by Brandon Smith
I hear a lot of talk lately in the alternative media (and even the mainstream media) of the potential for World War III. The general assumption when one hears that term is that “nuclear conflict” is imminent. But a world war does not necessarily have to be fought with nukes. For example, we are perhaps already witnessing the first shots fired in a global economic war as the Trump administration gets ready to implement far-reaching trade tariffs. This action might provide cover (or justification) for destructive attacks on the U.S. fiscal system by China, Japan, Russia, the EU, OPEC nations, etc. The ultimate attack being a dumping of their U.S. debt holdings and the death of the dollar’s world reserve status.
Of course, an economic “world war” between nations would in itself be a smokescreen for and an even more insidious internal war being waged against the global economy by central banks.
There is a longstanding misconception that central banks always manipulate economic conditions to make them appear “healthy” and that the main concern of central bankers is to “defend the golden goose.” This is false. According to the evidence at hand as well as open admissions by central bankers, these private institutions have throughout history also deliberately created financial crises and collapses.
The question I always get from people new to the field of alternative economics is — “Why would central bankers crash a system they benefit from?” This question is drawn from a flawed understanding of the situation.
First, there is the assumption that economic systems are static rather than fluid. In reality, vast sums of wealth can be transferred into and out of any notion on a whim and at the speed of light. The collapse of one economy or multiple economies does not necessarily include the destruction of banker wealth. Even if wealth was their top goal (which it is not), global banks and central banks do not see any particular economy as a “cash cow” or a “golden goose.” From their behavior and tactics in the past, it is more likely that they see national economies as mere storage containers.
Banks can pour their wealth, which they create from thin air, into one or more of these many available containers. They can circulate that wealth within the container for a time and then pour all their wealth out at a moment’s notice. One container is no more valuable to them than any other container, and sometimes sacrificing a container can be beneficial.
The perceived destruction of a national economy can often be exploited as a means to a greater end. Usually this “greater end” means exploiting the crisis to justify centralization of power or the transfer of power from the public into the hands of an elitist class.
I have outlined the history of such transfers on numerous occasions, including the liquidity crisis of 1914 (just after the establishment of the Federal Reserve) leading into World War I and the subsequent hoarding of financial power by banks as well as the creation of the League of Nations.
Or how about the artificial bubble in multiple asset classes created by the Federal Reserve in the 1920s through low interest rates? A bubble which was then burst through the aggressive raising of interest rates at the onset of the Great Depression. This crash coincided with other fabricated economic disasters in Europe and Asia, leading to social despair, the rise of communism and fascism and World War II. This crisis benefited the banking establishment greatly as thousands of smaller independent banks were crushed and a handful of major banks devoured all assets. And, let’s not forget that WWII led to the creation of globalist edifices like the United Nations, the IMF, World Bank, the beginning roots of the European Union, etc.
Every new economic calamity seems to consolidate property and bureaucratic control into the hands of the same class of technocrats. And each calamity is linked to a very important economic factor — massive debt dependency.
So, let’s fast forward to today’s era of burgeoning crisis and how central banks like the Fed are feeding the fire of disaster. I would like to focus most of all on our debt situation to illustrate how the Fed can and will trigger an explosion, a controlled demolition of our financial system. What is our debt situation in the U.S. today?
The Consumer Debt Bomb
Total American household debt skyrocketed beyond $13 trillion at the end of 2017, well beyond historic highs. This is the fifth consecutive year of household debt increases, including credit cards, auto loans, mortgages, student loans, etc. This trend suggests that the “economic recovery” so far has not actually been based on any legitimate wealth creation or resurgence, but an even greater dependence on the same debt that helped cause the crash of 2008. The Fed’s money printing did NOT trickle down to consumers as was originally promised.
While these sectors of consumer debt did not necessarily enjoy the same near-zero rates as banks and corporations did after the crash and the bailout bonanza, their rates are now rising along with the Fed’s rate increases. This is affecting numerous asset classes including housing markets and auto loans.
The cold hard reality is that as the Fed raises interest rates all other areas of the economy come under pressure. The average citizen, with his/her record debt levels, is now subject to the machinations of the central bank through the arbitrary shifting of a single data point like “inflation”.
The Corporate Debt Bomb
This debt bomb is possibly the most subversive and the least understood. I have been warning about how corporate debt and rising interest rates could cause a stock market crash for quite some time, but only recently have mainstream analysts caught up to this realization.
Today, institutions like S&P Global Ratings are showing that at least 37% of 13,000 corporations examined have a debt to earnings ratio of five times, making them “highly leveraged.” This debt level is also even higher than it was in 2007 just before the collapse of Lehman and the beginning of the credit crisis.
The concern goes beyond debt holdings, though. Consider the fact that corporations have been exploiting low interest rates to borrow incredible sums of cash for the sole purpose of purchasing their OWN stocks. Stock buybacks are basically a legal form of market manipulation in which companies buy stocks back from the public and greatly reduce the number of existing stocks circulating in the market, thereby artificially increasing the value of each stock overall and keeping the Dow in the green.
Stock buybacks have been the primary fuel for the longest bull market in history, a bull market so fake that even the mainstream media has been questioning its validity lately. Stock buybacks are completely dependent on cheap debt, and cheap debt is disappearing as the Fed continues raising interest rates. The natural reaction by stock markets will be a crash.
Some people may question whether or not the Fed is actually doing this “deliberately,” or if they are simply ignorant. I would refer them to the recently released Fed minutes from 2012, in which Jerome Powell, now the chairman of the Federal Reserve, talked repeatedly of the negative reaction that would occur within markets once the Fed began cutting its balance sheet holdings and raising interest rates after addicting equities markets to the drug of easy profits.
Jerome Powell himself is recorded as knowing exactly what will happen as interest rates rise, and he is continuing to raise them anyway, while also cutting the Fed balance sheet far faster than was originally telegraphed to the public. How can anyone in their right mind argue that the Fed is not bringing the U.S. economy down deliberately?
The National Debt Bomb
This debt bomb has a much longer fuse that the other two, but in the wake of a potential global trade war (World War III), the question arises as to how long it will take before major U.S. treasury bond holders like China dump their holdings in retaliation.
With Trump refusing to take a stand against the continued raising of the national debt ceiling, and the addition of his $1.5 Trillion infrastructure spending plan, there is little doubt that our national debt will continue to rise. Therefore, foreign investment is essential.
It is important to remember that the Federal Reserve used to be the largest purchaser of U.S. debt or the “buyer of last resort.” Now, the Fed has ended quantitative easing and is cutting its balance sheet swiftly. So, the only buyers left are foreign central banks and investors. My prediction is that the Fed will not step in if a trade war escalates to a treasury bond dump. Or, that they will not step in until it is far too late to stall the resulting crisis.
In Barack Obama’s eight years as president the national debt was essentially doubled. This is a unsustainable rate of debt issuance, even for a nation with the world reserve currency. If we lose foreign investment and the world reserve currency then that debt accumulation will come back to haunt us.
It is important to remember that whatever happens within our economy and the global economy, central banks like the Fed have fully facilitated the bubbles produced as well as the inversions that result. The Fed knows exactly what it is doing. And all other factors, from the Trump trade wars to foreign dumping of U.S. treasuries and the dollar, will be a distraction from the banking elites truly culpable.
Economic warfare can in some cases be just as devastating as nuclear warfare. It can wipe out entire populations, give rise to tyrants and enslave the minds of individuals through the weaponization of resource scarcity. Such wars, though less psychologically immediate as our cinematic fears of atomic doom, should be taken very seriously, and the culprits behind them have to be dealt with harshly.
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by Brandon Smith