Toward the end of the Shemitah year (August/September), the fundamental flaws in our economy began to rear their ugly heads. In August, the market dropped about 14% off its 2015 peak. August 24 recorded the largest intraday drop in history (1,100 points).
(Photo by Pixabay.)
Recently, however, the market's downward trend has experienced an unprecedented 6 straight days of positive trading.
What precipitated this uptick? Was it the news that the 3rd quarter was the worst quarter in 2015? Is it the non-stop horrible earnings reports or the worse than ever manufacturing numbers? Could it be the horrific job numbers, the fact that 20% - 30% of stocks are in a downward trend (bear market), the imploding global markets or the ever-looming currency/housing/junk bonds/debt bubbles?
Lately, it seems the worse the economic news the higher the markets go. What gives?
Two words: The Fed. Yep. That’s the simple answer to what has now become the most convoluted, confusing, counterintuitive situation we’ve ever faced.
See, the markets used to be free. They used to be a genuine reflection of the strength/weakness of the economy. Today, (particularly since 2001) they are nothing more than a knee-jerk reaction to the Fed's manipulation -- a crapshoot.
The Fed (Federal Reserve) is NOT a branch of the government (though they do the bidding of the government). They are a small group of independent (yeah, right) bankers who have been manipulating our money supply, economy and markets since their inception in 1913. At the whim of the Fed (and in response to government pressure), interest rates and money supplies are manipulated. It’s this manipulation that is the primary reason for the unprecedented and repeated boom/bust cycles we’ve been experiencing.
Former Fed chair, Ben Bernanke, recently said that Wall Street executives should be in jail for causing the 2008 crash. What’s scary about that statement is that he meant it. The man who printed more monopoly money in the shortest period of time ever in our history; the man who set the Fed on a course of purchasing $4.5 Trillion in government debt; the man who slashed interest rates to zero; the man who is now and forever will be the government’s most infamous counterfeiter who, along with his banking and political cronies, has obliterated the U.S. economy wants to imprison the people who spent the monopoly money he counterfeited. Un-be-lievable!
Yes. The Fed wanted Wall Street and the banks to use that counterfeited money to build up their businesses, loan more and hire more. Instead, corporations fired more, gobbled up real estate, purchased other companies, and bought back their own stock. Banks cut back on their loans, and recorded the highest profits ever.
What happens next? Will the Fed raise rates? Nope. Nada. Not on your life. I know. I once believed they would, but I know better now. Not only will they not raise rates, but they’ll call for QE 4 (the 4th round of counterfeiting money). Watch.