Even though the nations of the world are very deeply divided on almost everything else, somehow virtually all of them have been convinced that central banking is the way to go. Today, less than 0.1% of the population of the world lives in a country that does not have a central bank. Do you think that there is any possible way that this is a coincidence? And it is also not a coincidence that we are now facing the greatest debt bubble in the history of the world. In Part I of this series, I discussed the fact that total global debt has reached 217 trillion dollars. Once you understand that central banks are designed to create endless debt, and once you understand that 99.9% of the global population lives in a country that has a central bank, then it finally makes sense why we have accumulated so much debt. The elite of the world use debt as a tool of enslavement, and central banking has allowed them to literally enslave the entire planet.
Some of you may not be familiar with how a “central bank” differs from a normal bank. The following definition of a “central bank” comes from Wikipedia…
A central bank, reserve bank, or monetary authority is an institution that manages a state’s currency, money supply, and interest rates. Central banks also usually oversee the commercial banking system of their respective countries. In contrast to a commercial bank, a central bank possesses a monopoly on increasing the monetary base in the state, and usually also prints the national currency, which usually serves as the state’s legal tender.
Over the past 100 years or so, we have seen central banks steadily be established all over the planet. At this point, there are just 8 very small nations that still do not have a central bank…
-Federated States of Micronesia
When you add the populations of those 8 nations together, it comes to much less than 0.1% of the global population.
But even though central banking is nearly universal, only a very small fraction of the global population can tell you how money is created.
Do you know where money comes from?
Here in the United States, most people just assume that the federal government creates money. But that is not true at all.
Many are absolutely shocked when they discover that U.S. currency is actually borrowed into existence. The federal government gives U.S. Treasury bonds (debt) to the Federal Reserve in exchange for money that the Federal Reserve creates out of thin air. The Federal Reserve then auctions off those bonds to the highest bidder.
Since the federal government must pay interest on those bonds, the amount of debt that is created in these transactions is actually greater than the amount of money that is created. But we are told that if we can just circulate the money throughout our economy fast enough and tax it at a high enough rate, then we can eventually pay off the debt. Of course that never actually happens, and so the federal government always has to go back and borrow even more money. This is called a debt spiral, and at this point we will never be able to escape it until we do away with this horrible system.
But why does our government (or any government for that matter) have to borrow money that is created by a central bank in the first place?
Why can’t governments just create money themselves?
Oops. That is the big secret that nobody is supposed to talk about.
Theoretically, the U.S. government doesn’t actually have to borrow a single penny. Instead of borrowing money the Federal Reserve creates out of thin air, the federal government could just create money directly and spend it into circulation.
Yes, this could actually happen. Back in 1963, President John F. Kennedy signed Executive Order 11110 which authorized the U.S. Treasury to issue debt-free “United States Notes” which were not created by the Federal Reserve. These debt-free notes began to be issued, and you can still find them for sale on eBay today. Unfortunately, President Kennedy was assassinated shortly after this executive order was issued, and the notes were not in production for long.
If we had ultimately fully adopted “United States Notes” and had phased out Federal Reserve notes, we would not be 20 trillion dollars in debt today.
The elite of the world love to get national governments deep into debt, because it enables them to enslave entire populations while making an obscene amount of money in the process.
Back in 1913, an insidious plan was rushed through Congress just before Christmas that was based on a blueprint that had been developed by very powerful Wall Street interests. Author G. Edward Griffin did an extraordinary job of documenting how all of this happened in his book entitled “The Creature from Jekyll Island: A Second Look at the Federal Reserve”. A central bank was established, and it was purposely designed to create a government debt spiral, and that is precisely what happened.
Since 1913, the size of the national debt has gotten more than 6,000 times larger, and the value of our dollar has declined by more than 98 percent. Many conservatives are still under the illusion that we could get out of debt someday if we just grow the economy fast enough, but I have shown in another article that we have gotten to the point where this is mathematically impossible.
And most people are also operating under the false assumption that the Federal Reserve is part of the federal government. But that is not accurate either. The following comes from one of my previous articles…
There is often a lot of confusion about the Federal Reserve, because a lot of people think that it is simply an agency of the federal government. But of course that is not true at all. In fact, as Ron Paul likes to say, the Federal Reserve is about as “federal” as Federal Express is.
The Fed is an independent central bank that has even argued in court that it is not an agency of the federal government. Yes, the president appoints the leadership of the Fed, but the Fed and other central banks around the world have always fiercely guarded their “independence”. On the official Fed website, it is admitted that the 12 regional Federal Reserve banks are organized “much like private corporations”, and they very much operate like private entities. They even issue shares of stock to the private banks that own them.
In case you were wondering, the federal government has zero shares.
According to the U.S. Constitution, a private central banking cartel should not be issuing our currency. In Article I, Section 8 of our Constitution, Congress is solely given the authority to “coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures”.
So why in the world has this authority been given to a central bank?
The truth is that we do not need a central bank.
From 1872 to 1913, there was no central bank and no income tax, and it turned out to be the greatest period of economic growth in all of U.S. history.
But since the Fed was established, there have been 18 different recessions or depressions: 1918, 1920, 1923, 1926, 1929, 1937, 1945, 1949, 1953, 1958, 1960, 1969, 1973, 1980, 1981, 1990, 2001, 2008.
Abolishing the Federal Reserve is one of the core issues of my platform, and I have been writing about these things for the last seven years.
As I discussed yesterday, the elite use debt to enslave all of the rest of us, and central banking allows them to literally dominate the entire planet.
Until we abolish this debt-based system and go to a currency that is debt-free, we are never going to permanently solve our very deep long-term economic and financial problems.
But because they are so immensely wealthy, the elite are able to wield extraordinary influence in our society. They control the mainstream media, our politicians and even global institutions such as the United Nations. Anyone that would dare to question the validity of the current system is marginalized, and for a long time very few politicians around the world were even willing to speak out against central banking.
However, that is starting to change. A new generation of leaders is rising up, and they are absolutely determined to break the stranglehold that the elite have on our society. It won’t be easy, but if we are able to wake enough people up, I believe that we will eventually be able to free ourselves from this insidious system.
Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.
How can a company that is going to generate $2,000,000,000 in negative free cash flow in 2017 be worth 70 billion dollars? Netflix has soared in popularity in recent years, but so have their financial losses. Just like during the original tech bubble, investors are ignoring basic fundamentals and are greatly rewarding firms that are bleeding giant mountains of cash year after year just because they are trendy “tech companies”. But somewhere along the line you actually have to quit losing money if you are going to survive. Just ask tech bubble 1.0 victims Pets.com, Webvan and Etoys.com. The investors that poured enormous amounts of money into those companies ended up losing everything, and similar tragedies will play out as tech bubble 2.0 bursts.
So far in 2017, the S&P 500 is up about 8 percent, but FANG stocks (Facebook, Amazon, Netflix and Google) are up a whopping 30 percent.
But at least Facebook, Amazon and Google are making money.
Netflix is not.
So why in the world has the stock shot up by more than 30 percent so far this year? It just doesn’t make any sense at all. According to CNBC, during the first quarter Netflix had $423 million in negative free cash flow, and for the entire year it is being projected that it will have $2 billion in negative free cash flow…
The California-based company is now dumping cash into original content to maintain its dominance over its growing field of rivals. The company’s had $423 million negative free cash flow during the quarter, wider than the $261 million negative free cash flow a year ago. Netflix expects to have $2 billion in negative free cash flow this year.
The bleeding of cash at Netflix only seems to be accelerating. The number for the first quarter of 2017 was 62 percent worse than the number for the first quarter of 2016, and it was more than twice as bad as the number for the first quarter of 2015.
It is hard to imagine that Netflix will ever be more popular than it is right now.
So if Netflix is not making a profit at this point, when will it ever make a profit?
Similar things could be said about Twitter. This is a company that has never made a yearly profit and that is actually starting to see revenues decline. But somehow the stock just continues to go up. Since the last time I wrote about Twitter, the market cap has shot up another 1.5 billion dollars.
At this point, the market values Twitter at 13 billion dollars, but in the entire history of the company it has actually lost 2 billion dollars.
What we are witnessing is a modern day version of “tulip mania”, and at some point this irrational euphoria will come to a sudden end. In fact, there are already some signs that tech bubble 2.0 may be in a significant amount of trouble. The following is an excerpt from a Bloomberg article entitled “Investors Go All-In on Tech Giants”…
The tech-powered rally has catapulted the sector to a price-to-earnings ratio of 24.4, or 41 percent above the 10-year average. But as Google and Amazon stretch to nearly $1,000 a share, not everyone is comfortable with the valuations. Investors pulled more than $716 million from the most popular technology exchange-traded fund last week — the $17.4 billion Technology Select Sector SPDR Fund, or XLK — its largest weekly outflow in over a year, data compiled by Bloomberg show.
“Most everybody remembers 2000, so they might be getting a little nervous with this development,” said Maley. “I just wonder how many people have said to themselves, ‘If AMZN gets to $1,000, I’m going to take at least some profits.’”
All over the financial world, prominent voices are warning that the enormous financial bubbles that we see all around us are not sustainable and that a major crisis is heading our way. I wrote about some of these voices yesterday, and today we can add Paul Singer to the list…
Given groupthink and the determination of policy makers to do ‘whatever it takes’ to prevent the next market ‘crash,’ we think that the low-volatility levitation magic act of stocks and bonds will exist until the disenchanting moment when it does not. And then all hell will break loose (don’t ask us what hell looks like…), a lamentable scenario that will nevertheless present opportunities that are likely to be both extraordinary and ephemeral. The only way to take advantage of those opportunities is to have ready access to capital.
When the financial markets collapse, Donald Trump will likely get most of the blame.
But Donald Trump did not create the stock market bubble, and he will not be responsible for ending it either.
Since the Federal Reserve was created in 1913, we have seen this same story play out over and over again. There have been 18 distinct recessions or depressions since the Fed was established, and the more the Fed interferes in the marketplace the larger the booms and busts tend to be.
And it could be argued that this time around the Fed has manipulated financial markets more than ever before. Interest rates were pushed as low as possible and trillions of dollars were pumped into the financial system during the Fed’s quantitative easing programs. Of course those actions were going to create a huge bubble, and of course that bubble is going to inevitably burst.
Unfortunately, this is not just a game. Real people with real hopes and real dreams are going to be absolutely devastated. Millions of Americans that were carefully saving for retirement are going to be financially crippled, and pension funds all over the nation are going to be wiped out.
I don’t know why we can’t seem to learn from history. And I am not talking about events that happened decades ago. The build up to this coming crisis is so similar to what we witnessed just before the crashes of 2000 and 2008, but we just keep getting fooled over and over again.
But once things fall apart this time, I think that the American people will finally be fed up. I think that they will be sick and tired of an unelected, unaccountable central bank that creates endless booms and busts, and I think that they will finally be ready to push Congress to shut the Federal Reserve down for good.
If everything is going to be “just fine”, why are so many big names in the financial community warning about an imminent meltdown? I don’t think that I have seen so many simultaneous warnings about a market crash since just before the great financial crisis of 2008. And at this point, you would have to be quite blind not to see that stocks are absurdly overvalued and that a correction is going to happen at some point. And when stocks do start crashing, lots of fingers are going to start pointing at President Trump, but it won’t be his fault. The Federal Reserve and other central banks are primarily responsible for creating this bubble, and they should definitely get the blame for what is about to happen to global financial markets.
My regular readers are quite familiar with my thoughts on where the market is headed, so today let me share some thoughts from five highly respected financial experts…
#1 When Altair Asset Management’s chief investment officer Philip Parker was asked if a market crash was coming to Australia, he said that he has “never been more certain of anything in my life”. In fact, he is so sure that the investments that his hedge fund is managing are going to crash that a decision was made to liquidate the fund “and return ‘hundreds of millions’ of dollars to its clients”…
While hardly a novel claim – in the past many have warned that Australia’s housing and stock market are massive asset bubbles (which local banks have been forced to deny as their fates are closely intertwined with asset prices even as the RBA is increasingly worried) – so far few if any have gone the distance of putting their money where their mouth was. That changed, when Australian asset manager Altair Asset Management made the extraordinary decision to liquidate its Australian shares funds and return “hundreds of millions” of dollars to its clients according to the Sydney Morning Herald, citing an impending property market “calamity” and the “overvalued and dangerous time in this cycle”.
“Giving up management and performance fees and handing back cash from investments managed by us is a seminal decision, however preserving client’s assets is what all fund managers should put before their own interests,” Philip Parker, who serves as Altair’s chairman and chief investment officer, said in a statement on Monday quoted by the SMH.
#2 Seth Klarman leads one of the biggest hedge funds in the United States, and he believes that U.S. investors are greatly underestimating the amount of risk in the market right now…
“When share prices are low, as they were in the fall of 2008 into early 2009, actual risk is usually quite muted while perception of risk is very high,” Klarman wrote. “By contrast, when securities prices are high, as they are today, the perception of risk is muted, but the risks to investors are quite elevated.”
Klarman oversees one of the US’s largest hedge fund firms, with some $30 billion under management. He has a huge following on Wall Street — investors named his book, “Margin of Safety,” their favorite investment book in a recent SumZero survey.
#3 Bill Blain is a strategist at Mint Partners, and he is actually specifically pointing to October 12th as the date when things will start to get “horribly interesting”…
But…. Catch a falling knife, why don’t you… I shall spend the summer wondering just how long the Stock Market games continue. When, not if.
At the moment, my prediction is October 12th. Around that day its going to get horribly interesting..
Why that particular day?
Gut feel and knowing how the Bowl of Petunias felt in Hitchhikers. (“Not again.”)
There are just too many contradictory currents out there. The unsustainability of burgeoning consumer debt, unfeasibly tight credit spreads, the sandcastle foundations of student loans, autos, housing and the CLO market, China, Trump, politics.. worries about what follows Brazil in the EM market, and whatever… The risks of a massive consumer sentiment dump..
#4 David Stockman has also been warning about what may happen this fall. According to Stockman, this current stock market bubble “is the greatest sucker’s rally we have ever seen”…
“The market is insanely valued right now. They were trying to tag, the robo machines and day traders, they were trying to tag 2,400 on the S&P 500. They ended up at 2,399, I think, but the point is that represents about 25 times trailing earnings for 2016. We are at a point in the so-called recovery that has already lasted 96 months. It’s almost the longest one in history. What the market is saying is we have reached the point of full employment forever. There will never be another recession or any kind of economic surprise or upset or dislocation. The market is pricing itself for perfection for all of eternity. This is crazy. . . . I think the market could easily drop to 1,600 or 1,300. It could drop by 40% or even more once the fantasy ends. When the government shows its true colors, that it’s headed for a fiscal bloodbath when this crazy notion that there is going to be some Trump fiscal stimulus is put to rest once and for all. I mean it’s not going to happen. They can’t pass a tax cut that big without a budget resolution that incorporated $10 trillion or $15 trillion in debt over the next decade. It’s just not going to pass Congress. . . . I think this is the greatest sucker’s rally we have ever seen.“
#5 Last but certainly not least, David Kranzler seems quite certain “that the stock market bubble is getting ready to pop”…
Anyone happen to notice that several market commentators have argued that is a bubble but the same stock “experts” look the other way as the U.S. stock market becomes more overvalued by the day vs. the deteriorating underlying fundamentals? Bitcoin going “parabolic” triggers alarm bells but it’s okay if the stock price of Amazon.com Inc (NASDAQ:) is hurtling toward parity with the price of one ounce of . Tesla (NASDAQ:) burns a billion per year in cash. It sold 76,000 cars last year vs. 10 million worldwide for General Motors (NYSE:). Yet Tesla’s market cap is $51.7 billion vs. $48.8 billion for GM.
This insanity is the surest sign that the stock market bubble is getting ready to pop. If you read between the lines of the the comments from certain Wall Street analysts, the only justification for current valuations is “Central Bank liquidity” and “Fed support of asset values.” This is the most dangerous stage of a market top because it draws in retail “mom & pop” investors who can’t stop themselves from missing out on the next “sure thing.” There will be millions of people who are permanently damaged financially when the Fed loses control of this market. Or, as legendary “vulture” investor Asher Edelman stated on CNBC, “I don’t want to be in the market because I don’t know when the plug is going to be pulled.”
Could all of these top experts be wrong?
It’s possible, but I wouldn’t bet on it.
Every stock market bubble of this magnitude in U.S. history has ended in a spectacular crash, and this one will not be any different. We can certainly have some good arguments about the exact timing of the next crash, but what everyone should be able to agree on is that a crash is coming.
You only make money in the stock market if you get out at the right time. Many of those that timed things well have made a tremendous amount of money, but most investors will be entirely caught off guard by the market implosion that is rapidly approaching.
As I have explained to my readers repeatedly, markets tend to go down a whole lot faster than they go up, and in the not too distant future we are going to see trillions of dollars of investor wealth wiped out very, very quickly.
Let’s hope that the coming crisis will not be as bad as 2008, but I have a feeling that it is going to be much worse.
We didn’t learn our lessons the last time around, and so now we are going to pay a very high price for our stubbornness.
A stock market crash is coming, and the Democrats and the mainstream media are going to blame Donald Trump for it even though it won’t be his fault. The truth is that we were headed for a major financial crisis no matter who won the election. The Dow Jones Industrial Average is up a staggering 230 percent since the lows of 2009, and no stock market rally in our history has ever reached the 10 year mark without at least a 20 percent downturn. At this point stocks are about as overvalued as they have ever been, and every other time we have seen a bubble of this magnitude a historic stock market crash has always followed. Those that are hoping that this time will somehow be different are simply being delusional.
Since November 7th, the Dow is up by about 3,000 points. That is an extremely impressive rally, and President Trump has been taking a great deal of credit for it.
But perhaps he should not have been so eager to take credit, because what goes up must come down. The following is an excerpt from a recent Vanity Fair article…
According to Douglas Ramsay, chief investment officer of the Leuthold Group, Trump administration officials will come to regret gloating about the market’s performance. That’s because Trump enters the White House during one of the most richly valued stock markets in U.S. history. The last president to come in at such valuations was George W. Bush, and the dot-com bubble burst soon afterward. Bill Clinton began his second term in a more overvalued stock market in 1997, and exited unscathed. But if his timing were different by just a year, he would have been blamed for the early-aughts market crash.
This stock market bubble was not primarily created by Barack Obama, Donald Trump or any other politician. Rather, the Federal Reserve was primarily responsible for creating it by pushing interest rates all the way to the floor during the Obama era and by flooding the financial system with hot money during several stages of quantitative easing.
But now the economy is slowing down. Economic growth on an annual basis was just 0.7 percent during the first quarter, and yet the Federal Reserve is talking about raising interest rates anyway.
The Federal Reserve also raised interest rates in a slowing economy in the late 1930s, and that had the effect of significantly extending the economic problems during that decade.
As I noted in my article entitled “The Federal Reserve Must Go”, there have been 18 recessions or depressions since the Federal Reserve was created in 1913, and now we stand on the precipice of another one.
After this next crisis, hopefully Congress will finally understand that it is time to shut the Federal Reserve down for good, and I am going to do all that I can to make that happen.
Ron Paul is someone that I look up to greatly, and he also agrees that the blame for the coming crisis should be placed on the Federal Reserve instead of on Trump…
“There are some dire predictions that say in the next year, or 18 months, we have something arriving worse than 2008 and 2009, the downturn is much worse,” Paul said in a recent interview with liberty-minded anti-globalist radio host Alex Jones. “They’ll say, ah, it’s all Trump’s fault. No. It wasn’t. 08 and 09 wasn’t Obama’s fault. It was the fault of the Federal Reserve, it was the fault of the Keynesian economic model, the spending too much, the deficit. So, unfortunately, there’s nothing he can do — Trump can’t do it.”
Paul, a medical doctor who took a keen interest in economics throughout his celebrated career as a constitutionalist in Congress, said Trump could “help” the situation by pursuing good policies. “But you can’t avoid the correction, the correction is locked in place, because the deficits are there, the malinvestment, everybody agrees interest rates have been too low too long,” he said in the late January interview. “The only thing he can do is allow the recession to come, get it over with, liquidate the debt. Politically, nobody wants that, so you’re going to see runaway inflation before you see this country wake up.”
Over the past decade, the U.S. economy has grown at an average rate of just 1.33 percent, and there is no possible way to put a positive spin on that.
And now the economy appears to be entering a fresh slowdown. A couple of months ago, banking giant UBS warned about “a sudden slowdown in new credit”…
There’s been a sudden slowdown in new credit extended to businesses over the last year, one that strategists at UBS are calling “drastic” and “highly uncommon outside of economic downturns.”
And since that time, lending has tightened up even more. The following comes from Zero Hedge…
According to the latest Fed data , the all-important C&I loan growth contraction has not only continued, but over the past two months, another 50% has been chopped off, and what in early March was a 4.0% annual growth is now barely positive, down to just 2.0%, and set to turn negative in just a few weeks. This was the lowest growth rate since May 2011, right around the time the Fed was about to launch QE2.
At the same time, total loan growth has likewise continued to decline, and as of the second week of May was down to 3.8%, the weakest overall loan creation in three years.
This is exactly what we would expect to see if we were entering a new recession. Neil Howe, one of the authors of The Fourth Turning, recently warned that “winter is coming” and I have to admit that I agree with him.
So when the stock market finally crashes, how bad could it be?
Well, one analyst that spoke to CNBC said that other historic market crashes have averaged “about 42 percent”…
“If you look at the market historically, we have had, on average, a crash about every eight to 10 years, and essentially the average loss is about 42 percent,” said Kendrick Wakeman, CEO of financial technology and investment analytics firm FinMason.
And as I have explained many times in the past, stocks would have to fall about 40 to 50 percent from current levels just for the stock market to get back to “normal” again. The valuations that we are seeing today are absolutely insane, and there is no possible way that they are sustainable.
When the crash happens, many people will be pointing their fingers at Trump, but it won’t be his fault.
Instead, it will be the Federal Reserve that will be at fault, and hopefully this coming crisis will convince the American people that it is time to end this insidious debt-based central bank for good.