The Fed's Liquidity Response Is Too Little Too Late - But That Was Always The Plan...

by Tyler Durden via Zerohedge

Fri, 11/01/2019 - 23:45 

Authored by Brandon Smith via Alt-Market.com,

The globalists and banking elites have been running the “order out of chaos” scam for a long time, centuries in fact. One thing that practice does is make people of otherwise average intelligence appear brilliant. One thing that organized conspiracy does is make a group of highly vulnerable criminals appear omnipotent and untouchable. Ultimately, it's all about time. The globalists have had lots of time to tune and refine their methods for manipulating the collective psyche of the masses.

They make mistakes often, but as long as no one confronts them directly and removes these people from the equation, they simply set up shop elsewhere under a different name using different masks and continue their insidious work. As long society is still stricken with ignorance and assumes that such conspiracies are “impossible”, the elites have a free hand to victimize the population further. As long as academic idiots misinterpret Occam's Razor and insist that the evidence of conspiracy does not matter because it does not fit with their narrow notion of “the simplest explanation”, they prop up the banking cartel and allow it to thrive.

On the positive side, I see an awakening taking place among a subset of the population which is savvy to the games of the globalists. I believe this subtle wave of analytical samurai has the elites worried; they realize that time for them is, for once in history, starting to run out. One day soon, they may find themselves the direct targets of a revolution, and they don't like that idea.

Hence, the globalists need a plan, a con game of epic proportions on top of one of the largest economic bubbles in recent history. The plan relies first on a tried and true weapon of the elites: Co-option of the people that oppose them. And how does one co-opt a movement? By taking over their leadership. Second, for global change the cabal needs a global distraction, or a firestorm of numerous distractions to keep the public enthralled or in fear. Third, they need to divert blame away from themselves by presenting the public with believable scapegoats.

When it's all over, they want people dazed and shell-shocked, wondering how it happened and searching for anyone to point a finger at. The narrative will be that “it was a perfect storm of coincidences”, that it was “the evil of the political left”, or the “evil of the political right”. They want to turn public confusion into civil war, all while they sit back and enjoy the chaos from a comfortable beach chair and wait for the moment they can swoop in and act like saviors seeking to “end the madness”.

This process is happening today, and only the most blind have problems seeing that the world has gone over the edge of an ugly precipice.

Disinformation agents call it “doom and gloom”, because that is supposed to dissuade you from taking it seriously. But the facts are the facts. This is why I focus so much of my time on economics – While numbers and stats can be rigged, the effects of a financial crash cannot be hidden. It is undeniable, and all the critics of this information can do is try to trick people into not looking at it.

The reality is this: The US economy is in steep decline and this is an engineered event.

The Federal Reserve spent the better part of the past decade inflating what we now call the “Everything Bubble”, a bubble that spreads through almost every facet of the economy from equities to housing to GDP to employment to corporate debt, consumer debt and national debt. I don't think anyone denies the existence of this bubble except the central banks and a few mainstream media outlets.

Jerome Powell, now the Fed chairman, warned back in 2012 that the markets had become addicted to Fed stimulus and that any tightening of liquidity by the central bank, including cutting the balance sheet or raising interest rates, would cause a sharp reversal or crash. As soon as Powell became chairman, he ignored his own warnings and tightened liquidity anyway.

People confused about why Powell would take such action knowing full well that it would trigger a crash should look into the history of the Bank for International Settlements and how it dictates the policy decisions of all its member banks. The BIS is the “central bank of central banks” and is the central global manager of all national central banks. Powell and the Fed board do not write policy alone, they merely carry out policy decision made by the BIS.

As Powell hinted at in 2012, the Everything Bubble was popped in 2018 by the Fed through rate hikes and balance sheet cuts. Once the avalanche is triggered there is no stopping it.  The rupture in fundamentals is ongoing.  Only stocks markets and certain rigged statistics remain in blissful levitation.

The plunge in stock markets in December was stalled as corporations stepped in with stock buybacks and China pumped billions in stimulus into the global system. However, stocks are not long for this world as buybacks are set to slow down and stimulus measures from various central banks are seeing limited gains.

• US manufacturing has fallen to levels not seen in 10 years and has entered recession territory.
• US housing starts fell sharply in September and new home building declined. This indicator usually precedes a fall in overall housing sales by a few months. This would mean a return to the plunge in housing sales last seen during the summer.  In other words, the recent pop in sales is a one off driven by lower mortgage rates, and is set to end.
• US retail sales are following a similar pattern to housing markets, with a recessionary decline earlier this year, followed by a short term rebound, and now a return to negative territory as the trend reasserts itself.
• Retail stores are closing at a record pace in 2019. Over 8500 stores are already closing this year, with a predicted 12,000 store closing by the beginning of 2020. This is often blamed on “online shopping”, but online retailer only account for around 14% of the total retail market. This hardly explains why brick and mortar stores are closing in droves.  Not only that, but major online retailers like Amazon are seeing declining profits, with projected holiday profits set to fall even further.
• Corporate profits have tumbled in 2019 and earnings growth estimates have been drastically adjusted to the downside.  Only certain companies, like Apple, have come out of the fray untouched so far, but this is common during recession and depression level crisis events - a handful of corporations survive and consolidate while the rest collapse.
• Corporate debt is at all time highs while cash holdings of most corporations are minimal; so much so that these companies are turning to the Fed's repo overnight loans more and more to stay liquid.
• Consumer debt is at all time highs, with American households owing a total of more than $13 trillion.
• While there has been a recent steepening of the 3 month to 10 year yield curve as well as the 2 year to 10 year yield curve, this is actually a bad sign. A long term inversion of the yield curve is a sure signal of economic recession. When the yield curve steepens, this is the point historically in which a sharp crash in fundamentals and markets takes place.

In other words, the crash is happening now. Many analysts have wrongly assumed that that the Fed's recent asset purchases indicate that they are seeking to “kick the can” on the crash. It's much too late for that.  If the Fed wanted to stall the crash then they would have initiated full bore QE4 around 8-10 months ago just after the December plunge. International banks and central banks have been warning about dollar liquidity issues since mid-2018. The Fed continued to tighten and did not act until the past couple of months, coincidentally, right after multiple polls showed that a majority of Americans were becoming worried about a recession.

That is to say, the Fed kept liquidity conditions as tight as possible until the public finally became aware of the crisis.  The truth is, nothing has changed as far as liquidity is concerned.

The Fed launched asset purchases to make it look like they care about trying to fix the problem. However, the Fed's repo stimulus and balance sheet increases are not enough to make any difference. Calling Fed repo actions “Not-QE” is a funny means pointing out that the Fed is not being straightforward about its intentions, but when comparing current repo loans and asset purchases to an event like TARP back in 2008, which by itself injected over $16 trillion in liquidity into the financial system (no audit of the other QE programs has yet been undertaken), the current stimulus is nothing but a drop in the ocean.

The Fed is definitely NOT being honest in its intentions, but not in the way many alternative analysts seem to think.  The Fed's not trying to hide QE4 measures, the Fed is continuing to do the bare minimum necessary to appear as though they are taking action while actually accomplishing very little.

They clearly have no intention of kicking the can any longer. The Fed WANTED a crash, and now they have it. The reason why is perfectly logical: The central bank, under the control of globalists at the BIS, needs economic chaos to provide cover for what they call the “global economic reset”. Essentially, it is the controlled demolition of the old world order to make way for their “new world order”.

As I've noted in previous articles, they've done all his before and openly admitted to causing crashes in the past, including the Great Depression. After each of these financial crisis events, globalist institutions have been formed and leaps forward in global governance have been taken. The implosion of the Everything Bubble appears to be the last intended economic crisis event before total centralization is achieved.

This is not to say that they will be successful in their agenda; I happen to think that in the long run they will fail. But the fact remains that the current recessionary collapse, soon to become far more destructive than it already is, was caused by the central bankers, and they did it knowingly. The narrative of the “bumbling Fed” desperate to save itself or the system is delusional. The evidence simply doesn't support this claim.

Fed officials publicly acknowledged what would happen if liquidity tightening was pursued. They did it anyway, and then told the public all was well. They have lied every step of the way, keeping the public completely in the dark and unprepared for the consequences.

At the same time, we have a supposedly "populist" president that attacks the Fed regularly while at the same time taking full credit for the bubble in markets.  Donald Trump boasts daily of his influence in markets, employment, GDP, etc. He does this even though he called the economic recovery 'a bubble' during his campaign. He now owns the health of the economy, and by extension he has given the central bankers and the globalist a perfect gift – He has set himself and his supporters up as scapegoats for the crash.  As he falls, he will discredit central bank critics for generations to come.

If you were wondering why the globalists stalled for ten years on crashing the system, now you know. If they launched the crisis a few years ago, they would have been blamed for it. Today, it's hard to say. The growing contingent of liberty activists immune to the scam (and immune to the Kabuki theater involving Donald Trump) might be able to turn the tide enough to force the hand of the elites. Maybe they will have to back off of some of their centralization efforts, or drag out the economic downturn longer than they wanted. I suspect they have already had to do this on a number of occasions because of liberty analysts.

Ultimately, the crash is about us. It is about affecting changes to the public psychology, making us more receptive to extreme globalization. If they don't care what we think, then why spend trillions of dollars and endless hours and manpower trying to influence our perception? They need the vast majority of us to consent to the “new world order”, otherwise they will have failed.

*  *  *

If you would like to support the work that Alt-Market does while also receiving content on advanced tactics for defeating the globalist agenda, subscribe to our exclusive newsletter The Wild Bunch Dispatch.  Learn more about it HERE.