… For those unfamiliar with what stagflation is, it is essentially the loss of economic growth in numerous sectors coupled with a marked spike in consumer and manufacturing costs. In other words, prices keep going up while employment growth, wages, production, etc. decline….
QE3 was a dramatic con, along with Operation Twist. The Fed got exactly what it wanted — an unprecedented bull market rally in stocks and temporary stability in bond markets. As stocks jumped higher and higher despite all negative fundamental data, the mainstream simply regurgitated the fool’s narrative that a “recovery” was upon us. But now things are changing and no illusion lasts forever.
The second observation I have made is that central banking elites and their cronies tend to give warnings on great economic shifts, but only about a year before they occur. They do this for a few reasons. One, because they are the people that engineer these crisis events in the first place and it’s not very hard to predict a calamity you helped create. Two, because it makes them appear prophetic when they are not, while at the same time giving the public as little time as possible to prepare. And three, because it gives them plausible deniability when the crisis actually happens, because they can claim they “tried to warn us”, though unfortunately it was too late.
The Bank For International Settlements warned of the derivatives and credit crash in 2007, about a year before the disaster struck. In 2017, former Fed chairman Alan Greenspan warned of inevitable “stagflation not seen since the 1970s.” In later comments, he and others attributed this potential crisis to the policies of Donald Trump.
It is important to note that stagflation is entirely the fault of central bankers and not the presidency, though the White House has indeed aided the Fed in its efforts regardless of who sits in the Oval Office….
Both sides were wrong because they refused to acknowledge the third option — stagflation….
As we all know, rent prices across the country have been skyrocketing in the past few years along with home prices, while at the same time home buyers have dwindled and the millennial generation is staying at home with mom and dad rather than paying out monthly for homes and apartments. That is to say, in a normal economic environment fewer buyers should result in lower prices, but this is not what has happened. The question is, how has the Federal Reserve and QE contributed to this example of stagflation?
First, the Fed’s artificial support for Fannie Mae and Freddie Mac after the derivatives debacle allowed for the continued propping up of the housing market when bad debt should have been allowed to cycle out of the system and house prices should have been allowed to fall.
Second, the Fed’s bailout funding of Fannie Mae directly benefited companies like Blackstone, which has become a partner with Fannie Mae and one of the largest buyers of homes in the country. Blackstone has not purchased tens of thousands of homes for resale, but for conversion into rentals. Blackstone’s vast purchases of single family homes has artificially boosted home values across the nation and given the false impression of a housing recovery that does not really exist.
Third, a very interesting discovery; while the central bank under Jerome Powell has become more and more aggressive in its balance sheet reductions, a move which has directly contributed to the recent decline in stock markets, there is one asset class that the Fed has been ADDING to its balance sheet — Mortgage Backed Securities (MBS). These purchases tend to take place directly after older MBS have been allowed to roll over, meaning, the Fed is maintaining a relatively steady number of MBS while it is dumping other assets.
MBS represent around 40 percent of the Fed’s total balance sheet, and the Fed’s continued fiat support of the MBS market helps explain why home prices refuse to fall despite negative fundamentals. It is also interesting to me that the Fed has chosen to dump certain assets that appear to be causing a downward reaction in stock markets and other sectors while maintaining assets that keep housing prices high. It’s almost as if the Fed wants stagflation…
The source of almost every instability within our economy can be tracked straight back to the Federal Reserve and the “too-big-to-fail” corporations they bailed out after the credit crash. The current stagflationary development is no different. Stagflation will ultimately result in extreme price increases on necessary goods and services far beyond what we have already seen while the public’s ability to keep up with those prices will falter….
But they really really want to do right. They just can’t resist their own greed and their need to dominate. I’m sure there’s a 12-step program they could get into.