Boom and Bust Cycles: Courtesy Of the Fed

Boom and Bust Cycles:

Updated March 29, 2023

Fiat is the central banker’s weapon of choice, and they wield it ruthlessly, raining misery and death on the unsuspecting masses. Their tool is fiat money, which they have used to feed off the pain of humanity since its inception. As George Washington, one of the wisest presidents, understood all too well, “Paper money has had the effect in your state that it will ever have – to ruin commerce, oppress the honest, and open the door to every species of fraud and injustice.”

Fiat money fuels the boom cycle, but inevitably, the bust cycle follows, only to be fuelled again by another boom cycle as the Fed floods the markets with more money. It’s a vicious cycle; the only incentive is dollars, with lives traded and sold based on the amount they stand to make. The masses suffer the consequences while the central bankers reap the rewards. In this world, money trumps everything, and life is just another number on a piece of paper.

“But if in the pursuit of the means we should, unfortunately, stumble again on unfunded paper money or any similar species of fraud, we shall assuredly give a fatal stab to our national credit in its infancy. Paper money will invariably operate in the body of politics as spirit liquors on the human body. They prey on the vitals and ultimately destroy them. Paper money has had the effect in your state that it will ever have, to ruin commerce, oppress the honest, and open the door to every species of fraud and injustice.” — George Washington in a letter to Jabez Bowen, Rhode Island, Jan. 9, 1787

Thomas Jefferson On Boom and Bust Cycles

“I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a monied aristocracy that has set the government at defiance. The issuing power (of money) should be removed from the banks and restored to the people to whom it belongs properly.” Thomas Jefferson, U.S. President

Central bankers have repeatedly shown that they are willing to sacrifice lives and inflict untold suffering on millions of people, all in the name of profit. Their actions are devoid of humanity, driven only by the lust for wealth and power.

People are treated like mere commodities, to be bought and sold at the whims of these bankers, who see them only as numbers on a ledger. The callous and calculated approach to monetary policy has led to countless deaths and ruined lives, leaving a trail of destruction in its wake.

The desire for profit has become so great that the very foundations of society are being eroded, and the future looks increasingly bleak. It is time to wake up and realize that these bankers are not the benevolent custodians of the economy they claim to be. Instead, they are the architects of a cruel and heartless system that benefits only a few. The time has come to demand change and hold these bankers accountable for their actions, lest we fall victim to their insatiable greed.

The Boom Phase

To cause a boom, they flood the markets with money, and to generate a bust; they tighten the spigots. This is what caused the dot.com bubble and its subsequent bust. The same applies to the housing bubble and the best, and the same thing is occurring now. The result is always the same; they change the music or the dance, but everything else is the same. In this instance, they have kept rates low for an unusually long period, and now, they have decided to do the unthinkable, embrace negative rates.

The first stage of the bubble was created by allowing corporations to borrow large sums of money and use this to repurchase immense shares, thereby artificially boosting the EPS and making it look like all is well. When nothing is improving, and only the number of outstanding shares is dropping, which gives the false impression that profits are increasing when they are not. In many instances, yields would have declined if the share buyback programs did not exist.

Lower Interest Rates Fuel boom and Bust Cycles

The Corporate world is drooling at the prospect of Negative rates, like a crack addict given a new dose of super crack. Unfortunately, the consequences of these actions will be dire for the masses. History shows that the con never changes; only the outfits change and the ones left holding the empty bag are always the sheep (otherwise known as the masses).

Despite putting on a brave face, the Fed is already backtracking from its firm early this year.

The Fed’s previous rate hikes were mere to give the masses the feeling that the markets are free when, in reality, they are entirely controlled and manipulated. Every boom and bust cycle was planned. The chart below illustrates that the economy is far from healthy; it appears almost comatose and is being kept alive through massive injections of hot money. Take away the hot money, and this illusory economic recovery crumbles.

Commodities are perking up.

Even more than equities, commodities are gearing up for long-term bull markets, making them a potentially lucrative investment.

The chart peaked in 2000; since then, it’s been downhill. There was a brief relief from 2009 to 2019, but the chart put in a bearish lower high, and things worsened. Despite the increase in the money supply, the money is not reaching the masses.

This is a tactic the Fed is using to prevent the effects of inflation, and it seems to be working for now. However, to create a giant bubble, the Fed needs to put this money into the hands of the masses. They appear to be testing this theory in the auto market with a subprime bubble waiting to burst.

The next forage will be to find a way to put this money into the hands of the masses for various general expenditures, like opening a new business or, better yet, creating the next housing bubble. The demand for housing is rising, but most people cannot qualify for a mortgage. Imagine what would happen if they suddenly made it easier to get a loan. The slogan would be “buy now and cut your rent”; for a time, this slogan would be accurate as it’s far costlier to rent than owning a home today in most parts of America.

Economic recovery is illusory in nature.

The Fed’s persistent low-interest-rate policy shows the unnatural nature of the current economic recovery. If the recovery were authentic, rates would be allowed to rise naturally, and the Fed would not need to intervene to support the stock market. However, after the Fed stopped, the corporate world stepped in with illegal stock buybacks.

Instead of focusing on improving their bottom line, companies artificially boosted their earnings per share by using profits to buy back their own shares. It’s a lucrative scam, requiring little effort and resulting in significant pay. As interest rates remain low, the incentive for companies to borrow large sums of money to continue these practices is more substantial than ever. As a result, expect stock buybacks to surge to unprecedented levels that may seem insane one day.

Gold is an excellent hedge in a world full of uncertainty.

It is essential to have a core position in Gold to protect against solid global currency debasement. However, betting solely on Gold may not be the best approach, as timing is critical for market success. Many individuals do not have the staying power to bet against the Fed and end up losing their investments. While the right investment may seem apparent, putting all your eggs in one basket is never advisable. Wall Street is full of tombstones of good men who were right but could not stay solvent long enough to benefit from their insights.

The currency war continues, and the consequences of these actions will be dire for the masses. The Fed is backtracking from its firm stance last year, and resistance is futile. The corporate world embraces negative rates enthusiastically, leading to an illusory economic recovery. The money supply has increased, but it is not making its way to the masses, leading to the infamous trick the Fed employed to coral the effects of inflation.

Finally, stock buybacks artificially boost EPS, a perfect scam for corporations. While stock buybacks surge to levels that will appear crazy one day, it is essential to keep a diversified portfolio and not put all your eggs in one basket.

Hedging Against Boom and Bust Cycles with the Timeless Value of Gold

The Federal Reserve has a history of fostering boom and bust cycles by raising or lowering interest rates, and recent years are no exception. The Fed’s easy monetary policies since 2008, including quantitative easing and near-zero interest rates, have created a hot money environment, driving stocks to new highs and causing corporations to engage in risky behaviour, such as the illegal use of stock buybacks.

The Fed’s policies have also led to a currency war, with central bankers worldwide trying to destroy their currencies. The consequences of these actions could be dire for the masses, with commodities gearing up for long-term bull markets and the corporate world embracing negative rates with enthusiasm. The Fed is already backtracking from its firm stance last year, indicating that the economic outlook is weaker than expected, and they will have no option but to join the rat pack.

While low-interest rates foster speculation and a bubble economy, it is not sustainable in the long run. The monetary base chart shows that the economy is far from healthy and is being forcefully kept alive through massive injections of hot money. The illusory economic recovery will crumble without hot money. The corporate world’s focus on stock buybacks instead of improving the bottom line is a perfect scam, and we can expect stock buybacks to surge to levels that will appear crazy one day.

Investors should have a core position in gold, which will react strongly to currency debasement. However, no matter how good an investment appears, one should never put all their eggs in one basket. The Fed’s actions and the market’s behaviour are beyond an individual’s control, and betting against the Fed may not be a successful strategy in the long run. Investors should be aware of the trend and adapt their strategy accordingly.

The Fed’s Role in Fostering Boom and Bust Cycles Via Rate Manipulation

The Federal Reserve’s policy decisions are often viewed as crucial to maintaining economic growth and stability in the US financial system. However, some argue that the Fed has significantly fostered boom and bust cycles through its interest rate manipulation. This article will examine the Fed’s actions and inactions in creating crises and its potential motives.

Historical Context

The Fed’s policies have changed, but its primary objective has always been to promote financial stability and economic growth. Following the financial crisis of 2008, the Fed introduced quantitative easing (QE), which was meant to stimulate the economy by lowering interest rates and increasing the money supply.

Boom and Bust Cycles

However, this policy also had the unintended consequence of fueling asset bubbles and increasing the risk of a financial crisis. The Fed’s actions, or lack thereof, have been attributed to fostering boom and bust cycles by creating an environment of easy credit and financial speculation.

Interest Rate Manipulation

One of the Fed’s most significant tools in controlling the economy is through its control of interest rates. The Fed makes borrowing cheaper and stimulates economic growth by lowering interest rates. Conversely, raising interest rates can slow down the economy and prevent inflation.

Machiavellian Plan?

Critics argue that the Fed may manipulate interest rates for their benefit, allowing them to foster boom and bust cycles and devalue the currency. This benefits the wealthy and powerful while hurting the middle class and the poor.

while the Fed’s policies promote economic stability and growth, they have been criticized for fostering boom and bust cycles through interest rate manipulation. Doing so has potentially created an environment of easy credit, financial speculation, and currency debasement. The debate surrounding the Fed’s actions and motives is ongoing, and more research is needed to understand their impact on the US economy.

Banks play a significant role in fostering boom and bust cycles through their ability to create money through lending. As the Fed lowers interest rates, banks are encouraged to lend more money, creating a bubble of debt that eventually pops.

Interest Rate Risk

Additionally, banks have been known to engage in risky behaviour, such as investing in subprime mortgages, creating a systemic risk to the financial system. The Fed’s failure to regulate these activities or take action against the banks has been criticized as contributing to the 2008 financial crisis.

Currency Debasement

Moreover, the ongoing race to the bottom and perpetual currency debasement can severely affect the global economy. As a result, owning precious metals such as gold, silver, and palladium can hedge against the ill effects of currency debasement. These metals have a track record of maintaining their value over time and can act as a safe haven during economic turmoil.

Additionally, some experts argue that banks’ actions are part of a broader effort to devalue the currency, benefiting the wealthy and powerful at the expense of the middle class and the poor. In this context, owning precious metals can provide financial security and protect against the potential downsides of currency devaluation.

Banks’ actions in fostering boom and bust cycles through interest rate manipulation raise concerns about the financial system’s stability. Owning precious metals can safeguard against the negative effects of currency debasement and provide financial security in times of economic uncertainty.