The Dark Side of Central Bank Intervention

Smaulgld on X22 Spotlight – Podcast

Central Banks Buying Bonds, Equities & Other Assets Won’t Lead to Collapse, but Total Control

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Last week I sat down with Dave of the popular X22 Spotlight You Tube Channel to discuss the state of the real estate and stock markets.

Pleaee have a listen and a look at the show notes below.

Check out all the Smaulgld podcasts here.

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Real Estate

Is Real Estate in a Bubble?

The ‘housing recovery’ reflects increased prices but not sales of homes, making homes more unaffordable for millennials and lowering the home ownership rate to the lowest in nearly sixty years. See The Dark Side of Rising Home Prices and “Why are New Home Sales Still Far Below Those Of Prior Decades

new-one-family-homes-sold-1963-2016

New Home sales in 2016 are at similar levels of 50 years ago when the population was far smaller.

US. Bureau of the Census, New One Family Houses Sold: United States [HSN1F], retrieved from FRED, Federal Reserve Bank of St. Louis

Is Gold Manipulated? If so Why?

See: Gold and Silver Price Manipulation (Suspected) & Gold and Silver Manipulation (Actual)

Physical Gold Demand Down in 2016 yet the prices is rising- the movement to “paper gold”

gold-etf-september-13-2016

There have been record inflow into gold ETFs in 2016, reflecting “investment demand”

People’s Bank of China Gold Reserves and Shanghai Gold Exchange Withdrawals

Russian Central Bank Gold Reserves

Indian Gold Imports

The Most Dangerous Alternative Financial Media Meme- “Central Banks are Losing Control”

Some commentators insist that central banks are losing control due to the excessive issuance and purchase of debt, giving false hope that the “system” will collapse soon and free markets will reign in the post collapse aftermath.

Dave and I discussed a darker more totalitarian view of central bank intevention that examines how, rather than losing control, they perhaps are gaining more control with pre-bailout tactics like purchasing equity shares in companies and thereby influencing not only equity markets but corporate policies as well.

While some cheer on central bank involvement in the equity markets as a way of boosting share prices while also helping make governments money, there is a dark side to central bank intervention in equity markets.

Two Stories That Smaulgld Broke re Central Bank Intervention in Equity Markets

Swiss National Bank Buys Mining Shares

Norwegian National Bank Discloses Mining Share Portfolio

Also note: The CME Group Special Volume Trading Discount for Central Banks

Central Banks Buy Equities

Buying of equities by central banks is particularly troubling. They can buy control which means they can select the directors and management and thereby set the policies of the company, including financial policies that would require the company to issue bonds that the owning central bank or other central banks could buy with money printed out of thin air. THEN the company can buy back shares with the proceeds of bonds it issued causing the price of the shares to rise and making the directors banks and govt rich, but adding no real value to the economy.

With central banks/governments as owners/customers, companies can operate without concern for profit. Under such a scenario companies don’t have to create value for customers, it only needs to create value to its government customers. Once companies have governmnets as partner/owners they can get special favors (debt write offs) and do favors for governments in return (create special products, give access to customer data).

Boosting asset prices without a corresponding addition of value, does not help the economy, it only enriches those holding the appreciated assets and creates wealth inequality.

As such, a rising stock market becomes detached from the declining health of the economy.

Troika of Government, Central Banks and Media to control markets

Operators of rigged systems don’t lose control, unless they are removed from running it. You dont beat the casino at the casino- The only way you win is if you play by the rules of the casino.

The only way the casino loses is if play out side the casino, the casino is closed down or burns down AND new owners are put in place.

After each collapse the same entities gain more power, they put in more controls, more QE, broader range of assets purchased under new QE, lower interest rates, negative interest rates, new accounting rules, new FDIC guarantees, They make it all seem normal so next time they lose control they can do it again and on a larger scale. Central Banks will continue to look for new assets to buy perhaps including infrastructure bonds, bad student loans, autoloans, corporate bonds, equities good assets, bad assets and derivatives on all of the above.

After each collapse, central banks step in with a quick fix.

What is the benefit of owning physical gold and silver?

The system favors and rewards paper/digital asset ownership. The more people on the grid, the less value off-grid assets like physical gold and silver have. Large profits have been made in paper assets. Physical gold and silver become more valuable in barter situation.

End Game

Central Banks put their digital mandated currency on the blockchain so they can tax, track and mandate all transactions. Then “bitcoin” is no longer a decentralized system – Central Bank Blockchain Currency IS centralized.

Further Reading in the Smaulgld Dark Side Series

The Dark Side of a Cashless Society

The Dark Side of Minimum Wage Laws

The Dark Side of Artificially Low Interest Rates

The Dark Side of Negative Interest Rates

The Dark Side of Rising Home Prices

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