Fed One Meeting Away From Creating A Doomsday Market Sinkhole

by | Feb 11, 2022 | Headline News | 12 comments

Do you LOVE America?


    This article was originally published by Brandon Smith at Alt-Market.us and first posted at Birch Gold Group. 

    The effective Federal Reserve funds rate (the EFFR) has been sitting at virtually zero for a long time now. It feels a little strange to think about the fact that it was 14 years ago when the central bank first helped to trigger the crash of 2008 and we are still dealing with the consequences of it today. I only started writing for the liberty movement two years before that. The amount of time that it takes for economic disasters to develop is well beyond the average person’s attention span. In fact, there are many people who are adults today that have no clue what happened in 2008 because they were in elementary school when it went down.

    This is how the establishment is able to get away with the negative changes to our national standard of living – because these changes usually happen over the course of decades and almost no one notices.

    That said, there comes a point in any financial collapse where the floor is as thin as it will ever get. When the next shoe drops it’s going to break right through along with all the furniture. At this stage there is no slow-moving crash, everything goes all at once. We have already seen this scenario in action, and again, I don’t think very many people remember the event.

    Here’s what most people have forgotten

    In 2018 the Fed began hinting at the institution not only of rate hikes but also cuts to asset purchases and its balance sheet simultaneously. It’s important to understand that effective rates had been sitting near zero for almost a decade and cheap overnight loans from the central bank were feeding one of the longest-running corporate stock buyback bonanzas in history. Stock buybacks and easy Fed money facilitated a near-endless bull market rally in equities. The lack of real price discovery and the perpetual free-for-all was so bad that the mantra for stocks became “Buy the F#ing dip!”

    The assumption was that the Fed was always going to step in to protect markets from falling. Why? Because they had done this for several years, creating one of the biggest spikes in the Dow and Nasdaq of all time. Why would they do anything different? But, in 2018, for short time we witnessed what would happen if the central bank was to take away the punch bowl and it was not pretty.

    Closing in on mid-2018 the Fed began to hike rates and cut its balance sheet more aggressively. We had seen small intermittent rate hikes since 2015, but these had not coincided with asset cuts or changes in overnight loans to major banks and corporations. The markets immediately began to reverse more than we had seen in some time, gas prices jumped and the yield curve flattened after rates rose a mere 50 basis points. It didn’t take much to cause a panic among investors.

    So, to be clear, the major business and investment framework of the U.S. has been so dependent on cheap credit from the Fed that even the tiniest increase in interest rates was enough to almost unhinge the entire system. Of course, bull market ticker trackers in the media missed the whole purpose of this exercise.

    The Fed reversed course on hikes and their balance sheet in mid-2019, so the mainstream once again assumed that this meant the central bank would “never” allow markets to fall.

    Back in 2018 the argument was that there was no need for the Fed to hike rates or drop assets because there was no imminent threat of inflation. The average economist and the media refused to acknowledge the many warning signs that high inflation was going to hit us in the near term. But the Fed knows exactly what it is doing and they understand that the trillions upon trillions of dollars they created out of thin air after the derivatives crisis will ultimately come back to bite the U.S. economy in the rear in the form of price inflation and stagflation.

    Another interesting fact about the hikes of 2018 is that Jerome Powell had warned about the consequences of such actions years prior in 2012 during the October Fed meeting:

    “…I think we are actually at a point of encouraging risk-taking, and that should give us pause. Investors really do understand now that we will be there to prevent serious losses. It is not that it is easy for them to make money but that they have every incentive to take more risk, and they are doing so. Meanwhile, we look like we are blowing a fixed-income duration bubble right across the credit spectrum that will result in big losses when rates come up down the road. You can almost say that that is our strategy.” – Jerome Powell [emphasis added]

    Yet, he signed off on the policy anyway once he became chairman. Why?

    Because he was ordered to. Former Fed chairman Alan Greenspan once admitted that the central bank answers to no one in government, but this does not mean the Fed is independent. The Fed is only a part of a larger global central banking machine under the oversight of the Bank for International Settlements.

    This is not “conspiracy theory,” it is simply reality. The notion that the Fed acts thoughtlessly, or that their goal is to keep the U.S. economy afloat is just not true. There are much bigger plans at play.

    The next deliberately Engineered economic crisis

    My position back then remains the same today: The rate hikes of 2018 were a test run for a more aggressive and deliberately engineered crisis down the road. The Fed has its own agenda, it does not care about protecting U.S. markets, nor does it even care about protecting the U.S. economy in general.

    I hold that the Fed is a weapon for social and political change within America and part of its job is to greatly reduce the standard of living of the population while making it appear as if this decline is a “natural” consequence of the U.S. system.

    Keep in mind that none other than Karl Marx was insistent that central banks were a primary pillar of a socialist/communist system and its ability to maintain control of the public. As Marx noted in his Manifesto Of The Communist Party written with Fredrick Engels, “despotic inroads on the rights of property” would be “unavoidable as a means of entirely revolutionizing the mode of production.” In other words, in order to meet their revolutionary goal, communists would need to destroy property rights.

    Among his ten requirements for a communism government, number five reads:

    “Centralization of credit in the hands of the state, by means of a national bank with State capital and an exclusive monopoly.”

    Control of the currency and credit framework means control of the population of any given nation because it allows a central authority to reduce the standard of living “scientifically.” That is to say, they can create economic decline or collapse out of thin air.

    But why do this at all? Because financial desperation is the fastest way to create public dependence on a central authority.

    Every collectivist regime in history has used poverty and near-starvation, or government rationing and management of production, as a means to keep their populations under control. This is nothing new but for some reason many people think this strategy will never be attempted in America. They think the establishment “needs” the American economy intact. They are simply delusional.

    When the government and the elites behind government become everyone’s Mommy and Daddy and the sole providers for the means of survival, it is unlikely that the citizenry will try to rebel. That is to say, people rarely bite the hand that feeds them.

    So, central banks and their corporate and political partners follow the Marxist model and seek to become the hand that feeds; by hook, by crook or by financial collapse if necessary.

    I have covered this agenda of central banking and the Fed in many articles the past year, but what we now face is the inevitability of Fed rate hikes. Yet I still see many analysts in the mainstream and in the alternative media who refuse to admit the chances are high that the central bankers will again engage in a rate hike demolition, only this time they are unlikely to have mercy as they did in 2018.

    What has changed since the last tightening cycle? Well, in 2022 we now have immediate and obvious stagflation with price inflation of most necessities hitting 40-year highs. This is something the alternative media has been warning about for some time and now the moment has arrived. Forget about the CPI print, it’s truly irrelevant and doesn’t even account for food, housing and energy. What matters is the average American’s wallet and how much it is being drained.

    Unfortunately, it’s only going to get worse. The Fed has created a Catch-22 situation in which inflation will hit hard regardless of whether they hike rates.

    Get ready for the yield curve to flatten again and for long term Treasury bonds to be dropped by most foreign investors. Also, get ready for the value of the dollar to plummet further, after a short initial spike, as stocks fall.

    I believe the Fed will stick with rate hikes this time because they have to at least be seen as “trying” to do something about inflation – the same inflation the Fed themselves created through over a decade of fiat money printing and easy credit.

    Price inflation will be aggressive this year and going into next year regardless of what the Fed does. Costs are going to rise exponentially for most people. This does not mean that we will be dealing with Weimar-style inflation with wheelbarrows full of Benjamins to buy a loaf of bread’. I’m betting we would see government price controls before that happens (which will trigger mass shortages of goods).

    However, it doesn’t take much in terms of price spikes to cause a breakdown. An increase of 50% in overall costs would crush a large number of U.S. households and make them desperate for aid, perhaps in the form of Universal Basic Income and ultimately a complete sea change over to some form of digital currency.

    The Fed has used interest rate hikes into economic weakness in the past, including at the onset of the Great Depression. We have also seen the Fed increase interest rates as high as 12.3% as they did during the inflationary crisis of 1974. These hikes crushed a lot of small and medium businesses at the time. In fact, my own grandfather had expanded his trucking company with multiple vehicles and millions of dollars and a large amount of credit in the early 70s, only to have his business destroyed by skyrocketing interest rates. The 1970s stagflation crisis was nothing compared to what we now face.

    Prepare today, because tomorrow will be too late

    The conclusion is obvious – get prepared. Price inflation is already here and I believe climbing credit costs are on the way. Getting prepared means stocking staples now that you and your family use them regularly. Buy at the lower prices of today so you don’t have to buy at the much higher prices of tomorrow. If you have debt I suggest dealing with it now if you can and don’t take on any new debt if you can help it.

    Do not expect that borrowing at fixed rates today will assure you of fixed rates tomorrow.

    Invest in commodities that don’t lose value to inflation, especially physical precious metals. There will come a time all too soon when street prices of gold and silver will explode far beyond the fake paper-gold markets.

    Most importantly, organize with like-minded people in your community. Trade must decentralize and localize to survive stagflation, and each community is going to need networks of producers and marketplaces to facilitate the shift. We can no longer rely on the supply chain and the global economy; as a culture, we will have to relearn how to provide for ourselves and our loved ones.


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      1. Very sound advice….

      2. “The CPi (Consumer Price Index)…..is irrelevant” makes another great point. The statistics provided for voters’ consumption have been manipulated beyond any objective relevance. Like the CBO (Congressional Budget Office) these data & organizations-providing-data have morphed into arms of the govt. propaganda wing, like the MSM.

      3. END THE FED!!!!!!

      4. The Rottenchild crime bank needs to be broken into a thousand pieces!

      5. More like we are only 9 meals away from collapse.

      6. I’m shocked they kept the plates spinning this long. Sell! Turn those machines back on.

      7. Staying out of debt and living on a cash basis has it’s benefits in both lean and robust times. Hedge purchasing is always a good idea, simply because the fed exists. Mortgage backed securities have always been an empty bag, backed only by the consumers ability to pay. The excess money went into corporations *stocks and property both commercial and residential. And now those systems have experienced inflation at a pace faster than goods and services, so the excess must now spill over to other sectors. People will get raises but they will not gain. Price is not the same as value. If it’s anything like 2008 we’re going to make a killing on picking up distressed discounted properties. However, price of housing will be among the last to truly fall as subsidization will hold this sector up until stability returns elsewhere. There will however be competition from international investors whom have actively staged new systems to compete with Americans for our various properties. If you’re debt laden you won’t get to make a play. While the millennials ‘house hack’ and become over invested at peak pricing just like the middle age and baby boomers were doing so many years back. New term, same soon to fail strategy. A portion of over invested inflated housing worth will flow over to default management companies and the complex network involved with that as a side effect of defaulted loan notes. They knew this was coming which is why the HUD moratorium on foreclosures kept getting extended. One of the mechanisms for plunge protection, surprisingly, was excess balance sheet inflation by way of the printing press never stopping. This pads the market for a softer fall. Get ready for either incremental price decrease alongside a flailing business & credit availability, or alternatively a soft continuation of price rise with additional QE flooding which is probably more likely but will have a net more damaging effect in the end. But take heart, if you don’t have debt and live cash basis it’s not going to hit you as hard as those leveraged to the hilt. They can keep all those investments we’re not interested, never have been, never will be. Quality of life is not your savings picture it is your here and now access to amenity. Run your vehicles in get everything fixed, work overtime while you can, continue to hedge purchase, buy the poor mans gold silver rounds for a while longer, stock up on durable goods. We’re going to run a champion garden this year as last year we learned a lot of skills like canning and it was so great reaching for canned stewed tomatoes and we subbed dozens and dozens of meals from our own garden for basically the price of water and seed. The real societal challenges lie with the masses whom refuse to adopt self sufficient approaches. I’ve been reading this website called ‘low tech magazine’, you should check that out for real. Cheers.

      8. The Puch Bowel taste is about to change.

      9. Don’t worry, inflation is just now getting started.

      10. Note to self, cancel vacation to Ukraine.

      11. As others have stated, my advice is to not necessarily accumulate dollars, but more importantly long-term commodities and tangibles. Not just prep with stockpiling food, etc., but becoming as self sufficient as possible.
        Things like buying a piece of land, learning how to garden, build a fish pond, buy equipment and materials to reload ammo (easy skill to learn), obtain water storage not just water purification, get a wood stove, utilize wind/solar power, and learning other skills, things like that. One should also find like-minded people who have something to contribute like a person for example with medical/dental skills, person with electrical/mechanical skills, animal husbandry, carpenter, etc. This would also greatly enhance sufficiency. (My ideal person would be a beautiful brunette with big t*ts, is an expert EMT, can consistently hit targets 300 yards out, and owns a liquor store.)
        We are entering a period where hyper specialization will no longer be feasible or practicable as it is now for the majority of people. Furthermore, holding a job will also not be sufficient to meet a family’s needs, one is simply going to need other ways to get the resources one needs (and no, that does not mean by crime).
        It will eventually not matter any more what the political, social, or whatever issues are. The main reason is debt, 30+ trillion dollars of debt, plus more than 150 trillion dollars unfunded liabilities. It will of course get worse, much worse. Yes, the gov’t can kick the can down the road to put off the reckoning by endlessly making more money out of nothing. But only two things will happen, money will keep losing its value and even more debt will pile up, in turn making the reckoning worse. Once the dollar is about valueless (and that’s the plan) TPTB can create a new form of exchange and make all money digital. And with digital currency TPTB can control what one can and cannot buy.
        The reason why I suggest not accumulating more dollars in an account or build dollar denominated investments is because when the SHTF, THERE WILL BE asset confiscation, it has already happened in other countries. There are trillions and trillions of dollars of private money in the US in checking and savings accounts, pension funds, investments, tax-deferred accounts, and many other type of accounts. It is too much to resist and the gov’t is hungry and licking its lips working up a way to get it. Asset confiscation would be accompanied by social strife and then a unified fed, state, local, crackdown.
        Sure, there are a lot of issues right now, but this is the one that is discussed the least but matters most. We do not hear anyone in gov’t talking about addressing the debt, they know it’s too late for that.
        When the SHTF an accompanying phenomenon there will be far less marriages and far fewer children born. This means women in general will need to accumulate more assets and learn more skills to survive too.

      12. And so what ya gonna do about it? Call yer mom?

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