Bear Market: The Average U.S. Stock Is Already Down More Than 20 Percent

Angry BearThe stock market is in far worse shape than we are being told.  As you will see in this article, the average U.S. stock is already down more than 20 percent from the peak of the market.  But of course the major indexes are not down nearly that much.  As the week begins, the S&P 500 is down 9.8 percent from its 2015 peak, the Dow Jones Industrial Average is down 10.7 percent from its 2015 peak, and the Nasdaq is down 11.0 percent from its 2015 peak.  So if you only look at those indexes, you would think that we are only about halfway to bear market territory.  Unfortunately, a few high flying stocks such as Facebook, Amazon, Netflix and Google have been masking a much deeper decline for the rest of the market.  When the market closed on Friday, 229 of the stocks on the S&P 500 were down at least 20 percent from their 52 week highs, and when you look at indexes that are even broader things are even worse.

For example, let’s take a look at the Standard & Poor’s 1500 index.  According to the Bespoke Investment Group, the average stock on that index is down a staggering 26.9 percent from the peak of the market…

Indeed, the Standard & Poor’s 1500 index – a broad basket of large, mid and small company stocks – shows that the average stock’s distance from its 52-week high is 26.9%, according to stats compiled by Bespoke Investment Group through Friday’s close.

“That’s bear market territory!” says Paul Hickey, co-founder of Bespoke Investment Group, the firm that provided USA TODAY with the gloomy price data.

So if the average stock has fallen 26.9 percent, what kind of market are we in?

To me, that is definitely bear market territory.

The rapid decline of the markets last week got the attention of the entire world, but of course this current financial crisis did not begin last week.  These stocks have been falling since the middle part of last year.  And what Bespoke Investment Group discovered is that small cap stocks have been hurt the most by this current downturn

Here’s a statistical damage assessment, provided by Bespoke Investment Group, of the pain being felt by the average U.S. stock in the S&P 1500 index:

* Large-company stocks in the S&P 500 index are down 22.6%, on average, from peaks hit in the past 12 months.

* Mid-sized stocks in the S&P 400 index are sporting an average decline of 26.5% since hitting 52-week highs.

* Small stocks in the S&P 600 index are the farthest distance away from their recent peaks. The average small-cap name is 30.7% below its high in the past year.

After looking at those numbers, is there anyone out there that still wants to try to claim that “nothing is happening”?

Over the past six months or so, the sector that has been hit the hardest has been energy.  According to CNN, the average energy stock has now fallen 52 percent…

And then there’s energy. The dramatic decline in crude oil prices rocked the energy space. The average energy stock is now down a whopping 52% from its 52-week high, according to Bespoke. The only thing worse than that is small-cap energy, which is down 61%.

If you go up to an energy executive and try to tell him that “nothing is happening”, you might just get punched in the face.

And it is very important to keep in mind that stocks still have a tremendous distance to fall.  They are still massively overvalued by historical standards, and this is something that I have covered repeatedly on my website in recent months.

So how far could they ultimately fall?

Well, Dr. John Hussman is convinced that we could eventually see total losses in the 40 to 55 percent range…

I remain convinced that the U.S. financial markets, particularly equities and low-grade debt, are in a late-stage top formation of the third speculative bubble in 15 years.

On the basis of the valuation measures most strongly correlated with subsequent market returns (and that havefully retained that correlation even across recent market cycles), current extremes imply 40-55% market losses over the completion of the current market cycle, with zero nominal and negative real total returns for the S&P 500 on a 10-to-12-year horizon.

These are not worst-case scenarios, but run-of-the-mill expectations.

If the market does fall about 40 percent, that will just bring us into the range of what is considered to be historically “normal”.  If some sort of major disaster or emergency were to strike, that could potentially push the market down much, much farther.

And with each passing day, we get even more numbers which seem to indicate that we are entering a very, very deep global recession.

For instance, global trade numbers are absolutely collapsing.  This is a point that Raoul Pal hammered home during an interview with CNBC just the other day…

Looking at International Monetary Fund data, “the year-over-year change in global exports is at the second lowest level since 1958,” Raoul Pal, Publisher of the Global Macro Investor told CNBC’s”Fast Money”this week.

Basically, it means economies around the world are shipping their goods at near historically low levels. “Something massive is going on in the global economy and people are missing it,” Pal added.

The steep decline in 2015 exports is second only to 2009, when the global recession led to a 37 percent drop in export growth.

We have never seen global exports collapse this much outside of a recession.

Clearly we are witnessing a tremendous shift, and it boggles my mind that more people cannot see it.

As for this current wave of financial turmoil, it is hard to say how long it will last.  As I write this article, markets all over the Middle East are imploding, stocks in Asia are going crazy, currencies are crashing, and carry trades are being unwound at a staggering pace.  But at some point we should expect the level of panic to subside a bit.

If things do temporarily calm down, don’t let that fool you.  Global financial markets have not been this fragile since 2008.  Any sort of a trigger event is going to cause stocks all over the world to slide even more.

And let us not minimize the damage that has already been done one bit.  As you just read, the average stock on the Standard & Poor’s 1500 index is already down 26.9 percent.  The financial crisis that erupted during the second half of 2015 has already resulted in trillions of dollars of wealth being wiped out.

When people ask me when the “next financial crisis” is coming, I have a very simple answer for them.

The next financial crisis is not coming.

The next financial crisis is already here.

An angry bear has been released after nearly seven years in hibernation, and the entire world is going to be absolutely shocked by what happens next.

Stock Market Crash 2016: This Is The Worst Start To A Year For Stocks Ever

Stock Market Collapse 2016We have never had a year start the way that 2016 has started.  In the U.S., the Dow Jones Industrial Average and the S&P 500 have both posted their worst four-day starts to a year ever.  Canadian stocks are now down 21 percent since September, and it has been an absolute bloodbath in Europe over the past four days.  Of course the primary catalyst for all of this is what has been going on in China.  There has been an emergency suspension of trading in China two times within the past four days, and nobody is quite certain what is going to happen next.  Eventually this wave of panic selling will settle down, but that won’t mean that this crisis will be over.  In fact, what is coming is going to be much worse than what we have already seen.

On Thursday I was doing a show with some friends, and we were amazed that stocks just seemed to keep falling and falling and falling.  The Dow closed down 392 points, and the NASDAQ got absolutely slammed.  At this point, the Dow and the NASDAQ are both officially in “correction territory”, and some of the talking heads on television are warning that this could be the beginning of a “bear market”.  But of course some of the other “experts” are insisting that this is just a temporary bump in the road.

But what everyone can agree on is that we have never seen a start to a year like this one.  The following comes from CNN

The global market freakout of 2016 just got worse.

The latest scare came on Thursday as China’s stock market crashed 7% overnight and crude oil plummeted to the lowest level in more than 12 years.

The Dow dropped 392 points on Thursday. The S&P 500 fell 2.4%, while the Nasdaq tumbled 3%.

The wave of selling has knocked the Dow down 911 points, or more than 5% so far this year. That’s the worst four-day percentage loss to start a year on record, according to FactSet stats that go back to 1897.

When CNN starts sounding like The Economic Collapse Blog, you know that things are really bad.  I particularly like their use of the phrase “global market freakout”.  I might have to borrow that one.

Even some of the biggest and most trusted stocks are plummeting.  For instance, Apple dropped to $96.45 on Thursday.  It is now down a total of 28 percent since hitting a record high of more than 134 dollars a share back in April.

So that means that if someone put all of their retirement money into Apple stock last April (which may have seemed like a really good idea at that time), by now more than one-fourth of that money is gone.

For months, I have been warning that the exact same patterns that we witnessed just prior to the great stock market crash of 2008 were happening again.  To me, the parallels between 2008 and 2015/2016 were just uncanny.  And now other very prominent names are making similar comparisons.  According to the Washington Post, George Soros says that the way this new crisis is unfolding “reminds me of the crisis we had in 2008″…

Influential investor George Soros said that China had a “major adjustment problem” on its hands. “I would say it amounts to a crisis,” he told an economic forum in Sri Lanka, according to Bloomberg News. “When I look at the financial markets, there is a serious challenge which reminds me of the crisis we had in 2008.”

Don’t get me wrong – I am certainly not a supporter of George Soros.  My point is that we are starting to hear a lot of really ominous talk from a lot of different directions.  All over the world, people are starting to understand that the next great financial crisis is already here.

As I write this tonight, I just feel quite a bit of sadness.  A lot of hard working people are going to lose a lot of money this year, and that includes people that I know personally.  I wish that my voice had been clearer and louder.  I wish that I could have done more to get people to understand what was coming.  I wish that my warnings could have made more of a difference.

I just think about how I would feel if everything that I had worked for all my life was suddenly wiped out.  And that is what is going to end up happening to some of these people.  When you lose everything, it can be absolutely debilitating.

You only make money in the markets if you get out in time.  And unfortunately, most of the general population will be like deer in the headlights and won’t know which way to move.

There will be up days for the markets in our near future.  But don’t be fooled by them.  It is important to remember that some of the greatest up days in U.S. stock market history were right in the middle of the stock market crash of 2008.  So don’t let a rally fool you into thinking that the crisis is over.

The financial crisis that began in the second half of 2015 is now accelerating, and everything that we have witnessed over the past few days is just a natural extension of what has already been happening.

Personally, I am just really looking forward to this weekend when I will hopefully get caught up on some rest.  Plus, my Washington Redskins will be hosting a playoff game on Sunday, and if they find a way to win that game that will put me in a particularly positive mood.

It is good to enjoy these simple pleasures while we still can.  Unprecedented chaos is coming this year, and we are all going to need strength and courage for what is ahead.

BLACK MONDAY: The First Time EVER The Dow Has Dropped By More Than 500 Points On Two Consecutive Days

New York City Empire State Building - Public DomainOn Monday, the Dow Jones Industrial Average plummeted 588 points. It was the 8th worst single day stock market crash in U.S. history, and it was the first time that the Dow has ever fallen by more than 500 points on two consecutive days. But the amazing thing is that the Dow actually performed better than almost every other major global stock market on Monday.  In the U.S., the S&P 500 and the Nasdaq both did worse than the Dow. In Europe, almost every major index performed significantly worse than the Dow.  Over in Asia, Japanese stocks were down 895 points, and Chinese stocks experienced the biggest decline of all (a whopping 8.46 percent). On June 25th, I was not kidding around when I issued a “red alert” for the last six months of 2015. I had never issued a formal alert for any other period of time, and I specifically stated that “a major financial collapse is imminent“. But you know what? As the weeks and months roll along, things will eventually be even worse than what any of the experts (including myself) have been projecting. The global financial system is now unraveling, and you better pack a lunch because this is going to be one very long horror show.

Our world has not seen a day quite like Monday in a very, very long time. Let’s start our discussion where the carnage began…

Asian Markets

For weeks, the Chinese government has been taking unprecedented steps to try to stop Chinese stocks from crashing, but nothing has worked. As most Americans slept on Sunday night, the markets in China absolutely imploded

As Europe and North America slept on Sunday night, Chinese markets went through the floor — the Shanghai Composite index of stocks fell by 8.49%, the biggest single-day collapse since 2007.

It wasn’t alone. Hong Kong’s Hang Seng fell 5.17%, and Japan’s Nikkei fell 4.61%. Stocks in Taiwan, the Philippines, Singapore, and Thailand also tumbled.

Things would have been even worse in China if trading had not been stopped in most stocks. Trading was suspended for an astounding 2,200 stocks once they hit their 10 percent decline limits.

Overall, the Shanghai Composite Index is now down close to 40 percent from the peak of the market, and the truth is that Chinese stocks are still massively overvalued when compared to the rest of the world.

That means that they could very easily fall a lot farther.

European Markets

The selling momentum in Asia carried over into Europe once the European markets opened. On a percentage basis, all of the major indexes on the continent declined even more than the Dow did

In Europe, the bloodbath from Friday continued unabated. The German Dax plunged 4.7%, the French CAC 40 5.4%, UK’s FTSE 100 dropped 4.7%. Euro Stoxx 600, which covers the largest European companies, was down 5.3%.

But wait… Europe is where the omnipotent ECB and other central banks have imposed negative deposit rates. The ECB is engaged in a massive ‘whatever it takes” QE program to inflate stock markets. But it’s not working. Omnipotence stops functioning once people stop believing in it.

U.S. Markets

Even before U.S. markets opened on Monday morning, the New York Stock Exchange was already warning that trading would be halted if things got too far out hand, and it almost happened

The thousands of companies listed by the New York Stock Exchange and Nasdaq Stock Market will pause for 15 minutes if the Standard & Poor’s 500 Index plunges 7 percent before 3:25 p.m. New York time. The benchmark got close earlier, falling as much as 5.3 percent.

There were other circuit breakers in place for later in the day if too much panic selling ensued, but fortunately none of those were triggered either. Here is more from Bloomberg

Another circuit breaker kicks in if the S&P 500 extends its losses to 13 percent before 3:25 p.m. If the plunge reaches 20 percent at any point during today’s session, the entire stock market will shut for the rest of the day.

When the U.S. markets did open, the Dow plunged 1,089 points during the opening minutes of trading. If the Dow would have stayed at that level, it would have been the worst single day stock market crash in U.S. history by a wide margin.

Instead, by the end of the day it only turned out to be the 8th worst day ever.

And in case you are wondering, yes, investors are losing a staggering amount of money. According to MarketWatch, the total amount of money lost is now starting to approach 2 trillion dollars

As of March 31, households and nonprofits held $24.1 trillion in stocks. That’s both directly, and through mutual funds, pension funds and the like. That also includes the holdings of U.S.-based hedge funds, though you’d have to think that most hedge funds are held by households.

Using the Dow Jones Total Stock Market index DWCF, -4.21% through midmorning trade, that number had dropped to $22.32 trillion.

In other words, a cool $1.8 trillion has been lost between now and the first quarter — and overwhelmingly, those losses occurred in the last few days.

Unfortunately, U.S. stock prices are still nowhere near where they should be. If they were to actually reflect economic reality, they would have to fall a lot, lot lower.

For example, there is usually a very strong correlation between commodity prices and the S&P 500, but in recent times we have seen a very large divergence take place. Just check out the chart in this article. At this point the S&P 500 would have to fall another 30 to 40 percent or commodities would have to rise 30 or 40 percent in order to close the gap. I think that the following bit of commentary sums up where we are quite nicely

“Markets are afraid of further economic weakness in China, further pain in global commodity markets and uncertain about Fed and PBoC policy — what they will do and what the impact will be,” Societe Generale’s Kit Juckes wrote on Monday. “The divergence between global commodity prices and equities is not a new theme but the danger now is that they begin to re-correlate – as they did when the dotcom bubble burst in 2000 and what had previously been an emerging market crisis became a US recession.”

And commodities were absolutely hammered once again on Monday.

For instance, the price of U.S. oil actually fell below 38 dollars a barrel at one point.

What we are watching unfold is incredible.

Of course the mainstream media is bringing on lots of clueless experts that are talking about what a wonderful “buying opportunity” this is. Even though those of us that saw this coming have been giving a detailed play by play account of the unfolding crisis for months, the talking heads on television still seem as oblivious as ever.

What is happening right now just doesn’t seem to make any sense to the “experts” that most people listen to. I love this headline from an article that Business Insider posted on Monday: “None of the theories for the Black Monday market crash add up“. Yes, if you are willingly blind to the long-term economic and financial trends which are destroying us, I guess these market crashes wouldn’t make sense.

And if stocks go up tomorrow (which they probably should), all of those same “experts” will be proclaiming that the “correction” is over and that everything is now fine.

But don’t be fooled by that. Just because stocks go up on any particular day does not mean that everything is fine. We are in the midst of a financial meltdown that is truly global in scope. This is going to take time to fully play out, and there will be good days and there will be bad days.  The three largest single day increases for the Dow were right in the middle of the financial crisis of 2008. So one very good day for stocks is not going to change the long-term analysis one bit.

It isn’t complicated. Those that follow my writing regularly know that I have repeatedly explained how things were setting up in textbook fashion for another global financial crisis, and now one is unfolding right in front of our eyes.

At this point, everyone should be able to very clearly see what is happening, and yet most are still blind.

Why is that?

Most People Cannot Even Imagine That An Economic Collapse Is Coming

Thinking - Public DomainThe idea that the United States is on the brink of a horrifying economic crash is absolutely inconceivable to most Americans.  After all, the economy has been relatively stable for quite a few years and the stock market continues to surge to new heights.  On Friday, the Dow and the S&P 500 both closed at brand new all-time record highs.  For the year, the S&P 500 is now up 9 percent and the Nasdaq is now up close to 11 percent.  And American consumers are getting ready to spend more than 600 billion dollars this Christmas season.  That is an amount of money that is larger than the entire economy of Sweden.  So how in the world can anyone be talking about economic collapse?  Yes, many will concede, we had a few bumps in the road back in 2008 but things have pretty much gotten back to normal since then.  Why be concerned about economic collapse when there is so much stability all around us?

Unfortunately, this brief period of stability that we have been enjoying is just an illusion.

The fundamental problems that caused the financial crisis of 2008 have not been fixed.  In fact, most of our long-term economic problems have gotten even worse.

But most Americans have such short attention spans these days.  In a world where we are accustomed to getting everything instantly, news cycles only last for 48 hours and 2008 might as well be an eternity ago.

In the United States today, our entire economic system is based on debt.

Without debt, very little economic activity happens.  We need mortgages to buy our homes, we need auto loans to buy our vehicles and we need our credit cards to do our shopping during the holiday season.

So where does all of that debt come from?

It comes from the banks.

In particular, the “too big to fail banks” are the heart of this debt-based system.

Do you have a mortgage, an auto loan or a credit card from one of these “too big to fail” institutions?  A very large percentage of the people that will read this article do.

And a lot of people might not like to hear this, but without those banks we essentially do not have an economy.

When Lehman Brothers collapsed in 2008, it almost resulted in the meltdown of our entire system.  The stock market collapsed and we experienced an absolutely wicked credit crunch.

Unfortunately, that was just a small preview of what is coming.

Even though a few prominent “experts” such as New York Times columnist Paul Krugman have declared that the “too big to fail” problem is “over”, the truth is that it is now a bigger crisis than ever before.

Compared to five years ago, the four largest banks in the country are now almost 40 percent larger.  The following numbers come from a recent article in the Los Angeles Times

Just before the financial crisis hit, Wells Fargo & Co. had $609 billion in assets. Now it has $1.4 trillion. Bank of America Corp. had $1.7 trillion in assets. That’s up to $2.1 trillion.

And the assets of JPMorgan Chase & Co., the nation’s biggest bank, have ballooned to $2.4 trillion from $1.8 trillion.

At the same time that those banks have been getting bigger, 1,400 smaller banks have completely disappeared from the banking industry.

That means that we are now more dependent on these gigantic banks than ever.

At this point, the five largest banks account for 42 percent of all loans in the United States, and the six largest banks account for 67 percent of all assets in our financial system.

If someone came along and zapped those banks out of existence, our economy would totally collapse overnight.

So the health of this handful of immensely powerful banking institutions is absolutely critical to our economy.

Unfortunately, these banks have become deeply addicted to gambling.

Have you ever known people that allowed their lives to be destroyed by addictions that they could never shake?

Well, that is what is happening to these banks.  They have transformed Wall Street into the largest casino in the history of the world.  Most of the time, their bets pay off and they make lots of money.

But as we saw back in 2008, when they miscalculate things can fall apart very rapidly.

The bets that I am most concerned about are known as “derivatives“.  In essence, they are bets about what will or will not happen in the future.  The big banks use very sophisticated algorithms that are supposed to help them be on the winning side of these bets the vast majority of the time, but these algorithms are not perfect.  The reason these algorithms are not perfect is because they are based on assumptions, and those assumptions come from people.  They might be really smart people, but they are still just people.

If things stay fairly stable like they have the past few years, the algorithms tend to work very well.

But if there is a “black swan event” such as a major stock market crash, a collapse of European or Asian banks, a historic shift in interest rates, an Ebola pandemic, a horrific natural disaster or a massive EMP blast is unleashed by the sun, everything can be suddenly thrown out of balance.

Acrobat Nik Wallenda has been making headlines all over the world for crossing vast distances on a high-wire without a safety net.  Well, that is essentially what our “too big to fail” banks are doing every single day.  With each passing year, these banks have become even more reckless, and so far there have not been any serious consequences.

But without a doubt, someday there will be.

What would you say about a bookie that took $200,000 in bets but that only had $10,000 to cover those bets?

You would certainly call that bookie a fool.

But that is what our big banks are doing.

Right now, JPMorgan Chase has more than 67 trillion dollars in exposure to derivatives but it only has 2.5 trillion dollars in assets.

Right now, Citibank has nearly 60 trillion dollars in exposure to derivatives but it only has 1.9 trillion dollars in assets.

Right now, Goldman Sachs has more than 54 trillion dollars in exposure to derivatives but it has less than a trillion dollars in assets.

Right now, Bank of America has more than 54 trillion dollars in exposure to derivatives but it only has 2.2 trillion dollars in assets.

Right now, Morgan Stanley has more than 44 trillion dollars in exposure to derivatives but it has less than a trillion dollars in assets.

Most people have absolutely no idea how incredibly vulnerable our financial system really is.

The truth is that these “too big to fail” banks could collapse at any time.

And when they fail, our economy will fail too.

So let us hope and pray that this brief period of false stability lasts for as long as possible.

Because when it ends, all hell is going to break loose.

From This Day Forward, We Will Watch How The Stock Market Performs Without The Fed’s Monetary Heroin

Money - Public DomainMark this day on your calendars.  The Dow is at 16974, the S&P 500 is at 1982 and the NASDAQ is at 4549.  From this day forward, we will be looking to see how the stock market performs without the monetary heroin that the Federal Reserve has been providing to it.  Since November 2008, the Fed has created about 3.5 trillion dollars and pumped it into the financial system.  An excellent chart illustrating this in graphic format can be found right here.  Pretty much everyone agrees that this has been a tremendous boon for the financial markets.  As you will see below, even former Fed chairman Alan Greenspan says that quantitative easing was “a terrific success” as far as boosting stock prices.  But he also says that QE has not been very helpful to the real economy at all.  In essence, the entire quantitative easing program was a massive 3.5 trillion dollar gift to Wall Street.  If that sounds unfair to you, that is because it is unfair.

So why is the Federal Reserve finally ending quantitative easing?

Well, officially the Fed says that it is because there has been so much improvement in the labor market

The Fed’s language, however, did suggest that they were getting more comfortable with the economy’s improvement. It cited “solid job gains,” citing a “substantial improvement in the outlook for the labor market,” as well as pointing out that “underutilization” of labor resources is “gradually diminishing.”

But that is not true at all.

The percentage of Americans that are working right now is about the same as it was during the depths of the last recession.  Just check out this chart…

Employment Population Ratio 2014

So there has been no “employment recovery” to speak of at all.

And as I wrote about yesterday, the percentage of Americans that are homeowners has been steadily falling throughout the quantitative easing era…

Homeownership Rate 2014

So let’s put the lie that quantitative easing helped the “real economy” to rest.  It did no such thing.

Instead, what QE did do was massively inflate stock prices.

The following is an excerpt from a Wall Street Journal report about a speech that former Fed chairman Alan Greenspan made to the Council on Foreign Relations on Wednesday

Mr. Greenspan’s comments to the Council on Foreign Relations came as Fed officials were meeting in Washington, D.C., and expected to announce within hours an end to the bond purchases.

He said the bond-buying program was ultimately a mixed bag. He said that the purchases of Treasury and mortgage-backed securities did help lift asset prices and lower borrowing costs. But it didn’t do much for the real economy.

Effective demand is dead in the water” and the effort to boost it via bond buying “has not worked,” said Mr. Greenspan. Boosting asset prices, however, has been “a terrific success.”

Moving forward, what did Greenspan tell the members of the Council on Foreign Relations that they should do with their money?

This might surprise you…

Mr. Greenspan said gold is a good place to put money these days given its value as a currency outside of the policies conducted by governments.

Wow.

It almost sounds like Greenspan has been reading the Economic Collapse Blog.

Since November 2008, every time there has been an interruption in the Fed’s quantitative easing program, the stock market has gone down substantially.

Will that happen again this time?

Well, the market is certainly primed for it.  We are repeating so many of the very same patterns that we saw just prior to the last two financial crashes.

For example, there have been three dramatic peaks in margin debt in the last twenty years.

One of those peaks came early in the year 2000 just before the dotcom bubble burst.

The second of those peaks came in the middle of 2007 just before the subprime mortgage meltdown happened.

And the third of those peaks happened earlier this year.

You can view  a chart that shows these peaks very clearly right here.

The Federal Reserve appears to be confident that the stock market will be okay without the monetary heroin that it has been supplying.

We shall see.

But it should be deeply troubling to all Americans that this unelected, unaccountable body of central bankers has far more power over our economy than anyone else does.  During election season, our politicians get up and give speeches about what they will “do for the economy”, but the truth is that they are essentially powerless compared to the immense power that the Federal Reserve wields.  Just a few choice words from Janet Yellen can cause the financial markets to rise or fall dramatically.  The same cannot be said of any U.S. Senator.

We are told that monetary policy is “too important” to be exposed to politics.

We are told that the independence of the Federal Reserve is “sacred” and must never be interfered with.

I say that is a bunch of nonsense.

No organization should have the power to print up trillions of dollars out of thin air and give it to their friends.

The Federal Reserve is completely and totally out of control, and Congress needs to start exerting power over it.

The first step is to get in there and do a comprehensive audit of the Fed’s books.  This is something that U.S. Senator Ted Cruz called for in a recent editorial for USA Today

Americans are seeing near-zero interest rates on their savings accounts while median incomes are falling, and millions of people are facing higher gas prices, food prices, electricity prices, health insurance prices. Enough is enough, the Federal Reserve needs to open its books — Americans deserve a sound and stable dollar.

Whether you agree with Ted Cruz on other issues or not, this is one issue that all Americans should be able to agree on.

If you study any of our major economic problems, usually you will find that the Federal Reserve is at the heart of that problem.

So if we ever hope to solve the issues that are plaguing our economy, the Fed is going to need to be dealt with.

Hopefully the American people will start to send more representatives to Washington D.C. that understand this.

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