% annualized growth makes objectively clear.
Note as well that the Fed’s balance sheet has grown by hundreds of percentage points since 2008, while our so-called economic “growth” grew by an annual rate of 2%. Some success story, eh?
This is not opinion, it’s math. Just read the links.
But public lies and hidden motives are nothing new to the Fed, or Fed fraud committed for years.
The recent bill does include direct payments to lower and middle-income families of $1,200 for each adult and $500 for each child.
That’s all fine, but it’s also a drop in the bucket compared to what the Fed has given Wall Street for generations.
Unlimited Money Printing—Miracle or Postponed Nightmare?
As of today, the Fed is embarking upon a policy of unlimited Quantitative Easing, which means it can simply create as much money as it wants to pay for any and all debts incurred by Uncle Sam.
Some may see this as a miracle solution. But is it?
Does anyone actually believe more debt will solve a systemic debt crisis, one that pre-dates COVID-19?
Is more debt, even “emergency debt” truly a legitimate “solution”?
After all, if we each had, say, $500,000 in debt, and could simply walk down into our basements and print $500,000 of cash, we could call that a miracle, no?
But the US District Court would call that fraud and the US Criminal Code would call that counterfeiting, punishable by years in a Federal prison.
Luckily, however, the Federal Reserve, is apparently exempt from Federal prisons and Fed fraud, despite the fact that the Fed is not “Federal” at all…
Instead, the Fed is a private bank legalized by Woodrow Wilson in 1913 to act outside of Congressional oversight (or Article 1, Section 8 of the U.S. Constitution) and whose creation Wilson later described as the darkest day not only in his life, but in the life of this country.
Now those are pretty intense words coming from the very President who signed the Fed into existence.
So, why was Wilson so afraid of the Fed?
Because he knew it was a sham bank from Day 1.
Despite the face time, book tours and self-congratulating arrogance of Greenspan, Bernanke, Yellen and now Powell, the Fed is a banker’s bank whose primary master, and motive, was (and remains) Wall Street.
Sound crazy? Kooky? Conspiracy-Theory unprofessional? We get this too.
But if you take a moment to read the aforementioned book or short-report, you can see for yourselves, so I will dispense with those details here.
Instead, I’ll focus on what’s happening now, as the Fed swoops into “rescue America” like some mythical super-hero.
Oh, how the ironies abound…The current rescue will lead to the greatest depression the US has ever seen. This is, alas, not only our “last resort,” it’s our last hurrah.
What’s Really Behind the Emergency Measures
The bill passed by the Senate on Wednesday will go into law and soon the Fed’s first directive will be to—you guessed it—create more debt on top of a nation now thoroughly soaked in debt–$75 trillion and rising.
DC is calling this “emergency lending facilities” and they are directed primarily to corporations who were surviving on debt pre-virus and obviously need more debt now to stay alive, despite never really doing anything but go into debt.
It’s good to be a modern rat in the C-Suite…Just go into debt, buy back your own shares, pay yourself a fortune and wait for a credit-bailout.
The Fed is then expected to establish a generous “Main Street Lending Program” to provide help to smaller firms, and God knows at least some of these small business (not hitherto on the S&P cheat-sheet) actually deserve it.
We’re talking about $2-3 trillion in more debt to be added to our already unpayable debt party in the US—and I’m not even talking about the unfunded liabilities of Medicare, veteran’s benefits or social security…
Again, we understand how this whole $6 to $10 trillion “stimulus” may seem like a really natural and necessary policy to most of you. Really: we get it. Desperate times call for desperate measures, right?
But look deeper behind the fancy talk in DC, which naturally, most American’s don’t have the time or expertise to decipher.
Understandably, Americans see needed money ostensibly going to Corona-impacted businesses who require and deserve support.
Unfortunately, and as shown below, the vast bulk of this “stimulus” money is going to buy Treasury bonds, and thus keep yields and rates continuously and artificially low, so that Wall Street and Uncle Sam can continue their low rate debt binge even longer and then call the same a “recovery.”
Meanwhile, Congress is telling YOU it needs this new credit and fiat money to help the heroic Fed to absorb any losses it may incur in making “risky emergency loans” to potentially “riskier borrowers.”
But folks, the Fed’s entire history is one of making risky loans, or giving free money, to risky borrowers, and if memory serves correctly, the riskiest and most supported beneficiaries of the Fed’s support has always been Wall Street and its complicit, insider banks.
Remember 2008? A small minority of NY-based banks were so overloaded with crappy sub-prime securities that they were on a well-deserved path to a lower Manhattan firing squad.
But what did the Fed do? It bought all those crappy subprime securities that no one else wanted at top dollar from the very banks who were drowning in a cesspool of bad debt which they alone created.
Thereafter, Wall Street rose like Lazarus from the dead and the media called the debt-driven S&P price inflation (and historical wealth gap) a “recovery” while our real economy and GDP sank to the basement of history.
Again, the ironies just abound in this era of Fed fraud.
Now, the media, the Senate and the Fed are acting as if Powell is doing the US economy another “Bernanke-like favor” by helping the smaller, more risky credits.
But folks, that’s a classic Fed head-fake hiding Fed fraud. The real beneficiaries, again, are the big names on the S&P and all those junky credits we otherwise call “investment grade” and a Wall Street repo market that is as fake as a 42nd Street Rolex.
In fact, the Fed fraud unfolding before our closed eyes is exponentially more of what has always gone on at the Fed, and hence the reason President Wilson so regretted its imposed birth upon his desk in 1913.
Fed Fraud: The Fed Is Once Again Concerned with Wall Street, not Main Street
And if you fear this is just the opinion of a Wall Street cynic, I get that too. It’s a normal assumption.
Toward that end, let’s stick to the facts rather than my bewildered eyes as history plays out the last hurrah for our economy and once-free markets as the Fed marches the United State toward the danger zone of near complete Fed-reliance, and hence the final nail in the coffin of classic capitalism.
The Fed is not YOUR friend.
What we are experiencing today in the backdrop of COVID-19 is hysteria in DC, the media and Wall Street that likely dwarfs the combined impact of 9-11, Pearl Harbor and the ride of Paul Revere.
More than hysteria, however, we are seeing Fed fraud and the pillaging of economic natural laws as the US, led by the Fed, destroys the last vestige of monetary sanity in order to buy a market rebound and short-term corporate bailout so that our children inherit a centralized, debt-ravaged and statist nation in which the Fed acts as the top dog as we suffer through the inevitable deflation and crippling inflation cycles which always follow.
Again, see why Wilson regretted signing the Fed into existence?
The only consequence of this much debt and printed money down the road is a socialized stock market rather than a free-market democracy willing to allow exchanges to naturally and occasionally tank, as all free markets are supposed to do. In trying to outlaw recessions, the Fed is only making the depression ahead the worst ever.
Sound crazy? A bit extreme?
First, let me say again that neither Tom nor I wish to disrespect, minimize or underestimate the horrific personal and national impact of COVID-19. All who can, and especially those at the highest risk, should take all measures possible to ensure their safety.
Nevertheless, the economic and police-state measures we are taking right now are ultimately far more dangerous than the virus.
Like the media-maligned Texas Lieutenant Governor, we recognize that we are in a terrible scenario in which no choices are good choices.
As such, we must accept the reality of this virus without fully placing our entire economy in lockdown or creating more debt or money than can ever be normalized, as such a “cure” will be economically more fatal than the disease’s current morbidity rates.
COVID-19 is scary. It scares you. It scares us. And lives matter more than markets. We get this too.
Based, however, upon the evidence at hand today, including the findings of the world’s leading epidemiologist, Stanford’s Dr. John Loannidis, the accurately analyzed mortality rate of COVID-19 is less than 1%.
But worth shutting down the country for months and crippling our economy for generations? YOU decide.
COVID-19 is a terrifying black swan, but it’s quantifiably no black plague, no DEFCON 1 emergency worthy of being classified as the Great Depression 2.0 and thus no justification for the shutting down of an entire country or the printing of simply unimaginable levels of money while incurring staggering and unsustainable levels of debt than our country can absorb without becoming a memory of its former self.
Something Sinister, Something Hidden in Plain Sight—Fed Fraud
In fact, there’s something far more sinister at play in America today than COVID-19. More on that below…
Tom and I are not immune to COVID-19 nor its human costs. We are equally vulnerable citizens but are now more concerned about the economic cadaver of a nation our generation is handing to our children’s generation.
Why so appalled?
Simple. The economic math behind this Fed fraud just terrifies us, even more than the virus stats.
As per the chart below, the Fed is literally buying $125 billion worth of US debt (i.e. Treasury bonds) and mortgage backed securities (i.e. the toxic waste from 2008) a day.
Yes, $125 billion a day.
This means, in just the last 10 days, the Fed has spent over $1 trillion to buy our own debt with money created out of thin air. That’s Fed fraud pretending at “assistance.”
This is not only utter madness, it’s pure debt monetization. That’s more fiat money creation in just over a week than the Fed created in the first 94 years of its existence.
The Real Story?
COVID-19 has now become the excuse rather than reason for the current hysteria. But frankly, not even an invasion from Mars would justify this much new debt and fiat money creation.
Japan, for example, has not shut down its country, despite being equally aware of the real health risks COVID-19 imposes despite fostering the oldest population on the planet and the largest percentage of life-time smokers anywhere.
Are the Japanese just stupid, greedy, callous or less empathetic for their fellow citizens that Americans?
Nope. Instead, Japan objectively recognizes and accepts that as horrific as COVID-19 may be, it’s not the Armageddon moment which DC, the Fed and the hysteria-driven (ratings-chasing) media would otherwise make it out to be.
Instead, the Fed, DC and Wall Street, who were staring down the barrel of a debt crisis, earnings crisis, and inevitable market disaster before the virus, are now exploiting a genuine crisis to justify their own massive “bail-in” and “bailout” while pointing the finger at COVID-19 rather than the debt-disease (and rigged game) they began (and exploited) years ago in the wake of the last financial crisis in 2008.
By printing trillions of new fiat currencies, extending trillions in more debt to “support” public companies already on the verge of a well-deserved debt-death before COVID-19, Wall Street and the Fed fraud pushers are essentially writing themselves (and Boeing and other junky friends of the Fed and Wall Street) a blank check just in the nick of time to extend their own egregious, debt-addicted survival.
See why President Wilson so feared this central bank? It’s not what you think it is, despite the smiling faces on bubble-vision.
How do we know this? Well, it’s because we played this rigged game for years, and from the inside…
As for the current markets and portfolios, well…trillions of dollars can certainly buy a “surge,” despite all the mathematically objective indicators of debt-broke companies and a real economy already in a growth depression before COVID-19, as backed by math and facts here, here and just recently here.
Again: Not opinion just fact. Please verify for yourselves. Take your time. Read the data. It’s your call.
Yet despite how insidious and rigged this Fed fraud game with Wall Street is, one cannot fight the Fed nor Fed fraud.
At Signals Matter, we expected such an emergency measure as inevitable, we just never thought the Coronavirus would be the excuse for the massive MMT-like insanity we are now experiencing in real-time.
As for our portfolio suggestions, we remain loyal to what the market signals rather than headlines tell us, and are bracing for price inflation (short-term), price deflation thereafter, and then mega-crippling inflation long-term, which will benefit those patiently owning gold down the road.
For now, the real data from the markets is objectively bad and defies the recent mega-sugar high handed to us by DC, but then again, a nuclear bomb could go off in Cleveland and markets would still rise if the Fed wants to double its balance sheet and DC blast U.S. debt levels to the moon.
DC and the Fed’s most recent multi-trillion-dollar tailwind (Fed fraud) is entirely uncharted territory and for now, we can’t gamble “all-chips-in” on this latest tailwind when uncertainty and risk are at far higher levels than reward, even with DC steroids pumped to levels no history or econ book could ever imagine.
For now, subscribers can check their dashboards to see our updated suggestions in this highly distorted backdrop.
For the rest of you, please take a moment to verify the data above for yourselves and then step outside the norm and consider the surreal, for that is where we are today, and Signals Matter was formed to help you through it.
Stay smart, stay safe. We’ll be back on Monday.
Your Guides, Matt & Tom