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Posts Tagged ‘Debt Crisis’

Financial Crisis

A prudent man foresees evil and hides himself, but the simple pass on and are punished.

    Proverbs 22:3

It was back in August that we began our look at the ongoing 2008 financial crisis. The immediate occasion for my writing on this topic was the sudden plunge in the US stock indices following the Federal Reserve’s decision to raise interest rates in late July. The market sold off hard, but managed to stabilize, or more accurately, was stabilized by the powers that be after a phone call by President Trump with three major bank CEO’s.

This was a similar situation to what happened around the end of the year in 2018. On December 23, the day before the Dow and S&P indices had their largest ever declines on Christmas Eve, Treasury Secretary Steve Mnuchin placed individual calls to America’s six largest banks – Brian Moynihan, Bank of America; Michael Corbat, Citi; David Solomon, Goldman Sachs; Jamie Dimon, JP Morgan Chase; James Gorman, Morgan Stanley; Tim Sloan, Wells Fargo. When the market re-opened after the Christmas break on December 26, the Dow closed up 1,086.25 points, the largest single day gain in the history of the index. This huge day was after a terrible December and in the absence of any news that would have caused a market surge.

Was there a relationship between Mnuchin’s call on December 23 and the blast off in the stock market three days later? While this can’t be formally proven, in the opinion of this author it is the most likely explanation. In short, I think that Mnuchin told these CEO’s to buy the market and that they obliged.

If my understanding is correct, this means that at least twice in the period of eight months orders came down from on high to rescue the stock markets. What, I would ask you, does this say about the state of our financial system? What are we to think of a system that requires this level of manipulation to keep from crashing?

Of course, calls from Trump and Mnuchin are not the only sort of manipulation in the financial system. In the short time that I’ve been writing this series, we’ve seen additional extraordinary measures taken by the Fed to prop up the system.

First there was the bailout of the overnight Repo market. Originally, this was to be for a few days in September. Next, they extended it to a couple weeks. Then it got pushed out to the second week of November, then it was January 2020. Just last week, Fed President James Bullard expressed his preference for a “standing repo facility.” By this he seems to mean that he wants the current repo market intervention by the Fed to become a permanent policy tool of the central bank.

And that’s not all. Last week on Wednesday, the Fed started QE4. With this latest iteration of what in 2008 was termed an “emergency policy,” the Fed will by purchasing $60 billion a month in T-Bill (T-Bills are short-term US Treasury debt instruments). Where, you ask, does the Fed get the $60 billion per month to conduct QE4? They get it by a process that, were you or I to try it, we’d be arrested. In short, they counterfeit it out of thin air.

Here’s another question you may want to ask yourself. If the economy is doing so great as we’re constantly being told by the mainstream financial press, why is the Fed running simultaneous bailouts of both the overnight repo market and the bond market, both of which are designed to prop up the stock market? The obvious answer is that, far from being the greatest economy ever, the US, and indeed the world’s, financial markets are a mess and getting messier by the day. All the hype you hear about how great the economy is doing is propaganda designed to keep you locked into the system for the benefit of those who run it.

In light of the enormous lies that are being told to the American people by government officials, by bankers, and by the press, in the opinion of this author it is imperative that God’s people hear the truth about the financial state of the country and some sound advice about how to take measures to protect themselves financially. That is the purpose of this week’s installment.

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Financial Crisis

“In his book…A Christian View of Men and Things [Gordon] Clark comments that the growth of government is the greatest tragedy of the twentieth century.”

    – John W. Robbins, “The Growth of Government in the United States

The thesis underlying this series of posts and reflected in the series’ titles, is that the 2008 financial crisis never really went away. Yes, the stock market has recovered and gone on to hit new highs. Yes, we don’t see massive layoffs taking place or people standing in bread lines. So the visual cues that we expect in a financial crisis are not present.

Further, we see announcements in the press stating how strong the American economy is, and various statistics are brought forth to prove this, perhaps most notably a low unemployment rate.

Donald Trump has been very aggressive at touting the strength of the American economy. The day after the worst stock market plunge of 2019, the President tweeted, “The United States is now, by far, the Biggest, Strongest and Most Powerful Economy in the World, it is not even close! As other falter, we will only get stronger. Consumers are in the best shape ever, plenty of cash. Business Optimism is at an All Time High!”

Now at least some of this is likely true. Objectively speaking, America has the world’s largest economy as measured by Gross Domestic Product (GDP). But there are reasons to doubt some of the President’s other claims.

For example, while the President says that consumers are in the best shape ever, the very next day CNBC ran a story announcing that Americans are more indebted than ever before. This hardly supports the President’s claim that consumers are in the best shape ever.

And if the economy is doing so well, why, according to the Bureau of Labor Statistics, has the labor force participation rate never recovered to the pre-crisis level?

If everything is so great, why has President Trump publicly called for more Quantitative Easing (QE) and interest rate cuts? QE is a radical money printing scheme which was used by the Federal Reserve as an emergency measure to save the financial system in the 2008 crisis. Since QE is an emergency measure that was used to stave off financial collapse, why is it that, on the one hand, President Trump is telling us that the economy is doing great under his leadership, but, on the other hand, is calling for emergency QE as if the financial system were collapsing again?

Another item contradicting the official narrative that everything is awesome with the economy is the calls for interest rate cuts. In the link above, Trump was calling for the Fed to lower interest rates. In a strong economy, demand for money is reflected in rising, not falling, interest rates. If the President is calling for the Fed to lower interest rates, by implication, he is saying the economy is stalling out, not charging ahead.

In the opinion of this writer, the struggles of ordinary Americans to find work and to make ends meet are reflective of a financial system in disarray, not one experiencing rapid growth.

Further, it is my view that the economic problems roiling America stem from the fact the American government and financial elite have refused for more than a decade now to deal honestly with the serious financial crisis facing the United States. At the root of the problem is the Fed, America’s central bank. Central banking is inherently immoral, unchristian, and destructive of the legitimate interests of the great bulk of the American people.

One of the great evils that flows from central banking is another great plague of modern society: Big Government.

In the quote at the top of this page, John Robbins noted that Gordon Clark thought that the growth of government in the United States was the greatest tragedy of the twentieth century. Considering all the evils of that century, Clark’s statement is remarkable indeed.

It is the contention of this author that America is going bankrupt as a result of big government, a great evil which itself is the child of the prior great evil of central banking. Yet there is no serious attempt on the part of elected officials of either party to address this situation.

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Financial CrisisTrump touts ‘strongest economy in the world’ after disappointing jobs report,” ran a recent headline that managed to capture both the official line of the Trump administration and the contrasting reality portrayed by many recent underlying economic data points.

The February 2019 jobs report, released in early March, was expected to show a gain of 190,000 jobs, but instead reflected a gain of only 20,000. That’s a big miss in anybody’s book.

Now one could argue that President Trump’s statement is not negated by the disappointing jobs report. The US could indeed have the strongest economy in the world – depending on how one defines “strong” – and still do a face plant when it comes to the production of new jobs. All that is required for these two ideas to be true at the same time is for the rest of the world to be in a bigger mess than the US.

It is the contention, however, of this author that, in spite of all the talk of a booming economy coming from the Administration and from various sources on Wall Street and in the media, the US economy is not doing well and, in fact, is very likely headed into recession. It may actually be in recession as of this writing. Below are thirteen reasons why this author thinks so.

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