Concerned Friend. Fed Taking Back Punch Bowl. Personal Market Thoughts. Our Political Choices Are More Stark In The Mid Year. My Candidates. Refresh.

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From a concerned friend and fellow memo reader:

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Dick:

Every day, the radicals now in (temporary) control, move this country closer and closer

to a totalitarian state. To them the Constitution, laws and life are little more than

stumbling blocks.  Even the justices of our Supreme Court are not immune from

intimidation, harassment and outright threats. Nor are you.

The gathering storm in 1930s Germany was apparent to some, thus, Lutheran Pastor

Martin Niemoller crafted this poem…a dire warning calling for people to speak out

and act against the onslaught of terror.  He was too late.

In today’s America, the consequences of inaction are no less grave. Think, organize,

communicate and act. 

Lloyd

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The Fed is taking the punch bowl away, but the inflation crisis will continue to grow 

By Brandon Smith

The Fed is taking the punch bowl away, but the inflation crisis will continue to grow 

By Brandon Smith

Four years ago, the overall sentiment among alternative and mainstream economists was that the Federal Reserve would never hike interest rates, taper stimulus or reduce its balance sheet into economic weakness. In fact, this was one of the few viewpoints that the mainstream and independent economists actually agreed on. A few of us had different ideas, though.

The argument is based on a dangerous assumption that the Fed's goal is purely to prop up and extend the life of the U.S. economy and stock markets. If you have been tracking equities in the Dow or the Nasdaq for the past decade, then it might seem like a safe bet. For several years they have consistently added stimulus or cut rates whenever stocks started to drop more than 10 percent, and this is what started the famous investor mantra "Buy The F'ing Dip." It was a sure thing; all you had to do was buy stocks after a correction of around 10 percent and the Fed would come in to save the day with more inflationary QE.

However, things change, and it is foolish to assume that the Fed actually cares about maintaining the U.S. economy. If they did care, they would not have tried to hide the inflation threat for so long.

My position on the Fed is the same as it has always been: The Federal Reserve is a suicide bomber. It is a useful weapon for the globalists at the BIS, the IMF, the WEF, etc. And those globalists want a new financial crisis so that they can implement global changes to the way money works and the way various national economies function. They want a single global authority and a one-world digital currency system. They want to be able to dictate all human trade around the planet using a single mechanism.

In order to achieve these ends, they need the Fed to blow up the U.S. economy, and that is exactly what they have done; most people just don't realize it yet.

As I've noted previously...

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"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 the 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."

The only question was one of timing. When would the central bankers try to pull the plug and allow the inflationary disaster to unfold without hiding it any longer?  Well, now we know...

As I predicted, the Fed is embarking on an active campaign to hike interest rates by 50 bps or larger per meeting. Some members of the Fed have sought to temper concerns by claiming that these hikes will be limited to around 2-3 percent. This is likely a lie. The jump in the U.S. money supply and the level of inflation I see and data tracking sites like Shadowstats.com sees indicates that interest rates of 2 percent to 3 percent will do nothing to stop the crisis. The Fed will use the ongoing price increases and stagflationary pressures as an excuse to continue hiking rates well beyond that.

The money supply issue is key here because the Fed does not acknowledge price inflation so much as they use money supply as their rationale for policies like hiking rates into weakness.

It's not a rule, but it is certainly a habit that the Fed likes to change the way they calculate certain economic stats whenever there is a major crisis. They changed the way inflation was measured in the 1980s after the near-disaster under Jimmy Carter (not his fault really, it was Nixon and the Fed completely removing the dollar from the gold standard a few years earlier that actually caused it). They also changed the way GDP was adjusted multiple times, and they have changed how official unemployment is reported. In most cases, these changes are designed to hide a problem rather than trying to gain more accurate data.

For example, the Fed ended its reporting of M3, which is a more accurate measure of the total money supply of U.S. dollars circulating around the world (they claimed M2 was just as good). This measurement was inconvenient to the Fed because inflationary policies are ever-present and accurate reporting might cause "alarm" within the American public. So, they simply stopped making the data available.

Maybe it's just a coincidence, but the Fed ended M3 in 2006 right before the credit crisis of 2007/2008 began, and right before they introduced tens of trillions of fiat dollars in bailouts and QE stimulus. One might think they knew a debt implosion was coming and that massive inflationary policies would be the response...

Another change has been made to M1 and M2 calculation (less accurate measures of U.S. money supply), and this was done in 2020, right in the midst of the COVID pandemic response. Strangely, this time the Fed's changes involved adding savings deposits from smaller accounts to the overall money supply data, which means the money supply jumped substantially.

Let me put this another way: The Fed's calculations of M1 are integral to how they create new monetary policy. They have been calculating M1 the same for decades. Suddenly, in 2020, they changed how they calculate M1 in a way that greatly increases the end result, to the point that it quintuples. It is very rare for the central bank to make data adjustments that make things look worse rather than making things look better.

Why did they do this?  I have a couple of theories.

Theory #1: In 2020 the Fed was already in the midst of one of the most pervasive stimulus programs since the bailouts of 2008/2009. They created over $6 trillion in new money in a single year, and that's just the official number not accounting for overnight loans and other programs. This money was injected directly into the general economy and into average people's accounts, as well as into the coffers of international corporations.

It is possible the Fed changed how they calculate M1 because they wanted to hide the true amount of dollars they were creating from thin air. If you try to make the argument that the Fed caused our current inflationary crisis, and you use M1 or M2 as an example of this, the central bankers can now say "Hey, that big jump in money supply is not because of our fiat printing, we added savings accounts to the calculation and that's why it's so high."

Of course, then you would have to believe that the money being held in small savings accounts across the country is enough to multiply the total money supply by 5 times. Yeah, I don't think so. To summarize, the Fed changed its data reporting in a negative way on purpose in order to obscure the role they are playing in the inflation disaster now unfolding.

Theory #2: The central bank wants to raise interest rates into economic weakness without argument. So, they adjusted the money supply calculations to be slightly more honest. Whether or not this giant leap in M1 and M2 in 2020 is due to savings accounts being added or due to elicit Fed printing doesn't matter. The point is, the Fed intends to jack up interest rates and taper in the extreme while GDP and retail are in decline and wages are becoming stagnant. It's the same thing the Fed did at the onset of the Great Depression, which made the depression far worse than it would have been otherwise.

That is to say, the Fed is seeking to sabotage our economy, but they need the data to justify their actions. They need the data to more honestly reflect the inflation threat so that they can hike rates and taper into economic weakness while avoiding any blame for the inevitable consequences.

In either case, the Fed's actions suggest that inflation is going to continue unabated, and they are merely positioning themselves to deflect blame.

The argument among independent and mainstream economists alike will now be that the Fed will "capitulate" and reverse course on tapering as soon as they "realize their error." Sorry, but the central bankers are well aware of what they are doing. I suspect liberty movement people want to believe the Fed will continue stimulus measures because they want gold and silver market prices to go up.

Don't worry, prices will go up eventually because there is zero chance that the Fed will stop inflation/stagflation with a 2-3 percent interest rate hike. Also, as the economic war with the East continues to heat up, nations like the BRICS will continue to dump the dollar as the world reserve. The physical price of gold and silver will decouple from the manipulated paper ETF price. It already happened in 2020-2021, and it will happen again soon.

Mainstream financial commentators want to believe the Fed will capitulate because they desperately want the party in stock markets to continue, but the party is over. Sure, there will be moments when the markets rally based on nothing more than a word or two from a Fed official planting false hopes, but this will become rare. Ultimately, the Fed has taken away the punch bowl and it's not coming back. They have the perfect excuse to kill the economy and kill markets in the form of a stagflationary disaster they caused. Why would they reverse course now?

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My market thoughts. I wrote tis around 1:45 PM, Wednesday , 5/11.

I do not believe investors have fully discounted inflation, though I believe it is in the process of peaking, and that the market has a bit more downside.

I am willing to nibble at a few stocks that have decent earnings, balance sheets and yield but not do a lot of spending of cash.

My focus remains energy related  (KMI and other stocks) health care (MRK has gotten too high to buy but ABBV has reacted enough to nibble) For income still like T and VZ.  In technology still being a chicken and sticking with less glamorous Cisco, Intel, QUALCOMM and maybe AAPL now that it has corrected.

At a somewhat better entry price I might be willing to dip my toe in deeper stocks like some of the Fang's because I know technology and growth will have their renewed day in the sun. 

Around 3:30 on the same day the market demonstrated it could not hold and began a modest decline which I will take as verifying what I previously wrote above.

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Politically, we always have choices but the mid-year one's are more stark than general because the disparities offered are so wide and consequential.

We can stay with Biden and pay a continued price that keeps us on the edge of further disaster or we can go back to the policies of Trump that were making us "great again."

If Trump proves those he supports win big time it might encourage him to run again but I would hope he would not because, though, he will in my opinion go down as one of our better presidents, his candidacy  includes a lot of baggage. Republicans have some excellent candidates who are prone/inclined to embrace his policies.

I favor DeSantis and Pompeo.

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I early voted and chose the Republican Ballot.  I would not vote for a Democrat Dog Catcher this time around.  It is time to wipe the rascals out and force them to re-fresh.

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