Tuesday, January 29, 2013

Federal Reserve Money Printing Is The Real Reason Why The Stock Market Is Soaring

Dees Illustration
Michael Snyder, Contributor
Activist Post

You can thank the reckless money printing that the Federal Reserve has been doing for the incredible bull market that we have seen in recent months.  When the Federal Reserve does more "quantitative easing", it is the financial markets that benefit the most.  The Dow and the S&P 500 this month have both hit levels not seen since 2007, and many analysts are projecting that 2013 will be a banner year for stocks.  But is a rising stock market really a sign that the overall economy is rapidly improving as many are suggesting?

Of course not. Just because the Federal Reserve has inflated another false stock market bubble with a bunch of funny money does not mean that the U.S. economy is in great shape.  In fact, the truth is that things just keep getting worse for average Americans.  The percentage of working age Americans with a job has fallen from 60.6% to 58.6% while Barack Obama has been president, 40 percent of all American workers are making $20,000 a year or less, median household income has declined for four years in a row, and poverty in the United States is absolutely exploding.  So quantitative easing has definitely not made things better for the middle class.

But all of the money printing that the Fed has been doing has worked out wonderfully for Wall Street.  Profits are soaring at Goldman Sachs and luxury estates in the Hamptons are selling briskly.  Unfortunately, this is how things work in America these days.  Our "leaders" seem far more concerned with the welfare of Wall Street than they do about the welfare of the American people.  When things get rocky, their first priority always seems to be to do whatever it takes to pump up the financial markets.

When QE3 was announced, it was heralded as the grand solution to all of our economic problems.  But the truth is that those running things knew exactly what it would do.  Quantitative easing always pumps up the financial markets, and that overwhelmingly benefits those that are wealthy.


In fact, a while back a CNBC article discussed a very interesting study from the Bank of England which showed a clear correlation between quantitative easing and rising stock prices...
It said that the Bank of England’s policies of quantitative easing – similar to the Fed’s – had benefited mainly the wealthy.
Specifically, it said that its QE program had boosted the value of stocks and bonds by 26 percent, or about $970 billion. It said that about 40 percent of those gains went to the richest 5 percent of British households.
Many said the BOE's easing added to social anger and unrest. Dhaval Joshi, of BCA Research wrote that  “QE cash ends up overwhelmingly in profits, thereby exacerbating already extreme income inequality and the consequent social tensions that arise from it."
So should we be surprised that stocks are now the highest that they have been in more than 5 years?
Of course not.

And who benefits from this?

The wealthy do.  In fact, 82 percent of all individually held stocks are owned by the wealthiest 5 percent of all Americans.

Unfortunately, all of this reckless money printing has a very negative impact on the rest of us.  When the Fed floods the financial system with money, that causes inflation.  That means that the cost of living has gone up even though your paycheck may not have.

If you go to the supermarket frequently, you know exactly what I am talking about.  The new "sale prices" are what the old "regular prices" used to be.  They keep shrinking many of the package sizes in order to try to hide the inflation, but I don't think many people are fooled.  Our food dollars are not stretching nearly as far as they used to, and we can blame the Federal Reserve for that.

For much more on rising prices in America, please see this article: "Somebody Should Start The ‘Stuff Costs Too Much’ Party".

Sadly, this is what the Federal Reserve does.  The system was designed to create inflation.  Before the Federal Reserve came into existence, the United States never had an ongoing problem with inflation.  But since the Fed was created, the United States has endured constant inflation.  In fact, we have come to accept it as "normal".  Just check out the amazing chart in the video posted below...



The chart in that video kind of reminds me of a chart that I shared in a previous article...


Not that I expect the United States to enter a period of hyperinflation in the near future.

Actually, despite all of the reckless money printing that the Fed has been doing, I expect that at some point we are going to see another wave of panic hit the financial markets like we saw back in 2008.
The false stock market bubble will burst, major banks will fail and the financial system will implode.  It could unfold something like this...

1 - A derivatives panic hits the "too big to fail" banks.

2 - Financial markets all over the globe crash.

3 - The credit markets freeze up.

4 - Economic activity in the United States starts to grind to a halt.

5 - Unemployment rises above 20 percent and mortgage defaults soar to unprecedented levels.

6 - Tax revenues fall dramatically and austerity measures are implemented by the federal government, state governments and local governments.

7 - The rest of the globe rapidly loses confidence in the U.S. financial system and begins to dump U.S. debt and U.S. dollars.

I write about derivatives a lot, because they are one of the greatest threats that the global financial system is facing.  In fact, right now a derivatives scandal is threatening to take down the oldest bank in the world...
Banca Monte dei Paschi di Siena, the world’s oldest bank, was making loans when Michelangelo and Leonardo da Vinci were young men and before Columbus sailed to the New World. The bank survived the Italian War, which saw Siena’s surrender to Spain in 1555, the Napoleonic campaign, the Second World War and assorted bouts of plague and poverty.
But MPS may not survive the twin threats of a gruesomely expensive takeover gone bad and a derivatives scandal that may result in legal action against the bank’s former executives. After five centuries of independence, MPS may have to be nationalized as its losses soar and its value sinks.

So when you hear the word "derivatives" in the news, pay close attention.  The bankers have turned our financial system into a giant casino, and at some point the entire house of cards is going to come crashing down.

In response to the coming financial crisis, I believe that our "leaders" will eventually resort to money printing unlike anything we have ever seen before in a desperate attempt to resuscitate the system.

When that happens, I believe that we will see the kind of rampant inflation that so many people have been warning about.

So what do you think about all of this?

Do you believe that Federal Reserve money printing is the real reason why the stock market is soaring?

Please feel free to post a comment with your thoughts below...

This article first appeared here at the Economic Collapse Blog.  Michael Snyder is a writer, speaker and activist who writes and edits his own blogs The American Dream and Economic Collapse Blog. Follow him on Twitter here.


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4 comments:

Anonymous said...

Primarily inflation occurs when money is created and loanded into circulation as debt, at interest under the fractunal reserve banking system.

Primarily deflation occurs when money is estinguish or when the banks call in the loans and credit is restricted under the fractunal reserve banking system.

The central bankers regulate volume of the currency m-1 m-2 m-3 of the money supply and the velocity of the currency, the number of moves of the currency of the same demonition equaling amount of money serving as circulating medium by expansion and contraction of credit.

Federal reserve notes stupidly called money are bills of credit.

We are being payed for our goods, services and labor with non-redeemable paper notes issued by the federal reserve a private banking syndicate of multi-international mega banking corporations that hold stock in the Federal Reserve and only look out for the interest of their share holders.

The money is created on a printing press and which we are forced to accept due to the legal tender laws.

The money has been pure fiat since the silver was taken out of the coins in 1965 and when Nixon closed the gold window in 1971. Prior to 1971 you could redeem the dollar for gold internationally but not domestically.

The Devolution of Money.
1-Commodity Money Gold and silver coins.
2-Fiduciary Money There is on deposit in the U.S. Treasury payable to the bearer on demand in gold or silver.
3-Fractunal Reserve Money. Part Fractunal Reserve. Part Fiat.
4-Pure Fiat. Currency on decree. Currency without precious metal backing. What ever the King or whatever the Elite Globalist Banking CABAL of the NWO that are members of the Illuminati says it's worth.

This the largest fraud that has ever been perpatrated against an ususpecting public.

It is a gigantic Ponzi Pyramid Scam or confidence game run by the financial mafia which are a bunch of legalized gangsters. They make a mafia loan shark look like a saint.

The Federal Reserve is uncontstituional, inherently fraudulent and inimical to the public interest.

All Pyramid scams eventually collapse when they can't get any new suckers to play their game.

The banks can loan out 10 times the amount of money they have in reserves on time deposits and 8 times on demand deposits.

The Federal Reserve is neither a Federal Government Institution, nor does it have any reserves because all the money is created from debt.

The banks know that not all the depositors will not demand all their money at ounce accept if there is a banking panic and a run on the banks. Now that the money is pure fiat if a financial and economic crisis occurs they simply create more money on a printing press.

Eventually they will have to devalue the dollar, thereby hyperinflating the currency and pay off the national debt wuth depreciated currency or worthless paper.

Inflation is the gradual bankruptsy of the government the largest debtor of all, so that they can pay you in depreciated currency or worthless paper.

The international bankers are going to play this out to the very end. Remember nothing last forever and what goes up must come down.

The international bankers have abscounded with the national treasury and usurped the people wealth.

Financial and economic crisis are created by the banks.

When the financial base of the economic system collapses the insiders at the top of the financial pyramid who are Elite Politicians, Bankers and industrialist bail out with their golden parachutes with a silver lining and make a soft landing while the debt surf slaves crash to the bottom and bear the full brunt of the blow.

Wake up America before it is too late

dogismyth said...

wake up america?? Its already to late. The best thing you can do now is ignore it all. Ignore the bad news. Ignore news like this article. You see...no one really cares. Not this blog, not this author, not you or I, and certainly not those in charge.

The time to wake up was a long time ago. The machine is on automatic pilot and those profiting from it will continue to do so from a LEGAL stance. They are not the machine, but they profit from it.

The best thing you can do is get out of the markets, ignore all the news (mostly BS and propaganda), live a more natural life and work with others to produce those things you need.

That's what you need to be doing. Stop worrying. STop following this circus. There is no truth anywhere in the news including these blogs. Do you really believe any of these blogs confirm and research their articles?

Really?

Forget it all, and start a new way of life. They want you distracted, afraid and attentive to their next moves. What a waste of time if you ask me.

Anonymous said...

I agree Dogismyth, I read these articles and comments for entertainment only.

STEADCORE said...

Wake Up! Any body reading this is probably awake but that wont do it. Dogismyth is right. It's all entertainment and our altered existence leaves us few choices but we can ignore them and keep your mind occupied with creative things. I'm sure things aren't looking good if you live by their view of the world but I see great things beyond this madness. Keep your imagination active and picture what the world will be like when our design is fully manifested.

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