A Command Economy In The Command Of The Central Banks

If you were to tell the average American back in say the 60’s that in 50 years the US would be a “command economy” they would probably react as if you’d lost your mind. Back in those days the Soviet Union was a command economy with the government controlling everything with its notorious “5-year plans”. Fast forward to now and the United States and other economic blocs like Europe are in the control of Central Banks. It was Mayer Amschel Rothschild who famously said “Permit me to issue and control the money of a nation, and I care not who makes its laws!” Thus we now have a situation where the Central Banks control economies and societies and are in reality the government, so that politicians are reduced to being their operatives. The voters are hapless ignorant pawns whose opinions are molded by a media that is also controlled by the Central Banks and the elites generally. Democracy is a farce designed to make the masses think they have a say in things by allowing them to go and place their puny worthless vote on one day every four or five years. Democracy is an absurd concept anyway, because you cannot have a situation where ignorant stupid people have the same say in things as intelligent, discriminating people who they vastly outnumber. Where this occurs, as it does in Western societies, the masses’ opinions are shaped by their favorite media, which are controlled by – you guessed it – the ruling elites – so they are simply sheep who can be guided in whatever way their rulers want. On those rare occasions when the masses attempt to break free from the control of their masters, as with the Brexit vote in the UK, the elites engage in procrastination and subterfuge until they succeed in getting their way. In the case of Brexit, the UK Prime Minister Teresa May, who is an elites’ stooge, has fashioned a win – win deal for the Brussels elites. The thinking behind it is that it is “Brexit in name only” – it is so bad for Britain that it would be better off staying in the EU, which means that there is a high chance that it will be rejected by the British parliament, and that is exactly what we are seeing. If it is rejected then the EU intends to “get it’s foot in the door” via a 2nd referendum, and with the masses now thoroughly fed up with the whole business there is a good chance that they will swing in favor of staying in Europe, especially as their opinions will have been worked on in the meantime by a scaremongering elite controlled media aiming to put them off the idea of leaving Europe. If that doesn’t work then they only have to stall for time until 2020 when the Lisbon Treaty comes into effect, and at that point Britain is an EU vassal state that cannot make decisions for itself any more, and will lose the power to opt out once and for all. So you see they are not going to let 60 million potential indentured servants break free simply because they want to.

It is amazing how easy it is to find the answers to seemingly complex issues by asking the simple question “Who stands to gain?” For example, applying this question we quickly find the answers to the following questions – “Why was Iraq invaded?” – answer: Saddam Hussein threatened to sell his oil in a currency other than the dollar, which would have undermined dollar hegemony, and Israel wanted it “cut down to size”, so it was invaded to effect regime change. “What was 9/11 all about?” – answer: to provide an excuse to invade Iraq (and Afghanistan). “What is the so-called “War on Terror” all about – answer: to maintain a permanent state of war in order to help justify the Military – Industrial complex sucking $1 trillion a year out of dopey US taxpayers.

This is not a political rant – I simply don’t have time for those these days. There is a reason for making the observations above. The point is this – that the normal business cycle has been interrupted and distorted by the interference of Central Banks, in Europe the ECB and in the US the Federal Reserve, which is not Federal at all and is a private concern run for the benefit of its members. Thus, when the US economy should have been purged and cleansed of excess by a healthy deep recession after the 2008 financial crisis, the Fed intervened with life support in the form of QE (Quantitative Easing) which it kept increasing and repeating so that the economy lurched forward in an undead state like Frankenstein. If we ask why they did this, it brings us back to our central question “Who stands to gain?” The Central Banks’ objective is to gain ever more power and control for itself, and to enrich the elites, which include its leading members. Their goal therefore is to maintain the status quo for as long as possible, because it serves them so well, and to maintain the “new normal” which is interest rates near to zero for themselves, so that they can continue to amass and grow their vast fortunes via arbitrage and speculation, while at the same time applying usurious interest rates to the masses who are forced to take out loans for the necessities of life, which are now seen to include cars and college education (another scam). In this way they drain the wealth of the lower and middle classes into their coffers, and in recent years we have as you know seen the great American middle class buckling under the strain for this very reason. This is why the lower and middle classes are actively encouraged to get into as much debt as possible, so that they can be turned into “debt slaves”, which is the modern face of serfdom. If they don’t run fast enough to keep up timely payments, then they are punished with massive charges for late payment, speeding up their financial depletion.

In the light of all this you should be able to understand why the Central Banks will strive to maintain the status quo for as long as possible. So they would prefer not to see a deflationary implosion that would inflict such privation on the masses that they take to the streets in a mood for revolution. How can they avert this? – simple, just keep printing more and more money to keep the system limping along, and as part of this they have an incentive to keep markets propped up.

Back late last year a bearmarket was starting, but the Fed averted it by doing a rapid about face, signaling that it would reverse course on interest rates and scaling back its assets. We got burned shorting the market again during the recent rally, having correctly called the initial drop, in the expectation that a normal cyclical bearmarket was starting, but Central Bank intervention has stopped it for now. What makes us leery of shorting the market again here even though it looks ripe for another downleg is this: we have alluded to a Fed and / or government massive slush fund used to intervene and prop up the markets but it may go much further than that. The Fed, and other Central Banks like the ECB, have been emboldened by their manipulative experiments in recent years, and have realized that since they can spirit into existence unlimited quantities of money, trillions if they feel like it, they can do far more than just prop up global stockmarkets, they can drive them higher and higher in what would be for them a virtuous circle – they wade in with a few trillion, buying stocks across the board, and before long they are looking good, because the value of their holdings goes up and up, encouraging them to buy more and more, and since they are only human like the rest of us (even if they do have a very high opinion of themselves), they get more and more involved driving a tremendous unprecedented spike which eventually blows the markets to smithereens, and since the great bullmarket from 2009 did not really end with a spectacular parabolic blowoff phase, this scenario could eventuate. This is a truly extraordinary possibility that we need to be aware of. It will have nothing to do with the real world economy and ordinary people will be blighted with an increasing cost of living as a result of accelerating inflation of prices of basic goods due to trickledown from the massive monetary infusions.

On the plus side, if the Central Banks do succeed in driving a massive parabolic spike in markets, our carefully selected stocks should do very well, and when the party ends we will stand ready to flip to bearish and make fortunes when the whole edifice comes crashing down.

The conclusion to this treatise is to repeat and emphasize its main point which is that Western economies and societies have been taken over and are being run by and for the benefit of Central Banks and their associated elites who are now their effective governments, with all politicians being reduced to the position of being their minions, and are aided and abetted by a compliant media which they control. Over the past decade especially they have engaged in unprecedented interference and manipulation of the business cycle, creating money and debt on a vast scale and ironing out and eliminating necessary corrective periods or recessions, which has caused massive distortions and misallocation of capital. The result of all this has been a buildup of debt across all strata of society - corporate, Federal, municipal and private - to monstrous, frightening and ultimately catastrophic levels. Emboldened by what they see as their recent success in these matters, the danger now is that they take center stage in the equity markets, by printing up trillions to drive markets higher and higher eventually into a spectacular parabolic spike, which will be a virtuous circle for them until the music stops, at which point the resulting explosion will be on a par with the cataclysmic eruption of Krakatoa in 1883, which could be heard clearly over 3000 miles away. Egon Von Greyerz of GoldSwitzerland has written a series of lurid and terrifying essays about what will happen when this debt edifice comes crashing down, but of course most complacently dismiss him as a crank, or as an opportunist who is trying to scare people into gold which is his business, but unfortunately for all of us, Von Greyerz is right. It is also worth noting that, not being troubled by scruples of any kind, these elites will also implement NIRP (negative interest rate policy) and engage in bail ins, which is another name for stealing from customer’s accounts – and if the going gets tough they will help themselves to as much of account holders money as they see fit. 

I regard this article as a “work in progress” and it is subject to changes and improvements, possibly involving the addition of charts, and since it has longer-term relevance may be rolled out again later in updated form. Let me know your thoughts and insights, and if they are worthwhile and relevant I may work them in later.