Chris Pirnak II - Background and Recommendations
February 5, 2018
Fed taking away the punchbowl?
"I'm actually very sad because if the FED doesn't do
an about-face on its policy it's going to cause
the economic collapse that the Protocols talk about.
I mean this will begin a dark time in human history."
Disclaimer - This looks like a normal correction to me but given how the Fed feels about Trump,
and the world feels about the US dollar, Chris may be right.
Deep background:
"This is much bigger than just about anyone can comprehend. God help us."
by Chris Pirnak
(henrymakow.com)
What we saw in the markets today was not normal profit taking. Some of the brightest minds in the financial realm are beginning to see what I already know. Let me provide you with a brief background.
On my blog and show I have always stated that stocks would continue to be well supported as long as yields on longer-dated US Treasuries remained low. This would allow the inexpensive credit to flow and be a sign that the global central bank quantitative easing (QE) programs were providing a support to all asset classes.
In order to keep these Treasury bond yields low, the United States needed a firm dollar. It didn't have to continue running up higher in value, but it needed a stable and strong value in the foreign exchange market place. With this in mind, foreigners could more safely continue buying US Treasury debt. It was a two-way street; as long as foreigners bought US Treasury debt the dollar would remain strong and as long as the dollar remained strong foreigners would buy Treasuries. Simple enough....
Now, if the US Fed and US Treasury wanted to keep longer-dated yields subdued it would be in their best interest to talk up the dollar, so they could keep short term rates lower. With low short-term rates the longer-dated bonds would also have lower yields as the yield curve would move down. For example, if the US Treasury Secretary openly supported a strong dollar he could help the US Fed accomplish their monetary policy objectives of fighting inflation while keeping unemployment low. A strong dollar would keep import prices restrained while reducing corporate America's cost of capital. This would effectively push out the supply curve to the right and the costs of production would be lower than with higher costs of capital. On the consumer side, it helps lower our mortgage and loan rates.
A strong dollar helps the US government finance its budget deficits as well. As long as US Treasuries are stable foreign investors will find their yields appealing, especially when compared to the yields of other sovereign debt issues around the world. But this implies that yields in the US will remain stable as well.
The problem
Now the problem is the Fed is tending to domestic concerns such as inflation and unemployment while it is disregarding the international concerns of the dollar as the reserve currency. This conflict of interest is referred to the Triffin Paradox.
So, the USFed is raising short-term rates in an effort to undermine the nascent domestic inflationary pressures. In a linear environment, this would normally be dollar-supportive. Traditionally, central banks around the world attempt to shore up a currency's value by raising short-term lending rates. However, in the instance of the US dollar, it is undermining the dollar's value. The whole irony is that by raising short-term rates, the US Fed is working to lower the value of the dollar. The more it raises rates the lower the value of the dollar will go.
Why? When the US fed funds rate is raised it causes the whole yield curve to shift up, raising yields for longer-dated Treasuries as well. Foreigners own a huge percentage of US Treasuries and about 50% of all US dollars are held overseas by foreigners. As Treasury yields rise, investors and holders of Treasuries lose money; prices move inversely to interest rates.
So, with foreigners losing money on Treasuries, they step back from buying and begin to sell. As they sell, the dollar loses value. Inflation then begins to rise in the US as import prices rise and the cost of capital climbs. Now we are seeing how the US Fed is responding; it is continuing to raise rates to thwart inflation and support the dollar, but instead of the dollar rising and inflation falling the opposite is happening.
It becomes a vicious cycle until the dollar reaches a tipping point, at which we get a cascade of losses in all asset markets.
CONSPIRACY FOR GLOBAL COLLAPSE
First, talk down the markets
In order for our monetary system and the US dollar to remain in equilibrium it is imperative that the officials of authority speak well of the dollar and the asset markets. This provides the needed confidence investors seek. So, if I were running the global financial system and wanted a collapse of confidence I would send out my puppets to set the tone for a down market.
I ask you; why is Skull & Bonesman and US Treasury Secretary, Steve Mnuchin, talking the dollar lower? He is much brighter than I am, so he knows a strong dollar is in our nation's best interest. Maybe he has a different objective.
Why did Alan Greenspan come out last week right after the FOMC minutes and exclaim about stock and bond bubbles?
Why did outgoing Fed Chair, Janet Yellen, come out on Sunday in an interview to talk down the stock and real estate markets?
Second, introduce lethal monetary policy while pretending to help
Raising rates and unwinding the USFed's balance sheet at this point is lethal. The USFed has to reverse course immediately.. By doing this it will ironically make the dollar more attractive.
How could it accomplish this task?
1) The USFed needs to stop raising the fed funds rate.
2) It also needs to commence another round of QE immediately.
I have no opinion on the merits of Quantitative easing (QE). Investors around the globe now accept it as a legitimate monetary policy tool. After the Bernanke Fed implemented it, all the other major central banks around the world copied it. They are still using it while the USFed is no longer. I find that interesting.
I stated in my prior articles on Henry Makow's site that the Fed should have begun to slowly raise short-term rates as far back as 2012. It could have continued QE and said that it just wanted to normalize rates to historical norms. But the Fed left short term rates at near 0% for seven years. It let the speculation get so far out of control that now it's too late. They can no longer raise rates without devastating consequences and sharp realignments in asset and currency markets. Perhaps this was the intention all along.
Mislead the Public with the controlled business media
Notice how the globalists are using their controlled business media to build support for their flawed monetary policy. I am continually reading articles on CNBC and Bloomberg about how the Fed's tight policies will help to support the dollar. Most investors will not make the connection until it is too late.
It is important to keep in mind that it won't be the weak dollar that causes any catastrophe; rather, the weak dollar will be the result of the flawed policies that will cause this catastrophe. Moreover, the Trump regime will get the blame. When the catastrophe occurs, the controlled press will comb the wreckage and blame the "America First" policies of the Trump regime. They will say he talked the dollar lower and they will say we need to think globally.
I bet that if the USFed said they were done raising rates the USD would rally.
RECOMMENDATIONS
I only recommend cash at this point. Just make certain you are in the cash that you transact with. The central banks can kill currency speculators with unforeseen announcements.
Cryptocurrencies are not ready to assume any role as a superior asset that is immune to the vagaries of monetary policy. The recent price action of the cryptos should already be a warning to stay away.
Gold should be supported here, but if asset prices are to really crumble as I think they will then cash is the only sure thing. Silver should not be incorporated as a safe-haven asset. Only gold can provide its holder with better safety. Silver's industrial offtake could drop in an economic slump.
Stocks are to be avoided at all costs.
Bonds need to be avoided at all costs as well. What makes this upcoming crisis unprecedented is that bonds will not get the usual support, unlike the previous "crises." It will be the bond sell-off that will provide the catalyst for the Fed to appear with the solution.
Real estate will suffer going forward, especially over-leveraged properties with weak cash flow. Properties with strong cash flow and low leverage will weather the storm. Transaction costs in real estate are high, so only poorly performing properties should be sold before it is too late.
If the cash flow on a property is superior, keep cash on hand rather than paying down any property loan.
CONCLUSION
According to game theory, it is easier navigating the financial markets when we know our adversaries. The USFed and the globalists, who control the media, are working against us and the nation-state. If we know their modus operandi and understand their objectives, we can invest successfully.
-Their goal is to appear as our heroes; providing solutions to the problems they cause.
-The controlled press like Bloomberg and CNBC are saying the USFed policies will strengthen the dollar. I say the opposite. They are all working to fool us and to create the upcoming manufactured crisis.
-As always and by definition, most will be on the wrong side of the equation and will lose a lot of money.
-The Trump regime will get the blame.
I have been warning my listeners and subscribers about the USFed's flawed monetary policy. Its detrimental effects are now presenting themselves and unless the Fed reverses course we are about to enter a very dark time for humanity. I have been making good money trading and speculating this past year, but I have been in all cash for the past two weeks. I already knew these dark days were approaching. However, it is very sad for me to see it unfold. My fellow human is about to get destroyed financially.
This is much bigger than just about anyone can comprehend. God help us.
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