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The Fed Is Taking The Punch Bowl Away – But The Inflation Crisis Will Continue To Grow

May 12, 2022

By Brandon Smith

Four years ago the overall sentiment among most alternative and mainstream economists was that the Federal Reserve would NEVER hike interest rates, taper stimulus or reduce their balance sheet into economic weakness. In fact, this was one of the few viewpoints that the mainstream media and independent economists actually agreed on. A few of us had different ideas, though.

The argument is based on a dangerous assumption – That the Fed’s goal is purely to prop up and extend the lifespan of the US economy and stock markets. If you have been tracking equities in the Dow or the Nasdaq for the past decade, then that might seem like a safe bet. For several years the central bank has consistently added stimulus or cut rates whenever stocks started to drop more than 10%, and this is what launched that famous investor mantra “Buy The F’ing Dip.” It was a sure thing; all you had to do was buy stocks after a correction of around 10% and the Fed would come in to save the day with more inflationary QE.

However, things change and it is foolish to assume that the Fed actually cares about maintaining the US economy. If they did care, they would not have tried to hide the inflation threat for so long. Hiding it hurts the US far more than admitting to it as soon as possible.

My position on the Fed is the same as it has always been: The Federal Reserve is a suicide bomber. It is a useful weapon for the globalists at the BIS, the IMF, the WEF, etc. Those globalists want a new financial crisis so that they can implement global changes to the way money works and the way various national economies function (the Great Reset). They want a single global financial authority and a one world digital currency system. They want to be able to dictate all trade around the planet using a single mechanism.

In order to achieve these ends, they need the Fed to blow up the US economy, and that is exactly what they have done; most people just don’t realize it yet.

As I noted in my article ‘The Fed’s Catch-22 Taper Is A Weapon, Not A Policy Error’, published last year:

If the Fed raises interest rates into weakness and tapers asset purchases, then we may see a repeat of 2018 when the yield curve started to flatten. This means that short term treasury bonds will end up with the same yield as long term bonds and investment in long term bonds will fall. A dumping of long term bonds causes a decline in currency value and a flood of dollars back to the US. Result? Inflation.

No matter what the Fed does the consequence will be inflationary/stagflationary. The only difference is that if they taper there will also be an immediate decline in stocks and the overall crash will happen faster. The presumption by some is that a reversal in stocks will lure more money into the dollar, and this might happen for a short period of time. However, as mentioned if the yield curve flattens or there is instability in Treasury bonds there will be no saving the dollar either…”

The only question was one of timing. When would the Fed try to pull the plug and allow the inflationary disaster to unfold without hiding it any longer? Well, now we know…

As I have been predicting, the Fed is embarking on an active campaign to hike interest rates by 50 bps or larger per meeting (including potential emergency meetings). Despite the hawkish tapering presented by the Fed, CPI prints continue to rise and now global bankers (and even Joe Biden) are suddenly admitting that inflation is hitting crisis levels after claiming all last year that the problem was “transitory.”

Some members of the Fed have sought to temper concerns about high rates by claiming that these hikes will be limited to around 2% – 3%. This is likely a lie. The jump in the US money supply and the level of inflation I see indicates that interest rates of 2% to 3% will do NOTHING to stop the crisis. The true inflation data collected by tracking sites like Shadowstats.com also supports this position. The Fed will use the ongoing price increases and stagflationary pressures as an excuse to continue hiking rates well beyond 3%.

The money supply issue is key here, because the Fed does not acknowledge price inflation so much as they use money supply as their rationale for changing policy.

It’s not a rule but it is certainly a habit that the Fed likes to change the way they calculate inconvenient economic stats whenever there is a major crisis. They changed the way inflation was measured in the 1980’s after the near disaster under Jimmy Carter (not his fault really, it was Nixon and the Fed completely removing the dollar from the gold standard a few years earlier that actually caused it). They have also changed the way GDP is adjusted multiple times, and they have changed how official unemployment is reported. In most cases, these changes are designed to HIDE a problem rather than trying to gain more accurate data.

For example, the Fed ended its reporting of M3, which is a more fine tuned measure of the total money supply of US dollars circulating around the world (they claimed M2 was just as good). This measurement was inconvenient to the Fed because inflationary policies are ever present and accurate reporting might cause “alarm” within the American public. So, they simply stopped making the data available.

Maybe it’s just a coincidence, but the Fed ended M3 in 2006 right before the credit crisis of 2007/2008 began, and right before they introduced tens of trillions of fiat dollars in bailouts and QE stimulus. One might think they KNEW a debt implosion was coming and that massive inflationary policies would be the response…

Another change has been made to M1 and M2 calculation (a less accurate measures of US money supply), and this was done in 2020, right in the midst of the covid pandemic response. Strangely, this time the Fed’s changes involved adding savings deposits from smaller accounts to the overall money supply data, which means the reported money supply jumped substantially.

Why did they do this? I have a couple theories.

Theory #1: In 2020 the Fed was already in the midst of one of the most pervasive stimulus programs since the bailouts of 2008/2009. They created over $6 trillion in new money in a single year, and that’s just the official number, not accounting for overnight loans and other programs. This money was injected directly into the general economy and into average people’s accounts, as well as into the coffers of international corporations.

It is possible the Fed changed how they calculate M1 and M2 because they wanted to hide the true amount of dollars they were creating from thin air. If you try to make the argument that the Fed caused our current inflationary crisis, and you use M1 or M2 as an example of this, the central bankers can now say “Hey, that big jump in the money supply is not because of our fiat printing, we added savings accounts to the calculation and that’s why it’s so high.”

Of course, then you would have to believe that the dollars being held in small savings accounts across the country is enough to multiply the total money supply by FIVE TIMES. Yeah, I don’t think so. To summarize, the Fed changed its data reporting in a negative way on purpose in order to obscure the role they are playing in the inflationary disaster now unfolding.

Theory #2: The central bank WANTS to raise interest rates into economic weakness without argument. So, they adjusted the money supply calculations to be slightly more honest. Whether or not this giant leap in M1 and M2 in 2020 is due to savings accounts being added or due to elicit Fed printing doesn’t matter. The point is, the Fed intends to jack up interest rates and taper in the extreme while GDP and Retail are in decline and while wages are becoming stagnant. It’s the same thing the Fed did at the onset of the Great Depression, which made the depression far worse than it would have been otherwise.

That is to say, the Fed is seeking to sabotage our economy, but they need the data to justify their actions. They need the data to more honestly reflect the inflation threat so that they can hike rates and taper into economic weakness while avoiding any blame for the inevitable consequences.

In either case, the Fed’s actions suggest that inflation is going to continue unabated, they know this is going to happen, and they are merely positioning themselves to deflect blame.

The argument among independent and mainstream economists alike will now be that the Fed will “capitulate” and reverse course on tapering as soon as they “realize their error.” Sorry, but the central bankers are well aware of what they are doing. I suspect some liberty movement people want to believe the Fed will continue stimulus measures because they want the gold and silver market price to go up.

Don’t worry, prices will go up eventually because there is zero chance that the Fed will stop inflation/stagflation with a 2%-3% interest rate hike. Also, as the economic war with the East continues to heat up, nations like the BRICS will continue to dump the dollar as the world reserve. The physical price of gold and silver will decouple from the manipulated paper ETF price. It already happened in 2020-2021, and it will happen again soon.

Mainstream financial commentators want to believe the Fed will capitulate because they desperately want the party in stock markets to continue, but the party is over. Sure, there will be moments when the markets rally based on nothing more than a word or two from a Fed official planting false hopes, but this will become rare. Ultimately, the Fed has taken away the punch bowl and it’s not coming back. They have the prefect excuse to kill the economy and kill markets in the form of a stagflationary disaster THEY CAUSED. Why would they reverse course now?

Just remember WHO is really to blame for the mess as prices continue to spike and the economy destabilizes. There needs to be a reckoning, and central bankers should not be allowed to escape without punishment.

 

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After 14 long years of ultra-loose monetary policy from the Federal Reserve, it’s no secret that inflation is primed to soar. If your IRA or 401(k) is exposed to this threat, it’s critical to act now! That’s why thousands of Americans are moving their retirement into a Gold IRA. Learn how you can too with a free info kit on gold from Birch Gold Group. It reveals the little-known IRS Tax Law to move your IRA or 401(k) into gold. Click here to get your free Info Kit on Gold.

 

You can contact Brandon Smith at:

brandon@alt-market.com

You can also follow me at –

Parler: @AltMarket

Gettr:  @Altmarket1

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Brandon Smith

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  • Cato the Uncensored May 12, 2022 at 9:28 am

    There are others who believe the Fed and NY banks are aiming to pull the rug out from under the Eurocentric WEF crowd. Destroying the USD might actually work to that end.

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      Brandon Smith May 12, 2022 at 11:03 am

      Destroying the dollar actually works in FAVOR of the WEF agenda.

      • Laura Ann May 13, 2022 at 10:54 am

        The economy here and Europe (incl other countries, Canada, Aust., etc) has to crash so the WEF/WHO dictators can rule completely w/digital slavery where no one has any financial privacy on anything they buy or sell. Social credit scores will control who buys or sells. This type system will be unfit to live in for thinking people with values. Younger generations have a zero future right now trying to make ends meet, because the top dogs are going full throttle. A young man in a business told me anyone is crazy to start a family/raise children, saying his brothers aren’t tuned in to the real world. This country has been sold out to globalism, corrupt and compromised congress and state/local officials all in on it. Few patriots alive today who will resist the tyranny and stand up.

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          Brandon Smith May 13, 2022 at 4:11 pm

          Maybe not in Europe, but there are plenty of freedom fighters in Canada and in the US, millions of us in fact.

  • Mr.BA May 12, 2022 at 9:29 am

    Do you think markets have topped and we now begin to descend to fair value? No more QE? thx.

    • Laura Ann May 13, 2022 at 7:32 pm

      Several yrs before retirement (during the day after 9/11 when mkts were closed) we switched our 401k from index fund C (S&P) to US treasuries 100% online, it will last us into our 90’s. If u are close to retirement it may be right for some people. Muni’s (in state) tax free also w/ broker.

  • Gauntlet33 May 12, 2022 at 11:28 am

    Hey Brandon, another great article as I wholly agree with your analysis and love to read these rather abstract articles re economic matters. “Just remember WHO is really to blame for the mess as prices continue to spike and the economy destabilizes. There needs to be a reckoning, and central bankers should not be allowed to escape without punishment.” I also like how the “WHO” you capitalized is a bit of a double entendre.

  • Greg B May 12, 2022 at 11:36 am

    A bit off-topic but what do you make of the SC leaks about plans to overturn Roe v Wade? Also there’s been a huge fuss over shortages of baby formulas that the pro-baby killers are using to attack pro-lifers.

    • Laura Ann May 13, 2022 at 11:12 am

      The whores and floozies are angry, doing protests w/ likeminded low lifes even threatening judges and protesting in their yard, so where were the police. These pro abortion women use abortions for birth control because welfare pays, when they should be sterilized since thier business is turning tricks, some raise kids w/ no dads, and many use drugs. The states will now have to decide to allow clinics, and taxpayers will foot the bill.

  • kmose May 12, 2022 at 1:12 pm

    I don’t know, we live in a world of absurdities now. As crazy as it sounds, I can see the whole world a smoldering ruin, civilization destroyed, and someone finding a still-working internet device in the rubble and the stock indices are still climbing ever upward on it. I can see them completely detaching stocks from any underlying economy or commerce and AI just programmed to constantly bid them up forever before a crash. Who would call them out on it? Goldman’s CEO? JP Morgan’s? Economics professors at prestigious universities that force all of the students to take experimental injections and wear masks? I can see them either suspending all trading and just changing the final stock prices to whatever they want them to be, or claiming the crash was a terrorist cyber attack caused by Russians, or evil white supremacists in league with Russia. I recall Dr. Michael Bury of “The Big Short” fame saying he was harrassed for a long time by the FBI after his big bet paid off and it gave me the impression that anyone who isn’t an insider with permission would never be able to collect their winnings from betting big against the establishment again. I’ve also heard Soros was given inside info for his big bet against the Sterling and his winnings from this sure thing bet came with service-to-the-cabal strings attached, so maybe this was always the case. Sure, people would know that it wasn’t the MAGA deplorables who wiped out their 401Ks, but covid showed us most are get-along-to-go-along cowards, and the higher up you go into venerated and revered institutions, like Ivy League universities and major corporations, people are just downright obsequious. I can see the central bankers pointing to ludicrous ever-rising stock markets as the world becomes that of Mad Max and saying, “see, we do our jobs competently. It’s those governments and incompetent politicians that screwed things up,” making the case for why bankers/technocrats should be in charge. I just don’t see them letting markets crash without a MAJOR and world-changing plan to deflect blame. If a crash happens, I see it accompanied by the rounding up of dissidents and then going pedal-to-the-metal to the Great Reset. I think those who are absolutely correct about the fundamentals of the economy and stock market aren’t considering the fact that the folks running the show are every bit as crazy, ridiculous and ruthless as Caligula. If you’ll wear two masks and take multiple experimental injections that you know don’t work and may be harmful, you’ll also believe the final stock prices are whatever they say they are, or the reason stock prices went down is the reason they gave, despite what you saw.
    In short, if the stock indices crash to their true unfettered market prices, it will be a very dangerous time for those who dissent.

    • Avatar photo
      Brandon Smith May 12, 2022 at 3:51 pm

      They made the same case for bankers being in charge after the 2008 crash. Why do you think they would do anything different today? Also, good luck with rounding us up – If they want a war, they will get one they won’t survive.

      • Gauntlet33 May 13, 2022 at 10:19 am

        Hey Brandon, I wanted to say this earlier, but forgot so I’ll say it now: When all this is over and the evildoers are ousted and hopefully lynched, I hope you (and other sound money Constitutionalist people) run for a government position.

        • Avatar photo
          Brandon Smith May 13, 2022 at 4:13 pm

          If I thought that things had changed and such political positions actually mattered again, yes, I would run for office. I suppose at the state and local level there are some people making a difference, but they are stifled by constant interference from the federal government.

  • Black Cat May 12, 2022 at 7:50 pm

    The Creature from Jekyll Island has emerged from the Abyss to consume the consumers for pennies on the dollar, just as it has always done!

  • Kevin M May 12, 2022 at 11:15 pm

    It has become knee jerk to make fun of the FED and global central banks. Like an old Stooges episode and quickly assigning, “idiots, morons, rock and a hard place, no credibility…” or the other, “they must in order to keep their credibility.”

    When looked at from the perspective this is all intentional with monetary reset is the key goal, it all fits soundly.

    Underground, parallel economies using Money should be in the discussions of every rural American community. These sociopaths are planning to enslave and/or destroy us. No one can vote these people out.

    • Black Cat May 13, 2022 at 6:27 am

      Well said.

  • Stan Sylvester May 13, 2022 at 7:04 am

    The apple doesn’t fall far from the tree. Nicole Schwab is Klaus’ daughter. She in actively involved in the family business. She is the Founding Director of the “Young Global Leaders” and Executive Committee member of the WEF. Can’t imagine what the conversation is like at the dinner table with Dad.
    Nicole recently stated that the Great Reset is as a “new humanity” and dubbed it a “restoration generation.” I don’t think I want to know what that means.
    Nicole also stated that she wanted governments to use Covid polices to thwart climate change. Looks like you can get locked down for something other that a pandemic.
    Proverbs 29:2
    “When the righteous are in authority, the people rejoice, but when the wicked rule the people mourn.”

  • Jay May 13, 2022 at 8:35 am

    But here is the big question. If they return to 17% interest rates like back in the 70’s, will individual account holders benefit from interest on their accounts, or is that just for the bankers?

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      Brandon Smith May 13, 2022 at 4:15 pm

      Regular account holders only benefit from higher rates when inflation is not pervasive. When inflation is rampant, that 17% makes little difference.

  • Jay May 13, 2022 at 9:13 am

    So Brandon, we learn in business class that the typical business cycle is 4 years. But they never define a starting point or end point and they never tell you whether you can depend on it or who drives and controls it. They just act like it’s all natural market forces that magically cycle every 4 years, regardless of what anybody says or does. Then they teach you about the Fed as if they had never mentioned the 4 year business cycle.

  • Concerned Citizen May 13, 2022 at 11:23 am

    So if the dollar keeps losing value what about the euro? it seems to be heading towards parity at this point. Which currency benefits from this dollar crash? Only Gold? It sure doesn’t look like Bitcoin. Or real estate/ farmland? Please some more insights on the Euro Brandon.

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      Brandon Smith May 13, 2022 at 4:09 pm

      The currency that benefits is the global currency the IMF has yet to release to the public. Gold and silver will rise because the BRICS nations are going to use it to back their currencies (just like Russia attached gold to the Ruble), but the globalists have a currency system ready and waiting that they have not named in public yet. I give it another year before they start talking about a digital currency coupled to the SDR basket.

  • Serge May 14, 2022 at 2:46 am

    A couple of years ago, Brandon, you wrote that article: “The worst thing is that central bankers know exactly what they are doing”. Clearly, they know.
    For those who “hold” crypto currencies: Be very, very careful…and remember CyberPolygon 21 and the latest simulation event dealing with a global cyber attack on the markets in December 2021, in Israel..
    https://sociable.co/web/israel-cyber-pandemic-exercise-simulating-cyberattack-global-financial-system/
    About currency war on run: https://www.informationliberation.com/?id=63085

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