by Gregory Mannarino
It is unprecedented.
This past February, the Federal Reserve began to hyperinflate its balance sheet (see circled area above) in an attempt to funnel epic sums of capital directly into the grasping hands of the mega corporations and the Wall Street banks.
A sudden drop in the U.S. stock market sparked this unparalleled hyperinflating of the Fed’s balance sheet. This mechanism has been exceedingly effective in preventing the stock market from correcting to “fair value.”
It has been successful in allowing mega corporations to directly merge with this New American Government, which is picking the winners (major corporations) while forcing others to lose (the remaining mom and pop shops and other small to medium-size businesses).
Additionally, the mechanism is effective in pushing epic sums of capital directly into the hands of the super-rich by re-inflating/disallowing equity markets to drop. Here again, we have clear examples of “Socialism for the rich and Capitalism for the rest of us,” as Gerald Celente has outlined many times.
The fact is simple. Today, more so than at any other time in history, we exist in an environment of extreme distortions across the entire spectrum of assets, with no real price discovery mechanism behind them whatsoever.
This is fostering not only an environment of “winners and losers” with regard to small businesses and corporate power, but also a mammoth transfer of wealth from the middle class straight up to the mega rich. This environment can be made worse for the middle class as calls for negative rates gets louder.
Understand that the wealth being legally stolen from the middle class and “transferred” to the rich is a direct result of massively suppressed rates. Suppressed rates are grand theft for every member of the middle class who has an interest-earning account. The rate of return, interest earned on these accounts, is less than the rate of inflation. By design, the mechanism of suppressed rates forces cash into risk assets – the stock market.
It appears the United States is going to have negative rates moving forward. While devastating for the middle class, negative rates can potentially push the stock market to new, all-time highs, regardless of a dead economy with tens of millions out of work and the culling of small businesses.
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by Gregory Mannarino