Tag Archives: Federal Reserve

The Fear Pandemic and the Crisis of Capitalism. Sleepwalking Towards A Global Economic Crisis?

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By Colin Todhunter

Source: Global Research

In October 2019, in a speech at an International Monetary Fund conference, former Bank of England governor Mervyn King warned that the world was sleepwalking towards a fresh economic and financial crisis that would have devastating consequences for what he called the “democratic market system”.

According to King, the global economy was stuck in a low growth trap and recovery from the crisis of 2008 was weaker than that after the Great Depression. He concluded that it was time for the Federal Reserve and other central banks to begin talks behind closed doors with politicians.

In the repurchase agreement (repo) market, interest rates soared on 16 September. The Federal Reserve stepped in by intervening to the tune of $75 billion per day over four days, a sum not seen since the 2008 crisis.

At that time, according to Fabio Vighi, professor of critical theory at Cardiff University, the Fed began an emergency monetary programme that saw hundreds of billions of dollars per week pumped into Wall Street.

Over the last 18 months or so, under the guise of a ‘pandemic’, we have seen economies closed down, small businesses being crushed, workers being made unemployed and people’s rights being destroyed. Lockdowns and restrictions have facilitated this process. The purpose of these so-called ‘public health measures’ has little to do with public health and much to do with managing a crisis of capitalism and ultimately the restructuring of the economy.

Neoliberalism has squeezed workers income and benefits, offshored key sectors of economies and has used every tool at its disposal to maintain demand and create financial Ponzi schemes in which the rich can still invest in and profit from. The bailouts to the banking sector following the 2008 crash provided only temporary respite. The crash returned with a much bigger bang pre-Covid along with multi-billion-dollar bailouts.

The dystopian ‘great reset’ that we are currently witnessing is a response to this crisis. This reset envisages a transformation of capitalism.

Fabio Vighi sheds light on the role of the ‘pandemic’ in all of this:

“… some may have started wondering why the usually unscrupulous ruling elites decided to freeze the global profit-making machine in the face of a pathogen that targets almost exclusively the unproductive (over 80s).”

Vighi describes how, in pre-Covid times, the world economy was on the verge of another colossal meltdown and chronicles how the Swiss Bank of International Settlements, BlackRock (the world’s most powerful investment fund), G7 central bankers and others worked to avert a massive impending financial meltdown.

The world economy was suffocating under an unsustainable mountain of debt. Many companies could not generate enough profit to cover interest payments on their own debts and were staying afloat only by taking on new loans. Falling turnover, squeezed margins, limited cashflows and highly leveraged balance sheets were rising everywhere.

Lockdowns and the global suspension of economic transactions were intended to allow the Fed to flood the ailing financial markets (under the guise of COVID) with freshly printed money while shutting down the real economy to avoid hyperinflation.

Vighi says:

“… the stock market did not collapse (in March 2020) because lockdowns had to be imposed; rather, lockdowns had to be imposed because financial markets were collapsing. With lockdowns came the suspension of business transactions, which drained the demand for credit and stopped the contagion. In other words, restructuring the financial architecture through extraordinary monetary policy was contingent on the economy’s engine being turned off.”

It all amounted to a multi-trillion bailout for Wall Street under the guise of COVID ‘relief’ followed by an ongoing plan to fundamentally restructure capitalism that involves smaller enterprises being driven to bankruptcy or bought up by monopolies and global chains, thereby ensuring continued viable profits for these predatory corporations, and the eradication of millions of jobs resulting from lockdowns and accelerated automation.

Author and journalist Matt Taibbi noted in 2020:

“It retains all the cruelties of the free market for those who live and work in the real world, but turns the paper economy into a state protectorate, surrounded by a kind of Trumpian Money Wall that is designed to keep the investor class safe from fear of loss. This financial economy is a fantasy casino, where the winnings are real but free chips cover the losses. For a rarefied segment of society, failure is being written out of the capitalist bargain.”

The World Economic Forum says that by 2030 the public will ‘rent’ everything they require. This means undermining the right of ownership (or possibly seizing personal assets) and restricting consumer choice underpinned by the rhetoric of reducing public debt or ‘sustainable consumption’, which will be used to legitimise impending austerity as a result of the economic meltdown. Ordinary people will foot the bill for the ‘COVID relief’ packages.

If the financial bailouts do not go according to plan, we could see further lockdowns imposed, perhaps justified under the pretext of  ‘the virus’ but also ‘climate emergency’.

It is not only Big Finance that has been saved. A previously ailing pharmaceuticals industry has also received a massive bailout (public funds to develop and purchase the vaccines) and lifeline thanks to the money-making COVID jabs.

The lockdowns and restrictions we have seen since March 2020 have helped boost the bottom line of global chains and the e-commerce giants as well and have cemented their dominance. At the same time, fundamental rights have been eradicated under COVID government measures.

Capitalism and labour

Essential to this ‘new normal’ is the compulsion to remove individual liberties and personal freedoms. A significant part of the working class has long been deemed ‘surplus to requirements’ – such people were sacrificed on the altar of neo-liberalism. They lost their jobs due to automation and offshoring. Since then, this section of the population has had to rely on meagre state welfare and run-down public services or, if ‘lucky’, insecure low-paid service sector jobs.

What we saw following the 2008 crash was ordinary people being pushed further to the edge. After a decade of ‘austerity’ in the UK – a neoliberal assault on the living conditions of ordinary people carried out under the guise of reining in public debt following the bank bail outs – a leading UN poverty expert compared Conservative welfare policies to the creation of 19th-century workhouses and warned that, unless austerity is ended, the UK’s poorest people face lives that are “solitary, poor, nasty, brutish, and short”.

Philip Alston, the UN rapporteur on extreme poverty, accused ministers of being in a state of denial about the impact of policies. He accused them of the “systematic immiseration of a significant part of the British population”.

In another 2019 report, the Institute for Public Policy Research think tank laid the blame for more than 130,000 deaths in the UK since 2012 at the door of government policies. It claimed that these deaths could have been prevented if improvements in public health policy had not stalled as a direct result of austerity cuts.

Over the past 10 years in the UK, according to the Trussell Group, there has been rising food poverty and increasing reliance on food banks.

And in a damning report on poverty in the UK by Professor David Gordon of the University of Bristol, it was found that almost 18 million cannot afford adequate housing conditions, 12 million are too poor to engage in common social activities, one in three cannot afford to heat their homes adequately in winter and four million children and adults are not properly fed (Britain’s population is estimated at around 66 million).

Moreover, a 2015 report by the New Policy Institute noted that the total number of people in poverty in the UK had increased by 800,000, from 13.2 to 14.0 million in just two to three years.

Meanwhile, The Equality Trust in 2018 reported that the ‘austerity’ years were anything but austere for the richest 1,000 people in the UK. They had increased their wealth by £66 billion in one year alone (2017-2018), by £274 billion in five years (2013-2018) and had increased their total wealth to £724 billion – significantly more than the poorest 40% of households combined (£567 billion).

Just some of the cruelties of the ‘free market’ for those who live and work in the real world. And all of this hardship prior to lockdowns that have subsequently devastated lives, livelihoods and health, with cancer diagnoses and treatments and other conditions having been neglected due to the shutdown of health services.

During the current economic crisis, what we are seeing is many millions around the world being robbed of their livelihoods. With AI and advanced automation of production, distribution and service provision on the immediate horizon, a mass labour force will no longer be required.

It raises fundamental questions about the need for and the future of mass education, welfare and healthcare provision and systems that have traditionally served to reproduce and maintain labour that capitalist economic activity has required.

As the economic is restructured, labour’s relationship to capital is being transformed. If work is a condition of the existence of the labouring classes, then, in the eyes of capitalists, why maintain a pool of (surplus) labour that is no longer needed?

A concentration of wealth power and ownership is taking place as a result of COVID-related policies: according to research by Oxfam, the world’s billionaires gained $3.9 trillion while working people lost $3.7 trillion in 2020. At the same time, as large sections of the population head into a state of permanent unemployment, the rulers are weary of mass dissent and resistance. We are witnessing an emerging biosecurity surveillance state designed to curtail liberties ranging from freedom of movement and assembly to political protest and free speech.

The global implications are immense too. Barely a month into the COVID agenda, the IMF and World Bank were already facing a deluge of aid requests from developing countries that were asking for bailouts and loans. Ideal cover for rebooting the global economy via a massive debt crisis and the subsequent privatisation of national assets.

In 2020, World Bank Group President David Malpass stated that poorer countries will be ‘helped’ to get back on their feet after the various lockdowns but such ‘help’ would be on condition that neoliberal reforms become further embedded. In other words, the de facto privatisation of states (affecting all nations, rich and poor alike), the (complete) erosion of national sovereignty and dollar-denominated debt leading to a further strengthening of US leverage and power.

In a system of top-down surveillance capitalism with an increasing section of the population deemed ‘unproductive’ and ‘useless eaters’, notions of individualism, liberal democracy and the ideology of free choice and consumerism are regarded by the elite as ‘unnecessary luxuries’ along with political and civil rights and freedoms.

We need only look at the ongoing tyranny in Australia to see where other countries could be heading. How quickly Australia was transformed from a ‘liberal democracy’ to a brutal totalitarian police state of endless lockdowns where gathering and protests are not to be tolerated.

Being beaten and thrown to the ground and fired at with rubber bullets in the name of protecting health makes as much sense as devastating entire societies through socially and economically destructive lockdowns to ‘save lives’.

It makes as much sense as mask-wearing and social-distancing mandates unsupported by science, misused and flawed PCR tests, perfectly healthy people being labelled as ‘cases’, deliberately inflated COVID death figures, pushing dangerous experimental vaccines in the name of health, ramping up fear, relying on Neil Ferguson’s bogus modelling, censoring debate about any of this and the WHO declaring a worldwide ‘pandemic’ based on a very low number of global ‘cases’ back in early 2020 (44,279 ‘cases’ and 1,440 supposed COVID deaths outside China out of a population of 6.4 billion).

There is little if any logic to this. But of course, If we view what is happening in terms of a crisis of capitalism, it might begin to make a lot more sense.

The austerity measures that followed the 2008 crash were bad enough for ordinary people who were still reeling from the impacts when the first lockdown was imposed.

The authorities are aware that deeper, harsher impacts as well as much more wide-ranging changes will be experienced this time around and seem adamant that the masses must become more tightly controlled and conditioned to their coming servitude.

The U.S. Economy In a Nutshell: When Critical Parts Are On “Indefinite Back Order,” the Machine Grinds to a Halt

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By Charles Hugh Smith

Source: Of Two Minds

Setting aside the “transitory inflation” parlor game for a moment, let’s look at what happens when critical parts are unavailable for whatever reason, for example, they’re on back order or indefinite back order, i.e. the supplier has no visibility on when the parts will be available.

If the part that blew out is 0.1% of the entire machine, and the other 99.9% still works perfectly, the entire machine is still dead in the water without that critical component. That is a pretty good definition of systemic vulnerability and fragility, a fragility that becomes much, much worse if there are two or three components which are on indefinite back order.

This is the problem with shipping much of your supply chain overseas: you create extreme systemic vulnerability and fragility even as you rake in big profits from reducing costs. Speaking of costs, let’s look at the costs of having a large, costly, complex mechanism sitting idle in a non-functioning state due to some broken element for which there is no substitute available. Whatever productive capacity the mechanism, process, etc. had is now stuck at zero.

Buying a new replacement is extremely costly, and that’s not always available for all the same reasons that parts and components aren’t available. Finding someone to fabricate a new component is not easy due to the wholesale transfer of manufacturing moxie and capability overseas.

You might be able to find someone to weld a replacement strut, but try finding someone to fab a new bicycle derailleur or better yet, a multilayer semiconductor chip. What about 3-D fabrication? Doesn’t that solve this problem? If the part can be “printed,” yes, but there are limits on what can be 3-D fabbed. You can’t 3-D fab a complex thermostat or controller, for example. You can’t 3-D fab a rubber gasket, either, or a great many other bits of petrochemical-based manufacturing.

Scarcities are not limited to parts and components; skilled people can be scarce, too. For example, there is a limited supply of ICU doctors and nurses. The training required to work in an ICU is specialized and experiential; throwing someone with minimal training in is not a substitution that’s going to work. You can’t order an ICU staff from China or print one digitally the way the Federal Reserve creates currency out of thin air. It takes many years to train the staff to function at a high level in ICU.

A great many such labor scarcities exist for skilled workers who cannot be replaced except by someone with the same training and years of experience. This is one reason ICUs can break down: there is no replacement staff available, and no way to “print more.”

It turns out there’s also a scarcity of people willing to do the dirty-work jobs America needs done for wages that haven’t kept up with inflation. As I have explained here, the $1.65 minimum wage I earned in 1970, if factored for real-world inflation, is around $18 per hour, and arguably closer to $20 per hour.

The solution is to raise the pay to levels that attract workers, but then this requires raising prices on the good and services to the point that customers can no longer afford them.

But wait, can’t we automate all work and deliver full-gee-whiz free-money, no-work communism to everyone? I invite everyone who reckons this is in the realm of the do-able to design, program and manufacture an automated robot that can trundle out to the laundry room, pop open a broken clothes dryer, diagnose the problem, manage to find a new controller board, fit it correctly and properly reconnect all the little wiring bits, close it up, test it, lift the dryer back on the washing machine and do all that for the relatively modest cost of a human repairperson. When you accomplish fabricating and programming that robot to do all the work without instruction or oversight, by all means let us all know how much it cost to design, program and manufacture, what the payback of the development and manufacturing process will cost amortized over the (short) life of the robot and how reliable it is in the real world.

The point is, fantasies are nice but reality is far more demanding.

There can also be scarcities of competence. There may be replacements who claim competence, but when reality intrudes on the shuck-and-jive, their competence was illusory, and the net result is the entire institution can be described by President G.W. Bush’s memorable phrase, this sucker’s going down.

There can also be scarcities of institutional infrastructure and capacity. Once the institution, enterprise, state agency, etc. has been stripmined of redundancy, institutional memory and competence, then the first scarcity that cannot be replaced is the first domino that topples all the other dominoes of systemic vulnerability and fragility.

The Federal Reserve can print trillions of dollars and the federal government can borrow and blow trillions of dollars, but neither can print or borrow supply chains, scarce skills, institutional depth or competence. That nice shiny new semiconductor fab you reckon will resolve the chip shortage? You can print the billions of dollars needed in an instant, but the machinery, expertise and time can’t be conjured quite so easily. That fab is years away from completion no matter how many freshly conjured dollars you throw into the air.

When Critical Parts Are On “Indefinite Back Order,” the Machine Grinds to a Halt: that’s the U.S. economy in a nutshell.

A great many essential components in America are on indefinite back order, including the lifestyle of endless globally sourced goodies at low, low prices. That lifestyle is out of stock and cannot be replaced with financialization fakery.

Hey, Federal Reserve, can you conjure up a non-corrupt financial system, a domestic supply chain, and an economy of open competition, transparency, accountability and competence? If not, you are even more worthless than we feared.

How Breakdown Cascades Into Collapse

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By Charles Hugh Smith

Source: Of Two Minds

Maintaining the illusion of confidence, permanence and stability serves the interests of those benefiting from the bubbles and those who prefer the safety of the herd, even as the herd thunders toward the precipice.

The misconception that collapse is an all or nothing phenomenon is common: Either the system rights itself with a bit of money-printing and rah-rah or it collapses into post-industrial ruin and gangs are battling over the last stash of canned beans.

Neither scenario considers the fragility and resilience of the socio-economic system as a whole. It is both far more fragile than the believers in the permanence of the waste is growth model grasp and more resilient than the complete collapse prognosticators grasp.

The recent relatively mild logjams in global supply chains of essentials are mere glimpses of precariously fragile delivery-supply systems. These can be understood as bottlenecks that only insiders see, or as unstable nodes through which all the economy’s connections run. Put another way, the economy’s as a network appears decentralized and robust, but this illusion vanishes when we consider how the entire economy rests on a few unstable nodes.

One such node is the delivery of gasoline and fuels. It’s such an efficient and reliable system that 99.9% of us take it for granted: there will always be plenty of gasoline at every station, the tanks of jet fuel will always be topped off, and so on.

The 0.1% know that this system, once disrupted, would knock over dominoes all through the economy.

Hyper-efficiency and hyper-globalization has reduced the number of producers of essentials to the point that disruptions cannot be overcome with redundant sources. We see this everywhere in the global economy: a handful of plants and companies (sometimes a single source of essential components) process or manufacture essential components in much larger systems.

This is how you end up with thousands of newly manufactured vehicles parked in lots awaiting one critical part that is in short supply.

Another key weakness is the entire system’s reliance on debt, leverage and speculation. Few seem to understand that physical production and delivery systems can grind to a halt for financial reasons–for example, lines of credit being pulled, a counterparty to some arcane commodity swap goes under, taking the presumably solvent corporation down with it, and so on.

The more debt that’s been piled up, the greater the instability of the entire system. Risk always appears low until the system destabilizes, and then all the hedges fail and risk breaks out, flooding through the entire financial system.

Leverage is great fun on the way up, as it magnifies gains. Since the Federal Reserve implicitly guarantees that “buy the dip” will generate massive gains, why not ramp up leverage ten-fold to maximize those Fed-guaranteed gains?

Leverage is less fun on the way down. When the underlying collateral has shrunk to 20% of the leveraged bets being made, a 21% decline in the asset wipes out all the collateral holding up the palace of leveraged debt.

The Fed can print money but it can’t create collateral, nor can it make insolvent entities solvent. All the Fed can do is increase the debt and leverage, which is not the solution, it’s the problem.

Speculation is also inherently unstable, as the euphoric herd, once startled, turns in panic and stampeded in fear. Markets which appeared liquid–i.e., sellers could count on someone buying as many millions of shares as they desired to sell–become illiquid, as buyers vanish like mist in Death Valley. With buyers gone, prices plummet to levels the herd reckoned “impossible” just days before.

The Fed’s entire strategy in the 21st century has been to inflate asset bubbles that generate the illusion of wealth–the so-called wealth effect which is presumed to inspire voracious borrowing and spending.

Unfortunately for the Fed, most of the gains flowed to the top 0.1%, and an economy based on a handful of billionaires buying super-yachts and spaceships is a line of dominoes awaiting the inevitable “accident.” So there are two systemic problems with relying on asset bubbles to generate “wealth”: 1) since 90% of the assets are owned by a thin slice of the populace, bubbles increase destabilizing inequality, and 2) bubbles are intrinsically unstable. So the U.S. economy, dependent on the Fed for the “juice” of monetary stimulus, is now dependent on incredibly unstable bubbles in assets, debt and leverage, bubbles which have generated extremes of wealth/income inequality that are destabilizing the social and political orders.

As the three charts below illustrate, the fragility and instability are well hidden until it’s too late: bubbles, debt, leverage, budgets and revenues can only click higher because the system breaks down if there is any sustained decline (the rising wedge model of breakdown). Once the subsystems fail, there’s no putting the eggshell back together.

The second chart depicts how buffers thin beneath the surface, masking the systemic fragility. The loss of redundancy, the decay of maintenance, the loss of experienced workers–all of these are hidden from public view until the system breaks down.

The third chart tracks the S-curve of expansion, confidence, complacency, delusion and collapse followed by human systems, from nations to empires to corporations: as the buffers thin and the rising wedge reaches an apex of vulnerability, the leadership evinces a delusional confidence in the permanence and stability of increasingly fragile, unstable systems.

Maintaining the illusion of confidence, permanence and stability serves the interests of those benefiting from the bubbles and those who prefer the safety of the herd, even as the herd thunders toward the precipice.

This is how breakdowns in apparently stable subsystems triggers the fall of dominoes throughout the larger system, leading to a collapse that was widely viewed as “impossible.” Such is the power of complacency and delusion.

Is Inflation “Transitory”? Here’s Your Simple Test

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By Charles Hugh Smith

Source: Of Two Minds

Is inflation “transitory” in your household budget? Really? Where?

The Federal Reserve has been bleating that inflation is “transitory”–but what about the real world that we live in, as opposed to the abstract funhouse of rigged statistics? Here’s a simple test to help you decide if inflation is “transitory” in the real world.

Let’s start with some simple stipulations: price is price, there are no tricks like hedonics or substitution. Nobody cares if the truck stereo is better than it was 40 years ago, the price of the truck is the price we pay today, and that’s all that matters.

(Funny, the funhouse statistical adjustments never consider that appliances that used to last 30 years now break down and are junked after 3 years–if we adjusted for that, the $500 washer would be tagged at $5,000 today because it has lost 90% of its durability over the past 30 years.)

Second, inflation must be weighted to “big ticket” nondiscretionary items. The funhouse statistical trickery counts a $10 drop in the price of a TV (which you buy every few years at best) as equal to a $100 rise in childcare, which you pay monthly. No, no, no: a 10% rise in rent, healthcare insurance and childcare is $400 a month or roughly $5,000 a year. A 10% decline in a TV you buy every three years is $50. Even a 50% drop in the price of a TV ($250) is $83 per year–absolutely trivial, absolutely meaningless compared to $5,000 in higher big-ticket expenses.

You can forego the new TV but not the rent, childcare or healthcare. That’s the difference between “big ticket” nondiscretionary and discretionary (meals out, 3rd TV, etc.).

Third, we jettison the painfully obvious manipulation of “owners equivalent rent” for housing costs. Housing costs are the prices we pay for rent, owning a home and paying property taxes, insurance and maintenance costs to own the home. (Have you priced having a new roof put on your house by a licensed, reputable contractor? No? Well, it’s become a lot more expensive than it was a few years ago. Where is that enormous price leap in “owners equivalent rent”? Just how stupid does the Fed reckon we are?)

OK, here’s the test: let’s say markets finally take a deflationary dive from overvalued heights. Housing, stocks and other risk assets fall 30%. Trillions of dollars in “wealth” (that didn’t exist prior to the Everything Bubble inflating) has vanished, generating a reverse wealth effect as all the owners of these assets feel poorer and less inclined to borrow and spend. This is classically considered highly deflationary: demand drops, prices drop.

The three billionaires who own more assets than the bottom 50% of Americans (165 million Americans) will be crying, but how does life change for the 165 million Americans who own a vanishingly thin slice of these assets? Does their rent drop? No, for the reasons I explained in The Fed Is Wrong: Inflation Is Sticky: the big corporate landlords have to keep rents high to placate their lenders. (And let’s not forget greed: the greedy never want to lower prices, preferring to cling to the Fed’s fantasy of “transitory” trouble.)

Now let’s ask about the higher-income 150 million Americans who own homes and pay property taxes, who pay healthcare insurance, college tuition and fees, childcare and elderly care. Even if there is a deflationary crash in stocks and housing, what are the odds the overall costs of owning and maintaining your home will drop significantly?

What are the odds that local government will let property taxes drop with valuations? Shall we be honest and say zero? If real estate valuations plummet, then property tax rates will rise to compensate. Or other “creative” fees will be imposed to make up the shortfall in tax revenues.

What about childcare? What are the odds that childcare costs will drop 30%? Shall we be honest and say zero? The costs paid by childcare providers only go up, and so those who don’t charge enough (marginal providers) will close down, generating a shortage of supply that elevates prices.

What about elderly care? Will assisted living facilities suddenly drop 30% just because asset bubbles pop? No. The costs of assisted living march higher regardless of what asset valuations and interest rates do.

What about healthcare? Will all those costs drop 30% because assets declined? No. Everyone exposed to real-world pricing of healthcare will be paying more.

But what about the roofing contractor? Won’t they charge 30% less? The biggest expenses for the contractor are workers compensation insurance, liability insurance, disability insurance, FICA (Social Security and Medicare) and healthcare insurance, and none of those will drop a single dollar even if stocks drop 30%.

Just as 85% of local government expenses are labor-related, most of the expenses of the roofing contractor are labor-related. The roofing materials dropping a few bucks might lower the cost by a few percentage points, but the material costs are based on the costs of the manufacturers, distributors, truckers, etc., and these are also based on labor-related expenses, taxes, insurance and healthcare–none of which will drop a dime, regardless of what asset prices do.

Economist Michael Spence elucidated the difference between tradable and untradable goods and services. If you want your washer repaired, that service in untradable, as shipping your broken washer to China for repair is not financially viable. As labor costs rise in China and other offshore economies, that raises costs even for tradable goods.

The majority of essential services are untradable and the costs are dependent on “big ticket” expenses which cannot go down without imploding the economy and government: taxes, insurance, healthcare, childcare, elderly care, etc. cannot drop 30% because they’re based on labor costs, highly profitable systemic friction (Big Pharma, the Higher Education Cartel, Big Ag, healthcare and other quasi-monopolies) and the need for ever-higher tax revenues to provide services which the public demands.

Let’s also ponder the consequences of the extreme concentration of wealth and income in the top 5% of U.S. households. The top 10% own roughly 85% of all wealth, and the top 1% own more than half the financial wealth.

Any significant drop in financial assets will have almost no effect on the bottom 90% because they don’t own enough of these assets to be consequential. So the deflationary effect of the reverse wealth effect will be concentrated in the discretionary spending of the top 10%: the luxury imported vehicles, the $100 per plate dinners (those $60 bottles of wine add up), the $500/day resort vacation, the $2,500/week AirBnB rental, etc.

The declines in the cost of these discretionary luxuries may well be noteworthy, but there are thresholds below which prices cannot drop. The high-end restaurant has equally high-end expenses, and so marginal providers will close, leaving only those few who can maintain profitability as demand for luxury dining craters.

The resort has high expenses as well, and once profitability has been lost, resorts will close just like other marginal providers. Supply shrinks along with demand, and the survivors keep prices high enough or they too will close.

So the essential “big ticket” costs will keep rising and the discretionary luxuries only the top 10% can afford will drop–but not by much as all those luxury providers have the same high fixed costs.

So to recap the test: what are the odds of these “big ticket” expenses dropping 30% if asset prices drop 30%?

Taxes: zero.

Healthcare: zero.

Childcare: zero.

Elderly care: zero.

Costs of doing business: zero.

As for housing: the mortgage doesn’t drop if the market value of the house drops 30%, and any declines in insurance will be modest. The costs of maintenance won’t drop much, either, and might actually increase as the supply of skilled workers declines. (Nothing is more expensive than the “cheap” repair that has to be redone correctly.)

Rents may drop in areas nobody wants to live anymore, but rents will rise in places people do want to live.

The larger point here is the long economic cycles have turned. The 40-year decline in interest rates has turned, whether we admit it or not. The 40-year decline in the prices of goods due to financialization (lower interest rates, higher speculative assets) and globalization has turned. The 40-year expansion of the workforce has turned. The 40-year decline of oil/fuel/resources prices has turned. The 40-year fantasy that we can depend on other nations for our essential resources and components is drawing to a close.

Untradable goods and services, cost thresholds, resource security, the end of financialization / globalization and declining interest rates matter. The fantasy that the top 10% can prop up the economy by borrowing and spending the phantom wealth of insanely overvalued asset bubbles is drawing to a close.

Is inflation “transitory” in your household budget? Really? Where?

The Systemic Risk No One Sees

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The unraveling of social cohesion has consequences. Once social cohesion unravels, the nation unravels.

By Charles Hugh Smith

Source: Of Two Minds

My recent posts have focused on the systemic financial risks created by Federal Reserve policies that have elevated moral hazard (risks can be taken without consequence) and speculation to levels so extreme that they threaten the stability of the entire financial system.

These risks are well known, though largely ignored in the current speculative frenzy.

But there is another systemic risk which few if any see: the collapse of social cohesion.

President Carter was prescient in his understanding that a nation’s greatest strength is its social cohesion, a cohesion that America’s unprecedented wealth / income / power inequalities has undermined. Consider this excerpt from his 1981 Farewell Address:

“Our common vision of a free and just society is our greatest source of cohesion at home and strength abroad, greater even than the bounty of our material blessings.”

In other words, a nation’s strength flows not just from its material wealth but from its social cohesion–a term for something that is intangible but very real, something that doesn’t lend itself to quantification or tidy definitions.

Here is my definition: Social cohesion is the glue binding the social order; it is the willingness of the citizenry to sacrifice individual gains for the common good.

Social cohesion is the result of the citizenry sharing a common purpose and identity and working toward the common good even at personal cost. Social cohesion arises from a national identity based on shared values and sacrifices.

To maintain social cohesion, opportunities to better their circumstances must be open to all (the social contract of social mobility) and sacrifices must be shared by the entire citizenry. If the privileged elites evade their share of sacrifice, social cohesion is lost and the entire social order unravels.

The glue binding the privileged elites to shared sacrifice is civic virtue, a moral code that demands elites devote a greater share of their own resources to the public good in exchange for their political and financial power.

Though no one dares confess this publicly, America is now a moral cesspool. As a result, the moral legitimacy of the nation’s leadership has been lost. Every nook and cranny of institutionalized America is dominated by self-interest, and much of the economy is controlled by profiteering monopolies and cartels which wield far more political power than the citizenry.

Civic virtue has been lost. What remains is elite self-interest masquerading as civic virtue.

In his Farewell Address, President Carter explained that “The national interest is not always the sum of all our single or special interests. We are all Americans together, and we must not forget that the common good is our common interest and our individual responsibility.”

Social cohesion, civic virtue and moral legitimacy are the foundation of every society, but they are especially important in composite states.

America is a composite state, composed of individuals holding a wide range of regional, ethnic, religious and class-based identities. The national identity is only one ingredient in a bubbling stew of local, state and regional identities, ethnic, cultural and religious identities, educational/alumni, professional and tradecraft identities, and elusive but consequential class-based identities.

Composite states are intrinsically trickier to rule, as there is no ethnic or cultural identity that unifies the populace. Lacking a national identity that supersedes all other identities, composite states must tread carefully to avoid fracturing into competing regional, ethnic or cultural identities.

Composite states must establish a purpose-based identity that is understood to demand shared sacrifice, especially in crisis. In the U.S., the national purpose has been redefined by the needs of the era, but never straying too far from these core unifying goals: defending the civil liberties of the citizenry from state interference, defending the nation from external aggressors, and serving the common good by limiting the power of special interests and privileged elites.

We’ve failed to limit the power of privileged elites, failed to demand greater sacrifices of the wealthy in exchange for power, and so the moral legitimacy of the regime has been lost. And with the ascendance of self-interest and the elite’s abandonment of sacrifice, social cohesion has been lost.

This loss is reflected in the bitter partisanship, the increasingly Orwellian attempts to control the mainstream and social media narratives, the debauchery of “expertise” as dueling “experts” vie for control, the fraying of social discourse, the substitution of virtue-signaling for actual civic virtue, the institutionalization of white-collar crime (collusion, fraud, embezzlement, etc.), the increasing reliance on Bread and Circuses (stimulus, Universal Basic Income) as real opportunity dissipates, and the troubling rise in shootings, crime, random violence and plummeting marriage and birth rates.

The unraveling of social cohesion has consequences. Once social cohesion unravels, the nation unravels.

What’s the solution? At the national level, all that has been lost will have to be restored: civic virtue, moral legitimacy, the social contract of opportunity, shared sacrifice that falls most heavily on the wealthiest and most powerful, and a renewed national purpose centered on serving the common good.

Is such a restoration of moral legitimacy and shared purpose even possible? No one knows. If history is any guide, such a renewal is only possible after the empire of rampant self-interest implodes.

So what do we do in the meantime? Nurture our own social cohesion by living purposefully and sharing sacrifices and bounties with those we trust and admire–those in the lifeboat we chose to join.

There is More to BlackRock Than You Might Imagine

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By F. William Engdahl

Source: New Eastern Outlook

A virtually unregulated investment firm today exercises more political and financial influence than the Federal Reserve and most governments on this planet. The firm, BlackRock Inc., the world’s largest asset manager, invests a staggering $9 trillion in client funds worldwide, a sum more than double the annual GDP of the Federal Republic of Germany. This colossus sits atop the pyramid of world corporate ownership, including in China most recently. Since 1988 the company has put itself in a position to de facto control the Federal Reserve, most Wall Street mega-banks, including Goldman Sachs, the Davos World Economic Forum Great Reset, the Biden Administration and, if left unchecked, the economic future of our world. BlackRock is the epitome of what Mussolini called Corporatism, where an unelected corporate elite dictates top down to the population.

How the world’s largest “shadow bank” exercises this enormous power over the world ought to concern us. BlackRock since Larry Fink founded it in 1988 has managed to assemble unique financial software and assets that no other entity has. BlackRock’s Aladdin risk-management system, a software tool that can track and analyze trading, monitors more than $18 trillion in assets for 200 financial firms including the Federal Reserve and European central banks. He who “monitors” also knows, we can imagine. BlackRock has been called a financial “Swiss Army Knife — institutional investor, money manager, private equity firm, and global government partner rolled into one.” Yet mainstream media treats the company as just another Wall Street financial firm.

There is a seamless interface that ties the UN Agenda 2030 with the Davos World Economic Forum Great Reset and the nascent economic policies of the Biden Administration. That interface is BlackRock.

Team Biden and BlackRock

By now it should be clear to anyone who bothers to look, that the person who claims to be US President, 78-year old Joe Biden, is not making any decisions. He even has difficulty reading a teleprompter or answering prepared questions from friendly media without confusing Syria and Libya or even whether he is President. He is being micromanaged by a group of handlers to maintain a scripted “image” of a President while policy is made behind the scenes by others. It eerily reminds of the 1979 Peter Sellers film character, Chauncey Gardiner, in Being There.

What is less public are the key policy persons running economic policy for Biden Inc. They are simply said, BlackRock. Much as Goldman Sachs ran economic policy under Obama and also Trump, today BlackRock is filling that key role. The deal apparently was sealed in January, 2019 when Joe Biden, then-candidate and long-shot chance to defeat Trump, went to meet with Larry Fink in New York, who reportedly told “working class Joe,” that, “I’m here to help.”

Now as President in one of his first appointees, Biden named Brian Deese to be the Director of the National Economic Council, the President’s main adviser for economic policy. One of the early Presidential Executive Orders dealt with economics and climate policy. That’s not surprising, as Deese came from Fink’s BlackRock where he was Global Head of Sustainable Investing. Before joining BlackRock, Deese held senior economic posts under Obama, including replacing John Podesta as Senior Adviser to the President where he worked alongside Valerie Jarrett. Under Obama, Deese played a key role in negotiating the Global Warming Paris Accords.

In the key policy post as Deputy Treasury Secretary under Secretary Janet Yellen, we find Nigerian-born Adewale “Wally” Adeyemo. Adeyemo also comes from BlackRock where from 2017 to 2019 he was a senior adviser and Chief of Staff to BlackRock CEO Larry Fink, after leaving the Obama Administration. His personal ties to Obama are strong, as Obama named him the first President of the Obama Foundation in 2019.

And a third senior BlackRock person running economic policy in the Administration now is also unusual in several respects. Michael Pyle is the Senior Economic Adviser to Vice President Kamala Harris. He came to Washington from the position as the Global Chief Investment Strategist at BlackRock where he oversaw the strategy for investing some $9 trillion of funds. Before joining BlackRock at the highest level, he had also been in the Obama Administration as a senior adviser to the Undersecretary of the Treasury for International Affairs, and in 2015 became an adviser to the Hillary Clinton presidential bid.

The fact that three of the most influential economic appointees of the Biden Administration come from BlackRock, and before that all from the Obama Administration, is noteworthy. There is a definite pattern and suggests that the role of BlackRock in Washington is far larger than we are being told.

What is BlackRock?

Never before has a financial company with so much influence over world markets been so hidden from public scrutiny. That’s no accident. As it is technically not a bank making bank loans or taking deposits, it evades the regulation oversight from the Federal Reserve even though it does what most mega banks like HSBC or JP MorganChase do—buy, sell securities for profit. When there was a Congressional push to include asset managers such as BlackRock and Vanguard Funds under the post-2008 Dodd-Frank law as “systemically important financial institutions” or SIFIs, a huge lobbying push from BlackRock ended the threat. BlackRock is essentially a law onto itself. And indeed it is “systemically important” as no other, with possible exception of Vanguard, which is said to also be a major shareholder in BlackRock.

BlackRock founder and CEO Larry Fink is clearly interested in buying influence globally. He made former German CDU MP Friederich Merz head of BlackRock Germany when it looked as if he might succeed Chancellor Merkel, and former British Chancellor of Exchequer George Osborne as “political consultant.” Fink named former Hillary Clinton Chief of Staff Cheryl Mills to the BlackRock board when it seemed certain Hillary would soon be in the White House.

He has named former central bankers to his board and gone on to secure lucrative contracts with their former institutions. Stanley Fisher, former head of the Bank of Israel and also later Vice Chairman of the Federal Reserve is now Senior Adviser at BlackRock. Philipp Hildebrand, former Swiss National Bank president, is vice chairman at BlackRock, where he oversees the BlackRock Investment Institute. Jean Boivin, the former deputy governor of the Bank of Canada, is the global head of research at BlackRock’s investment institute.

BlackRock and the Fed

It was this ex-central bank team at BlackRock that developed an “emergency” bailout plan for Fed chairman Powell in March 2019 as financial markets appeared on the brink of another 2008 “Lehman crisis” meltdown. As “thank you,” the Fed chairman Jerome Powell named BlackRock in a no-bid role to manage all of the Fed’s corporate bond purchase programs, including bonds where BlackRock itself invests. Conflict of interest? A group of some 30 NGOs wrote to Fed Chairman Powell, “By giving BlackRock full control of this debt buyout program, the Fed… makes BlackRock even more systemically important to the financial system. Yet BlackRock is not subject to the regulatory scrutiny of even smaller systemically important financial institutions.”

In a detailed report in 2019, a Washington non-profit research group, Campaign for Accountability, noted that, “BlackRock, the world’s largest asset manager, implemented a strategy of lobbying, campaign contributions, and revolving door hires to fight off government regulation and establish itself as one of the most powerful financial companies in the world.”

The New York Fed hired BlackRock in March 2019 to manage its commercial mortgage-backed securities program and its $750 billion primary and secondary purchases of corporate bonds and ETFs in no-bid contracts. US financial journalists Pam and Russ Martens in critiquing that murky 2019 Fed bailout of Wall Street remarked, “for the first time in history, the Fed has hired BlackRock to “go direct” and buy up $750 billion in both primary and secondary corporate bonds and bond ETFs (Exchange Traded Funds), a product of which BlackRock is one of the largest purveyors in the world.” They went on, “Adding further outrage, the BlackRock-run program will get $75 billion of the $454 billion in taxpayers’ money to eat the losses on its corporate bond purchases, which will include its own ETFs, which the Fed is allowing it to buy…”

Fed head Jerome Powell and Larry Fink know each other well, apparently. Even after Powell gave BlackRock the hugely lucrative no-bid “go direct” deal, Powell continued to have the same BlackRock manage an estimated $25 million of Powell’s private securities investments. Public records show that in this time Powell held direct confidential phone calls with BlackRock CEO Fink. According to required financial disclosure, BlackRock managed to double the value of Powell’s investments from the year before! No conflict of interest, or?

A Very BlackRock in Mexico

BlackRock’s murky history in Mexico shows that conflicts of interest and influence-building with leading government agencies is not restricted to just the USA. PRI Presidential candidate Peña Nieto went to Wall Street during his campaign in November 2011. There he met Larry Fink. What followed the Nieto victory in 2012 was a tight relationship between Fink and Nieto that was riddled with conflict of interest, cronyism and corruption.

Most likely to be certain BlackRock was on the winning side in the corrupt new Nieto regime, Fink named 52-year-old Marcos Antonio Slim Domit, billionaire son of Mexico’s wealthiest and arguably most corrupt man, Carlos Slim, to BlackRock’s Board. Marcos Antonio, along with his brother Carlos Slim Domit, run the father’s huge business empire today. Carlos Slim Domit, the eldest son, was Co-Chair of the World Economic Forum Latin America in 2015, and currently serves as chairman of the board of America Movil where BlackRock is a major investor. Small cozy world.

The father, Carlos Slim, at the time named by Forbes as World’s Richest Person, built an empire based around his sweetheart acquisition of Telemex (later America Movil). Then President, Carlos Salinas de Gortari, in effect gifted the telecom empire to Slim in 1989. Salinas later fled Mexico on charges of stealing more than $10 billion from state coffers.

As with much in Mexico since the 1980s drug money apparently played a huge role with the elder Carlos Slim, father of BlackRock director Marcos Slim. In 2015 WikiLeaks released company internal emails from the private intelligence corporation, Stratfor. Stratfor writes in an April 2011 email, the time BlackRock is establishing its Mexico plans, that a US DEA Special Agent, William F. Dionne confirmed Carlos Slim’s ties to the Mexican drug cartels. Stratfor asks Dionne, “Billy, is the MX (Mexican) billionaire Carlos Slim linked to the narcos?” Dionne replies, “Regarding your question, the MX telecommunication billionaire is.” In a country where 44% of the population lives in poverty you don’t become the world’s richest man in just two decades selling Girl Scout cookies.

Fink and Mexican PPP

With Marcos Slim on his BlackRock board and new president Enrique Peña Nieto, Larry Fink’s Mexican partner in Nieto Peña’s $590 billion PublicPrivatePartnership (PPP) alliance, BlackRock, was ready to reap the harvest. To fine-tune his new Mexican operations, Fink named former Mexican Undersecretary of Finance Gerardo Rodriguez Regordosa to direct BlackRock Emerging Market Strategy in 2013. Then in 2016 Peña Nieto appointed Isaac Volin, then head of BlackRock Mexico to be No. 2 at PEMEX where he presided over corruption, scandals and the largest loss in PEMEX history, $38 billion.

Peña Nieto had opened the huge oil state monopoly, PEMEX, to private investors for the first time since nationalization in the 1930s. The first to benefit was Fink’s BlackRock. Within seven months, BlackRock had secured $1 billion in PEMEX energy projects, many as the only bidder. During the tenure of Peña Nieto, one of the most controversial and least popular presidents, BlackRock prospered by the cozy ties. It soon was engaged in highly profitable (and corrupt) infrastructure projects under Peña Nieto including not only oil and gas pipelines and wells but also including toll roads, hospitals, gas pipelines and even prisons.

Notably, BlackRock’s Mexican “friend” Peña Nieto was also “friends” not only with Carlos Slim but with the head of the notorious Sinaloa Cartel, “El Chapo” Guzman. In court testimony in 2019 in New York Alex Cifuentes, a Colombian drug lord who has described himself as El Chapo’s “right-hand man,” testified that just after his election in 2012, Peña Nieto had requested $250 million from the Sinaloa Cartel before settling on $100 million. We can only guess what for.

Larry Fink and WEF Great Reset

In 2019 Larry Fink joined the Board of the Davos World Economic Forum, the Swiss-based organization that for some 40 years has advanced economic globalization. Fink, who is close to the WEF’s technocrat head, Klaus Schwab, of Great Reset notoriety, now stands positioned to use the huge weight of BlackRock to create what is potentially, if it doesn’t collapse before, the world’s largest Ponzi scam, ESG corporate investing. Fink with $9 trillion to leverage is pushing the greatest shift of capital in history into a scam known as ESG Investing. The UN “sustainable economy” agenda is being realized quietly by the very same global banks which have created the financial crises in 2008. This time they are preparing the Klaus Schwab WEF Great Reset by steering hundreds of billions and soon trillions in investment to their hand-picked “woke” companies, and away from the “not woke” such as oil and gas companies or coal. BlackRock since 2018 has been in the forefront to create a new investment infrastructure that picks “winners” or “losers” for investment according to how serious that company is about ESG—Environment, Social values and Governance.

For example a company gets positive ratings for the seriousness of its hiring gender diverse management and employees, or takes measures to eliminate their carbon “footprint” by making their energy sources green or sustainable to use the UN term. How corporations contribute to a global sustainable governance is the most vague of the ESG, and could include anything from corporate donations to Black Lives Matter to supporting UN agencies such as WHO. Oil companies like ExxonMobil or coal companies no matter how clear are doomed as Fink and friends now promote their financial Great Reset or Green New Deal. This is why he cut a deal with the Biden presidency in 2019.

Follow the money. And we can expect that the New York Times will cheer BlackRock on as it destroys the world financial structures. Since 2017 BlackRock has been the paper’s largest shareholder. Carlos Slim was second largest. Even Carl Icahn, a ruthless Wall Street asset stripper, once called BlackRock, “an extremely dangerous company… I used to say, you know, the mafia has a better code of ethics than you guys.” 

USA 2021: Capitalism For The Powerless, Crony-Socialism For The Powerful

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By Tyler Durden

Source: Zero Hedge

The supposed “choice” between “capitalism” and “socialism” is a useful fabrication masking the worst of all possible worlds we inhabit: Capitalism for the powerless and Crony-Socialism for the powerful. Capitalism’s primary dynamics are reserved solely for the powerless: market price of money, capital’s exploitive potential, free-for-all competition and creative destruction.

The powerful, on the other hand, bask in the warm glow of socialism: The Federal Reserve protects them from the market cost of money–financiers and the super-wealthy get their money for virtually nothing from the Fed, in virtually unlimited quantities–and the Treasury, Congress and the Executive branch protect them from any losses: their gains are private, but their losses are transferred to the public. The Supreme Court ensures the super-rich maintain this cozy crony-socialism by ensuring they can buy political power via lobbying and campaign contributions–under the laughable excuse of free speech.

Cronies get the best political system money can buy and you–well, you get to carry a sign on the street corner, just before you’re hauled off to jail for disturbing the peace (and you’re banned by social media/search Big Tech, i.e. privatized totalitarianism, for good measure).

The Federal Reserve is America’s financial Politburo: cronies get a free pass, the powerless get nothing. While the three billionaires who own more wealth than the bottom 165 million Americans can borrow unlimited sums for next to nothing thanks to the Fed (i.e. Crony-Socialist Politburo), the 165 million Americans pay exorbitant interest on payday loans, used car loans, student loans, credit cards and so on.

Capitalism (market sets price of money) for the powerless, Crony-Socialism (nearly free money) for the powerful–thanks to America’s Crony-Socialist Politburo, the Fed. Consider the “free market” plight of America’s working poor: earning low wages that are rapidly losing their purchasing power makes them a credit risk, i.e. prone to defaulting, so lenders (i.e. capital’s exploitive potential) charge high interest rates on loans to the working poor.

Since they pay such high rates of interest and earn so little, they default on their debt at higher rates–just what the lenders expected, and what the lenders created by charging sky-high rates of interest: gee, you’re having trouble paying 24% interest? Too bad you’re poor. You see the point: low wages, poverty and exorbitant rates of interest are mutually reinforcing: a primary driver of defaults and poverty is paying sky-high rates of interest and all the late fees, bounced check fees, etc. that go with 24% interest rates.

The Crony-Socialists have a much different deal with the Fed and its crony-bankers: the super-wealthy arrange for the corporations they own shares in to borrow billions of dollars to fund stock buybacks (which in a less exploitive era were illegal market manipulation). The super-wealthy Crony-Socialist’s personal wealth rises by $100 million thanks to the stock buybacks, and then the super-wealthy Crony-Socialist borrows $10 million for next to nothing against this newly conjured “wealth” (thanks, Fed!) to fund living large.

Crony-Socialist corporations pay no income tax thanks to loopholes and the Crony-Socialists who own the shares report $1 in salary and zero income because they borrowed their living expenses against their Fed-conjured wealth. Do you discern the difference between capitalism for the powerless and crony-socialism for the super-wealthy?

If you can’t yet discern the difference, then ask yourself: can you borrow $1 billion from the Fed’s cronies to buy back shares of your own company, and then borrow $10 million for near-zero rates of interest against the newly conjured “wealth”? You can’t? Well, why not?

If you answer “I don’t have enough collateral,” you missed the key point here: thanks to America’s Crony-Socialist Politburo (the Fed), the super-wealthy have no exposure to the market price of money. The Fed manipulates the cost of money to near-zero, and then funnels unlimited sums of this nearly-free money to corporations, financiers and the super-wealthy.

Collateral is unnecessary in Crony-Socialism; that’s just a excuse given to the powerless. Crony-Socialists borrow $1 billion for next to nothing, buy Treasuries with the free money, put the Treasuries up as collateral (but wait, didn’t they borrow the money? Never mind, it doesn’t matter), originate some financial instruments (CDOs, etc.), post those as collateral, and then leverage up another bet on that fictitious collateral.

If the bets all go bad, the Crony-Socialist claims the whole fraud is now a systemic risk and so the losses are transferred to the public / taxpayers to “save the financial system from collapse.” Isn’t Crony-Socialism fantastic?

Just as the rich kid caught with smack gets a suspended sentence and probation while the powerless kid gets a tenner in the War on Drugs Gulag, the super-wealthy Crony-Socialists avoid all the consequences of their gambles and frauds. America’s Crony-Socialist Politburo (the Fed) takes care of its cronies and the powerless bear the brunt of predatory exploitation that’s passed off as “capitalism.”

The only dynamic that’s even faintly “capitalist” about America’s Crony-Socialism is the price of political corruption is still a “market”: what’s the current price of protecting your monopoly or cartel from competition? It’s moving up fast, so better get those bribes (oops, I mean campaign contributions for the 2022 election) in now before the price of corrupting “democracy” goes even higher.

Stagflation Subterfuge: The Real Disaster Hidden By The Pandemic

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By Brandon Smith

Source: Alt-Market.us

In recent economic news, headlines are being dominated by concerns over rising bond yields. Increased bond yields are a sign of a possible spike in inflation and, logically, they call for the Federal Reserve to raise interest rates in order to prevent that inflation.

Higher bond yields also mean there is a competitive alternative to stocks for investors – both factors that could trigger a plunge in the stock market.

If one studies the real history behind the stock market crash during the Great Depression, they will find that it was the Federal Reserve’s interest rate hikes that caused and prolonged the disaster after they had created an environment of cheap and easy money throughout the 1920s. Former Chairman Ben Bernanke openly admitted the Fed was responsible back in 2002 in a speech honoring Milton Friedman. He stated:

“In short, according to Friedman and Schwartz, because of institutional changes and misguided doctrines, the banking panics of the Great Contraction were much more severe and widespread than would have normally occurred during a downturn. Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”

This then raises the question – inflation or deflation? Will the Fed “do it again?”

Probably not in exactly the same way, but we will see elements of both inflation and deflation soon in the form of stagflation.

It’s a Catch-22 that the central bank has created, and many (including myself) believe that the Fed has created the conundrum deliberately. All central banks are tied together by the Bank for International Settlements (BIS) and the BIS is a globalist institution through and through. The globalist agenda seeks to trigger what they call the “Great Reset,” a complete reformation of the global economy and capitalism into a single one world socialist system… managed by the globalists themselves, of course.

In my view the Fed has always been a kind of institutional suicide bomber; its job is to self-destruct at the right moment and take the U.S. economy down with it, all in the name of spreading its cult-like globalist ideology.

The only unknown at this point is how they will go about their sabotage. Will the central bank continue to allow inflation to explode the cost of living in the U.S., or will they intervene with higher interest rates and allow stock markets to crash?

Either way, we face a serious economic crisis in the near future.

 

Increasing Inflation Means Economic Recovery?

Mainstream economists will often argue that rising yields and inflation are a “good thing.” They claim this is a sign of rapid economic recovery. I disagree.

If “inflation” was the same as “recovery,” then there would not have been total economic collapses in Argentina in 2002, in Yugoslavia in 1994, or in Weimar Germany in the early 1920s.

I do not see recovery. What I see is the rapid devaluation of the dollar’s buying power due to massive fiat printing through stimulus measures. The Fed and the U.S. government are buying a short-term surge in economic activity, but at a hidden cost. This is a condition that the Dollar Index does not even begin to address, but obvious in prices of necessary goods and commodities.

Keep in mind that all of this is being done in the name of responding to the pandemic. The pandemic is the ultimate excuse for the active destruction of the U.S. economy. Stimulus measures have devolved into helicopter money being thrown about haphazardly as billions are siphoned primarily by major corporations and through fraud. People who are clamoring for a $2,000 relief check from the government have no idea that corporate welfare has been ongoing for the past year along with billions in retroactive tax refunds. All of that money printing is going to cause damage somewhere. It cannot be avoided.

 

It’s Not About The Pandemic

Let’s make something clear first: The pandemic is NOT the reason for the stimulus flood. The pandemic did very little to hurt actual business in the U.S. Rather, it was the lockdowns that did most of the damage.

Think about that for a moment – federal and state governments crushed the economy through lockdowns, then offered the solution of vast stimulus measures. This in turn is destroying financial stability and generating rapid price inflation.

Conservative states and counties that refused to shut down are recovering at a much faster pace than leftist states which imposed draconian restrictions on citizens. Yet, the lockdowns did nothing to stop the spread of COVID-19 in blue states. So, the lockdowns accomplished no discernible advantage for the public, but they did give the central bank a perfect rationale to further erode the dollar.

This resulting price inflation is something that not even the red states can escape.

For example, home prices are rapidly expanding beyond the market bubble of 2006. This is partially due to millions of people participating in perhaps the largest migration in the U.S. since the Great Depression. Anyone who is able is moving away from major cities into suburban and rural areas. But, home prices also have a historic habit of inflating along with currency devaluation. The cost of maintaining and remodeling an older home, or building a new home, rises as the prices of commodities like lumber inflate.

And lumber prices are certainly inflating! Softwood lumber prices are up at least 110% from a year ago, and are climbing as much as 10% in a week.

Home rentals also do not escape inflation, as the rising cost of maintaining properties forces landlords to increase rents. The only places where rents are decreasing are major cities that Americans are seeking to flee, such as New York and San Francisco.

 

Inflation In More Than Just Housing

The majority of commodities continue to see price inflation across the board. Food and energy prices have been creeping higher for the past year. Governments are once again blaming the pandemic and “stresses on the supply chain,” which may have been a believable claim nine months ago, but not today. Anything to hide the fact that all that stimulus has inflationary consequences.

Dollar devaluation is the most visible in terms of imported goods. In other words, it costs more dollars to buy goods outside the U.S. as the value of the dollar falls. And since the majority of U.S. retail is supplied by foreign producers, this means that average American consumers will suffer the brunt of inflationary consequences. Public stress and anger will be high.

 

Pandemic Lockdowns Are Just An Excuse

This is why the COVID-19 lockdowns must continue and the pandemic fear factory must remain active. The globalists need a cover event for the Reset and they need to keep the citizenry under control, and the pandemic can be blamed for just about anything. I think this is why we are already seeing the media hyping the existence of “COVID mutations.” Do not be surprised if the Biden Administration tries to implement a national lockdown sometime this year in the name of stopping the spread of a “more deadly” COVID-19 variant.

It won’t matter that the previous lockdowns were useless and all the data shows that keeping the economy open is a superior policy. It might seem like logic is going completely out the window, but there is a very logical reason for what is happening in the minds of globalists.

Stagflation comes into play through losses in certain sectors of the economy, high unemployment and the inability of wages to keep up with costs.

There is the continued dismantling of the small business sector, which, again, I believe is being destroyed deliberately. It’s not a mistake that small businesses were predominantly targeted as “non-essential” during the lockdowns. It’s also not a coincidence that the majority of COVID-19 PPP loans went to big box corporations while small businesses received almost nothing. The small business sector is being erased, leaving only the corporate sector to provide for consumers.

This may be why Democrats are so adamant about raising the federal minimum wage to $15 an hour. Wages are already rising according to market demand and region. The average non-skilled worker in the U.S. is making around $11 an hour. There is no need for the government to interfere, unless they have ulterior motives.

A $15 minimum wage would likely crush what’s left of small businesses, and only corporations that are receiving the bulk of stimulus dollars will be able to afford to pay workers the higher rate. On top of that, years from now the government could claim they “took action” to front-run stagflation by increasing people’s pay. But a $15 minimum wage is most useful to the establishment in the short term because it muddies the waters on the inflation issue.

Prices will continue to rise due to dollar devaluation, but the media and government will say that it has nothing to do with the dollar and everything to do with companies raising shelf prices to offset increased labor costs.

 

The Biggest Threat In The History Of American Society

I suspect that the establishment will do everything in its power to distract the public from the biggest threat in the history of American society – the stagflationary time bomb.

If they admit to its existence then the public could prepare for it, and they don’t want that. If Americans were to decentralize their local economies, support local small businesses instead of big box retailers, start producing necessities for themselves, and if they started developing currency alternatives like local scrip backed by commodities… then they would be able to survive a national financial crisis.

In fact, I guarantee that any community, county or state that takes these steps will immediately be targeted by the federal government, further revealing the truth: The establishment wants the public to suffer.

They want economic disaster. They do not want people to have the option of taking care of themselves. They need people scared, desperate and malleable, or they will never achieve their Reset agenda.