The Fed IS the Ugly Truth


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    Rembrandt van Rijn Man with a falcon on his wrist (possibly St. Bavo) 1661   This Fed thing just keeps going on, and it needs to stop. There is n
    [See the full post at: The Fed IS the Ugly Truth]


    The word your looking for “abyss”
    a catastrophic situation seen as likely to occur to the people with wealth that is built upon “leverage.”
    Leverage results from using borrowed capital as a funding source when investing to expand the firm’s asset base and generate returns on risk capital. Leverage is an investment strategy of using borrowed money — specifically, the use of various financial instruments or borrowed capital — to increase the potential return of an investment. Leverage can also refer to the amount of debt a firm uses to finance assets. When one refers to a company, property or investment as “highly leveraged,” it means that item has more debt than equity.

    Since I don’t have leverage I must be poor.

    Ken Barrows

    The machines do not pay for themselves. To preserve industrial civilization, interest rates cannot rise much. I will say it again: the 10Y UST cannot go over 3% for more than six months. Moreover, the interest rate needed will slowly decrease over time. Perhaps the markets will decide the rate should be lower than currently. And when that happens, the deflation predicted by TAE becomes recently. After that,, industrial civilization ends soon enough.

    Ken Barrows

    Not recently, reality

    V. Arnold

    I think people should pay very close attention to what is going on in France.
    It perfectly illustrates just how powerless “we the people” have become.
    What we’ve become is the enemy.
    Emperor Macron will not step down, but rather continue to crush the right to demonstrate; to express peaceful opposition to the seated government.
    It would likely be worse in the U.S. if the people dared to do likewise…

    Oh, and nice Rembrandt van Rijn Man with a falcon on his wrist (possibly St. Bavo) 1661.

    Doc Robinson

    “The entire US economy today is about the quick buck.”

    Even the stock market these days seems to be about the quick buck. In the US, the average holding period for stocks has dropped from 8 years (1960), to 5 years (1970), to 2 years (1990), to 4 months (in the past few years).

    The policies of the Fed (as well as the Board of Directors of the companies) are evidently geared towards the short-term benefits of the owners who will be leaving in a few months. The long-term health of the companies, the economy, and the overall society (mostly non-owners) is evidently not so important to the Fed and the CEOs.

    “…When market tumbled in 2015 and 2016, global central banks embarked on the largest combined intervention effort in history… giving us a grand total of over $15 trillion.”

    Those $15 trillion in assets being held by the central banks propped the global stock market capitalization up to around $75 trillion. Short term thinking that gives short-term benefits. Take away the props and of course that sucker is going to fall. What were they thinking, the overweight patient with all of those systemic problems is going to be able to walk just fine when the crutches are taken away?

    Maxwell Quest

    I’m right there with you, Ilargi. It’s been bubblenomics ever since Paul Volcker was fired by Reagan. I won’t bother to go into the long history of how the Fed (price stability my ass) has turned the dollar into a nickel. The phrase “store of value” just popped into my head and I could feel the blood pressure start to rise… legalized theft is all it is.

    Anyway, I sense that the Fed is past the point of no return policy-wise. With social unrest nipping at the elite’s heels (Yellow Vests, anyone?), and the carrot of total US hegemony dangled before them, they have no choice but to goad the empire forward with their money-pumping policies.

    If they would’ve only restructured the banks in 2008, prosecuted the fraud, and reinstated Glass-Steagall, the financial system (and social contract) would be much healthier today, but no, greed is self-destructive.

    At this point, either deflation or inflation will lead to social unrest, only deflation will get you there sooner. Therefore, the Fed will choose the path of hyper-inflation, just as every other fiat currency regime has done before them. The pattern seems clear: more wars, more QE, more debt, more wealth consolidation (inequality), and much more inflation… then collapse.


    > As if it’s completely natural, and desirable, for an economy to grow forever. It isn’t and it won’t happen …

    To me it sounds like you think if we could only get rid of the Fed, everything would be hunky-dory, and we all could get back to becoming millionaires without doing any hard work. But Capitalism won’t make everyone rich, it won’t eliminate poverty or racism or sexism, it won’t repair the environment, and it won’t lift a finger to protect the world’s biodiversity. Fortunately, it can’t create Energy, and THAT is the one thing that will bring Industrialised Civilisation to a grinding halt, Fed or not, markets or not. We have got so used to digging up energy and using it to drive the modern machinery we need to live.

    When the fossil energy has peaked and gone into decline, it will be too late to start thinking about building a solar panel factory or a wind turbine factory or any kind of factory – they take an awful lot of energy.

    People will have to forget about buying their food in supermarkets and taking it home by car, and join the Third World who have always planted their own seed stock, and fertilised it, and watered it, and harvested it and stored it for the winter time, with some left over to plant again in the spring.

    The thought of all that hard work makes bashing the Fed seem like something insignificant.

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