The Fed’s Casino Is in Flames, but Please Continue Gambling

"The pool of greater fools is drying up, and so the Fed has been forced to start buying its own gambling chips directly. This is an act of complete desperation"

Those taking seats at the gaming tables in the Federal Reserve’s casino believe that they can’t lose. Or more precisely, any losses they suffer will quickly be made good by the house, i.e. the Fed, which can digitally print as much currency as needed to restore order to the gambling.

The punters crowding around the tables have forgotten that gambling is inherently risky. The Fed can digitally print currency, but it can’t force punters to play.

Unfortunately for all the punters crowding around the tables, the casino is on fire. The Fed’s rigged games are in flames, and Head Tout/Fixer Jay Powell is telling all the nervous gamblers who smell smoke to please stay at the tables and continue gambling, the fire is under control.

But of course it’s not under control, it’s raging out of control, and to maintain the illusion of control, the Fed is buying chips in its own games: buying junk bond funds and corporate bonds.

The Fed’s casino has operated on a simple principle: the Fed digitally prints trillions of dollars and hands the dough to broker-dealers in exchange for Treasury bonds, mortgage backed securities and now, junk bond funds and corporate bonds.

The new currency flowed into financial assets as banks, corporations and financiers borrowed money, leveraged it up and bought back their own shares or bought stocks.

What the punters don’t understand is this mechanism isn’t guaranteed. The players getting the freshly created dough don’t have to buy stocks or junk bonds. They only do so when they are confident that there are plenty of greater fools at the tables to buy these assets at higher prices.

The pool of greater fools is drying up, and so the Fed has been forced to start buying its own gambling chips directly. This is an act of complete desperation, yet the punters at the tables who smell the smoke don’t yet realize the fire is out of control and the entire casino will soon be engulfed in flames.

Here’s the thing about gambling: risk cannot be made to disappear, it can only be transferred to others. The absence of risk in the Fed’s casino is an illusion. The Fed’s casino has transferred all the well-hidden risk to the entire financial system, which is now in danger as the Fed’s burning casino triggers a conflagration few even imagine and virtually none think is possible.

So by all means, believe the soothing words of Head Tout/Fixer Jay Powell if you want, but realize that words and digitally printed currency won’t make risk disappear. Rather, they only increase the risk of the fire spreading to the entire financial system.

Source: Of Two Minds

  1. George W Obama says

    The Fed uses short cut keys on their magic keyboard to create dollars from the vacuum of space. That is why they call it Quantum Economics. One tap of F3 creates a trillion dollars! The fictitious national debt is like an electron. It looks solid as long as you don’t try to pin it down. If you look too closely it vanishes into a cloud of fraud, over billing and lies.

    The Fed could easily hit the delete key and eliminate the fake debt. Or they could hit Control + F3 and add a trillion to the debt bondage. The Fed has a God like power over the economy. There will be no fire unless the Fed wants fire.

    The one threat to the con is if other countries decide to take away the money changers greatest weapon, they stop accepting these virtual dollars as payment.

  2. cechas vodobenikov says

    the ruling class could care less—as amerikans scrounge in food lines, passively submit to covid fascism, unemployment resembles 1930’s and amerikans quarrel about 2 identical cretins–biden, trump, they vandalize their own nation….and the stock market continues to rise to record levels….the rich are not stupid …they place their money in the Cayman Islands purchase property in Patagonia, New Zealand where they pay 3+ million for survival bunkers….gates and others may be self indulgent fake philanthropists —they can only buy so many mansions and tres leches….but they are fully protected with their jets and helicopters, private militias

    1. David Bedford says

      Vladimir Putin is playing the master game in chess whereas Donald Trump is playing checkers, Vlad has insulated his country with the highest tech hypersonic missiles and is just about to release his missile defence field that is able to shoot down hypersonic missiles. Since 2009 he has slowly been extracting the Federal reserve of its artificially cheap and gold and who knows how much silver he has also bought? The Russian economy is bullet-proof.

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