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View Full Version : Is The Fed Going To Attempt A Controlled Collapse?



Ares
8th July 2014, 07:17 PM
As most Fed watchers know, last week was interesting because Janet Yellen, speaking at IMF came out and said something quite surprising. In a nutshell, she said “It’s not the Fed’s job to pop bubbles”. While many market participants immediately took this to mean, “To the moon, Alice!” and started buying equities hand over fist, there’s another possible explanation for Mrs. Yellen’s proclamation of unwillingness: The Fed could be preparing to do exactly what it said it wouldn’t.

Here’s a quick re-cap of events: In the recently released Annual Report of the BIS: Bank for International Settlements (commonly thought of as the “central bank’s central bank”) the BIS made a rather ominous recommendation to it’s member banks: Pop this bubble now. Their specific language wasn’t quite so direct, but the message was just as clear.

The risk of normalising too late and too gradually should not be underestimated… The trade-off is now between the risk of bringing forward the downward leg of the cycle and that of suffering a bigger bust later on .



Few are ready to curb financial booms that make everyone feel illusively richer. Or to hold back on quick fixes for output slowdowns, even if such measures threaten to add fuel to unsustainable financial booms,” …



“The road ahead may be a long one. All the more reason, then, to start the journey sooner rather than later.”

As we noted last week, there are a couple of fascinating things to note about this recommendation. First, for anyone who thinks that the concept of intentionally crashing the stock market is the stuff of conspiracy theorists, that notion is now dead and buried. It’s extremely clear from the BIS’ language, that the concept of initiating a collapse is openly discussed as a policy measure. This was a direct recommendation to bring on the crash – or as they say so colorfully, to “bring forward the downward leg of the cycle”.

http://notquant.com/wp-content/uploads/2014/07/bisvsyellen.jpg

More kabuki?

But what else is fascinating is that just days after the BIS report was released, Janet Yellen seemed to counter the BIS in her presentation to the IMF:

“At this point, it should be clear that I think efforts to build resilience in the financial system are critical to minimizing the chance of financial instability and the potential damage from it. This focus on resilience differs from much of the public discussion, which often concerns whether some particular asset class is experiencing a ‘bubble’ and whether policymakers should attempt to pop the bubble. Because a resilient financial system can withstand unexpected developments, identification of bubbles is less critical.”

What Yellen seemed to be saying — quite possibly in direct response to the BIS’s recommendations — is that the Fed isn’t in the business of popping bubbles, nor does it see a reason to intervene in their development.

So to summarize: The BIS publicly recommended popping the bubble now… and Yellen said no.
So what’s going on?

We could take all of this at face value if we chose: The BIS playing hawk, and the Fed playing dove. And that might well be the case — as to some extent Yellen is still something of an unknown entity.

But there is one more twist to the puzzle: Yellen has openly stated that she would not be offering clear guidance to the market as her predecessor had advocated. The age of Fed-glastnost is apparently coming to an end.

So indulge us for a moment as we present another possibility:

Yellen is going to orchestrate a controlled collapse. Or, at least one which we hope is controlled.

There are political considerations to be made, however: The Fed, which has not only come under intense fire for overt market manipulation, but which is also deeply concerned with market perception, simply cannot afford to be perceived as an instrument of the market’s collapse. To be seen as the instigator of a crash could do irreparable harm to the institution.

http://notquant.com/wp-content/uploads/2014/07/yellen_do_not_say.jpg

Pop bubbles? Who us?

So just maybe the Fed fully intends on heeding the advice of the BIS, and is strategically positioning itself as a stalwart dove to shield itself from the public fallout of it’s orchestrated financial calamity. A particularly sound play from a political perspective in the event that things don’t go as smoothly as planned.

One thing is certain at this point: An intentionally orchestrated crash is the direct recommendation of the BIS, per it’s annual report. That this action exists as a potential policy measure is now confirmed.

The remaining question is: Would the Federal Reserve pursue such a policy measure openly, or behind the same curtains from which most of their historic policies were enacted.

As we re-think Mrs. Yellen’s speech to the IMF, we are less certain that the Fed is as unwilling to intervene as Mrs Yellen would have us believe. Bringing forward the next leg of the cycle, may well be on the Fed’s agenda.

http://www.zerohedge.com/news/2014-07-08/fed-going-attempt-controlled-collapse

Serpo
9th July 2014, 01:40 PM
The FED is a controlled collapse .............

gunDriller
9th July 2014, 02:14 PM
We've been watching a controlled collapse since at least 9-11. And that's not a sideways reference to the demolition, I'm referring to the economy.

The economy has contracted more in some areas of the country than others. Typically rural areas and cities that don't have a toe in the energy, tech, or Jewish-dominated (finance, Hollywood, war-toys, tech) markets.


When you see a dozen highly armed men pepper-spray and tase a single depressed woman over a 4 hour period, in a showdown that was initiated by the police - that's not just a bunch of cruel motherfvckers. That's a jobs creation program. They turn a minor event, something that could be dealt with by one person with some coupons for lodging and food, into 8 hours' each of work for 12 men - and their supervisors. That's 3 weeks of work.


I have seen doctors do the same thing. Withhold a needed medication unless you signed up for a far more expensive exam or elective procedure. Basically, they don't want $175 a year patients. They want $3500 a year patients.

Ponce
9th July 2014, 02:20 PM
Anything that they do will be to protect themselves from us and not to helps us......anything else is bull.

V

osoab
9th July 2014, 05:49 PM
QE is to wind down in October

FOMC Minutes Show Fed Fears Investors Are Too Complacent; QE To End In October (http://www.zerohedge.com/news/2014-07-09/fomc-minutes-show-fed-fears-investors-are-too-complacent-qe-end-october)Submitted by Tyler Durden (http://www.zerohedge.com/users/tyler-durden) on 07/09/2014 - 14:01

Serpo
9th July 2014, 07:57 PM
Maybe they will taper the counterfeiting through Belgium.........




Or maybe they increase printing by 20billion and then taper that so its only 15billion they print.......................at least they have TAPERED.........

Sparky
9th July 2014, 08:09 PM
Like gundriller says, we are in the midst of a controlled collapse. The Fed knows that trouble lies ahead. This is why they have ballooned their balance sheet from $1Trillion to $4Trillion in just 6 years. This give them control of the pace at which to unravel the system, whether it be over 5 years or 50 years. As long as most people don't understand the system, they can get away with this.

I'm in the camp that says the "collapse" will be a prolonged degradation in standard of living over the next 20 years, with short-lived crises popping up regionally on a regular basis. I expect price spikes and disrupted availability occurring locally or regionally for periods of days and weeks, or perhaps months in some cases. These will occur with food, water, energy, and other necessities. Temporary regional and localized problems will occur with money and credit and paper assets. TSHTF will not be spread evenly; it will come in waves and hit specific areas. It will not be a complete meltdown. This is how the collapse will be "controlled".

mick silver
13th July 2014, 05:35 PM
back to the top

Cebu_4_2
13th July 2014, 08:28 PM
Like gundriller says, we are in the midst of a controlled collapse. The Fed knows that trouble lies ahead. This is why they have ballooned their balance sheet from $1Trillion to $4Trillion in just 6 years. This give them control of the pace at which to unravel the system, whether it be over 5 years or 50 years. As long as most people don't understand the system, they can get away with this.

I'm in the camp that says the "collapse" will be a prolonged degradation in standard of living over the next 20 years, with short-lived crises popping up regionally on a regular basis. I expect price spikes and disrupted availability occurring locally or regionally for periods of days and weeks, or perhaps months in some cases. These will occur with food, water, energy, and other necessities. Temporary regional and localized problems will occur with money and credit and paper assets. TSHTF will not be spread evenly; it will come in waves and hit specific areas. It will not be a complete meltdown. This is how the collapse will be "controlled".

I was in the '70s, the "energy crisis" worked quite well, now we have new SUV's getting 20 MPG... what a fucking waste. All it did was suck the money out of the general population. Companies had to outsource to stay in business, and now we have the amerika they wanted. Look at Detroit, the most prosperous place on the planet.