Fed at Fault: What Goes Up Must Come Down

This interview would be funny if it weren’t so sad. Richard Fisher, recently retired CEO and President of  the Federal Reserve Bank of Dallas, is a little out of touch with the ordinary person’s experience of events. But, at least he is honest, in fact, he’s utterly shameless.  The sound is a little out of sync with the video.   If it bothers you, close your eyes.  This is the voice of the 1%.    Listen and weep – or laugh – as the spirit moves you.

While we were sleeping?

“What the fed did, and I was a part of that group, what we did was, we front loaded a tremendous market rally staring in 2009, in March of 2009.”

Of course you and I were having a nightmare.    We were pretty busy dealing with lost jobs and trashed 401K accounts at that time.    In fact, nothing has been quite the same since.

The banks were bailed out, the Fed dropped lending rates to zero and started printing money, and the market roared back to life.   The rest of us lost our jobs and our savings and were reduced to debt peonage with our short term zero percent credit cards that will turn into pumpkins this year when the Fed starts raising the rates for the banks.

This interview is Mr. Fisher’s response to the fact that the Market opened the new year with a precipitous fall, from which it has not so far recovered.

According to Kevin Zeese and Margaret Flowers’ Popular Resistance Newsletter on Friday:

We seem to be at the beginning of the economic collapse predicted by many for 2016. The predictions call for a collapse worse than 2008. There are trillions of dollars more in high risk investments and central banks are over-leveraged. After central banks shifted trillions to wealthy businesses after the last collapse, they are now in a weaker position to respond to the next collapse. The Federal Reserve is leveraged at 78 to 1, for comparison Lehman Brothers was at 30 to 1 when it triggered the 2008 collapse.

The US commodities markets are at depression-era levels not seen since 1938. Wholesale sales collapsed creating an inventories-to-sales ratio that is the highest since 2008′s crisis and as high as the worst in the 2001 recession. The risky derivatives market is now at $555 trillion in a global economy that is $70 trillion. You read that correctly – risky investments are nearly eight times the total global economy. This is a giant bubble ready to pop.

Back to Richard Fisher, he calmly points out that this is just natural.

” I wouldn’t be surprised for whats happening.   I wouldn’t blame it on China.”

He sees China on a positive economic trajectory.  The US, however, is in the first stages of a karmic

“We had a tremendous rally and I think there’s a great digestive period that is going to take place now.  And it may continue.”

The Market’s still overpriced.”   “They’re trading at 19 and !/2 times earnings.”

“I could see significant down time.   Or maybe I could see just a flat Market for quite some time digesting that enormous return the Fed engineered for six years.”

Last year the US economy did so well that the Fed has begun to raise (restore is more accurate) the big banks’ interest rates which have been at ‘0%’ since 2009.    It’s all good.   They are going to be cautious.  I heard this on NPR.    But wait!    Fisher says that there hasn’t been any profit at all in the Market last year outside of dividends.  Hmmmmm.    According to NPR, Job growth was great last December.   But again, don’t you always get lots of short term low wage jobs over the holidays?   According to Kevin and Margaret, December job growth didn’t even match the number of new workers coming into the workforce.

So, indeed, what goes up must come down.   The question is, what will happen to those of us who weren’t on board the flight in the first place?    And what can we do about it?   For starters, check out PopularResistance.org

 

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