This article was written by Michael Snyder and originally published at his Economic Collapse blog.
Editor’s Comment: The power to expand and contract the money supply at will lies at the heart of the Federal Reserve’s powers. They alone have the ability to correct and punish everyone inside their crazy fun house game of mirrors. Those who took on too much debt during the easy credit phase of quantitative easing over the last many years are now facing a “call” on their outstanding debts and will have to make repayments – which many fragile entities will not be able to do.
Meanwhile, lenders will be more and more reluctant to give money as rates are raised, and the economy can easily stall. How much until things have gone too far?
The Federal Reserve Just Made Another Huge Mistake
by Michael Snyder
As stocks continue to crash, you can blame the Federal Reserve, because the Fed is more responsible for creating the current financial bubble that we are living in than anyone else. When the Federal Reserve pushed interest rates all the way to the floor and injected lots of hot money into the financial markets during their quantitative easing programs, this pushed stock prices to wildly artificial levels. The only way that it would have been possible to keep stock prices at those wildly artificial levels would have been to keep interest rates ultra-low and to keep recklessly creating lots of new money. But now the Federal Reserve has ended quantitative easing and has embarked on a program of very slowly raising interest rates. This is going to have very severe consequences for the markets, but Janet Yellen doesn’t seem to care.
There is a reason why the financial world hangs on every single word that is issued by the Fed. That is because the massively inflated stock prices that we see today were a creation of the Fed and are completely dependent on the Fed for their continued existence.
Right now, stock prices are still 30 to 40 percent above what the economic fundamentals say that they should be based on historical averages. And if we are now plunging into a very deep recession as I contend, stock prices should probably fall by a total of more than 50 percent from where they are now.
The only way that stock prices could have ever gotten this disconnected from economic reality is with the help of the Federal Reserve. And since the U.S. dollar is the primary reserve currency of the entire planet, the actions of the Fed over the past few years have created stock market bubbles all over the globe.
But the only way to keep the party going is to keep the hot money flowing. Unfortunately for investors, Janet Yellen and her friends at the Fed have chosen to go the other direction. Not only has quantitative easing ended, but the Fed has also decided to slowly raise interest rates. The Fed left rates unchanged on Wednesday, but we were told that we are probably still on schedule for another rate hike in March.
So how did the markets respond to the Fed?
Well, after attempting to go green for much of the day, the Dow started plunging very rapidly and ended up down 222 points.
The markets understand the reality of what they are now facing. They know that stock prices are artificially high and that if the Fed keeps tightening that it is inevitable that they will fall back to earth.
In a true free market system, stock prices would be far, far lower than they are right now. Everyone knows this – including Jim Cramer. Just check out what he told CNBC viewers earlier today…
Jim Cramer was tempted to resurface his “they know nothing” rant after hearing the Fed speak on Wednesday. He was hoping that a few boxes on his market bottom checklist might be checked off, but it seems that the bear market has not yet run its course.
“The Fed’s wishy-washy statement on interest rates today left stocks sinking back into oblivion after a nice rally yesterday,” the “Mad Money” host said.
Without artificial help from the Fed, stocks will most definitely continue to sink into oblivion.
That is because these current stock prices are not based on anything real.
And so as this new financial crisis continues to unfold, the magnitude of the crash is going to be much worse than it otherwise would have been.
It has often been said that the higher you go the farther you have to fall. Because the Federal Reserve has pumped up stock prices to ridiculously high levels, that just means that the pain on the way down is going to be that much worse.
It is also important to remember that stocks tend to fall much more rapidly than they rise. And when we see a giant crash in the financial markets, that creates a tremendous amount of fear and panic. The last time there was great fear and panic for an extended period of time was during the crisis of 2008 and 2009, and this created a tremendous credit crunch.
During a credit crunch, financial institutions because very hesitant to lend to one another or to anyone else. And since our economy is extremely dependent on the flow of credit, economic activity slows down dramatically.
As this current financial crisis escalates, you are going to notice certain things begin to happen. If you own a business or you work at a business, you may start to notice that fewer people are coming in, and those people that do come in are going have less money to spend.
As economic activity slows, employers will be forced to lay off workers, and many businesses will shut down completely. And since 63 percent of all Americans are living paycheck to paycheck, many will suddenly find themselves unable to meet their monthly expenses. Foreclosures will skyrocket, and large numbers of people will go from living a comfortable middle class lifestyle to being essentially out on the street very, very rapidly.
At this point, many experts believe that the economic outlook for the coming months is quite grim. For example, just consider what Marc Faber is saying…
It won’t come as a surprise to market watchers that “Dr. Doom” Marc Faber isn’t getting any more cheerful.
But the noted bear at least found a sense of humor on Wednesday into which he could channel his bleakness.
The publisher of the “Gloom, Boom & Doom Report” told attendees at the annual “Inside ETFs” conference that the medium-term economic outlook has become “so depressing” that he may as well fill a newly installed pool with beer instead of water.
If the Federal Reserve had left interest rates at more reasonable levels and had never done any quantitative easing, we would have been forced to address our fundamental economic problems more honestly and stock prices would be far, far lower today.
But now that the Fed has created this giant artificial financial bubble, the coming crash is going to be much worse than it otherwise would have been. And the tremendous amount of panic that this crash will cause will paralyze much of the economy and will ultimately lead to a far deeper economic downturn than we witnessed last time around.
Once the Fed started wildly injecting money into the system, they had no other choice but to keep on doing it.
By removing the artificial support that they had been giving to the financial markets, they are making a huge mistake, and they are setting the stage for an economic tragedy that will affect the lives of every man, woman and child in America.
Michael T. Snyder is a graduate of the University of Florida law school and he worked as an attorney in the heart of Washington D.C. for a number of years.
Today, Michael is best known for his work as the publisher of The Economic Collapse Blog and The American Dream.
If you want to know what is coming and what you can do to prepare, read his latest book [amazon text=Get Prepared Now!: Why A Great Crisis Is Coming & How You Can Survive It&asin=150522599X].
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Just deflating the bubble they created. Not terrible news and it’s just play money anyway. Not going to be worth much.
It is a shame the embezzlement of $3 billion daily by the Board of Governors of the Federal Reserve is overlooked. It is a simple matter of the FRBNY’s exclusive control of the accounts of auctioned Treasury securities. Ref. 31 CFR 375.3. The accounts have never been audited nor are they reported to Congress. They handle about $9 trillion annually. https://www.scribd.com/doc/48194264/rip-off-by-the-Federal-Reserve-revised.
This financial fountain waters the corporatocracy decried by John Perkins (using the CIA, IMF, WB and U.S. military); of which Carroll Quigley exposed as the CFR; of which David Rockefeller brags and promotes as the future utopia.
The owners of the BOG (the TBTF banks) have created $80 trillion in derivatives. They hold a legislated super-debt status. During national bankruptcy, the TBTF banks will collect all the wealth within the US.
US debt was never intended to be paid back. We have been under the heavy hand of the US banking cartel since 1913. Grandma Yellen is simply milking this for the cartel as long as they can. Over the years, many people have tried to predict when/if there will be a final catastrophic financial collapse. The problem with doing this is the vast majority of analysts and economists have grossly underestimated just how corrupt the banking cartel is. The US ‘recovery’ was due to ZIRP and QE. The GDP was manipulated to show growth by including ‘income’ that historically had never been considered part of the GDP. The only true growth has come from fracking for instance. The unemployment rate of 5% is a lie. How do we know that? There is no wage growth or any real upward pressure on wages. They’ve simply changed their metrics to fit their narratives (lies). My analysis shows the US could in theory continue until our debt hits 30 trillion as long as they can continue to keep interest rates as low as they are. (The CBO recently estimated we’ll hit 30 trillion debt in 10 years) Clearly history teaches us this fiat lie will crumble at some point in the future. We need to remain vigilant and prepare for the inevitable outcome. The outcome for the US will be loss of the dollar as the world reserve currency. The US will continue to slowly sink over the years from a superpower into a third rate economic and military power.
Part of the problem was what companies did with all that cash. They bought their own stock with intent tto keep stock prices artificially high, no investment, poor management. No money cycled into the economy, which would have driven the engine. If they had given cash to people it would make corporations work to get their share instead of lazing around on the dole. Nothing more destructive to an economy than corporate welfare.
Rebecca gets the cookie today for being first poster and on the money
Rebecca, have you seen the film “Margin Call”? Although it dates back a few years, it is still very relevant and an excellent portrayal of how the financial elite operate.
The entire film consists of slow-building and comparatively subtle suspense; when viewed against the popular fare of action movies and romantic comedies, I am frankly surprised that this film was ever made.
Karl V.
I have not seen Margin Call, I will watch it. Subtle suspense build up is good.
No doubt it isn’t like some of the newer movies that flash scenes and lights so much they could trigger a grand mal seizure.
I do hope that you give it a go…. I will be interested to hear your reaction after you view it ~
Since when is an arrest warrant served at 3,025 feet per second?
Not arrest it was a declaration of execution
Off track this zika virus affects the brain of fetuses brand new never seen before and unlike any thing else or is it a lab generated form of viral meningitis now a fetus the affects would show quickly because it is developing however on an adult could take longer they did say the 5 women had the virus so because it affects the brain could this be the virus that could cause a zombie crazies kind of state in an adult but in turn be controlled due to inability of fetus development so as to run its course and die off
There is an agenda to create a substantial population of low-IQ people. We have large numbers of Muslims flooded into the West – as one gene study in Denmark found, their IQ levels tested low because of incest and inter-family marriage. Then we have migrants from Africa, most of whom have damaged cognitive capabilities because of birth malnutrition and neglect. All are perfect drones for the welfare and industrial prison economy class. Just attach some sort of robo sex machine to their genitals during the work day, and they will stay docile.
I would not be surprised if this zika is a bio-weapon to create a creepy race of small-headed drones. For their own well-being, they will need to be chipped and tracked and controlled. Just watch the response: if people start calling for chipping, then it is a bio-weapon.
Seems like a lot of unnecessary bother, since electronic entertainment has already been so impressively effective.
“The presence versus absence of quantifiable levels of [the pesticide] atrazine or a specific atrazine metabolite was associated with fetal growth restriction… and small head circumference… Head circumference was also inversely associated with the presence of the herbicide metolachlor.”
Getting the picture?
its the shit these insects are getting from human scientific altering , its not biologically in these insects make up , humans have fucked with them
Of course, both Atrazine and metolachlor pesticides are used in Brazil. Why is this connection to birth defects being overlooked? If this is still a serious question, in this day and age, and if the answers aren’t obvious,
Tons and tons and tons of various pesticides and other poisonous chemicals…but forget that, it’s all because of a virus.
“A virus” is the best false cover story ever invented.
To rebel against insurmountable odds is an act of faith, without which the rebel is doomed. This faith is intrinsic to the rebel the way caution and prudence are intrinsic to those who seek to fit into existing power structures. The rebel, powered by inner demons and angels, is driven by a vision, I do not know if the new revolutionary wave and the rebels produced by it will succeed. But I do know that without these rebels, we are doomed
by some dude i dont remember who
I beleive that alot of tv shows and movies are sum what educational created for the population like all the survival ones then storage wars to let you know of resources even extream coupon and horders then you have red dawn remake all the zombie ones the Alaska one and tiny houses ect
Michael, Michael, oh Michael.
I believe you are basically a good guy and are driven by your spirit filled concern for humanity. As many don’t know you personally, you do believe in the Good Book and and the Divine Saviour.
However; the continual harping about the volatile stock market doesn’t align with your belief in the coming NWO system. They manipulate the markets to cause the see-saw movements because it is where the fat cats make their big money.
Regular investors don’t play the markets like the fat cats that can handle a few bumps along the way. In fact, most “retirement” investors use brokerage firms, and never have any idea where their $$ are being invested, until they look at their reports.
The average investor doesn’t even know he has lost part of his retirement, when the funds drop, until he divest it into cash.
The game is rigged, and it will continue to see-saw along until… the powers get ready to pull the plug.
Most pre-retirement investors have no choice with their retirement because they have fallen for the old 401-K pension scam, and other plans. It is out of their control.
When the plug gets pulled, the whole damn dam will break and trillions will be lost around the world. All retirees lucky enough to be able to cash out prior to that time will be lucky to get some preps in place and maybe take a trip or two before all hell breaks loose.
As we all agree, it is coming, we can’t all agree on “when”.
Making rash decisions based on a few hundred points, or even a few thousand, swings in the DOW, is not really helping anyone.
Having said all that, I do believe that as soon as anyone can take their investments in the markets, and put it to better use elsewhere, then it should be done sooner, rather than later.
The problem is that most investors are driven by greed. My very own Dad is a prime example. He has all his retirement investments locked into moderate to high risk, corporations. That isn’t a good place to be in this type atmosphere…especially at age 78.
There will come a day when those invested dollars will shrink by 50 to 80 %, and never rebound, because the powers have rigged it that way. The banksters will have already converted those $$ long before the SHTF, and the retirement investors will be stuck with pieces of paper that are only good for fire starter and wiping their backside.
Good points: the market is not there to serve the individual investor – I wish more would wake up to that fact. The market works to enrich the top players. They like volatility and big see-saws because they can ramp it up and down and clean-up on the difference (all big guys hedge for every eventuality, so they always win). Another factor is fees: the more trade that goes on, the more fees that are made by the brokers. They also want volatility. They will always talk up a stock or commodity, walk it right up to the top, then get out, watch it drop, collect on their hedge that it would drop, while also counting all the money they made on the way up. And then they repeat the cycle by buying up everything again for pennies on the dollar from the suckers.
It is a game and the muppets fall for it every time.
I completely agree – we are stuck in a 401k and my husband has been researching and making calls only to find out the most he can do is move it over to a sort of savings account but no way to get it completely out. We are 10-15 years (husband is a pilot) from retirement and I doubt we will see a dime of that money. We’ve planned on him retiring at 60 but looks like it’ll be 65 now for sure and that’s only if this economy last long enough for him TO fly! So now it’s about basically starting over and prepping for a much more frugal retirement than we once dreamed.
Pull it and start your own charter plane jet buisiness take control of your destiny
My wife has the same problem. We can’t get her out so we have just written that money out of our plans. Instead, we are building wealth elsewhere with the assumption neither the 401k or the government will be there when we retire.
It is actually a relief to do this: you mentally come out of the mindlock the financial services industry and government have on you.
As for your husband, get together with a business person and grab a good route somewhere. Hire the hottest stews, dress them really well, make sure the design is top-notch throughout the cabin and all your marketing material, have excellent food and drink, fly between cities with high net worth folks. You would make some good cash doing that. London City to Frankfurt comes to mind. Business model: Porter Airlines in Canada.
I never went into a 401k. Many moons ago when the “smart” people were trying to convince me that if I put just 3% of my earnings in, I would have a very healthy income for retirement. And hey, it’s tax deferred too! But to me, theyre the same as da gubmint because although SS taxes are confiscatory,and I have no choice as to “contributing” theyre both basically saying they know how to plan for my retirement better than I do. Nope.
Tammi,
Welcome to my world. My retirement is much reduced and who knows how much I will have when it is all said and done. 5 acres, small house, garden is where I am at now. The only thing to do is recalibrate. Good luck to you.
When should they raise rates if not now? I know it should have been done years ago, but they are damned either way. I don’t like these SOB’s one bit, but if they kept the rates unchanged, the article would be how the FED is admitting that the economy sucks and the end is nigh. If they raise rates to help savers, well…the end is nigh. You get it, there is an article for fear either way. I say let’s quit shit and get the show on the road. Quit kicking the can.
If the zika virus is like chicken pox herpes ect that would mean that once your infected with it you can never have a child that is not dissabled or even live long cus viruses mutate so in turn this could be a virus that has the potential to end the reproduction and existance of humans then we also have to look at the what if and affects on animals every day we get closer and closer to our demise
I know you can have children if you have herpes ect just comparing it as the virus never goes away
Godsoldier,
Biologists usually think in terms of which “plague” will depopulate the planet. No life form has been immune to some form of that when it gets out of balance in the ecosytem, it is in the system design, and protects the system as a whole.
If we are an intelligent species we will dispense free birth control to all humans on the planet and allow depopulate in to occur in an easy and voluntary fashion. A few at the top, see Georgia Guidestones, may be planning a depopulation event in their way. Having worked with those folks, they all seem to agree that “something needs to be done.”
As for our endless toxic pollution, most depopulation events occur because waste products kill off the population. And that includes microbes.
So we will depopulate. My suggestion is free universal birth control. It is less traumatic. Everyone, regardless of their religion, uses birth control voluntarily… even if secretly. The exceptions are not statistically significant. Worth a try, the alternatives, like gruesome viral infections, are horrible to contemplate.
Birth control will not stop or prevent people from being infected and a biologist is for plants this would be a virology issue and yes if they have a vaccine for tptb then they have control over who continues existence and who does not now that is control
Godsoldier, I hope I didn’t indicate that I thought lowering the population would mean we shifted into the Garden of Eden. However, populations that are too dense spread viral and other contagions more easily. Populations that sit in their own waste products, as we are doing, have compromised immune systems and more often fall prey to disease as well as the original toxin. We will depopulate. Name your poison, or God will name it for you… and it may be called tptb. I named my poison… universal free and voluntary birth control. What is yours?
Natural selection gods intended form
amen
theres enough depopulation already going on and its Ugly as hell
what did God say? .. go forth and multiply.. he didnt specify a number ,,because it will balance itself out
at this current state of fucking with everything , the populations of different races are now all skewed , and the white man is not even on the dam list! because we are so called “acting responsibly” our women are on BC, but the brown crowd aint, the Muslims aint, and neither are the blacks
we whites are about to be depopulated out of existence and all the other races are using our money to do it as they sit at home on their EBT cards and I go to work to support 3 families I never get to see !
I agree: there is the kind way to de-populate (birth control), or the unkind way. I would prefer the kind way because it leaves less of a negative psychic footprint on the planet.
They should be spraying the Middle East and Africa with birth control, or putting something in the food aid shipments. The governments openly encourage their populations to over-breed, often with the belief they can out-birth ‘whitey’ and become the dominate race on the planet. Just a little problem with that: ‘whitey’ creates all the wealth and makes all the science and technology (along with Asians). All they will end up doing is creating a festering cesspit of poverty and disease, with periodic epidemics wiping people out (Ebola, dysentery, cholera, etc.).
Frank Thoughts,
My mom always said birth control should be in everyone’s water and they could request the antidote for free. LOL she figured the human race would die out in one generation. She has a point though. It is only skewed against white folks because we have easier access to birth control. Give it to everyone.
It is written in revelations woe to the woman with child
That scripture is in reference to the time when Christ returns.
It is meant to be taken spiritually/figuratively, about being sided/in bed with, Satan during his little reign as playing the Messiah returned.
When Christ returns, He does not want to find “anyone” in bed with Satan (waiting on a so-called Rapture), and “impregnated” with all of Satan’s/Antichrist’s, lies and deception.
There is no sin in being with child at anytime, unless a woman has fallen for one of the soldiers of Satan, and has been sleeping with him, as the women in Noah’s time did.
Yes, most of the fallen Angels will be here with Satan when he comes in…claiming to be Christ returned.
Any one here know any one in world health org or cdc please ask about zika virus
Better still, ask them about Ebola and how that went down. They have some amazing tales to tell about that.
The markets aren’t continuing to crash – they are going back up.
I think the worst is over now.
SHTF in 2017 perhaps?
Wrong.
Ill never understand why they wanted off guilligans island
it was because of the stuck up movie star bitch
Poor ginger she just had a great hunger for love she wasn’t getting ok how about the blue lagoon they had a waterfall
Eight Los Angeles police officers who mistakenly opened fire on Los Angeles Times newspaper delivery women thinking they were rogue ex-cop Christopher Dorner in 2013 will not be criminally charged, the L.A. County district attorney’s office announced Wednesday. The officers opened fire in the predawn hours of Feb. 7, 2013, as Margie Carranza and her mother, Emma Hernandez, were slowly cruising though a Torrance neighborhood in a pickup truck delivering papers
COBB COUNTY, Ga. — Investigators say a Georgia State Patrol trooper has been shot on Interstate 75 near Delk Road. Channel 2 Action News confirmed that trooper was shot at the end of a police chase.
When I looked a the markets this morning, when I got a chance it was at +114.00 now at 1050 hrs. it is -42 points down.
It goes Down Down, and the Flames get higher. The Ring of Fire!!!!
God I miss Johnny.
Sgt.
I see Snyder is still writing his same old articles. Hey Esquire, you said the economy was going to collapse before the end of last year, and the year before that, and the year before that, and the year before that, and the year before that, and the year before that, and the year before that. I’m surprised anyone bothers to read your broken record articles anymore. There are a lot of new articles on here by other people with something constructive to say. You should go back to chasing ambulances.
I see rock n free world is still reading Snyder articles…..find something productive & stop with your nonsense!!!
Why must you & your ilk click on every article & complain…..what a waste!!!
The world is not awash with paper cash money. The money to fund the debt isn’t actually printed. Its digital dollars. no one will have wheelbarrows full of the actual paper cash to wipe their butt with. the mint prints new paper 24×7 and has done so for decades. and they burn truckloads of worn out paper money daily. as lons as they don’t print anything bigger than the $100 bill we will not be awash in the physical paper cash money.
You are right: it will be a digital hell storm and they won’t be physically printing money. Instead, they will use quantum computers to generate digital credits at a furious pace. Nobody will be able to get ahead of it. The government will just dial things up and down as they see fit. You will be hamstrung: stuck unable to do anything without a piece of plastic, you will just have to accept the prices as they are.
The government will also fix a percentage which will be tax. Nothing will exchange without paying the tax. A digital Weimar where the cost of things can go up and down like stocks do on the stock exchange. Lots of demand today for Jack Daniels? Then a bottle will set you back $100. Lots of lactose intolerant Asians in your ‘hood? Then a quart of milk is just .50 cents.
Why would anyone take Jim Cramer seriously?
Huh? What?
Market uneasy?
1/28 – DOW +120 something.
1/29 – DOW up over 200 already.
They don’t care.
They CONTROL how the 1’s and 0’s are moved so there can be little hope of natural forces moving the market.
We’ll wake up one day and it may or may not be all gone. No one knows.