And the Fed keeps doing it

[Bill Bonner’s Diary]( And the Fed Keeps Doing It By Bill Bonner Thursday, December 16, 2021 [Bill Bonner] YOUGHAL, IRELAND – Don’t forget. We’re cleaning out our desks, putting our things in cardboard boxes… and saying misty-eyed farewells to the Legacy team. It’s been fun. But now, it’s time to try something new. A new adventure. A new way of staying in touch with dear readers. And a new expedition into a new and treacherous – financial world. [We hope you’ll join us]( And now, back to our regularly scheduled programming. Birds do it. Bees do it. Even educated fleas do it. Give them more money from the Federal Reserve… and interest rates below the rate of inflation… and everybody does it. Borrows money, that is. And who does it best? The U.S. government… Borrower Numero Uno in the whole world. It borrows so much – nearly $6 trillion added to its debt over the last two years – it could never do so honestly. It has to connive with the Federal Reserve to provide more cash and keep interest rates low. Recommended Link [Silicon Valley’s NEXT Secret Tech Revealed [#1 Free Stock Pick]]( [image]( An unstoppable new technology is streaming out of Silicon Valley. It’s called: [“M.T.A.”]( Yahoo Finance says… “[M.T.A.] could ultimately become a multi-trillion-dollar market as it transforms our lives” NASDAQ reports this… “Could be like buying internet stocks back in the 1990s – before they went on to soar 10X, 20X, even 100X or more” The CEO of NVIDIA, says “[M.T.A.] is where we will create the future and transform how the world's biggest industries operate” Soon this could become the [biggest news story in America…]( That’s why elite investors and early adopters are jumping in head-first... [Click here for all the details. Revealed: [#1 Free Stock Pick]]( -- “Inflate or Die” Trap But now, the central bank is in a tough spot. It encouraged people to take on debt. So if it raises rates… they will lose their investments, their businesses, even their homes. Billionaire investor and hedge fund manager Ray Dalio sees the “[Inflate or Die]( trap; MarketWatch reports: Ray Dalio warns Fed’s hands are tied and higher U.S. inflation is sticking around. Democracy, maybe not. Yes, the Bridgewater jefe understands that the Fed cannot corral runaway prices… and that inflation is ultimately incompatible with consensual democratic capitalism. And word is getting around. Even CNN sees the “Inflate or Die” trap: The good news is that the Federal Reserve knows how to fight inflation: By tapping the brakes on the economy. The bad news is the harder it hits the brakes, the greater the risk of an accident that ends the economic recovery, freaks out financial markets – or both. “The Fed knows what to do, but they don’t necessarily know how to do it without squashing the economy,” Lisa Shalett, chief investment officer of Morgan Stanley Wealth Management, told CNN. Squashing the economy? Yes… and squashing the elite, too – which just happens to control Congress, the press, the administration, the universities, and the central bank. [Featured: The Truth Behind the Global Chip Shortage]( If monetary policy would go back to normal, stock prices would go back to normal, too. [As we told you on Tuesday]( “normal” for the stock market used to be about 80% of GDP. With U.S. GDP at about $23 trillion right now, that would put the total value of all stocks – mostly owned by the top 10% of the population – at around $18.5 trillion… or about $30 trillion lower than they are today. Almost all of the losses would come out of the pockets of the elite. The elite would lose power, too. The ruling party would be voted out of office… And those who take over would be warned: Don’t cut off the money. Recommended Link [Are you ready for Congress’ “Wealth Transfer Act”?]( [ad_img]( The mainstream media will NOT cover this story… But luckily Teeka Tiwari is revealing all the details of this terrifying new bill that’s working its way through Congress. He’ll even give away the name and ticker of his #1 investment for this new trend. [Click here to see it.]( -- The Fed Rolls Over So, what did the Fed do yesterday? Did it throw the switch, raise rates, and stop “printing” new money? Or will it let the money machine keep working as long as possible? Here’s MarketWatch: U.S. equity benchmarks closed sharply higher Wednesday, and the S&P 500 missed a record closing high, after the Federal Reserve announced a speedier reduction of its monthly asset purchases in the face of persistently elevated inflation. Fed policy makers also now think official interest rates could rise three times in the coming year, rather than the sole hike penciled in earlier. That’s right. As expected, the Fed is rolling over. Instead of putting out the inflation fire, it will reduce the rate at which it adds tinder! And nobody, except the financial press, was fooled. But who cares? Not investors. They’re bidding up stocks, sure that the Fed still has their backs. And not the federales either. At the current inflation rate, the real value of federal debt is going down at about [$1.4 trillion per year](. And the elite? They’re in power… and getting richer. What’s not to like? Recommended Link [Holy Cow, Only $19!]( [ad_img]( “Hi, my name is Jeff Clark. For the past 36 years, I’ve helped people from all walks of life make money in the markets. Retired stockbrokers… presidents of companies… people with almost no financial experience… and everything in between. But I haven’t done it the usual way… My method is different. It’s unlike anything you’ve probably ever seen before. [We’re unveiling it right now for just $19.]( That’s the lowest price my publisher has EVER offered for a trading research service… And it won’t be available for long. [Watch a ‘10-second live demo’ of this method]( to see how it works." [Watch Now!]( -- What Smart Central Bankers Do One of our dear readers said he learned in school that “nobody knows what causes inflation.” He’s right, of course. In the real world of economics and finance, nobody knows anything. And inflation is especially wily… devious… hard to control… and impossible to fine tune. How it goes from smoke to flame is poorly understood. But there are things you shouldn’t do – even if you don’t know exactly how it works. We don’t know when a bull is going to charge… so we stay out of its way. We don’t know if Hell actually exists. But we’re not going to rob a retiree, murder a Democrat, or rape a nun just to find out. [Featured: (Why America Is Failing) — 1,000+ Pages of Evidence Collected]( Likewise, a prudent central banker doesn’t multiply a nation’s monetary base three times since 2008 – simply because he doesn’t know the combustion point of paper money. A prudent central banker knows what he doesn’t know. He doesn’t know exactly how much new money he can print before inflation rates flare up… But he knows it will be hard to bring the fire under control later. If he is stupid, he says to himself, “No one knows what causes inflation, so I might as well print more money.” But if he is smart, he says, “Geez, there’s no good way out of this. If I cut off the money, they’ll act as if I had horns and a tail, and get rid of me. But if I keep printing, things will seem okay for a while. I might even be considered a hero, like that fool Bernanke.” So he keeps doing it. Regards, [signature] Bill P.S. Don’t forget to [sign up for our new service](. --------------------------------------------------------------- Like what you’re reading? Send your thoughts to [feedback@rogueeconomics.com](mailto:feedback@rogueeconomics.com?subject=Investors are either very smart… or very stupid.). --------------------------------------------------------------- FEATURED READS [Use Investment Losses to Your Advantage Before the End of the Year]( Every time you sell an investment, outside of retirement accounts, there’s a tax consequence… Our colleagues at Palm Beach Research Group want to help you protect your big gains this year with a quick and easy way to offset any losses… [Diet Sodas Are Disappearing From Store Shelves]( Companies are rebranding diet sodas as the word “diet” has fallen out of fashion – especially for Millennials and Gen Z-ers. “Zero sugar” has replaced “diet” for many no-calorie soft drinks. Consumers want new things, which opens the door to a lot of competition in the soda market… MAILBAG The mask debate continues among Dear Readers… I keep hearing this analogy between the mosquito and the chain link fence. But, isn't the real target of the masks the aerosol particles/droplets that carry the virus? The droplets should be easily blocked by most quality masks and the virus would probably dissipate very rapidly if not inside the droplets. My understanding could well be wrong and I would be glad to be corrected if so. – Mohan R. Why do I wear a mask? Because it makes that elderly lady at the supermarket feel safe passing me in the aisles and because it keeps peace at home. Also, I hope it tells people I'm proud not to be a part of Trump's cult. – Leo G. The fellow that said masks are totally ineffective and it's not rocket science needs to realize that most virus particles ride on moisture through the air. Viruses need moisture to survive for very long too. But if the moisture can't make it through the mask then it prevents most viruses. It is not rocket science here. All one has to do is on a cold morning where you can see your breath and literally how far the vapor goes through the air. Put on a mask and watch what happens. It ain't rocket science. I don't like having to wear a mask but will on occasion unless demanded. I personally have had the disease, and have shots too. I feel I am immune to it, but have noticed that other diseases seem to be much less than before masks. – Tim B. Geez! I've got to respond to Alan S. and all of Bill's other dear readers who point out that viruses are much smaller than the holes in face masks. True. But, what they fail to take into account – or are too ignorant to realize – is that the viruses are NOT floating around in the air on their own. They are riding in droplets of exhaled moisture, spit, and snot. And the holes in masks ARE small enough to catch those droplets. That's what they're designed to do! Thus, masks are effective. Why else would doctors wear them in the operating room! Wise up, people! – Dale A. Lastly, one reader responds to Bill’s recent writings on the state of the government and how the U.S. gets out of this mess… Think we need lots of gear to ride this ship down and come back up to the surface. That will clean out a lot of criminals in our governments, cause maybe they can't swim. Then rebuild this country using the original constitution and a currency backed by precious metals. This is too simple a solution, and will cause a lot of pain for the middle class. – Richard S. How do you see inflation playing out in 2022? Will the Elite ever let the Federal Reserve cut off their supply, as Bill writes about? Write us at [feedback@rogueeconomics.com](mailto:feedback@rogueeconomics.com?subject=And the Fed keeps doing it). 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