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Thursday, January 24, 2019

Federal Reserve Confirm 🔴Continued Signs Of Global Financial Economic Collapse Feb 2019


Federal Reserve Confesses Sole Responsibility For All Recessions

In a surprisingly candid admission, two former Federal Reserve chairs have stated that the Federal Reserve alone is responsible for creating all recessions in the United States.
First, former Fed Chair Ben Bernanke said that
Expansions don’t die of old age. They get murdered. - MarketWatch
To clarify this statement, former Chair Janet Yellen placed the murder weapon in the Fed’s hands:
Two things usually end them…. One is financial imbalances, and the other is the Fed.
Think that through, and you quickly realize that both of those things are the Fed. Is there anyone left standing who would not say the Fed’s quantitative easing in the past decade was the biggest cause of financial imbalances all over the world in history? Moreover, whose profligate monetary policies led to the Great Financial Crisis that gave us the Great Recession?
So, the Fed loads the gun with financial causes and then pulls the trigger. In fact, I think it would be hard to find a major financial imbalance in the US that the Fed did not have a hand in creating or, at least, enabling. Therefore, if those are the only two causes, then it is always the Federal Reserve that causes recessions by its own admission.
And, yet, those Fed dons look so pleased with themselves.
Yellen went on to say that when the Fed is the culprit, it is generally because the central bank is forced to tighten policy to curtail inflation and ends up overplaying its hand. (She didn’t mention that the Fed’s monetary policy may have a hand in creating financial imbalances.)
Exactly, nor did she mention that the inflation they were “forced” to curtail always happens because of financial imbalances the Fed created or enabled. That is why I call our expansion-recession cycles, rinse-and-repeat cycles. Therefore, the Fed is only forced by its own ill-conceived actions. First you have to create the imbalance, which causes the economy and stocks to inflate, then you have to pull the trigger to shoot that down by tightening into a recession, which the Fed always does:
Bernanke elaborated on Yellen’s point, accusing the central bank of, in essence, murder. It takes an aggressive act on the part of the monetary authority to bring an expanding economy to a halt and cause it to shift into reverse.
Yellen and Bernanke were speaking at the annual meeting of the American Economic Association in Atlanta earlier this month in the company of current Fed Chair Jerome Powell.
As I demonstrated in my two earlier articles this week (“Does Inverted Yield Curve Indicate Recession?” and “What is an inverted yield curve and what does it mean?“), the Fed carries out this act of econocide by getting the yield curve to invert via its forced interest changes. As shown in those articles, every recession has been immediately preceded by a Fed-created inversion of the yield curve — the Fed’s smoking gun.
The Fed Fix Is Almost In
As noted in those articles, today’s yield curve has already slipped into its penultimate inversion. First (on December third), three-year notes started paying more interest than five-year notes. (The five-year was at 2.83% interest, while the three-year hit just over that at 2.84%.) In essence, investors were betting the economy would be a tad better in five years than it would in three.
Within a matter of weeks, the three-year notes were paying more than seven-year notes. Then, just about Christmastime, they started paying more than eight-year notes, inverting the yield curve even further out. The orange recession indicator light comes on when they take the next step of paying more than ten-year notes; and above that we go full recessionary red! The first three came all within in a month, so the rest may come just as quickly.
In fact, we’re so close that one more rate increase by the Fed could pull the trigger. This is why Powell can be so reassuring about pulling back soon on targeted interest-rate increases. He knows he’s already operating with a hair trigger because of the Fed’s other tightening action in rolling bonds off of its balance sheet.
Like a skilled sharp-shooter, Powell recently said the Fed is “watching and waiting” before it pulls the trigger with its next rate increase. At the same time, he suggested his balance-sheet reduction won’t end for awhile (and, of course, the Fed knows that its balance sheet reduction is skewing the yield curve faster than the Fed’s targeted interest-rate increases.
I’ve said before that those interest-rate increases are now just playing verbal catch-up to what the balance sheet reduction is doing in the open market. In other words, the balance sheet reduction is pulling the Fed’s targeted interest rates up, regardless of what is says, so it is pressed to state it intends an increase just to keep up with the effects of balance-sheet reduction. Last summer the Fed tactic admitted this when…
The Fed raised the target range for its benchmark rate by a quarter point to 1.75 percent to 2 percent, but only increased the rate it pays banks on cash held with it overnight to 1.95 percent. The step was designed to keep the federal funds rate from rising above the target range. Previously, the Fed set the rate of interest on reserves at the top of the target range. -Bloomberg
In other words, the Fed had to change the way it calibrates some interest rates because other factors than their change in their stated target rate were driving rates up. In order to keep bank demand for Fed funds from pushing the rate above 2%, the Fed set its stated rate at 1.95% to create some headroom. That’s explained as…
Officials have said that, as they drain cash from the system by shrinking the balance sheet, a rise in the federal funds rate within their target range would be an important sign that liquidity is becoming scarce…. The increase appears to be mainly driven by another factor: the U.S. Treasury ramped up issuance of short-term U.S. government bills, which drove up yields on those and other competing assets, including in the overnight market.
And that is what is now happening, but they are still planning to keep tightening by reducing their balance sheet. What is not said there is that the major reason the US Treasury is ramping up its issuance of government bills is that the Fed’s unwind is forcing them to refinance maturing bills on the open market as the Fed now refuses to refi those bills. I’ve maintained for a couple of years that the unwind will drive up other interest rates, causing problems throughout the economy.
Gunsmoke And Mirrors
So, the Fed’s recent talk about reducing the number of rate increases in the Fed’s interest target is slight of hand because the Fed’s unwind is doing the heavy lifting here, driving up rates faster than the Fed changes its stated target rate. Powell assures everyone the Fed will slow down its interest-rate increases, even as the Fed pushes right ahead with its balance-sheet unwind, which is doing the most to invert the yield curve.
Powells only defense against concerns expressed about balance-sheet reduction was…
“We are looking carefully at that, and the truth is, we don’t know with any precision,” Fed Chairman Jerome Powell told reporters on Wednesday when asked about the increase. “Really, no one does. You can’t run experiments with one effect and not the other.”
Not too reassuring to hear the Fed Head say no one really has any idea what impact its balance-sheet unwind will have on other interest rates. Does the Fed not know, or does the Fed just not want to say what it does know?
For additional cover as to whether the yield-curve inversions the Fed creates will cause a recession this time as they did in all previous times, Yellen, protested, as I noted in an earlier article this week, that this time is different:
Now there is a strong correlation historically between yield curve inversions and recessions, but let me emphasize that correlation is not causation, and I think that there are good reasons to think that the relationship between the slope of the yield curve and the business cycle may have changed.
It’s not every day that the Fed admits total culpability for the death of every expansionary period. Nor that it admits that the inflation its expansionist monetary policies create force it to become the culprit. Nor that it routinely overplays its hand.
Apparently, the Fed Heads are so comfortable with all of this (hence the smarmy looks in their photos above) that the economic murderers can confess in broad daylight every murder they are responsible for with complete impunity, even as they tell you where the bodies are buried. However, because they still have their next economic massacre to commit right before your eyes and don’t want you to stop them, they wish to assure you that “we can’t possibly know what will happen” now or “this time is different. Things have changed.”
The words “I can’t know what will happen” when a gunslinger is twirling his cocked and loaded pistol with his finger on the trigger, should not give you comfort.
Perhaps all these confession now will enable them to smile even bigger when the slaughter is over, and they know they did it this time in broad daylight.
Of course, there is one major difference this time. In all previous times, the Fed didn’t have the most massive balance-sheet unwind pushing interest rates all around so it had to rely more on its conventional tool of incremental changes in the its targeted interest rate. The new existence of that big gun mean it can who you it is putting away the little gun to disarm you because it has a cannon pointing at you from just inside the woods to your left. Thus, Powell said disarmingly,
More rate hikes wasn’t a pre-set plan and the forecast of two moves was conditional on a “very strong outlook for 2019.” - MarketWatch
In other words, keep your eye on the rate hikes I keep talking about (the little gun), not on the big balance sheet reductions that we put on autopilot so we don’t have to talk about them. Like a great hunter, Powell said the Fed can be patient.
Some analysts believe the Fed’s runoff of its balance sheet is hurting financial markets and want the central bank to end the program.
Gee, ya think? A runoff that intends to force the US government to refinance an additional $2 trillion over the next 3-4 years on the open market might be hurting financial markets more than a quarter-point increase in the Fed’s interest target every few months?
One analyst who disagrees with Powell is Peter Boockvar, chief investment officer at Bleakley Advisory Group:
“It’s no coincidence that accidents begin to pick-up the deeper you get into tightening … QE inflated markets to very high valuations. It’s wishful thinking to believe QT isn’t going to have an impact.”
By shrinking its balance sheet, the Fed is draining the liquidity that sent stocks booming. - CNN
Some of the Fed’s colleagues at other central banks also agree and express concern about what this will do to them:
Last month, Irjit Patel, the governor of the Reserve Bank of India, pleaded with the Fed to slow plans to shrink its balance sheet. If the Fed doesn’t shift course, “a crisis in the rest of the dollar bond markets is inevitable,” he wrote in an op-ed in the Financial Times.
Other Fed members are just as aware of the Fed’s institutional murder rates as Bernanke and Yellen. St. Louis Fed President James Bullard told the Wall Street Journal this month that a recessionary risk is being telegraphed by what is now happening in the yield curve and that the Fed is causing the flattening of the curve toward inversion. So, these guys all appear to be well aware of what they are doing.
However, to maintain the distraction, Bullard also said,
In separate remarks to reporters …. he was open to a revisiting the balance sheet runoff but doesn’t think it is damaging markets as some argue. Bullard [said] that if the balance sheet runoff was impacting bond market as some suggest, then yields would be moving higher instead of the steady decline seen since November.
The latter would be happening, except that money has been pouring rapidly out of stocks and into bonds due to the rate increases the unwind created in September and October. What he ignores is the fact that rate increases were so substantial they sucked massive amounts of money out of the stock market in a flood of capital flight because all of a sudden treasury interest looked quite enticing. That, of course, pushed those rates down some in November.
So, “Nothing to see there, folks. Keep your eye on the little gun; and, oh, did we tell you that we have murdered every economic expansion in history?”
Who’s your daddy?
Now that we’ve heard the confessions from the murderers and have experienced the diversions that will allow the next murder to happen as much in plain sight as the confessions just happened, let’s look at the case from another angle: What has been keeping the stock market alive and hopping over the past decade?
Let me lay out evidence that it is clearly the Fed.
Exhibit A: What turned around the market’s major crash in 2009? The Fed’s QE1. Does anyone think the market would have turned around without that massive intervention? Was that intervention with hundreds of billions of dollars mere window-dressing, or was it the greatest financial intervention to a financial crisis the world had ever seen?
Exhibit B: What turned the market around the next time it “corrected” as soon as QE1 ended? Was it not instant QE2? More hundreds of billions of dollars?
Exhibit C: What saved the market when Republicans played roulette with the nation’s credit rating in the summer of 2011 and shot themselves in the foot politically when Standard & Poor’s gave the nation its first credit downgrade before Republicans even had the chance to let the nation default? Was it not the immediate promise of an ever bigger, indefinitely ongoing new kind of QE called Operation Twist, which morphed into QE3?
Exhibit D: Then, when markets tumbled in 2015 and 2016, because the Fed was backing off from monetary stimulus, their colleagues in other countries jumped in with their own QE. More than $5 trillion worth in 2016! All told, the world’s central banks have pumped in $15 trillion since then.
But now they are all stopping!
Exhibit E: The prosecution presents a full picture of all central-bank stock salvation:
http://www.silverbearcafe.com/private/01.19/images/MW-HB348.jpg
The Fed may claim that it does not attempt to rescue markets and that it looks only at economic indicators, yet somehow every time the market took a major plunge in the graph above, the Fed was instantly on the scene with a new invention of monetary stimulus in massive doses. Of course, “correlation is not causation.” Correlation is pretty interesting, though, especially when it happens at every plunge, except the one at the top that is plunging much further than any other time on this graph … because one thing IS different: No one is stepping in with salvation this time.
If the Fed has been the salvation of the market again and again, lifting it higher and higher, what happens if the Fed and other CBs let the stock market drop? Do you think they won’t do that? The highest authorities in the Fed just told you they did it every other time. First, they create massive “financial instability,” as Yellen said, otherwise known as “bubbles,” which grow due to the Fed’s infinite capacity to create monetary stimulus. They let these grow until inflation finally “forces” them to tighten until they crash them.
The prosecution presents Exhibit F:
http://www.silverbearcafe.com/private/01.19/images/MW-HB3462.jpg
This one is the Fed and all its major partners in crime. When did stock markets start to plunge all over the world? Wasn’t it as soon as global QT started to reverse at the end of that graph in 2018? Ah, but “correlation is not causation.” Except that it kind of is when you keep finding correlation everywhere you turn.
If the defense wants to argue the US market is not utterly dependent on the Fed’s constant protection, let me ask, “What did the market do in September of 2018 when the Fed removed one little word from its market-soothing speeches? Accommodative. Just as it watched its balance sheet-reduction up to full rewind speed.” It took its biggest plunge by far in the entire ten-year recovery period. As nearly everyone was saying, nothing bad suddenly emerged in the economy. All that changed was the Fed to merely implying it would be less accommodative to market concerns as it moved to full unwind.
If you still think the Fed isn’t going to kill the economy this time, I have one more question for you: When was the last time the Fed raised rates in the middle of a major market “correction?” How about never. Yet, now it is raising rates and reducing money supply via balance-sheet reduction at the same time that it hints it is removing accommodation.
But balance-sheet reduction doesn’t matter, right?
“We don’t believe that our issuance [new bond to replace those rolling off the balance sheet] is an important part of the story of the market turbulence that began in the fourth quarter of last year. But, I’ll say again, if we reached a different conclusion, we wouldn’t hesitate to make a change,” Powell said. “If we came to the view that the balance sheet normalization plan — or any other aspect of normalization — was part of the problem, we wouldn’t hesitate to make a change.” - MarketWatch
In other words, “Don’t look at the big gun. Nothing to see there.” Said the people who have just told you that none of their expansions ever ended until they murdered it!
Does the Fed have motive?
Don’t ask me why the Fed will kill its own recovery. It is enough that it admits it always does. So, I’ll leave determining which of the many possible “why’s” up to you. Maybe the Fed will cop an insanity plea and say that even it doesn’t know why it does the things it does. Whatever their actual motive, this sure has the Fed’s unswerving M.O. all over it. It has their fingerprints and their multiple confessions of guilt.
Still, let me lay out a couple of motives that are popular among those many people attribute to the Fed just to show there are plenty of possible motives out there:
Maybe the Fed’s member banks, who own and run the Fed (as its only shareholders and as governing board members who have huge influence over who the additional government-appointed board members are), like to repossess things. That would be a motive.
Or maybe they want to create a new cashless, digital, global monetary system. That would be a motive.
Or maybe, if they can crash things as perennially as Japan has done for score or more of years, they can get permission to start buying stocks directly, and use their infinite money supply, as Japan, has done to take major ownership in all the stocks of the nation.
Numerous conspiracy theories spend entire books making a strong case for different motives. I won’t land on one, but will note that all that matters is that there are plenty of motives to choose from.
Sure, Yellen protested that “correlation isn’t causation,” but, on the other, she admitted causation by saying that, when the Fed is the culprit, it is generally because the central bank is forced to tighten policy to curtail inflation — inflation that only the Fed causes by creating trillions of dollars monetary stimulus. There only struggle this time to stay within their M.O. is that they have failed to create inflation in the general economy that they are supposed to govern. Maybe that is why they have pushed the expansion into the longest in history because they are obsessed with following their usual M.O., and inflation didn’t cooperate this time to “force” them to tighten into recession (their cover story).
So, we have multiple confessions of murder by known Fed ringleaders. We have numerous pieces of circumstantial evidence that support their confessions. We have many possible motives. And, even the fact that the Fed continued pushing expansion longer than it has with more and more rounds of QE can be explained by its M.O. How many times has the Fed said they don’t understand why they couldn’t get inflation to rise to their 2% target for years. They could hardly claim inflation concerns when everyone knew CPI was under the target they’ve always said they want. Now it’s there. So, everything is in place.
I rest my case.

BOND PRIMER: Does Inverted Yield Curve Indicate Recession?

This brief post presents simple historic proof that inverted yield curves predict recessions. I am posting it in anticipation of an article this week in which the Federal Reserve surprisingly admits it is solely responsible for creating recessions.

Does an inverted yield curves predict a recession?

An inverted yield curve has happened shortly before every US recession because the Fed has always tightened up financial conditions at the end of its recovery programs by raising interest rates until the yield curve inverts. That would be an inversion of the yield curve ranging from two-year notes paying a better bond yield than ten-year notes to two-year notes paying more than 30-year bonds.
Here is one of the Fed’s own graphs that proves inverted yield curves have preceded every recession in, at least, the last forty-five years where the blue line represents how much interest on 10-year notes was above (as it should be) or below 2-year notes (inversion):
You can see that, after every yield-curve inversion, recession (the gray zones) followed. That is as much as to say the Federal Reserve, once it starts tightening financial conditions to thwart the possibility of runaway inflation, always keeps turning the screws down on interest rates until it manages to convince investors in the so-called open marketplace that a recession is imminent. As explained in my article on inverted yield curves (linked above), investors demand higher interest in the short-term than they do further out where they think the economy will be doing better if they think recession is imminent.

Federal Reserve Insanity or Deceit?

If you click on the link in the caption to the graph, you’ll see that even the Federal Reserve is aware of the fact that it tightens interest until it creates recessions. Apparently it doesn’t care because it continues to do this every time. One almost has to conclude that either 1) the Fed wants to create recessions or 2) the Fed is insane because the common definition to insanity is to keep repeating the same behavior and expect different results.
It is not as if the Federal Reserve could not see a yield-curve inversion coming long in advanced in 2018 (and every other time it has taken this path). After all, their own graphs show a trajectory that was clearly headed toward an inverted yield curve, which actually began to form in December, 2018:
You can see an inverted yield curve recession coming from a mile away.
Whether the Fed is just pathetically ignorant of the things its own graphs and data and its own writers tell it (and tell us) or insane or just evil (i.e., wanting to intentionally crash the economy while pretending it doesn’t), I’ll leave up to you; but apparently Janet Yellen, former Fed Head, is going to cop a plea of innocence by reason of insanity:
Now there is a strong correlation historically between yield curve inversions and recessions, but let me emphasize that correlation is not causation, and I think that there are good reasons to think that the relationship between the slope of the yield curve and the business cycle may have changed.
Well, when it correlates precisely every single time, I think causation is obvious. If you sit on my chest and I can’t breath, it’s always possible I cannot breath for some other reason, such as I’m having a heart attack; but, if you sit on my chest over and over, and every time I cannot breath, I’m going to conclude you are definitely the cause of my suffocation. With such precise and constant correlation, odds of anything else being the cause become infinitesimal.
Given that Yellen looks at this Fed chart and still doesn’t believe the Fed is the cause and evens says she believes “may have changed” this time, Yellen might as well just say the Fed is going to continue doing exactly the same behavior it by tightening until a recession but anticipates different results this time. That fits most people’s common definition of insanity to a “T.” Nearly fifty years of history in the graph above says, “Good luck with that!”

Fed creates inverted yield curve recessions

Recessions average about 18 months in length, so investors who are anticipating a recession in the next six months are not going to want to invest in treasury securities that are shorter than two years because they don’t want to roll their money over to a new investment in the middle of a recession when they are fairly certain the Fed will be lowering interest.
It is about betting what the Fed will be doing with interest rates in the future, so determined is the entire bond market by Fed policy. Investors know that, if we go into recession, the Fed will slacken interest rates. Thus the yield curve inverts to where longer-term bonds pay more interest than shorter-term notes or bills.
Whenever the Fed pushes investor concerns that far into fearing near-term investments more than long-term investments, the economy always crashes into recession. That is because, at that high level of concern, financial markets start to seize up. And, as explained in my yield curve inversion article, finances start to stand on their head when short-term credit costs more than long-term credit as the same risk level.
Think of it this way, if investors in the safest of all investments, US treasuries, are that concerned to where they need higher interest from the government to entice them into safe government bonds, how much more so are banks and other institutions and individuals who are making other kinds of much riskier loans?
Once risk concern hits the treasury market that hard, it means everyone making loans everywhere is concerned about where this means things are going so that the whole financial realm looks skewed on the immediate event horizon.
Please let me know in the comments if some aspects of this intentionally simplified article could have been expressed more accurately, while remaining equally simple, and I’ll make the adjustments.
Inverted bond yields a sign of things to come from things gone bye?
See next where the Fed openly admits that it has created every US recession in recent history.

Government Shutdown Is Proving Americans Are Not Prepared For A Recession

The brutal reality is that most Americans are not prepared for the next economic downturn or recession. The government shutdown is highlighting just how much Americans rely on others as opposed to themselves, and how little they have saved for an emergency.
According to the newest op-ed article by Market Watch, the government shutdown is perfectly proving that Americans are not prepared for a financial disaster of any kind, let alone an economic recession. Many have long assumed that the government (which as we all know is almost $22 trillion in debt) will be using their money (stolen funds aka, taxation) to bail out those who get themselves into trouble. But the shutdown is proving just how little the government actually doesand just how financially illiterate many Americans have allowed themselves to become.
Almost 60% of Americans have less than $1000 in savings for a rainy day fund or an immediate emergency. It’s been ten years since the Great Recession left many Americans jobless with no money, and it appears most have learned nothing. The government shutdown serves as a painful warning and preview for what will happen once unemployment rises from 50-year lows.  Americans are far too dependent on others, including the government, for their survival.
Within just a few weeks into the government shutdown, people are struggling to cope. We hear stories about people turning to food banks to feed their families. We hear stories about people who are in dire straits because they can’t get loans. We hear stories about people who can’t pay their mortgages. That’s not even one month into the shutdown. –Market Watch
Most Americans live paycheck to paycheck, including those who work for the government.  Many won’t live below their means in order to save and it certainly seems that most citizens have picked up the government’s spending habits. They have also stopped saving for themselves. According to a recent GoBankingRates survey, only 21% of Americans have more than $10,000 in savings,with nearly 60% having less than $1,000 in savings. Almost 32% of Americans have nothing saved up at all.
And something most don’t want to hear is that every economic cycle will end and hit a low again despite the rosy attestations of those who wish to keep confidence high. There is nothing in history that suggests that extremely low unemployment can be maintained for an extended period of time. Indeed, it is precisely at the end of an economic cycle that low unemployment rates tend to reverse rather suddenly.
http://shtfplan.com/wp-content/uploads/2019/01/unemployment-chart-e1548246071199.png
There is one way to prepare for a recession and it’s to end dependence on debt and save some money for an emergency. Without the shackles of credit card debt, student loan debt, and car payments, Americans could not only save more, but their money would go much further as no one has already claimed it in the form of debt repayment.


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