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Less Than Zero: How The Fed Killed Saving

It destroyed the incentive to do it
Friday, June 2, 2017, 6:27 PM

Savings accounts were created to provide an incentive for people to plan for the future. Put money away today, let it grow through the miracle of compounding interest, and have more tomorrow.

Prudent savings is essential to a healthy economy. It offers resilience during downturns, and provides seed capital for productive enterprise.

But we are no longer a nation of savers. The Federal Reserve has killed the incentive to be one. » Read more

Insider

Understanding The Fed's Endgame Is Key To Protecting Your Wealth

When all this breaks, the carnage will be astounding
Friday, May 26, 2017, 11:52 PM

Executive Summary

  • Why the Fed's rate hikes are not actual "hikes"
  • The new debt issuance directly or indirectly enabled by the Fed is staggeringly large
  • Why the Fed's intervention in the financial markets is creating worrisome instability
  • As the risks mount, what should the concerned investor do?

If you have not yet read Part 1: The Federal Reserve Is Destroying America available free to all readers, please click here to read it first.

When Is A Rate Hike Not A Rate Hike?

The Fed keeps talking about raising interest rates, but they really aren’t doing any such thing.  In fact they are doing the opposite.

I know that’s a controversial statement, so let me explain.  The point of a ‘rate hike’ is not to make the cost of money (interest rates) go up, but to drain excess money from the system.  That’s why a rate hike cycle is called a ‘tightening’ cycle; because it is making the amount of money available for lending to shrink, or for conditions to become tighter.  The same as if you don’t have quite enough money at the end of the month, things are tight. 

This means that the interest rate is the derivative, and the amount of money is the main driver.  You don’t set interest rates, you control the amount of money in the system, and the interest rates follow along.  They are the result, not the cause.

Or at least that’s how it used to be.  But not any longer.

In the past, when the Fed ‘hiked rates’ what it actually did was drain money from the system.   Money out = interest rates up.

Now when the Fed hikes rates it removes zero money in the system, and this is why a rate hike is not actually a rate hike at all, but the opposite because it leaves 100% of the money in the system but raises the amount that banks and other financial institutions can charge you for new loans and outstanding credit.

How did we get to this ‘upside down world’ where a rate hike increases money? 

To understand let’s be sure we are clear on... » Read more

Blog

The Federal Reserve Is Destroying America

And wait until you hear what they're getting away with now
Friday, May 26, 2017, 11:50 PM

The Federal Reserve is destroying America. 

It might have good intentions, but it's working with bad models. Ones that lead to truly horrible outcomes.

One of the chief failings of central banks is that they are slaves to an impossible idea; the notion that humans are free to pursue perpetual exponential economic growth on a finite planet.  » Read more

Insider

Off The Cuff: Buy The @%&^ Dip!

This phrase will be a widow-maker in the next downturn
Thursday, May 25, 2017, 5:20 PM

In this week's Off The Cuff podcast, Chris and Mike "Mish" Shedlock discuss:

  • Fake, Fictitious Markets
    • None of today's prices is justified by the underlying data
  • Death By Drowning
    • Too much liquidity is killing our markets
  • Housing Bubble Trouble?
    • Prices now declining in the San Francisco Bay Area
  • Buy The @%&^ Dip!
    • What will happen when this universal strategy no longer works?

After last week's brief re-emergence of volatility in the financial markets, the world's various sovereign plunge protection teams have been hard at work flooding liquidity into the system to push prices back up. Losses will not be tolerated!

And so the "Buy the dip!" crowd is victorious once again. This strategy, mindless as it is, has worked extremely well over the past 6 years -- due to an ever-present influx of 'thin air' $billions supplied by the central banks. But for many reasons, that mindless approach can't -- and won't -- continue forever. And likely not for much longer.

Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio and other premium content today. » Read more

Blog

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How Long Can The Great Global Reflation Continue?

And what will happen when it ends?
Friday, May 19, 2017, 8:01 PM

Given the extraordinary failure of both Keynesian stimulus and private-sector credit growth to create a self-sustaining cycle of expansion whose benefits flow to the entire workforce rather than to the top few percent, what can we expect going forward? Can we just keep doubling and tripling the economy’s debt load every few years? What if household incomes continue declining? Are these trends sustainable?

In the near-term, is this Great Reflation running out of steam, or is it poised for yet another leg higher? Which is more likely? » Read more

Insider

Off The Cuff: Too Many Balls In The Air

Why the central banks will ultimately crash the markets
Friday, May 12, 2017, 3:26 PM

In this week's Off The Cuff podcast, Chris and Mish Shedlock discuss:

  • Too Many Balls In The Air
    • The central banks are losing control of them all
  • Growing Risk In Europe
    • Macron's victory masks huge looming problems
  • Without Continued Central Bank Balance Sheet Expansion...
    • ...The markets will crash
  • Things Don't Matter Until They Do
    • Why the crash will happen unbelievably quickly

This week Chris and Mish enumerate how completely dependent today's financial market prices are on the continued expansion of central bank balance sheets around the world.

Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio and other premium content today. » Read more

Blog

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The End Of Money

Our first live event on our new webinar platform
Wednesday, May 10, 2017, 3:27 PM

Today's lofty asset prices are dependent on one thing far beyond all else: continued massive amounts of liquidity injected each and every month by the world's central banks.

Over $12 trillion in "thin air" money has been printed up by the world's central banks since the start of the Great Recession. And so far in 2017, a fresh $200 billion is added to the pile each month(!)

This makes the future price trajectory for stocks, bonds, real estate and nearly every other asset class more dependent on central bank policy than at any time in history. Investors need to ask: What are the central banks most likely to do next, and what will the repercussions be? » Read more

Insider

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Keep Your Eye On The Ball

What the France election tells us about the world economy
Monday, April 24, 2017, 4:13 PM

For investors and regular folks just trying to protect and growth their wealth, now is the hardest of all possible times.

As we've written extensively about here at PeakProsperity.com, we're living through the Mother of all Financial Bubbles. Simply maintaining this sham is requiring the world's central banks to inject an enormous amount of thin-air money into the markets. Every. Single. Day.

Everything has become distorted. Price signals are completely broken and mean nothing. Fundamentals? They haven't mattered for nearly a decade. It’s very, very hard to maintain one’s perspective during such a time.

And things get even more nuts each time a critical election occurs, as we just had yesterday in France. » Read more

Podcast

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G. Edward Griffin: Exposing The Creature From Jekyll Island

Hard truths from the man who wrote the book on the Fed
Sunday, April 23, 2017, 3:25 PM

G. Edward Griffin, the author of the seminal book on the formation of the Federal Reserve, The Creature of Jekyll Island, joins the podcast this week to add his perspective to our ongoing critical examination of the Fed and the impact its actions are having on society.

Ed's decades of research and critique of the Federal Reserve, sadly, have left him with conclusions that corroborate our own. Despite its carefully-crafted image as an essential public servant, Griffin concludes it is anything but. It is a private cartel that has connived its way to tremendous advantage and power, secretly (and not-so-secretly) plundering the American people of their treasure and freedoms. » Read more

Insider

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The Coming Conflagration

Prepare for it before things explode
Friday, April 21, 2017, 8:26 PM

Executive Summary

  • Have overt central bank propping efforts created a bubble in asset prices?
  • Will these overinflated markets EVER collapse?
  • What to expect when today's smoke turns into tomorrow's conflagration
  • Which assets are most sensitive to a price correction if the central banks' efforts fail?

If you have not yet read Part 1: Where there’s smoke... available free to all readers, please click here to read it first.

Question #2: How much does overt central bank propping have to do with their elevated prices?

Overt propping of the stock and bond markets also happens with some regularity.  First, at the macro level, dumping hundreds of billions of freshly printed currency units into the financial markets each month without any question whatsoever, plays a huge role in keeping them elevated.

One the one hand you have the central banks talking at every turn about how they are confident in the economy, that they feel the data is good, if not solid, and yet you have them dumping money into the financial “”markets”” (double quote marks because one is no longer sufficient to convey how unreal they’ve become) at the fastest pace in all of recorded history through the first 4 months of 2017; $1 trillion dollars(!!).

(Source)

If you were wondering why these markets are having such a difficult time going down, $250 billion a month goes a long way towards helping you appreciate why that’s the case.

It’s an astonishing number, and I want you to appreciate the fact that central banks would not be dumping record amounts of thin-air money into the ““markets””

The next point is that... » Read more