Obviously, they are already expert in controlled demolition as in WTC 9/11. But can they apply the same expertise to another private entity called Federal Reserve?
Some quarters are seeing signs that indicate the Federal Reserve is undergoing a controlled collapse. Is the dollar printing machine about to shut down its operation for good?
Is The Fed Going To Attempt A Controlled Collapse?
Submitted by Tyler Durden on 07/08/2014 17:00 -0400
Originally posted at NotQuant.com,
As most Fed watchers know, last week was interesting because Janet Yellen, speaking at IMF came out and said something quite surprising. In a nutshell, she said “It’s not the Fed’s job to pop bubbles”. While many market participants immediately took this to mean, “To the moon, Alice!” and started buying equities hand over fist, there’s another possible explanation for Mrs. Yellen’s proclamation of unwillingness: The Fed could be preparing to do exactly what it said it wouldn’t.
Here’s a quick re-cap of events: In the recently released Annual Report of the BIS: Bank for International Settlements (commonly thought of as the “central bank’s central bank”) the BIS made a rather ominous recommendation to it’s member banks: Pop this bubble now. Their specific language wasn’t quite so direct, but the message was just as clear.
The risk of normalising too late and too gradually should not be underestimated… The trade-off is now between the risk of bringing forward the downward leg of the cycle and that of suffering a bigger bust later on .
Few are ready to curb financial booms that make everyone feel illusively richer. Or to hold back on quick fixes for output slowdowns, even if such measures threaten to add fuel to unsustainable financial booms,” …
“The road ahead may be a long one. All the more reason, then, to start the journey sooner rather than later.”
As we noted last week, there are a couple of fascinating things to note about this recommendation. First, for anyone who thinks that the concept of intentionally crashing the stock market is the stuff of conspiracy theorists, that notion is now dead and buried. It’s extremely clear from the BIS’ language, that the concept of initiating a collapse is openly discussed as a policy measure. This was a direct recommendation to bring on the crash – or as they say so colorfully, to “bring forward the downward leg of the cycle”.
But what else is fascinating is that just days after the BIS report was released, Janet Yellen seemed to counter the BIS in her presentation to the IMF:
“At this point, it should be clear that I think efforts to build resilience in the financial system are critical to minimizing the chance of financial instability and the potential damage from it. This focus on resilience differs from much of the public discussion, which often concerns whether some particular asset class is experiencing a ‘bubble’ and whether policymakers should attempt to pop the bubble. Because a resilient financial system can withstand unexpected developments, identification of bubbles is less critical.”
What Yellen seemed to be saying — quite possibly in direct response to the BIS’s recommendations — is that the Fed isn’t in the business of popping bubbles, nor does it see a reason to intervene in their development.
So to summarize: The BIS publicly recommended popping the bubble now… and Yellen said no.
So what’s going on?
We could take all of this at face value if we chose: The BIS playing hawk, and the Fed playing dove. And that might well be the case — as to some extent Yellen is still something of an unknown entity.
But there is one more twist to the puzzle: Yellen has openly stated that she would not be offering clear guidance to the market as her predecessor had advocated. The age of Fed-glastnost is apparently coming to an end.
So indulge us for a moment as we present another possibility:
Yellen is going to orchestrate a controlled collapse. Or, at least one which we hope is controlled.
There are political considerations to be made, however: The Fed, which has not only come under intense fire for overt market manipulation, but which is also deeply concerned with market perception, simply cannot afford to be perceived as an instrument of the market’s collapse. To be seen as the instigator of a crash could do irreparable harm to the institution.
So just maybe the Fed fully intends on heeding the advice of the BIS, and is strategically positioning itself as a stalwart dove to shield itself from the public fallout of it’s orchestrated financial calamity. A particularly sound play from a political perspective in the event that things don’t go as smoothly as planned.
One thing is certain at this point: An intentionally orchestrated crash is the direct recommendation of the BIS, per it’s annual report. That this action exists as a potential policy measure is now confirmed.
The remaining question is: Would the Federal Reserve pursue such a policy measure openly, or behind the same curtains from which most of their historic policies were enacted.
As we re-think Mrs. Yellen’s speech to the IMF, we are less certain that the Fed is as unwilling to intervene as Mrs Yellen would have us believe. Bringing forward the next leg of the cycle, may well be on the Fed’s agenda.
Marc Faber: Stocks Could Crash 30% Because “Obama’s A Very Poor President”
Submitted by Tyler Durden on 07/08/2014 21:31 -0400
“There is a colossal bubble in all asset prices and eventually it will burst,” is the subtle recurring message from The Gloom, Boom, & Doom Report’s Marc Faber, warnings that “maybe has begun to burst already.” While Faber admits he has called for such a correction previously, he notes that the difference now is that “valuations are so much higher; and contrary to what the mainstream economists believe, I don’t believe the global economy is strengthening; in fact I believe it is weakening.” Furthermore, while “you never know what will trigger for a bull market or bear market is until after the fact,” Faber offers 3 factors (aside from the Fed) that could trigger a 30% crash or more… beginning with “a) In The White House we have a very poor President – which will lead to political issues domestically in the US,” which are not priced in.
“There is a colossal bubble in all asset prices and eventually it will burst.. and maybe has begun to burst already”
“We are not going to have a ‘correction’; but we are going to have a bear market”
“You never know what will trigger a bull market or what will trigger a bear market – you only know it after the fact”
“When markets peak out, nobody can believe that it could go down and we have an environment where everybody puts their faith in central banks printing money – and therefore asset prices cannot go down”
“I look for 30% – if you can’t buy something with the expectation that it could drop 30% then don’t even get out of your bed in the morning because we have within markets now a lot of volatility” – no matter how obscured it is by the VIX.
While Faber admits he has called for such a correction previously, he notes that the difference now is that “valuations are so much higher; and contrary to what the mainstream economists believe, I don’t believe the global economy is strengthening; in fact I believe it is weakening.”
Analysts are all bullish for the next quarter’s earnings but as Faber says “I have never met an analysts who predicted a downturn in earnings”
The fact is simply, he notes “earnings have been boosted by stock buybacks not by revenue growth and earnings are grossly inflated due to artificially low interest rates… don’t rely on analysts expectations as of today.”
Faber thinks there are other factors that could drive prices down aside from a Fed that raises rates sooner rather than later (which he doesn’t expect)
a) In The White House we have a very poor President – which will lead to political issues domestically in the US (which are not priced in);
b) we have numerous geopolitical issues to consider (that are not priced in); and
c) We could have potentially a much higher oil price (which is not priced in)
* * *
The rest of the clip offer sup a Gartman vs Schiff debate over the merits of gold… worth the price of admission (and a desparate attempt by Gartman to explain how he was so wrong about Corn)
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