Will the Fed Taper?

          Stocks continued their rough stretch last week.  While we could see a Santa Claus rally this month as we often do as the year comes to a close, given how extended stocks are from what would be considered to be more ‘normal’ levels, we may not experience the traditional year-end rally.

          Last week, I examined the math behind the colossal national debt, the gigantic federal operating deficit and concluded that since the Federal Reserve, the nation’s central bank controlled by private bankers, is now the buyer of last resort of US Government debt, the Fed would have no choice but to continue to create currency further fueling the inflation that is now here.

          What that means, in a nutshell, is that the Fed is creating currency out of thin air and then using that newly created currency to fund the federal government’s operating deficit.

          Despite the public talk of tapering, or slowing the rate of currency creation, unless the Federal government cuts spending, the Fed will have no choice but to continue to create currency.

          This past week, I found an article written by Matthew Piepenburg of Matterhorn Asset Management that articulated this idea that I put forth last week quite articulately.  Here is a bit from the article (Source:  https://goldswitzerland.com/latest-treasury-fed-and-bis-reports-confirm-all-twisted-paths-lead-to-gold/)

History’s patterns confirm that the more a system implodes under the weight of its own self-inflicted extravagance (typically fatal debt piles driven by years of war, wealth disparity, currency debasement, and political/financial corruption), the powers-that-be resort to increasingly autocratic controls, distractions, and automatic lying.

The list of such examples, from ancient Rome, 18th century France, and 20th century Europe to 21st century America are long and diverse, and whether it be a Commodus, Romanov, Batista, Biden, Franco, or Bourbon at the helm of a sinking ship, the end game for bloated leaders reigning over-bloated debt always ends the same: More lies, more controls, less liberty, less truth, and less free markets.

Seem familiar?

As promised above, however, rather than just rant about this, it’s critical to simply show you. As I learned in law school, facts, alas, are far more important than accusations.

Toward that end, let’s look at the facts.

Earlier this month, the Fed and Treasury Department came up with a report to discuss, well, “recent disruptions”

The first thing worth noting is the various “authors” to this piece of fiction, which confirm the now open marriage between the so-called “independent” Fed and the U.S. Treasury Dept.

If sticking former Fed Chair, Janet Yellen, at the helm of the Treasury Department (or former ECB head, Mario Draghi, in the Prime Minister’s seat in Italy) was not proof enough of central banks’ increasingly centralized control over national policy, this latest evidence from the Treasury and Fed ought to help quash that debate.

In the report above, we are calmly told, inter alia, that the U.S. Treasury market remains “the deepest and most liquid market in the world,” despite the ignored fact that most of that liquidity comes from the Fed itself.

Over 55% of the Treasury bonds issued since last February were not bought by the “open market” but, ironically, by private banks which misname themselves as a “Federal Open Market Committee”

The ironies (and omissions) do abound.

But even the authors of this propaganda piece could not ignore the fact that this so-called “most liquid market in the world” saw a few hiccups in recent years (i.e., September of 2019, March of 2020) …The cabal’s deliberately confusing response (and solution), however, is quite telling, and confirms exactly what we’ve been forecasting all along, namely: More QE by another name.

Specifically, these foxes guarding our monetary hen house have decided to regulate “collateral markets and Money Market Funds into buying a lot more UST T-Bills” by establishing “Standing Repo Facilities for domestic and foreign investors” which are being expanded from “Primary Dealers” to now “other Depository Institutions going forward” to “finance growing US deficits” by making more loans “via these repo facilities (SRF and FIMA).”


Folks, what all this gibberish boils down to is quite simple and of extreme importance.

In plain speak, the Fed and Treasury Department have just confessed (in language no one was ever intended to understand) that they are completely faking a Fed taper and injecting trillions more bogus liquidity into the bond market via extreme (i.e., desperate) T-Bill support.

Again, this is simply QE by another name. Period. Full stop.

The Fed is cutting down on long-term debt issuance and turning its liquidity-thirsty eyes toward supporting the T-Bill/ money markets pool for more backdoor liquidity to prop up an otherwise dying Treasury market.

Again, this proves that the Fed is no longer independent, but the near-exclusive (and rotten) wind beneath the wings of Uncle Sam’s bloated bar tab.

Or stated more simply: The “independent” Fed is subsidizing a blatantly dependent America.

          Mr. Piepenburg brilliantly deciphers how the Fed is claiming to be seriously considering slowing the rate of currency creation, but in reality, it is not.  It is simply changing the way that newly created currency is subsidizing the deficit operations of the US Government.

          That is congruent with the deficit and debt math that we have been analyzing.  It now seems that the Fed will create currency until the consequences are too severe to bear.

          Mr. Piepenburg’s associate, Egon von Greyerz, had this to say on the topic last week (Source: https://goldswitzerland.com/evil-is-the-root-of-all-fiat-money/):

The US government is currently spending $7 trillion annually but the tax revenue is ONLY $4 trillion. So there is a net annual deficit of a mere $3 trillion or 43% of the US budget.

How can anyone believe that the US can repay a debt of currently $29 trillion and rising to $50 trillion with an annual deficit of $3 trillion – a deficit which is rising exponentially. The simple answer is that they never will repay it. Instead, it will increase uncontrollably.

As I said at the beginning of the article – Evil is the root of all fiat money as a 50 fold increase in the US debt since 1981 can only be achieved through corrupt means.

And don’t believe that the Fed will really taper the $120 billion a month that they are printing. They have declared a $15 billion tampering programme but that is a FAKE TAPER as my colleague Matt Piepenburg wrote about.

As expected they are cooking the books, giving with one hand and taking back with the other one – Plus ça change….. (the more it changes, the more it stays the same). 

          I believe that we find ourselves at the point in time, as others throughout history have found themselves, that the politicians and policymakers of the last 50 years have collectively brought us to the point that the only possible way to postpone a titanic deflationary collapse is to continue to create currency.

          Notice that I used the word postpone rather than the word avoid.  Debt levels dictate that they are too high to ever be paid with honest money – so they won’t be.  Instead, the politicians and policymakers will continue with currency creation until they can’t.  At that point, the deflationary collapse will occur.

As I stated last week, in my view, it’s never been more important to have an income plan that’s funded with some assets to help preserve assets in a deflationary environment and some assets that will help to act as an inflation hedge.

If you or someone you know could benefit from our educational materials, please have them visit our website at www.RetirementLifestyleAdvocates.com.  Our webinars, podcasts, and newsletters can be found there.

Inflation Update

         Fed leadership and some politicians have insisted that inflation is transitory or temporary and that once the economy fully reopens, things will return to a more ‘normal’ state as far as inflation is concerned.

          They may now be changing their tune a little or at least hedging their bets.  Treasury Secretary, Janet Yellen said last week that Americans can expect more inflation than was indicated initially.  (Source:  https://www.cnbc.com/2021/07/15/yellen-sees-several-more-months-of-rapid-inflation-worries-about-impact-on-home-buyers.html0) (emphasis added):

Treasury Secretary Janet Yellen cautioned Thursday that prices could continue to rise for several more months, though she expects the recent startling inflation run to ease over time.

In a CNBC interview, the Cabinet official added that she worries about the problems inflation could pose for lower-income families looking to buy homes at a time when real estate values are surging.

“We will have several more months of rapid inflation,” Yellen told Sara Eisen during a “Closing Bell” interview. “So I’m not saying that this is a one-month phenomenon. But I think over the medium term, we’ll see inflation decline back toward normal levels. But, of course, we have to keep a careful eye on it.”

The consumer price index, which measures costs for a wide range of items, increased 5.4% in June, the fastest pace in nearly 13 years. Excluding food and energy, the gauge rose 4.5%, the fastest acceleration in nearly 30 years. Prices that goods and services producers receive for their products jumped 7.3%, a record for data going back to 2010.

Also, housing prices in the nation’s largest cities climbed nearly 15% in the most recent measurements from S&P CoreLogic Case-Shiller.

All of that has added up to concern that inflationary pressures could stall the aggressive U.S. economic recovery, with the housing escalation raising fears of a bubble.

“So I don’t think we’re seeing the same kinds of danger in this that we saw in the runup to the financial crisis in 2008,” Yellen said. “It’s a very different phenomenon. But I do worry about affordability and the pressures that higher housing prices will create for families that are first-time homebuyers or have less income.”

          I’d like to make a prediction – the inflation narrative will continue to change as inflation becomes increasingly, painfully obvious.  The narrative has already changed from transitory to some persistent inflation.  When the narrative changes again, there will be something or someone to blame other than the Fed policy.

          The narrative will HAVE to change; the officially reported inflation numbers are attention-getting and the officially reported numbers are a far cry from reality.  This from Birch Group (Source:  https://www.birchgold.com/news/thirty-year-inflation/?msid=94970&utm_source=market_update&utm_campaign=newsletter_071721&utm_medium=email):

Consumer prices increased 5.4% in June from a year earlier, the biggest monthly gain since August 2008.

That’s what Jamie Cox of Harris Financial Group meant when he told CNBC, “The headline CPI numbers have shock value, for sure.”

Yes indeed. This is the largest one-month jump since 2008. If you take the “lowest of the lowball” Core CPI measure, which ignores food and energy prices (because nobody really needs to eat, right?) the June annual inflation rate is only 4.5%, the biggest jump in 30 years.

The article called this rise “higher than expected.” That’s one way of putting it. Like saying a wreck that totals your car is “inconvenient.”

We shouldn’t worry, though! This is just transitory, just a blip of supply chains and post-pandemic pressures relaxing. Remember?

Well, not everybody’s buying that anymore.

Sarah House, the senior economist for Wells Fargo, said:

‘What this really shows is inflation pressures remain more acute than appreciated and are going to be with us for a longer period. We are seeing areas where there’s going to be ongoing inflation pressure even after we get past some of those acute price hikes in a handful of sectors.’

“More acute than expected” means, higher than the Fed said.

“For a longer period” means, longer than the Fed said.

“A handful of sectors,” hmm. Let’s take a closer look at that.

Here’s a CNN snapshot of the current inflation situation. It’s incomplete but more realistic than the vague numbers we discussed previously.

Ms. House’s “handful of sectors” turned into these thirteen specific price categories, according to CNN.

Admittedly, there is a bit of cherry-picking going on. Overall, food prices have increased 2.4% year over year, so if you don’t eat bacon or fruit or fresh fish or drink milk, your grocery bill hasn’t gone up quite as much.

Although this number didn’t make it onto CNN’s graphic, a New York Fed survey anticipates:

  • +9.4% healthcare prices
  • +6.2% housing prices
  • +9.7% rent payments

It’s really difficult to look at these numbers and understand how they all add up to an overall inflation rate of 5.4%… Still, personal inflation rates are idiosyncratic. If you eat bacon and fruit every day, you’re going to pay more for groceries than people who only eat canned beans and ramen. If you work in transportation, the huge increase in gas prices are probably your major concern.

Your individual situation dictates just how much you’re hurting from inflation. Generally speaking, though, these price rises affect the entire nation.

          Inflation affects everyone.

          Inflation is just another tax.

          The current crop of policymakers are following the actions of many policymakers at various times historically.  When debt levels get high enough and can no longer be addressed via tax increases, only two options remain – cut spending or print currency. 

          When currency is created and inflation results, goods, and services cost more for everyone.  This additional cost for goods and services is a tax that disproportionately affects the poor; those that currency creation was ostensibly going to help.

          The numbers bear that out.

If you or someone you know could benefit from our educational materials, please have them visit our website at www.RetirementLifestyleAdvocates.com.  Our webinars, podcasts, and newsletters can be found there.