by Nomi Prins, Daily Reckoning:
Donald Trump was onto something when he said during the first presidential debate that “we’re in a big, fat ugly bubble.” Even if he ironically embraces the bubble now that he’s in the Oval Office.
The questions du jour are…
Why hasn’t the bubble popped yet?
And how long can a rigged market stay rigged?
Will the market keep moving higher? Correct? Or will it crash?
And, should everyday investors play the game?
The answers — and the catalyst for this bold new project — lie in two words:
You know the adage, “It takes money to make money.” That adage has been around for a long time. What’s relatively new, however, is collusion between various governments, central banks and private banks. They work in tandem to siphon off more power and money for themselves using law’s, power-brokering, and quid-pro-quos.
Ultimately, what allows all of this political and financial extraction from Main Street is central bank monetary policy that creates what I’m calling “dark money.”
As the Wall Street Journal has revealed, 60% of the market’s gains between 2008 and 2016 were generated on days when the Federal Reserve made its policy decisions.
That’s dark money in action — together with collusion of central banks around the world.
And according to research done by Brian Barnier of Value Bridge investors and the website FedDashboard, 93% of the stock market’s move since 2008 is explained by the Federal Reserve’s actions.
The authors of the book, Invest with the Fed also write that “the data show that stock returns are approximately three times higher when monetary conditions are expansive than are returns earned when conditions are restrictive.”
Even former Dallas Federal Reserve President, Richard Fisher admitted on the record that:
“What the Fed did — and I was part of that group — is we front-loaded a tremendous market rally, starting in 2009…in order to accomplish a wealth effect.”
And later, he admitted:
“You have to be… frank about what drove the markets…. It was, the Fed, the Fed, the Fed, the European Central Bank, the Japanese Central bank … all quantitatively driven by central bank activity.”
So that age-old adage needs updating. Nowadays, “It takes dark money to make money.”
Since late 2007, the Federal Reserve has embarked on grand-scale collusion with other G-7 central banks to manufacture a massive amount of dark money. The scope and degree of this collusion are unprecedented.
On July 31, 2017, Fischer delivered a speech in Rio de Janeiro, Brazil. He addressed the phenomenon of low interest rates worldwide. Fischer admitted that “the effects of quantitative easing in the United States and abroad” are suppressing rates.
He also said there was “a heightened demand for safe assets affecting yields on advanced-economy government securities.” What he meant was that investors are realizing that low rates since 2008 haven’t been effective at fueling real growth, just asset bubbles.
Remember, Fischer was the Fed’s No. 2 man. He was also a professor to former Fed Chair Ben Bernanke and current European Central Bank President Mario Draghi. Both have considered him to be a major influence in their economic outlook.
The “Big Three” central banks — the Fed, the European Central Bank and the Bank of Japan — have collectively held rates at a zero percent average since the global financial crisis began. For nearly a decade, central banks have been batting about tens of trillions of dollars in dark money.
They have dictated the cost of money and fueled bubbles. They have amassed assets on their books worth nearly $14 trillion.
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