Addicted

No “Recovery” From the Fed’s Dope Were you forwarded this email? [Sign-up to The Daily Reckoning here.]( [Unsubscribe]( [Daily Reckoning] Addicted - Wealth conjured from thin air will return to thin air… - The Fed is the “greater fool”… - Off the road to recovery and over the falls… Recommended Link [How high could this stock go this year?]( [Read more here...]( Legendary trader Dr. Nomi Prins revealed the name of one of my favorite reopening stocks… If you’ve missed out on the airlines… the hotels… the cruise ships… the theme parks… the bank stocks… all the reopening stocks that have soared already… You have one last chance to catch up on the biggest gains of the year. [Click Here To See How]( San Francisco, California April 3, 2021 Editor’s note: We are told the economy is on the road to recovery. But today, Charles Hugh Smith shows you how the real recovery hasn’t occurred — recovery from the Fed’s free money that has created serial bubbles. [Charles Hugh Smith] Dear Reader, I realize nobody wants to hear that most of their "wealth" was conjured out of thin air, but there it is: and that which was conjured out of thin air will return to thin air. Something for nothing is a powerful attractor, but it doesn't offer a narrative that the delusionally self-important demand: I earned this by working hard and being smart. Oh, right, yeah, sure. It had nothing to do with currency being created out of thin air and made available to insiders, financiers, banks, etc., or being able to leverage this new money into ever-larger bets, all guaranteed to be winning trades by the Federal Reserve. Nope, you're all stone-cold geniuses. Back in reality, tangible assets — real as opposed to financial conjuring — are at historic lows relative to financial-bubble assets. Tangible assets represent such a meager proportion of total assets that we might assume they could slip to zero without affecting our "wealth" much at all. The Fed Is the “Greater Fool” If we compare financial-bubble assets to the nation's Gross Domestic Product (GDP), a (flawed) measure of real-world activity, we find they’re worth over six times the nation's real-world economy. This reflects what happens to valuations when "money" is created out of thin air and then leveraged into fantastic, monstrous illusions of "wealth." Assets are chasing their own tails higher, completely disconnected from the real world. Here’s the sole dynamic driving assets higher: the Fed is the “greater fool.” What do I mean? Everyone knows the Fed will always save the day. Should valuations falter, buyers know there will always be a greater fool willing to pay more for an overvalued asset because the Fed has promised us it will always be the greater fool. This obviously isn’t just plain old normal healthy "capitalism" at work. So by all means, lavish yourself with praise for your hard work and genius, and keep chasing your own tail because the Fed has promised us it will always be the greater fool. What a pretty fantasy. But aren’t we on "the road to recovery?” The "recovery" has an unfortunate but all-too accurate connotation: recovery from addiction. Recommended Link [Man Who Picked Apple Under $2 Issues NEW Urgent Buy]( [Read more here...]( He picked Apple back in 2003… BEFORE shares skyrocketed almost 48,000%. He picked Bitcoin when it was trading for just $428. Since then, it has exploded over 9,000%. And now he’s saying this will be the hottest investment of 2021. [Click Here To Get The Ticker (No Strings Attached)]( No Recovery From Addiction to the Fed’s Free Money The "recovery" we've been told is already accelerating at a wondrous pace does not include any treatment of the market's addiction to Federal Reserve free money for financiers. Rather, the "recovery" is entirely dependent on a never-ending speedball of Fed smack and crack and a booster of Fed financial meth. The addiction to Fed speedballs had already turned the entire financial sector into a casino of lunatic junkies who delusionally believe they're all geniuses. Beneath the illusory stability of the god-like Fed has our back, the addiction to free money has completely destabilized America's social, political and economic orders by boosting wealth and income inequality to unprecedented extremes. While it's convenient to blame the carnage on the response to the Covid pandemic, the damage to the speedball-addicted financial system had already reached extremes before the pandemic. The addiction began decades ago, but like all addictions, the amount of stimulus needed to maintain the high keeps expanding, and eventually the need can't be met without toxic doses: then the junkie addicted system collapses. Both Smack and Crack The ever-greater doses of Fed speedballs have unleashed both deflation (smack) and inflation (crack). Real returns on ordinary savings have been crushed to zero (deflation of ordinary income), and as the cost of capital/credit have been dropped to near-zero, then the purchasing power of wages has deflated while the speculative gains of those who own assets have soared (asset inflation). By lowering the cost of capital to zero, the Fed has generated fatally perverse incentives. With the cost of capital at zero, it makes sense to buy labor-saving technologies to replace costly labor — labor that is costly to employers because of America's perverse sickcare system, which burdens employers with ever-higher costs. Not only have the Fed's free-money speedballs made it essentially free for financiers to speculate in the stock market casino, the Fed has rigged the game and bailed out its cronies whenever their bets soured. This has fueled infinite moral hazard: Go ahead and gamble with free money from the Fed, and go ahead and leverage it up 10-to-1 because the Fed will bail you out if you lose, but if you win, the stupendous gains are yours to keep. The problem with addiction is you're dependent on the high, no matter what the eventual consequences may be. Long-term consequences are ignored because all that matters to the addict is to get the next Fed speedball and throw it on the gambling table to keep the high going. Our entire economy is now dependent on ever-expanding speculative gains. Should the casino winnings falter, our economy will crash. And given the primacy of money and consumption in our society and political system, the financial collapse of the Fed's casino lunacy will sweep those systems over the falls. Recommended Link [Stop: Do Not Buy A Single Other Stock Before April 30th, 2021]( [Read more here...]( This is the date President Biden is set to sign a divisive new policy into law… And experts predict it could tilt the entire stock market. Although the normally cautious Warren Buffet made a $15 BILLION move in anticipation, regular Americans look set to profit too. [Get Full Details Here]( The Fatal Consequences of Addiction As the level of Fed smack and crack needed to maintain the high increases, system fragility increases geometrically. The irony of addiction is that when the crack/meth kicks in, the addict feels god-like, in control, invulnerable. This artificial confidence is entirely illusory, a deadly combination of delusion and hubris. In this delusional state of supreme confidence, the addict loses touch with reality, i.e. the fatal consequences of the addiction. That's the detour we've taken in becoming addicted to the Fed's free-money speedballs. Now the road to recovery has ended in a trackless wilderness. There is no way back and no way forward. The addict's addled confidence will push them into the ice-cold river. And as they're swept over the falls, the realization that it was all a drug-induced delusion will come too late to make a difference. Regards, Charles Hugh Smith for The Daily Reckoning Editor’s note: Physical gold (and silver) can help protect your wealth as the system goes over the falls. And we recommend [Hard Assets Alliance]( to help you get started. Or if you already own gold or silver, to acquire more at today’s bargain basement levels. These folks are extremely trustworthy (we know because we own a share of the business). And don’t worry: If you think it’s difficult to get started owning your own physical gold, think again. You won’t have to deal with pushy salespeople or phone calls. You can do it all online right now. [Go here to open an account here with the Hard Assets Alliance today.]( It costs you absolutely nothing to establish your account. --------------------------------------------------------------- Thank you for reading The Daily Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Charles Hugh Smith][Charles Hugh Smith]( is an American writer and blogger, and serves as the chief writer for the blog "Of Two Minds". Started in 2005, this site has been listed No. 7 in CNBC's top alternative financial sites, and his commentary is featured on a number of sites including Zerohedge.com, The American Conservative, and Peak Prosperity. Add feedback@dailyreckoning.com to your address book: [Whitelist us]( Additional Articles & Commentary: [Daily Reckoning Website]( Join the conversation! 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