RHINEBECK, New York – Here’s the latest from the Fed.
It just completed a two-day policy meeting and wrote in a press release:
The Committee judges that the case for an increase in the federal funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of continued progress toward its objectives.
What a shocker!
It’s been eight years since the Fed introduced its “emergency” zero interest rates.
And it’s been at least a year since we made our prediction: It will never return to a normal interest rate policy – at least not voluntarily.
Why? ’Cause we’re all crazy now!
According to the Fed, the emergency passed long ago. Still, it is biding its time… carefully managing the “recovery” and protecting the little green shoots of growth from the big, stomping boots of the real economy.
We are up in Hillary country – about two hours north of New York City – four days before the election.
“Trump ought not to be able to claim that the election is rigged,” says a right-thinking, civic-minded Democrat. “It undermines the whole process.”
For all the candidates’ faults, this election has been nothing if not entertaining. “What will they do next?”… we all wanted to know.
It’s not over, of course. But most people seem to wish it were. “Voters are so done with this election,” reads a Bloomberg headline.
They want it to be over. And it may as well be. Because, whoever wins, the American people lose.
Trump is right: The election is rigged. Not necessarily the voting process itself, but the economy, the media, the government, the courts – practically everything is rigged in favor of the Establishment status quo. They’ve all been suborned to protect it and paid to act like half-wits… with about $35 trillion in make-believe bribe money.
That’s why the Fed cannot tighten. It helped rig the system. Now, like a magician who has handcuffed himself to a desperate lunatic, it goes where he wants to go.
But so do we all. We cannot turn to the left. We cannot turn to the right. We cannot go back. We can only go farther… until we have gone too far.
Significantly higher interest rates would be a disaster – at least in the short run.
And except for a few outliers, such as Libertarian Party candidate Gary Johnson… no president… no politician… no CEO… almost no one… can refuse to go along. Their businesses, their careers, their fortunes, and their reputations have all been built on dishonest money.
And no one wants to see it go away.
We’ve seen how the feds’ fake money distorted everything, even family life.
The commander-in-chief claims our economy has been shaped by a few greedy capitalists.
Not so. It has been shaped by the feds’ own funny money. First, it gave them delusions of wealth and power. And then it made them crazy.
With the pleasure of repeating ourselves: When you have a money system backed by gold – as was the Bretton Woods system that practically existed up until 1968 – there’s a limit on how much credit you can put into the system.
Most people date the demise of the gold-backed dollar to 1971, when President Nixon defaulted on America’s promise to convert foreign-held dollars to gold at a fixed rate of $35 an ounce. But it was President Johnson who removed the requirement for the Fed to back its notes with gold with the passage of the Gold Reserve Requirement Elimination Act of 1968… thus freeing up the Fed to issue paper currency at will.
Before that, each dollar had to be “backed” by gold. And gold was limited.
Gold tied the dollar to the real economy of stuff… services… resources… labor… and profits and losses.
Credit Runs Wild
Under the gold-backed money system, the ratio of credit to GDP was fairly constant.
Until the 1970s, it was about 1.5 to 1.
More than anything else, this signaled the abiding connection between the dollar, credit, and real economic output. You couldn’t lend what you didn’t have. And you couldn’t have it if you didn’t earn it (GDP). But take away the gold, as the feds did in 1968 and 1971, and you take away the limit. Credit could run wild.
Now, the ratio of credit to GDP is about 3.2 to 1. For every dollar of real GDP output, in other words, there are more than three dollars of debt.
That represents about $35 trillion of unfinished transactions – borrowing and buying (but not repaying) – over the last 40 years that shouldn’t have happened.
You see traces of it now in the houses, shopping malls, corporate debt, golf courses, wars, prisons, bonuses, credit card bills, mortgages, apartments, and cruise lines – $35 trillion worth of things that wouldn’t exist had it not been for the Fed’s fake money.
And now, the Fed can’t withdraw its fake money… or its cheap credit. The economy depends on it. And so does almost everyone in the economy.
And now, no matter who is elected president, the feds will respond to the next crisis with more of it.
Further Reading: This Sunday, in a bonus Weekend Edition of the Diary, we’re going to kick off an important new theme we’ll be following all next week. You see, Bill’s longtime friend and founder of Stansberry Research, Porter Stansberry, has important new developments on the historic credit bubble Bill’s been warning about.
In short: Porter believes we’ve entered a critical period for investors. Hundreds of billions of dollars’ worth of bad debts are about to be wiped out, he says. And he’s planning on betting against it.
It’s his biggest trade yet, and Porter has a knack for getting it right. (He once wrote an essay titled “Fannie Mae and Freddie Mac Are Going to Zero”… four months before they collapsed in 2008.)
We’ll be sharing the details of Porter’s research with Diary readers all week starting Sunday.
Bill also recently met with Porter in person to interview him in detail about this big trade. Watch your inbox closely, we’ll send you this interview early next week.
BY CHRIS LOWE, EDITOR AT LARGE
With just less than a week to go before the presidential elections, investors are getting nervous.
And the S&P 500 has lurched lower.
As you can see from today’s chart, the index has now broken below the bullish uptrend that’s been in place since February.
The trend, in other words, is no longer U.S. stock market investors’ friend.
How Gold Gets to $10,000/Oz.
Central bankers are losing control of the global financial system. And one currency expert says it’ll cause a “super-spike” in gold. More importantly, he believes he’s found the best way to play gold in this situation.
Five Things You Still Don’t Know About Trump’s Agenda
If Donald Trump becomes president, what will he replace Obamacare with? How many illegal immigrants will he deport? What tax rate will he make businesses pay? Here’s what you still don’t know about his agenda…
Five Things You Still Don’t Know About Clinton’s Agenda
If Hillary Clinton becomes president, what will she do with corporate taxes? Will she impose a financial transaction tax? What about her “risk fee” on banks? Here’s what you still don’t know about her agenda…
Bill reckons the Supreme Court is up for grabs. And it continues to prompt a flood of feedback from readers…
This was one of my all-time favorites! I have never looked at the Supreme Court quite like this before, and I will never look at it the same way again.
– Greg S.
Yours is the commentary I most look forward to and enjoy. I find myself agreeing with you pretty much completely. Am I suffering from confirmation bias? Probably. Too bad – you have to believe something.
– Kevin R.
The Supreme Court matters only if the people serving have integrity and are willing to abide by the Constitution instead of trying to rewrite it.
Since we have evolved into a people that no longer cares, you will continue to see Supreme Court justices that reflect the overall moral decay in society. Our country is rotting from the inside out, and we had better come to grips with that.
– Hipolito C.
Great article. You probably know this, but the Supreme Court is a fraud – always has been, always will be. As is the Constitution and Bill of Rights, unfortunately.
The Judiciary Act of 1789 gave the Supreme Court ultimate control over what was and was not considered “constitutional” before the Bill of Rights was even ratified by a majority the 13 individual states.
– David W.
And this response to a heartfelt piece of feedback from Diary reader Jill S. about how government policies are destroying family life in America.
Wow! Jill S.’s personal story given in response to Bill’s “Government policy is destroying the family” issue really resonated with me.
I am a 67-year-old married woman. And both my husband and I are still working fulltime trying to prepare for our retirement. I, too, “resent the system and the corrupt politicians who have served us up a lifetime of servitude on a silver platter.” I resent that I, too, “now find myself ‘prepping’ for economic disaster because of their abuse of power.” And I, too, resent that they have “ruined our country.”
How beautifully and aptly stated, Jill. My heart goes out to your family and all of our countrymen and women who are struggling to manage, given the quicksand we are stuck in, courtesy of the Deep State managers.
– Christine J.
In Case You Missed It…
Legendary gold investor – and Bill’s old friend – Doug Casey is finally sharing the secret to his investing success. He calls it “The Casey Method,” and it’s the private strategy he’s used to amass a fortune over the last 40 years… including a staggering 86,900% gain on just one investment.
To get the details straight from Doug himself, listen here.