Warning: The Bubble Is About to Pop

When it does, who’s going to get the blame and why? A false narrative is already emerging.

The media will debate about whether the Federal Reserve is raising rates too much or too quickly.  Donald Trump has already picked up and ran with this false narrative criticizing the Federal Reserve for raising rates.  In typical politician fashion, he’s now saying the exact opposite of what he said during his campaign when he called the economy a big fat ugly bubble based on low interest rates. But Trump being a fraud when it comes to the Federal Reserve is nothing new as we pointed out long ago. Do not be led astray by this false narrative.  The Federal Reserve is certainly to blame for the coming bust, but not because they are “too tight” with interest rates now. The actual problem is that rates are rigged to begin with and that they were rigged too low for far too long.

As we explained before, a bust was inevitable the moment the Federal Reserve embarked on the path of rigging interest rates to 0%. You can’t build a healthy economy by centrally planning interest rates to encourage debt, consumption, and reckless speculation. This is the exact opposite of a healthy economy which is built on savings, production, and thoughtful investment. While it seems to “work” in the short term as asset prices are driven sky high and a consumption binge ensues, it’s just a house of cards. The debt and malinvestments that stack up during the “boom” eventually become unserviceable as interest rates rise.  The question about the ensuing collapse is only a matter of timing. We are getting close to the tipping point as interest rates have already started to affect some of the bubbles within the economy such as housing and autos as well as the federal debt servicing expense.  This will spread as interest rates continue to move higher.

Buckle up.  This is the biggest bubble in history so it will be the biggest bust in history.

 

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2 thoughts on “Warning: The Bubble Is About to Pop

  1. Pete says:

    Is gold and crypto both good hedges against?

    • endthefed says:

      I think gold is an appropriate hedge against what’s coming. The Fed will most likely reverse course at some point and turn on the printing presses again. I’m not sure about cryptocurrencies. I consider them to be a part of the speculative mania and they might go down with the rest of the speculative assets.

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