The Fed’s Ultimate Choice

Defend the Billionaire’s Bubble or the U.S. Empire Were you forwarded this email? [Sign-up to The Daily Reckoning here.]( [Unsubscribe]( [Daily Reckoning] It’s come to our attention that you might be missing out on extra benefits exclusively for The Daily Reckoning subscribers. Check out our website where you can find archives, updates, and everything else included in your subscription. You can access it by [clicking here now](. The Fed’s Ultimate Choice - The Fed’s public relations cover conceals its true purpose… - The Cult of Speculation is really the Cult of Doom… - A sideshow of hucksters and carnies… Recommended Link [Attention! Before You Read Any Further…]( Before you read any further in today’s issue, an urgent situation needs your immediate attention. If you don’t plan on claiming this new upgrade to your Strategic Intelligence subscription, you’re missing out on a huge opportunity. Right now is your chance to grab one of the biggest (and most valuable) upgrades our company has ever made to a newsletter. I’m taking Strategic Intelligence to an entirely new level and I’d hate to see you left behind. [Click Here Now]( San Francisco, California January 22, 2022 Editor’s note: Which is more important to the Federal Reserve — keeping the bubble inflated or ensuring the dollar remains the world’s leading reserve currency? Today, Charles Hugh Smith shows you why the Fed will choose King Dollar and will allow the bubble to burst. [Charles Hugh Smith]Dear Reader, One of the most enduring conceits of the modern era is that the Federal Reserve acts to goose growth and therefore employment while keeping inflation moderate. This conceit is extremely handy as PR cover: The Fed really, really cares about little old us and expanding our ballooning wealth. Nice, except it doesn't. The Fed's one real job is defending the U.S. dollar, which is the foundation of America's global hegemony, aka The Empire. One thing and one thing alone enables global dominance: being able to create "money" out of thin air and use that "money" to buy real stuff in the real world. The nations that can create "money" out of thin air and trade it for magnesium, oil, semiconductors, etc., have an unbeatable advantage over nations that must actually mine gold or make something of equal value to trade for essentials. All About Confidence The trick is to maintain global confidence in one's currency. There is no one way to manage this, as confidence in a herd animal such as human beings is always contingent. Once the herd gets skittish, all bets are off. There are various tricks one can deploy to maintain confidence: Pay a higher rate of interest on bonds denominated in one's currency so global capital flows into your currency; treat this capital well with a transparent set of tax laws and regulatory oversight; maintain a deep pool of liquidity so capital can enter and exit without stampeding the herd; and have at least a semiproductive, diverse economy that generates goods, services and income streams to support the currency. There is a mechanism for calming the herd, and it's called the market. Markets are only trustworthy to the degree they are unfettered. What make markets trustworthy are transparency, liquidity (i.e., being able to buy and sell instruments in virtually unlimited quantities without stampeding the herd) and the price discovery of risk, as risk is the key determinant of the herd's movement. Recommended Link [URGENT: Battery Patent No. 3069168]( [Read more here...]( One of Tesla’s senior battery engineers QUIT Tesla and submitted a patent application for a revolutionary new tech process… But he didn’t just quit…he’s brought the chief of Tesla’s entire battery division with him. The man who helped create the original lithium ion battery. And today, you can take advantage of their TINY startup. This stock could skyrocket as much as 100% in a matter of minutes. [Click Here For More Urgent Details]( The Key to Global Dominance Turning to global dominance — let's ask one question and one only: Which nation pegs its currency to another's currency, and who owns that currency? Does the U.S. peg its dollar to the mighty RMB? No, it's the other way around: China pegs its RMB to the USD. China's ability to create "money" out of thin air is based on its peg to the U.S. dollar, not because the value of its bonds and currency have been discovered by unfettered global markets. To unpeg its currency, China would have to relinquish control of its sovereign bonds and currency and let the market discover its price and risk structure. This is the tradeoff: If you want to earn the confidence of the herd, you must relinquish control to the unfettered global market. Otherwise, the herd will always be skittish because risk is opaque and therefore safety is elusive. So the dollar is really the key to global dominance. But many don’t see that. It seems to them that the Fed's only real job is maintaining the Billionaire's Bubble in stocks. The Billionaire’s Bubble The Fed has created a global Cult of Speculation that has recruited virtually the entire human populace in a bizarre cult in which speculating wildly is now the accepted norm, a norm papered over with fine-sounding phrases such as "investing for the future," "conviction trade," "new paradigm" and so on. They’re all variations on the time-honored "This time it's different." But speculative frenzies are not different, they are the norm. Humans love gambling, winning, windfalls, something for nothing, being ahead of the pack ("the new paradigm," etc.,) and the excitement of running with the triumphant herd, all of which are fulfilled by speculative frenzies. All the speculative free-for-all is lighthearted fun on the way up, but there is a much bleaker reality that few are willing to recognize, much less discuss: Now that the global economy is in thrall to the top 0.1% and the foundations of widespread prosperity crumble into dust, the ladder to wealth, power and prestige has few rungs left. Most of the few remaining open slots in the top tier have already been taken by insiders and the offspring of the already-wealthy, and so the only way to get ahead is to speculate and win — not just win, but win big. In other words, the fundamental driver of this speculative frenzy isn't just greed, it's desperation. For the vast majority of the world's population, speculating and winning is their only chance to escape debt serfdom or wage slavery. Recommended Link [URGENT: Your New Crypto Book Is Awaiting Shipment]( [Read more here...]( If you’ve kicked yourself for not investing in cryptocurrency… Watching Bitcoin go from $61… To $1,000… To over $60,000… Then pay close attention. Famous crypto millionaire James Altucher just released a brand-new book on crypto… [And he’s releasing a limited number of books to folks who click here now.]( We have a copy reserved in your name, and we just need to hear back from you. [Click Here To Claim Your Copy]( Cult of Speculation Is a Cult of Doom The global Cult of Speculation is a Cult of Doom because all speculative bubbles pop, generally in a way that continues to give punters buying the dip hope that the downturn is now over and huge gains await those who back up the truck and buy, buy, buy. The key dynamic in speculative frenzies is the self-reinforcing feedback of everyone else being confident the bottom is in so buy now: The first blip higher convinces skittish bulls that the bottom is indeed in and so buying encourages more buying, which then stampedes the herd into a euphoric confidence that this is it, the herd is running, the rally is unstoppable. This works again and again, increasing the bulls' confidence, until one time the herd thunders off a cliff. All speculative frenzies eventually pop because the euphoria has detached from real-world fundamentals and entered an unstable orbit of magical thinking — the Fed is all-powerful, etc. As with all cults, skeptics and doubters are vilified and scorned. Those outside the cult look on in wonder at the strange rituals and extreme behaviors. Wise outsiders avoid any contact with the unstable, skittish herd. We're now in the confounding stage where buying the dip isn't working 100% of the time, and so the cult is losing adherents even as the faithful double down and demand evidence of fealty. Surely the Fed gods will affirm the cult's most revered articles of faith. But false gods eventually fail, even the Fed. A Sideshow of Hucksters and Carnies But from the point of view of maintaining global hegemony, the Billionaire's Bubble was a sideshow of hucksters and carnies. The real policy goal was funding the empire's vast spending and not allowing the USD to rise too much or too quickly, as this tends to demolish weaker currencies, stampeding the herd. But now it's time to suck in global capital by raising rates and let nature cull the herd. The number of pundits announcing that the Fed will never raise rates; that the Fed can't raise rates because the precious Billionaire's Bubble would burst; and that the Fed would never, ever, ever let its precious Billionaire's Bubble burst are legion. But they're wrong, alas, for the Fed's job isn't to enrich billionaires — it's to maintain the confidence of the herd in the USD. The precious Billionaire's Bubble is already bursting, and all those profiting from the bubble expanding are pawing the ground nervously, afraid of being picked off by lurking predators. Choose one, but only one: You can't defend the Billionaire’s Bubble and the USD/Empire. It's not that difficult a decision. What matters more, maintaining global hegemony or phantom wealth? The Empire is striking back, protecting what really counts and the Billionaire’s Bubble sideshow is folding its tents. Best to take your prizes home before it rains. Regards, Charles Hugh Smith for The Daily Reckoning Editor’s note: In 2013, he recommended Bitcoin live on CNBC before it exploded for more than 50,000%... In 2017, he got his readers into Ethereum for a potential 10X return… And most recently… He personally grew $25,000 into more than $3 million on a single crypto investment. [(A 125X gain in just four years.)]( And now… Multimillionaire crypto investor James Altucher is stepping into the public spotlight [to show you exactly how he finds these opportunities…]( And how YOU can essentially use [the exact same strategy]( for yourself. [Click here for more...]( Plus, James will also give you the name of [the No. 1 coin]( to buy right now – just to help you get started. But don’t wait. This opportunity is strictly limited. In fact, only 500 people can access the full details on the 125X Crypto Secret today. [So click here now.]( --------------------------------------------------------------- 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. To end your Daily Reckoning e-mail subscription and associated external offers sent from The Daily Reckoning, feel free to [unsubscribe here.]( Please read our [Privacy Statement](. For any further comments or concerns please email us at feedback@dailyreckoning.com. If you are having trouble receiving your Daily Reckoning subscription, you can ensure its arrival in your mailbox [by whitelisting The Daily Reckoning.]( [Paradigm Press]© 2022 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized financial advice. We expressly forbid our writers from having a financial interest in any security they personally recommend to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of a printed-only publication prior to following an initial recommendation. Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. Email Reference ID: 470DRED01