Today one of the greats in the business warned that the US Fed has created 50% more money out of thin air in the past 2 years than ever existed in the previous 256 years unleashing inflation hell that is rippling throughout the entire world.
Modern US Policy: Dangerously Sinister?
August 7 (King World News) – Matthew Piepenburg, Partner at Matterhorn Asset Management: In case you’ve been paying attention, very little makes sense these days.
Surveying the Senseless
The USA is staring down the barrel of a four-decade high inflation rate, an inverted yield curve and the highest debt levels in its history as Wall Street recently enjoyed the strongest relief rally since 2020 on the “bad news” of yet another Fed rate hike (75bp) into a percolating liquidity crisis?
In a Fed-led dystopia, bad news is now good news to investors nervously waiting for more Fed stimulus. Positive jobs data creates a sell off; crippling rate hikes signal stock surges. It’s just that distorted and sad.
For over a year and half, while we and many other candid market observers were warning of crippling inflation ahead, our central bankers were describing it as “transitory” with as much open dishonesty as they are now telling us that a recession is not a recession but, as per Yellen, a “transition.”
In DC, the corruption, insider deal-making and open disregard for truth are beyond shameless. These factors force one to ask: Are politics about total service or total control?
Wealth disparity in the home of the brave has passed the highest levels ever recorded and points directly to the slow and empirical death of the American middle class.
The suburbs around DC are growing richer with lobbyist and defense contractors buying concessions and second homes from politicians who openly sell their souls for reelection in a democracy that more resembles an auction house than a house of representation.
A former governmental tobacco tsar at the FDA, for example, recently took a 7+ figure executive salary in the private sector at Phillip Morris just around the same time that a millionaire executive from Raytheon (America’s second largest defense contractor) accepted a leadership post at the Department of Defense.
In North Carolina, the headlines are now filled with politicians lining their pockets over casino deals as the Governor of NY swapped a $300K political “donation” for a $1M no-bid contract.
The Land of the Free?
If fascism is defined as “the perfect merger of the state and corporate powers” (See Mussolini circa 1936), then the USA may still be the land of the brave, but it no longer feels like the land of the free…
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And if such evidence of greed, insider corruption and the merger of private enterprise and degraded government “leadership” were not otherwise obvious enough, JP Morgan, lead by a $35M/year Jamie Dimon, just paid a $96M “fine” for $20B in profits garnered from openly manipulating the gold market.
At the same time, once great (and now police-defunded) cities like Chicago, NYC, and San Francisco are seeing tumbleweeds blowing past office vacancy rates as high as 40% following historically disastrous COVID lockdowns which did far more psychological and financial damage ($7T and counting) to America than a flu with less than a 1% Case Fatality Rate.
And as for American foreign policies, having failed to deliver “freedom and democracy” to Vietnam, Iraq, Libya, Syria, and Afghanistan at the cost of America’s best sons and daughters, one wonders why we’ve spent over $60B to bring “freedom” to the Ukraine, a nation run by a puppet thug and former sitcom actor who made the cover of Vogue magazine in between censoring the press and jailing political opponents.
Yet many Americans, drinking the propaganda of its so-called “media,” blindly wave Ukrainian flags in moments of ad-water, instant-virtue signaling despite not being able to place Ukraine on a map nor bother to examine the complex history of its Russian tensions which date back to the 1750s.
Needless to say, sending an IQ, history and geography challenged Kamila Harris to pre-war Ukraine with a NATO narrative only accelerated the February drums of war (and the financially disastrous sanctions that followed) in the same way that Pelosi’s recent trip to Taiwan seems to be more about flaming rather than cooling the war cries.
Does the US, with over 800 military bases in 70 countries actively seek war, or does it seek peace?
Has the miliary industrial complex, against which Eisenhower (no stranger to the military or war) warned in January of 1961, become more about distraction, debt and dollars than freedom, defense and democracy?
Meanwhile, as American monetary and fiscal policy reached new levels of open insanity in the seemingly deliberate fear-campaign led by “experts” like Fauci in the war against COVID, the latest boogieman out of DC is the war against climate change.
If passed, “The Inflation Adjustment Act of 2022” now sitting on Biden’s desk (or pillow), seeks to add even further spending with money America does not have and which the White House assures won’t be inflationary.
All these question and issues, from markets, inflation and recessions to political office selling, saber rattling and Wall Street rigging, are at least worthy of some cold analysis and open debate, no?
Do the foregoing samples of seemingly ridiculous policies, conditions and facts evidence open stupidity, or is there something more systemic and sinister at play out of DC?
The Fed: Den of Thieves or Honest Brokers
My take on the Fed will come as no surprise to many. That said, it is only that: My take.
And in a vain attempt at full disclosure, I’ll confess that my take is based upon the premise (and bias) that the Fed is driven to serve the few and not the many.
This presumption comes not only from personal observations, but a careful study of the Fed’s nefarious history, practices and origins, far too complex to unpack here.
The Ongoing Inflation Lie
As I’ve been writing and saying for months, the Fed’s current inflation narrative as well as “solution” is as openly bogus as a 42nd Street Rolex.
There is very little about the current inflation narrative that compares to the 1970’s, and similarly, there is little about Powell’s current and projected anti-inflationary policies that remotely compares to the so-called “Volcker solution” or era of 1980.
Nevertheless, I am fascinated by the extensive time, brain-power and pundit attention given to explaining current inflation, from its debated origins to its equally debatable (and rate-obsessed) solutions.
Fancy concepts from “demand-pull” to “supply shocks,” or “extraneous shocks” and “accelerants” to even “black swans” (like COVID or Putin?) are used to explain a CPI inflation scale now at 9.1% (and which, if DC truly wishes to be “Volcker-like,” is closer to 18% using the CPI scale of his era…).
Inflation, which was already steadily rising pre-Putin and percolating pre-COVID, was and is nothing more than the direct consequence of USD debasement driven by: 1) years and years of criminally negligent and openly addictive mouse-click money (up more than 10X since 2008) out of the Eccles Building and, 2) fatal fiscal spending out of the White House, whether lead by a red or blue president.
In just the last 24 months, the US Fed created 50% more money out of thin air than all the money that ever existed in the entire 256 years of its prior existence as a nation.
In short, things cost more because the grotesquely inflated/de-valued dollar buys less.
Between 1776 and the un-immaculate conception of the Fed in 1913 (against which Tom Jefferson, Andy Jackson and even Woody Wilson argued), a USD was once a USD.
Since 1913, however, a USD is really (worth) nothing more than 5 pennies or a Nickle.
Because when a central bank creates trillions of those dollars out of thin air with no link to an underlying real asset or an equivalent exchange for a good or service (as Germans like Alfred Lansburgh, Austrians like von Mises and Americans like Andrew Dickson White argued), that dollar is nothing more than a symbol of broken faith rather than a store of genuine value.
Like a glass of wine filled with a swimming pool of water, the dollar is diluted. It loses it flavor, color and value. Since 1971, and when measured against a single milligram of gold, the USD, like all other fiat currencies, has lost greater than 95% of its value.
The Fed: Experts at Finger Pointing, but Blind of Before a Mirror
Rather than confess the toxic reality (as well as complicity) of years of the fatal and inflationary expansion of the broad money supply, the Fed and other DC elites first tried to call it “transitory,” and when that failed, they tried to call it “Putin’s inflation.”
Others will even blame the inflation on COVID.
Well, there’s no doubt that the sanctions against Putin sent gas prices and the CPI higher—especially in Europe. And there’s also no doubt that the trillions of fiscal and monetary dollars used to “fight” COVID were CPI tailwinds.
But a tailwind does not mean a cause.
COVID Did It? Putin Did it?
Take the “war on COVID” and the $7T+ in combined fiscal and monetary dollars used to combat it? Certainly, that was a war worth fighting, no?
I’m not here to end the COVID debate with medicine or science, of which I’m no expert. But I feel many of us (including Rand Paul or Christine Anderson) would agree that neither was Fauci, the CDC or the NIH.
Pretty much everyone has already caught the virus, jabbed or un-jabbed, masked or un-masked, and thus it’s fairly clear than locking the country (and globe) down for well over a year did nothing but cost money we couldn’t afford and destroy businesses who deserved to choose for themselves whether to stay open or shut.
There will be others who have every right to disagree, but in my legally, historically and financially educated mind, not since the oxy-moronic Patriot Act have I seen a greater crime (or psy op) against a nation’s own citizens and their inalienable rights and civil liberties as that which was embodied by the 2020 lockdowns.
Shame on them all. Period. Full stop.
Critical Thinking Locked Down
As a kid who won athletic scholarships to some of the fanciest schools (from Choate to Harvard) in America, I learned the inspired art of critical thinking, which any of us can learn, with or without a shiny diploma.
What particularly sickened me, however, was that the very schools (prep to grad level) who taught me the history, laws and methods of thinking critically, independently and openly, were the same schools who collectively insulted those very same principals by immediately shutting their doors to the un-vaxed while censoring sound, alternative views.
As for the cost of that phony war on COVID, it was certainly inflationary, as it was paid with mouse-click money rather than GDP.
But was it a wise policy or expense? Were these lockdowns proof of humanitarian concern or were they just test-drives for profound control over national and international markets, currencies and populations?
I’m not here to answer, just raise questions and add perspective.
From the very beginning of the pandemic, expert virologists, physicians and even vaccine creators (as evidenced by the meetings at the AIER in Great Barrington) with equal if not far superior credentials than Dr. Fauci, were openly censored, gas-lighted and painted by the media as flat-earth “conspiracy theorists”—DC and the corporate media’s now favorite term of art for anyone or group who disagrees with their often comically official narrative on anything from WMD in Iraq to the current definition of a recession.
Thus, when considering the current inflation narrative and its causes, was the US merely stupid in imposing financially crippling lockdowns or were there forces in DC intentionally engineering fear as a means of pushing the masses into dependency while printing more dollars into saving the repo and bond markets rather than Main Street?
Again: These are questions each of us must weigh against our own perspectives, instincts and alas—critical thinking.
Saudi Did It?
Others may want to blame the Saudis and the high oil prices for the crippling inflation we see today.
It’s worth reminding, however, that today’s oil price is roughly the same as it was in April of 2020.
The Solution Narrative
As far as combatting inflation, that too creates a great deal of space for debate, error and comedy.
Many, including the Fed’s James Bullard, are arguing for aggressive rate hikes to kill inflation.
With inflation already at 9.1%, this would require the Fed to follow the IMF’s recommendation that interest rates be at least 1% above inflation rates to reach “neutral,” which in an honest world would require a 10.1% interest rate environment—which, of course, would immediately bankrupt Uncle Sam.
Instead, Powell is boasting of his aggressive 2.25-50% Fed Fund Rates to fight inflation, the policy equivalent of storming the beaches of Normandy with pea-shooters.
Meanwhile, the Cleveland Fed, as per my recent articles, is using extremely clever (i.e., dishonest) math to tell the public that the US is enjoying +1% real rates despite the fact that when measuring even a 3% yield on the 10Y UST against a 9.1% inflation rate, the USA is in fact living in a world of at least -6% rather than +1% real rates.
In short, and like the very CPI scale itself, the Fed appears to be openly lying about negative real rates.
Sadly, such clever math and open lies is now the new DC normal. They won’t say what they are truly thinking, and that boils down to this: The only tool to fight Fed-made inflation is a Fed-made recession, which, like real inflation rates, they will deny in plain sight.
The Recession Narrative
The latest lie from on high, of course, is the valiant attempt by Powell, Biden and Yellen to downplay 2 consecutive quarters of negative GDP as non-recessionary despite such data effectively confirming the very definition of a recession.
But the clever folks in DC would now have us believe that positive labor and unemployment data is non-recessionary.
In particular, DC is boasting 528,000 newly created jobs in July (and 2M year to date), all well ahead of expectations and now placing US unemployment levels at an admirable 3.5%, the lowest seen in 50 years.
Such good news from the labor market may give Powell the “data” he needs to raise rates higher in September and thus push the economy and markets even closer to their inevitable “uh-oh” moment.
Unfortunately, a little bit of honest math would again reveal that those “new jobs” don’t represent new folks finding work, but sadly, just more working folks having to take on second or third jobs to survive inflation pains.
In fact, the July labor force participation rate actually went down, which means there are less not more people in the work force.
In April of 2019, I did a far more extensive report (too lengthy to detail here) on the DC math used to artificially puff US labor data (U3 and U6) which is far worse than officially reported.
Ahh. But who needs real math when comforting words from DC feel so much better?
Such consistent trends of dishonesty, however, force us to question the intelligence and desperation of our financial and political leadership.
That is, are they so incompetent that they have to lie about inflation, real inflation, labor data, and recessionary status to stay in power, or, again, is there something more sinister at play?
From Fake Math to Real Wars
I’ve written and spoken extensively about the avoidability of the war in Ukraine as well as the foreseeable stupidity of the Western sanctions against Putin, all of which have empirically backfired at every level– from the slow collapse of the petrodollar (and hence USD) to the slow rise of a stronger, Eastern-lead trading block among the BRICS.
The petrodollar is no laughing matter. Since de-coupling from the gold standard, the US relies on the forced global purchase of oil in USD to prevent its already debased currency from losing even more demand, and hence value and power.
Only two global leaders have since tried to stand up to the petrodollar power in the past. Saddam Hussein wanted to buy oil in euros and Khaddaffi wanted to buy oil in gold; and just look what happened to them…
Unfortunately for the US, China and Russia have nuclear weapons so the US playbook of fighting wars or indirectly eliminating leaders to keep its financial interests secure got a little bit messier this February when poking at Putin.
The Dollar Fairytale: Another Open Lie from On High
Despite openly objective evidence of an increasingly unloved USD, DC continues to boast of the relative strength of the USD on the DXY.
What DC won’t say, however, is that this “strength” is only measured against a tanking Japanese Yen and Western euro, two debt-soaked currencies who don’t have enough reserve currency clout to afford a currency-boosting rate hike.
Against the Chinese Yuan, the US has less of which to boast…
In short, the USD is anything but strong. As discussed above, its inherent purchasing power has been neutered by over a century of devaluation and is little more than the best horse in the Western glue factory rather than a Derby-winning thoroughbred.
Profitable War Drums
Given all the failings and open lies discussed above, from inflation realism and recessionary word-smithing to dying currencies and rising, unpayable debts, why on earth would the US now be so reckless in saber rattling over the Ukraine of pinching the Chinese bear in Taiwan?
Is it because we, as a nation, just love to spread democracy and freedom and help the underdog, whatever the sacrifice?
Well, one of our most famous underdogs, military generals and presidents, George Washington, warned us over 2 centuries ago to stay out of precisely such foreign entanglements.
“Truly enlightened and independent patriots,” he argued, focused on prosperity within their borders not peripheral wars outside them.
Despite such warnings, the US has spent a lot of time fighting outside its borders rather building unity within them.
Well, one sad but empirically proven argument is that war is historically good for tanking GDP and struggling stock markets.
In March of 2018, I penned an exhaustive yet eerily prescient analysis of how US stocks love global war, and warned of escalations against Russia and China.
In particular, I addressed the historical data of what I described then as the “war dividend,” which tracked US markets reacting favorably to de-stabilization outside its borders.
Thus, even if Generals Washington and Eisenhower warned against such conflicts, Wall Street and the defense contractors who lobby DC love a good war, which our children fight for them.
Why? Because war tends to feed US markets, as conflicts overseas lead to massive capital flows into the relative safety of the US.
This is exactly what happened, for example, during the Iraq War, as hundreds of billions in Middle Eastern assets rushed into US markets while NATO bombs landed in Iraq. Between 2003 and 2008, the Dow rose steadily upwards.
During the Vietnam War (which killed 58,000 Americans and 1.2 million Vietnamese), the Dow gained 53%. When the war ended, the markets promptly fell, and fell hard.
During the Great War of 1914-1918, the Dow nearly doubled. And as for WW2, the Dow rose by 164% between Pearl Harbor in 1941 and VJ day in 1945.
If one were to follow such simplified history/correlations, one might defy logic and be bullish rather than bearish in times of war—especially our modern version of permanent war.
Given such trends, was the recent idea of sending a kindergarten-level intellect like Kamila Harris to negotiate peace with Putin in early 2021 just a dumb idea, or was it more deliberately set up to fail?
Was Pelosi’s recent flight to Taiwan a sign of spreading freedom? A stupid idea? Or is there a more sinister, yet hidden, motive to push for war in a time of economic disaster at home?
History Poses Important & Hard Questions
History teaches and confirms that every debt crisis leads to a financial crisis, followed by a market crisis, a currency crisis, social unrest, a political crisis, and ultimately extreme authoritarian and centralized control from the political left of right.
Given how increasingly centralized our openly broken yet centrally controlled markets, economies and politics have become, and given the acceleration and scope of the open lies, backfiring polices and unpayable costs and debts which have emerged in the post-COVID and post-sanction new normal, is it possible that the USA is headed toward a similarly authoritarian fate?
Is it possible that the openly failing inflation, recessionary, domestic and foreign polices listed above are more than just a list of the stupid mistakes, but symptoms of a set-up for something more sinister?
Are our markets, economies, currencies and individual freedoms about to be sacrificed to the altar of order, control, safety and security?
Is DC creating an intentional class of American lords and serfs, in which the former hand out stimulus checks to prevent the later from reaching for pitch forks?
After all, a dependent and debt-soaked peasant is safer to his master than an angry, debt-soaked peasant.
As we learned in the Europe of the 1930’s or the lockdowns of the 2020’s, fear is potent tool of control—it turns revolutionary anger into malleable subservience. Governments can pretend to offer solutions when in fact they are merely creating dependence out of a chaos and fear they privately engineer.
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