Day: April 15, 2016

Apr

2016

The Fed WANTS Inflation

The Fed has unleashed inflation.

And it wants more of it.

From mid-2014 until early 2016, commodities as an asset class, collapsed some 45%.

This was an all out bloodbath. But despite this collapse in prices, inflation began to perk up.

Since that time, numerous Fed officials, including Fed Vice-Chair Stanley Fischer have concluded that inflation has arrived and that the Fed wants more of it.

Beyond this, the Fed failed to raise rates in March despite data hitting levels at which it claimed a rate hike was warranted. It has also walked back its rate hike forecast from four potential rate hikes to just two (if that).

There is also the political issue to consider. President Obama had a sit down with Fed Chair Janet Yellen on Monday. This was the first one-on-one meeting they’ve had since October 2014 (right before Congressional elections).

The first Fed rate hike in nine years did so much damage that it took multiple Central Banks unveiling multiple new policies to undo it. In light of this, what are the odds Obama pushed Yellen to refrain from hiking rates and pushing an already weak economy into full-blown recession? Pretty darn high.

Which means you can forget about another rate hike this year. Instead we’ll get numerous Fed officials playing “good cop, bad cop” with different verbal interventions to maintain the illusion that another rate hike is possible.

Politically it is not. Which means… inflation will be rising even more in the coming months. Indeed, sticky inflation is moving sharply higher. This will only worsen as commodities continue to rebound (oil is up 40% since its bottom).

The precious metals markets know it too. Inflation is here. And the Fed isn’t going to try and stop it.

Gold and Gold-related investments will be exploding higher in the coming weeks.

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Apr

2016

The Real Reason the Fed Will Not Raise Rates Again

The Fed is “one and done” for rate hikes. It will not raise rates again.

We called this back in mid-2015. The US economy is far too weak for the Fed to engage in anything resembling a series of rate hikes. Corporate leverage, household leverage, even the national debt stand at levels that limit the Fed from hiking rates.

The Central Banking insiders know this. Which is why Former Fed Chair Ben Bernanke admitted in private luncheons with hedge fund managers that rates would not “normalize” in his “lifetime.”

The Fed is not interested in the economy. It is interested in the bond bubble. All of the talk regarding Main Street, employment, etc. is just that “talk.” The Fed will not, under any circumstances permit the bond bubble to burst because doing so would implode its true owners: the private banks.

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The Fed is a privately held institution. The US does not own the Fed. And while Fed Chairs might take some marching orders from sitting Presidents (just as Janet Yellen was recently told by Obama to not raise rates again until after the election), the large banks are the TRUE controllers of the Fed.

Bonds, particularly sovereign bonds, are the senior most collateral sitting on the big banks balance sheets.

These bonds are what backstops the $700 trillion derivatives market. $1 in your typical Treasury is likely backstopping over $300 worth of trades in over the counter markets that are completely unregulated.

The vast bulk of these derivatives are based on interest rates or bond yields.

What are the odds the Fed would risk blowing up the derivatives market, thereby imploding the very banks that own the Fed?

Absolutely ZERO.

The Fed is “one and done” for rate hikes. It was a symbolic move brought about by political pressure after seven years of ZIRP. The Fed raised rates a mere 0.25% and the financial markets entered a free fall. That’s the end of that. Anyone who argues otherwise based on “data” or the “state of the economy” is ignoring the facts of how the financial system operates.

So what does this mean?

The bubble will continue to grow until it bursts. The world has added $57 trillion in new debt since 2007. The fastest growing segment of the debt markets has been government debt, which has grown at an annualized rate of over 9%.

This bubble will burst as all bubbles do. Given the ongoing revolt by Japan and Europe against negative interest rates, it’s only a matter of time before it does.