Don’t Trust The Fed

Posted By Darren Winters on Aug 4, 2022

Don’t Trust The Fed

Perhaps don’t trust the Fed could be a more relevant trader investor mantra, rather than the well-known don’t fight the Fed.

Cast your mind back to just before the financial crisis of 2008 and the Great Recession which followed, which many believe we have not exited. 

Remember the former chairman of the Federal Reserve, Bernanke taking to the stage and denying a debt housing market crisis just before the financial crisis of 2008. 

Here is an archived clip of former Fed chair Bernanke supporting the bubbly housing market. “Fundamentals are strong, we have got a strong economy, and we have got demographics supporting housing,” said Bernanke. 

So Joe six-pack and family rushed out to buy a home at the top of the housing bubble, mortgaged to the maximum.   

Don’t trust the Fed mantra would have saved households a lot of heartaches in the 2009 Great Recession

How many people were suckered into buying at the peak of the housing bubble only to end up with a mortgage estimated at more than the value of the home?

More recent examples where don’t trust the Fed would have saved investors from huge losses. 

I wrote a piece entitled “The everything bubble ripe,” August 2019  

“So everything bubble is ripe for those who believe that the Fed’s monetary policy is exhausted.”

Don't Trust The Fed

I remember at the Time Fed chair talking about how the economy was in a good place, unemployment was low, etc.

Nevertheless, the Fed implemented a hawkish rate cut.

“A hawkish rate cut is an oxymoron, the economy is either ticking over nicely or it isn’t.

The poker face doesn’t work when the cards are on the table and the Fed Chair Powell has shown his cards with a rate cut,” I wrote. 

Don’t trust the Fed, the economy was tanking in Q3 2019, despite a decade of the greatest monetary easing experiment in the history of finance

Then came the pandemic global lockdowns which justified even more central bank printing. Every crisis whether it be the 1933 Depression, the 1970s oil crisis, the 2008 financial crisis, or the global lockdowns has been met with more central bank printing, more overreaching government and more currency debasement.  

Don’t trust the Fed on inflation

Remember Fed chair Powell’s inflation narrative from there is no inflation, to transitory inflation to then entrenched inflation.

The global lockdowns have disrupted supply-demand dynamics and possibly triggered a global depression. The civil and political instability we are witnessing on every continent is the result of transitional friction to the great reset agenda.        

The current monetary system is under extreme debt stress and if central banks decide to deleverage debt with hard money we will experience a biblical depression. But history suggests paying down the debt with hard money will be abandoned, in other words, the money printing will continue. 

The takeaway is that cash is trash, and with every monetary crisis or transition of a monetary system, asset prices tend to rise. 

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