America’s “Helicopter Parent”

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[Sign-up to The Daily Reckoning here.]( [Unsubscribe]( [Daily Reckoning] America’s “Helicopter Parent” - “For 12 long years, the Federal Reserve has stripmined savers and the risk-averse to funnel all the gains to its predatory, parasitic cronies”… - The Fed has become the nation’s “helicopter parent,” and the moral hazard that results… - The middle class has finally gone “all-in” at the casino… Recommended Link [***#1 Buy Signal Of All Time***]( [Read more here...]( After 14 months of real world recommendations, this hot new strategy grew a model portfolio of $30,000 into $168,705… (All by generating an average gain of 21.25% in 6.9 days – per trade!)… Imagine… Instead of checking the market every 5 minutes… Or spending hours of research trying to find “the next big thing”… You can let this simple, reliable, repeatable pattern guide your decisions… It’s perfect for stress-free trading… Folks from all walks of life are already using it… Entrepreneurs… Lawyers… Even a former professional trader! You can use The #1 Buy Signal Of All Time for yourself. [Click Here To Learn How]( San Francisco, California April 17, 2021 Editor’s note: You are doubtless familiar with the term “helicopter parent,” which refers to an overprotective parent who shields her child from the consequences of its actions. Today, Charles Hugh Smith shows you how the Federal Reserve has become America’s helicopter parent. [Charles Hugh Smith] Dear Reader, The decay of America's middle class has been well documented and many commentators have explored the causes. This decay isn't random; the income of the middle class isn't going to suddenly increase at 15 times the growth rate of the income of the top 0.1%. The income of the top 0.1% grew 15 times faster than the incomes of the bottom 90% because that's the only possible output of America's distorted financial system. The same can be said of the rising asymmetry of wealth. The top 10% own 2.5 more wealth than the middle class (51% to 90%) and 34 times the wealth of the bottom 50% as a result of the asymmetric structure of our financial system. In a truly market economy, risk avoidance is rational as risk can wipe you out. But in a financial system rigged to reward the biggest and most aggressive speculators, risk avoidance is irrational because all the gains generated by the economy go to the biggest and most aggressive speculators rather than to the most productive workers or enterprises. Stripmining Savers to Benefit Cronies For 12 long years, the Federal Reserve has stripmined savers and the risk-averse to funnel all the gains to its predatory, parasitic cronies —Wall Street banks, financiers and global corporations, turning rational risk aversion on its head. It's now rational to gamble in the rigged casino, as that's the only avenue left to protect one's stake. In the Fed's rigged casino, it's not only rational to make high-risk bets, it's rational to borrow as much money as you can to increase your stake and leverage your bets — because the Fed has our backs and so every wager on markets lofting higher will pay off. It's crazy not to max out credit and leverage because the Fed has guaranteed every punter will be a winner. This has created a feedback loop — the more the Fed guarantees markets will never be allowed to decline, the greater the incentives to borrow and leverage ever riskier bets in the Fed's casino. Recommended Link [FINALLY… Elon Musk’s Secretive Supplier Revealed?]( [Read more here...]( Forget Tesla. It’s the company that’s been supplying this key piece of tech to Elon Musk that will shock everyone. This is all part of a $30 trillion megatrend. And I’m not talking about blockchain, artificial intelligence, 5G, robotics, or the Internet of Things. This trend is BIGGER than all of those things COMBINED! And if Elon Musk mentions this company in a tweet, there’s no telling how high shares could go. [Get These Details Before It's Too Late]( The Fed Has Become America’s “Helicopter Parent” You might say the Federal Reserve is the nation's helicopter parent, saving everyone from the consequences of their actions. We all know what happens when over-protective helicopter parents save their precious offspring from any opportunity to learn from mistakes and failures: They cripple their child's ability to assess risk and learn from failure, guaranteeing fragility and catastrophically blind-to-risk decisions later in life. Helicopter parents generate a perfection of moral hazard, defined as there is no incentive to hedge risk because one is protected from its consequences. Moral hazard perversely increases the incentives to take on more risk because Mommy and Daddy (the Fed) will always save me / bail me out. The Fed is the ultimate helicopter parent, protecting all the power players in our economy and society from the consequences of their risky actions. No Limit By crushing interest rates to near-zero, the Fed has perversely incentivized increasingly risky expansion of credit, and given the green light to there's no limit, spend as much as you want government borrowing. The Fed's implicit promise to never let the stock market drop for more than a few days — the Fed Put — has incentivized every punter from billionaires to corporations to unemployed people with stimmy checks to max out their credit (or margin accounts) to increase their bets in the market casino. The Fed has implicitly informed the bigger players that they can bet as big as they want because the Fed will always bail them out, transferring private losses to the public via Fed bailouts, lines of credit, backstops, etc. Indeed, now that the Fed Put has been established as unbreakable, it would be irrational not to max out margin to increase one's exposure to risky bets. And voila, margin debt has soared as the Fed has signaled its commitment to bail out every risky bet in the market casino. Recommended Link [Former U.S. Congressman—here’s how rich get richer]( [Read more here...]( Former 12-term Congressman, Air Force surgeon, and Presidential candidate says both political parties are wrong about how the rich REALLY get richer. Take a few minutes to hear him explain what’s going on... what’s coming next... and most importantly, what YOU can do about it, starting right now. [Click Here For Details]( The Middle Class Has Finally Gone “All-in” Now the middle class has been sucked into the dynamic. The middle class has finally surrendered the last of its rational risk-aversion and gone all-in on bets in the Fed's rigged casino. Record inflows into equities is evidence that the middle class has been suckered into the Fed's rigged casino. Why lose money every day in savings and money market accounts when newbie punters are raking in $250,000 a month playing options on Gamestop? More evidence that the middle class has gone all-in is the unprecedented highs in margin debt. Big players don't use margin accounts in brokerages.They have immense lines of credit and tools to leverage their bets. It's the so-called retail traders who use margin. Alas, the majority of this "wealth" is phantom. The Fed can create currency out of thin air, but this isn't real wealth. Real wealth has to be generated by work and investing in productive assets. Lambs to Slaughter The Fed's casino prints trillions of dollars and gives them to the biggest gamblers for free, and so the artificial semblance of free money for everyone who gambles is compelling. Unfortunately, the Fed's casino is only rigged to benefit the Fed's cronies. Everyone else is suckered in to lose whatever they have. The Fed's cronies have been impatiently waiting for the suckers to surrender their rational risk aversion and flood into the rigged casino to share in the Fed's limitless wealth machine: the more you risk, the more you win! The Fed's casino isn't just rigged; it's criminally unstable. Once the phantom wealth evaporates and returns whence it came (i.e. thin air), the unfairness of the Fed's financial system will trigger a Cultural Revolution that the Fed will be helpless to control, for everything the Fed can do will only accelerate the unraveling. The entire financial system is now careening down a treacherous stretch of curves and blind spots, absolutely confident that being dead-drunk on the Fed's promise of never-ending gains in the market poses no risk whatsoever because the Fed has our back. But once the fragile, brittle, disconnected-from-reality system the Fed has created crashes, the Fed will be as powerless as all the other helicopter parents to reverse the irreversible consequences of their meddling with moral hazard. Regards, Charles Hugh Smith for The Daily Reckoning Editor’s note: The central banks blew the doors off the printing press in 2020. Take a look: [Click here for more...]( As you can see by the chart, the U.S. is not alone. The E.U. and Japan are also over the 100% mark. Meaning debt is higher than GDP. The world’s balance sheet is heading in the wrong direction. And they all have the same solution… [Print More Money.]( That’s why silver was one of the best performing assets in 2020. But it still hasn’t hit a new all-time high like gold, the Dow, and the S&P 500. That could change soon. The move would be huge because silver would have to hit $50 to reach a new all-time high. [Discover the market forces pushing silver to new high’s here… and learn how you can protect your money in the process.]( More and more people are discovering just how small the silver market is… and how scarce and in demand silver is becoming. We’ve partnered with [Hard Assets Alliance]( to give you a simple and secure way to get into the silver game (we believe in them so much we actually own a share of it). [Click here now for all the details.]( --------------------------------------------------------------- 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! Follow us on social media: [Facebook]( [LinkedIn]( [Twitter]( [RSS Feed]( [YouTube]( The Daily Reckoning is committed to protecting and respecting your privacy. We do not rent or share your email address. By submitting your email address, you consent to Paradigm Press delivering daily email issues and advertisements. 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