Conspiracy Theorist: 9/15

Don’t blame China

Blame the Fed for the stock market crash

Mark Luedtke

On Monday, Aug. 24, the Dow plummeted 1,100 points at opening before closing down over 500 points. That followed a big loss the previous Friday, and losses continued on Tuesday. Trillions of dollars of phony wealth were wiped out in three days, but the mainstream media barely mentioned the crash as if it were nothing of importance. The financial press had its story ready though. The Toledo Blade reported, “Growing concerns about a slowdown in China had already shaken markets around the world on Friday, driving the U.S. stock market sharply lower. A big sell-off in Chinese stock today caused the rout to continue.”

Blaming China was convenient—our rulers never admit blame for the problems they cause—but it wasn’t accurate. China’s troubles have been going on since June. Nothing new happened in China to trigger the crash. Blaming China for the crash was like blaming the tree you crashed your car into when you were driving drunk and tired in the dark with no lights or brakes.

What was new was the Federal Reserve (Fed) was threatening to raise interest rates in September. The Fed’s fantastic counterfeiting since 2008, expanding its balance sheet from $800 billion to over $4 trillion, has produced the biggest stock market bubble in history. This counterfeit money has disassociated the stock market from the real economy. The high price level is 100 percent dependent on the Fed continuing the zero interest rate policy (ZIRP) it started in 2008 and has kept in place since.

But while inflating the stock market, ZIRP is destroying the real economy. ZIRP is the equivalent of the Fed driving our economy drunk and tired in the dark with no lights or brakes. And we’re all stuck in the car.

ZIRP creates a zombie economy in which companies that are unprofitable and should go bankrupt continue destroying wealth because they can borrow at zero percent interest to sustain themselves. So while the economy is in the boom cycle, it’s really destroying wealth by misallocation of resources, making us all poorer in the process. The bust, while painful, is the cure, wiping out zombies, and it must be allowed to run its course. Unfortunately, the government, especially the Fed, never lets that happen.

David Stockman explains, “That the Federal Reserve’s policies have failed is now so painfully evident that even the political class is awakening to this truth. Rather than re-ignite broad-based, self-sustaining economic growth, the Fed’s loose-money policies (zero-interest rate policy a.k.a. ZIRP, and quantitative easing a.k.a. QE or free money for financiers), have perversely distorted the economy and widened wealth and income inequality.”

Stockman continues, “The abject failure of these policies to aid Main Street while heaping wealth on Wall Street greatly complicates the Fed’s endgame. Given the economy’s dependence on the Fed’s monetary heroin, declaring victory and beating a hasty retreat is not really an option: once the Fed stops delivery of monetary heroin, the economy will go into withdrawal, and the Fed’s failure will be too obvious for even its most ardent backers to deny.”

Despite knowing this, Fed Chairman Janet Yellen had hinted she intended to raise rates in September, and she wouldn’t be dissuaded. Until August 25. Stockman noted, “After just three days of market turmoil the monetary politburo swung into action. This time they sent out [Bill Dudley] to promise still another monetary sweetener. Said the head of the New York Fed,

‘From my perspective, at this moment, the decision to begin the normalization process at the September [Fed Open Market Committee] meeting seems less compelling to me than it was a few weeks ago.’”

This turnaround prompted some to wonder if the crash was engineered.

While China cannot be blamed for the recent crash, its problems are indicative of a global problem. With the Fed leading the way, central banks all around the world have been counterfeiting unprecedented amounts of money. As a result, the phony global boom is about to turn into the biggest global bust in history. We’re in the early stages of an unprecedented global meltdown.

John Ficenec writes, “From China to Brazil, the central banks have lost control and at the same time the global economy is grinding to a halt. It is only a matter of time before stock markets collapse under the weight of their lofty expectations and record valuations.” Even moms and pops are cashing out because they know the big crash is coming.

The views and opinions expressed in Conspiracy Theorist are the views and/or opinions of the author and do not reflect the views and/or opinions of the Dayton City Paper or Dayton City Media and are published strictly for entertainment purposes.

Mark Luedtke is an electrical engineer with a degree from the University of Cincinnati and currently works for a Dayton attorney. He can be reached at MarkLuedtke@DaytonCityPaper.com.

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Reach DCP freelance writer Mark Luedtke at MarkLuedtke@DaytonCityPaper.com.

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