International Forecaster Weekly

How (Not) to Pop a Bubble

Quantitative Tightening means that all those dollars that were thrown around the world over the past decade are now being sucked back into the US.

James Corbett | October 26, 2018

It may not have been the craziest headline that the Trump whirlwind has generated in recent months, but you might have seen it amidst all the Stormy Kavanaghs out there: Trump says Fed is his 'biggest threat' because it is raising rates too fast . This latest outburst is just one more example of a pattern we have seen emerge over the past two years: Any and all good news about the economy is because of Trump, and any and all bad news about the economy is because of the Fed. I've touched on this theme before, but I think we all know how it goes.

When candidate Trump was on the campaign trail, he bemoaned the "big fat ugly bubble" blown by the Fed's low interest rate policies. But when candidate Trump became President Trump, he suddenly stopped pushing for higher rates and instead started touting the big fat ugly bubble. And now that the Fed is actually raising interest rates like candidate Trump said he wanted, the dissembler-in-chief has suddenly decided that this is horrible and tells us the Fed has "gone crazy."

Correction: The Fed has not "gone crazy." And although it might make a good quip, it's not even true that the Fed has always been crazy. Sadly, the wizards of Wall Street are perfectly in control of their mental faculties. They know what they are doing when they blow a bubble up, and they know what they are doing when they make one pop. And guess who's got their needle pointing ominously at the global economy right now?

So, for the benefit of those who haven't been keeping up, chaos has returned to the markets this week. A dead-cat bounce after a six-day losing streak has abruptly ended and, as of press time, stocks are back in freefall, led by plunging European markets (on track for their worst rout in five years) and poor earnings from two of Silicon Valley's FAANGs. I say this not as someone who cares about the phoney baloney stock market (see literally anything I've ever written about stocks on this website for reference). I simply observe this as part of a wave of indicators that are being sent out to the hoi polloi right now that the pin is ready to prick this current bubble of economic unreality that we are living in.

Joe Sixpack and Jane Soccermom are meant to follow the ups and downs of the stock market and react to those signals in predictable ways. When stocks are reaching record high after record high, the message is clear: "BUY! BUY! BUY! Things are only ever going to go up from here on out! It's different this time!" When stocks are suddenly falling the message is likewise clear: "PANIC! SELL! Get out while you still can!"

Add this to the list of things that people who follow the major economic headlines are meant to be worrying about right now. Rising interest rates. The looming specter of the end of quantitative easing in Europe. The trade war. The cutbacks to official forecasts. And now we're hearing reports that the Fed, "may have to raise rates further than justified just to prove their independence" (i.e. to prove that they are the real rulers of the country), thus causing even more panic selling.

Again, a lot of this is smoke and mirrors. But in an economy that runs mostly on smoke and mirrors, that's the point. The narrative that we've been fed for the past decade—you know, the one that assures us we avoided the financial crisis from the Lehman shock when the valiant central bankers stepped in to literally save the planet (again)—is finally coming to an end. The next chapter in this story is beginning to unfold, and we can already discern its outline: blah blah blah populism blah blah blah Brexit blah blah blah trade wars blah blah blah empire in decline blah blah blah stock market collapse blah blah blah economic crisis. And unfortunately for all of us, this chapter (like all the others in the history books) is being written by the "winners."

Predictably, the 4-D chess-playing, MAGA-spouting, Q-touting, Trumpian NPCs will tell you that this is because the deep state is looking to crash the economy to topple Trump. If so, then they have fallen for the presidential psyop, which holds that the president actually matters and casting a ballot on election day is the secret weapon for fighting back against the globalists (darn, why didn't anyone think of that before!).

Newsflash: The future of the world economy does not depend on which Zaphod Beeblebrox-like character happens to be inhabiting the Oval Office at any given moment, and the banksters who have been puppeteering the  economy for centuries are (sadly) not a bunch of Keystone Kops, bumbling their way toward an economic crash because they are otherwise powerless against the Almighty President. No, they are engineering another crisis just as they engineered the Lehman crisis and the dotcom bust and Black Monday 1987 and the oil price shock of 1973 and Black Friday 1929 and the Panic of 1907 and the Panic of 1893 and . . .

So what's the angle this time? What are the banksters planning? Well, remember Ross Perot's "giant sucking sound?" Well there's another giant sucking sound that's ramping up right now, only this time it's sucking money into the United States, not out of it.

What am I talking about?  Why, the global dollar shortage, of course. Those rising interest rates aren't just having an effect on the US stock market. Much more to the point, they represent a drying up of liquidity and a reversing of all of that short-term dollar-denominated debt that has flooded emerging markets in recent years. You see, one of the results of the Fed's quantitative easing and near-zero rates over the past decade was an investing trend which involved pouring money into absolutely anything that offered returns, whether that be junk bonds or harebrained emerging market investment schemes.

But, as with all beautiful tunes, the song eventually comes to an end and the piper has to be paid. After years of quantitative easing, the Fed is finally shrinking their balance sheet once again and magically erasing all of that funny money that they conjured into existence over the past decade. It's called "Quantitative Tightening" and it means that all those dollars that were thrown around the world over the past decade (in the form of debt, of course) are now being sucked back into the US. We've already seen the havoc this has wrought in places like India, Argentina, Turkey, Indonesia and elsewhere. And this process is only getting under way.

Now, I'm not a crystal ball gazer so I can't give you dates and price points and precise predictions, but it doesn't take a Nostradamus to notice trends and patterns. And if the history of the past century has taught us anything it's that the banksters never let a good crisis go to waste and the globalists will use any cataclysm as an excuse to push for global government. So it's pretty safe to say that whatever is coming, we know what ready-made solution they're going to try to shove down our throat.

So strap yourselves in, folks. We're in for a bumpy ride.