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This time, the Federal Reserve has created a truly global problem. A big chunk of the trillions of dollars that it pumped into the financial system over the past several years has flowed into emerging markets. But now that the Fed has decided to begin "the taper", investors see it as a sign to pull the "hot money" out of emerging markets as rapidly as possible. This is causing currencies to collapse and interest rates to soar all over the planet. Argentina, Turkey, South Africa, Ukraine, Chile, Indonesia, Venezuela, India, Brazil, Taiwan and Malaysia are just some of the emerging markets that have been hit hard so far.
In fact, last week, emerging market currencies experienced the biggest decline that we have seen since the financial crisis of 2008. And all of this chaos in emerging markets is seriously spooking Wall Street as well. The Dow has fallen nearly 500 points over the last two trading sessions alone. If the Federal Reserve opts to taper even more in the coming days, this currency crisis could rapidly turn into a complete and total currency collapse.
A lot of Americans have always assumed that the U.S. dollar would be the first currency to collapse when the next great financial crisis happens. But actually, right now just the opposite is happening and it is causing chaos all over the planet.
OR, what *ARE* they preparing for ?
What a strange planet we live on.
They point out that many people think a currency collapse will start with the U.S. Dollar.
The Fed doesn’t talk to you or me about these things. It calls Goldman Sachs or JP Morgan. And most of the Wall Street wealth of the last 30 years has been the result of leverage (credit growth). Take away credit and easy monetary policy and a lot of very “wealthy” people suddenly are not so wealthy.
Let me put this in terms of real job growth (created by startups) vs the “job growth” of the last five years.
According to the National Bureau of Economic Research, startups account for nearly all of the US’s net job creation (total job gains minus total job losses). And smaller startups have a very different perspective of debt than larger more established firms.
The reason is quite simple. When a small business owner takes out a loan he or she is usually posting personal assets as collateral (a home, car or some other item). As a result, the debt burden comes with the very real possibility of losing something of great value. And so debt is less likely to be incurred.
This stands in sharp contrast to a larger firm, which can post collateral owned by the business itself (not the owners’ personal assets) and so feels less threatened by leveraging up. Thus, in this manner, QE and other loose monetary policies maintained by the Fed favor those larger firms rather than the real drivers of job creation: smaller firms and startups.
For this reason, the Fed’s policies, no matter what rhetoric the Fed uses, are more in favor of the stock market than the real economy. That is to say, they are more in favor of those firms that can easily access the Fed’s near zero interest rate lending windows than those firms that are most likely to generate jobs: smaller firms and start-ups.
This is why job growth remains anemic while the stock market has rallied to new all-time highs. This is why large investors like Bill Gross have applauded the Fed’s policies at first (when the deleveraging was about to wipe him out in 2008), but then turned against them in the last few years as a political move. This is why QE is so dangerous, because it increases concentration of wealth and eviscerates the middle class.
"This bill would effectively gut important financial reforms and put taxpayers potentially on the hook for big banks' risky behavior," Peterson said. "The provision is a modest measure designed to prevent the federal government for bailing out or subsidizing bank activity that is not related to the business of banking."
Peterson also noted that under current law, banks can still perform about 90 percent of the swaps hedges they were able to perform before Dodd-Frank.
"So banks can keep 90 percent in the bank," he said. "But apparently this isn't good enough for some of these big banks, which is why we're here today with H.R. 992."
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reply to post by NullVoid
Can you explain to a retired elderly woman with a little money about this bitcoin. I would love to see alternatives to the current system. At least, maybe I can direct my adult working kids.
I think the collapse started when they took all the silver and gold from people and had free reign to print all the money they wanted.
In March 1968, the effort to control the private market price of gold was abandoned.
However, Beijing has two options, 1. Allow the default and pick up pieces after the dust settles or 2. Bail the bank out and kick the can down the road. Should they allow #1 the banking sector will take a major hit and a loss of confidence with the Chinese people but would recover in a couple of years. Going with option 2 would pull the whole system down in the not too far distant future. Both options are bad options.