Central Banks Finally Own Up to the Crisis They Created

Central Banks Finally Own Up to the Crisis They Created
Photo by Rawpixelimages

From Brandon Smith

As the Federal Reserve continues its fastest rate hike cycle since the stagflation crisis of 1980, a couple vital questions linger in the minds of economists everywhere:

When is recession going to strike?

When will the Fed reverse course on tightening?

The answers to these queries are, at the same time, simple and complex.

First, the recession has already arrived.

Second, the Fed is not going to reverse course, though they will stop tightening for a time.

The recession has already arrived

The most widely-accepted definition of a recession in the U.S. is two consecutive quarters of negative GDP growth. We already experienced that in 2022, so, the Biden administration and its partisan economists within the mainstream media tried to change the definition. The Federal Reserve also ignored deflationary signals throughout the last year and evidence suggests they even tried to hide the downturn with false employment numbers.

For a few years I predicted that the establishment would shift into a monetary tightening phase and they would continue with interest rate hikes and balance sheet reductions until markets break and the system destabilizes. That prediction has proven accurate so far, and the data shows that elements of a deflation environment has already been created.

The St. Louis Fed recently and quietly published data indicating that the U.S. is now entering a recession. This admission was posted right before the new year, clearly as a means to avoid wider media attention. The news also comes not long after the Philadelphia Fed revised their 2nd quarter labor growth numbers, erasing a whopping 1 million jobs from their original estimates.

The implication is that the Fed may have deliberately misreported jobs growth.

Why?

Because the central bank wants to continue monetary tightening (and the subsequent economic decline) and they need positive employment numbers in order to justify rate hikes.

The question we need to ask ourselves is why, after over a decade of easy money and quantitative easing (QE), is the establishment now so insistent on popping the bubble now?

Here’s why the Fed is determined to destroy the bubble it created

I can’t say exactly why the timing for the crash has been scheduled for 2023; I would have to be a mind-reader to do that. What I can say is that the crash will be dramatic and, as I noted in December, this crash will probably accelerate in March/April (not long after the Fed hits a 5% interest rate).

Does this mean the central bank will pivot back to stimulus measures? No, it does not.

I believe the Fed will stop rate hikes at around 5% for a time, but stimulus will not return.

Also, a pause in hikes does not mean they will not restart tightening if price inflation remains high. Keep in mind that the Fed printed uncountable trillions of dollars since the 2008 credit collapse, and they created over $8 trillion in 2020 and 2021 alone in the name of economic stimulus to combat the crisis caused by Covid lockdowns.

The sheer amount of dollars floating around the world is truly epic. For this reason alone, inflation is not going away anytime soon.

For example, the U.S. housing market has seen at least 10 consecutive months of sales declines as rates increase, yet prices remain extraordinarily high. In fact, nearly every sector of the consumer market is suffocating from high prices, and climbing interest rates have done little to pull them down. The Fed has room to declare a rationale and a mandate for tighter credit and no QE for many months to come.

Of course, the Fed created the stagflationary crisis in the first place, and now their “solution” is set to make things even worse. I have held and continue to hold to my theory that the central bank is deliberately triggering an economic crisis.

All of their actions support this theory.

The average middle class citizen faces a serious uphill battle going into the new year, and not just in the U.S.

The IMF has admitted that at least 30% of the world will enter recession conditions in 2023 and that the scenario will be “tougher” than last year as the US, EU and China see their economies slow. China, the largest exporter/importer in the world, is witnessing a dramatic downturn in exports which suggests that global consumer activity is tumbling.

The IMF, not surprisingly, is still trying to blame Covid and the war in Ukraine for economic developments that central banks and corrupt governments are completely responsible for. This kind of disaster does not gestate in the span of a year, or even a couple of years – it can take a decade or more to inflate the massive financial bubble that held markets together up to 2020, and it takes strategic policy planning to pop that bubble in a way that is timed to coincide with a regional war.

Ukraine has nothing to do with current economic developments.

Not a thing.

The stagflation crisis started well before the war was launched. Covid has nothing to do with the crisis either; Covid is essentially dead, but the central-bank-created global inflation lives on.

So, as job losses skyrocket this year, as stocks tank and as sales plummet, remember this: the people who are responsible for the entire mess are the same people who are going to come to you one day soon and offer to “save” you and your family from all this economic strife. If you’re already suffering, if you’ve seen your wealth destroyed and your future plans wiped out, you’ll be much more receptive to their promises of salvation.

They’ll say that all they need is more power and more centralization to stop the bleeding and make everything okay again.

This is a lie. As Rahm Emanuel famously said, “Never waste a crisis.” A crisis is always an opportunity for authoritarian-minded governments to seize more power and greater control, always a chance to make the population more depended on the government.

And if you don’t have the crisis you need to get your way, what do you do? You create one. To be clear, I do not think the coming economic crisis is “fake news.” It will be real, destructive and utterly catastrophic for the unprepared.

By “unprepared” I mean individuals and families who have let themselves become dependent on the government for their wellbeing. Who have let themselves believe in the U.S. dollar as a store of value – and who have failed to diversify their savings with assets whose value doesn’t depend on the whims of the Federal Reserve. Hard, intrinsically-valuable assets like farmland, livestock and physical precious metals (especially physical gold and silver) aren’t just inflation-resistant. They aren’t just independent of the ‘strength” of the dollar for their value. They’re prized during times of stability for their utility and as stores of value. They’re even more valuable during times of crisis as safe havens that have real, tangible value that can’t vanish overnight or be inflated away.

Don’t trust your government and their scapegoat narratives. Be on the lookout for crises (manufactured or natural) that are used to chip away your freedoms.

Trust in yourself and in the liberty minded people around you – and trust what history has shown to be the only truly valuable things worth owning.

Brandon Smith has been an alternative economic and geopolitical analyst since 2006 and is the founder of Alt-Market.com.

The views and opinions expressed in this article are those of the author and do not necessarily reflect those of Birch Gold Group.

2023, brandon smith, Featured, federal reserve, recession