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Strong Earthquake Rattles Spain and Morocco

A 6.3-magnitude earthquake struck in the Mediterranean early on Monday, causing some material damage in southern Spain and northern Morocco, although no deaths or injuries were reported.

The quake occurred at 5:22 a.m. Central European Time, about 100 miles southeast of Gibraltar and about 40 miles north of the Moroccan city of Al Hoceima, where an earthquake left hundreds dead 12 years ago.

The quake hit at a depth of about 20 miles and was registered with a preliminary magnitude of 6.1 by the United States Geological Survey, but that assessment was raised by Spain’s national geographical institute. The first quake was followed by another, with a magnitude of 5.3, as well as by several smaller aftershocks.

Spanish national television showed panicked people on the streets in coastal cities in southern Spain as well as in Melilla, a Spanish enclave in northern Africa.

Television reports showed people surveying cracked building facades, but the regional government of Andalusia, in southern Spain, issued a statement saying that there had been no reports of casualties. The tremors were felt as far inland as Seville, the capital of Andalusia.

In February 2004, a magnitude 6.3 earthquake near Al Hoceima killed 631 people. The last major earthquake in Spain, in 2011, destroyed much of the town of Lorca, in the southeast, and killed nine people.

Towards a Geopolitical Shift? China’s President Xi Jinping in Tehran

China is Iran’s largest trading partner, including oil and gas, along with billions of dollars in other products and services.

On Friday, President Xi Jinping arrived in Tehran, officially welcomed by Iranian President Hassan Rohani.

The visit was the first by a Chinese head of state in 14 years, Jiang Zemin the last one in 2002, early in the post-9/11 era, featuring endless US imperial wars, along with hostile anti-Russian/anti-Chinese policies.

Presidents Xi and Rohani seek closer ties, Xi signalizing a new chapter in bilateral relations. Iran’s IRNA news agency quoted him saying:

China is seeking to improve bilateral ties with Iran to start a new chapter of comprehensive, long-term and sustainable relations with the Islamic Republic.

Notably, Xi is the first head of state to visit Iran since international sanctions were lifted on January 16. Putin visited Tehran last November, discussing enhanced bilateral ties going forward.

Accompanying Xi on his visit were three deputy prime ministers and six other ministers, along with a large delegation of Chinese business officials

He and Rohani signed 17 documents, involving mutual cooperation in economic, commercial, industrial, transportation, environmental, cultural and judicial relations, including oil and gas, peaceful nuclear energy, financing a bullet train and banking, Xi saying:

In this visit, we have struck an agreement on planning for 25-year-long strategic cooperation and are ready to develop and deepen cooperation in all the various cultural, educational, technological, military and security fields at the level of strategic partners.

Xi criticized Western powers without naming them, saying they seek hegemonic rule – calling George Bush’s “you are either with us or against us” policy “jungle rule.”

Developing economies left Western ones “bereft of their monopolized power…pav(ing) the way for the practice of independent states’ policies.”

He stressed the eagerness of China to enhance ties and cooperation with Iran. Chinese Academy of Social Science Middle East expert Yin Gang called his visit historically significant, signaling enhanced bilateral relations.

“Iran is the place to prove China’s ‘One Belt, One Road’ strategy,” said Yin. Its potential is huge.

Renmin University Chongyang Institute for Financial Studies dean Wang Wen called Iran a hub along the “New Silk Road” route – giving China’s “one Belt, One Road” strategy “solid underpin(ning).”

According to Beijing Ministry of Commerce researcher Mei Xinyu, “Iran is one of the most important players in the region and a key Chinese partner in the Middle East. (It’s) vital for China’s strategies in West Africa and North Asia.”

Besides its huge energy needs vital to its economy, Iran’s large population (nearly 80 million) offers attractive potential for Chinese exports.

In 2014, bilateral trade exceeded $50, Iranian exports totaling $27.5 billion in energy and other products. Chinese oil imports from Iran account for around 12% of its domestic needs, likely increasing ahead with international sanctions lifted.

On Saturday, Xi met with Ayatollah Seyed Ali Khomenei. “Westerners have never obtained the trust of the Iranian nation,” he said.

The government and nation of Iran have always sought expanding relations with independent and trustful countries like China.

Tehran intends increasing ties with the “East.” He praised Beijing’s “independent” stance on global issues, saying “China has always stood by the side of the Iranian nation during hard days.”

America’s approach is “dishonest” on all geopolitical issues, he stressed. Closer Iranian Eastern ties makes it less vulnerable to US-led Western hostility.

Stephen Lendman lives in Chicago. He can be reached at lendmanstephen@sbcglobal.net.

His new book as editor and contributor is titled “Flashpoint in Ukraine: US Drive for Hegemony Risks WW III.”

www.claritypress.com

Listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network.

It airs three times weekly: live on Sundays at 1PM Central time plus two prerecorded archived programs.

The original source of this article is Global Research

Copyright © Stephen Lendman, Global Research, 2016

The Tide Is Turning in 2016. Profound Geopolitical and Economic Changes are Occurring

Though pessimistic news still dominates and controls the headlines in both mainstream and alternative media worlds, a closer look at what’s going on right now might reveal glimpses of profound changes occurring just below the surface echo chambers. This presentation will focus on the most visible signs reflecting the current underlying transformative metamorphosis the earth is undergoing at what appears to be the most tumultuous, dangerous and exciting time in human history.

All high seas shipping around the entire globe has come to a screeching halt. The Baltic Dry Index, the foremost economic mechanism responsible for tracking international trade of industrial commodities like grain, iron ore, coal, cement and fertilizer, has been in a state of freefall. On Monday it plummeted to an all-time low of just 369 points. On Tuesday it fell even lower, another 1.63% to 363 points, taking a nosedive in the first three weeks of 2016’s first month alone to a whopping 24% drop. A latest check of Vessel Finder shows absolutely no cargo ships are in transit anywhere on the planet, clearly a historic first in modern history. Shipping companies are lamenting about the rising costs of transporting goods eating up their profits and thus keeping all cargo vessels worldwide sitting in their port docks. Brace yourself for depleted empty store shelves to start showing up in the coming weeks and months.

But another far more plausible explanation as to why global shipping has suddenly come to a standstill is because China for the first time as the emerging Asian powerhouse giant is now demanding all trade payment be transacted in Chinese Yuan. Over the last six months China has been steadily dumping its massive dollar reserves and ordered its banks to stop buying in US dollars. And now suddenly dozens of Chinese billionaire bankers and executives have mysteriously gone missing without a trace. With the faltering Chinese economy, the question becomes whether this phenomenon is payback for China’s economic woes or whether it’s part of a larger cover-up of corruption that could implicate high government officials.

Combine this latest development with last Friday’s bombshell announcement that this year Walmart will be closing 269 of its stores globally, the majority of which will be in America at 154 outlets, and the rippling of major shockwaves to come are already being felt early on in 2016. Walmart shares have plunged 30% in the last 12 months, reflecting the sobering reality that American consumers can no longer afford to indulge themselves buying up cheap junk from China they don’t need. If you believe the Walmart CEO, the massive closures are but a drop in the bucket, accounting for less than 1% of both the world’s largest retailer’s revenue as well as its global square footage.

Though that assurance may appease Walmart shareholders somewhat, it offers no consolation at all to the swelling class of Americans struggling desperately to feed their families and make ends meet. US malls that haven’t already become ghost towns are near empty nowadays. The everyday masses that used to be a once thriving robust middle class and backbone of this nation are starting to really feel the hurt of chronic impoverishment and destitution. Under Obama’s leadership, the number of Americans living in poverty has skyrocketed from 37 million to 47 million people. The wealthiest nation on earth isoffering no more jobs beyond minimum wage. Near 40% of working age Americansare not participating in the labor force with a growing segment that’s long given up and stopped looking for work. The Federal Reserve’s folly to simply print more money to prosperity has finally caught up, and as a consequence America is now facing the realization that the Feds’ longtime shortcut to cheating death has only hollowed out its doomed house of cards economy to the point of self-implosion.

For over a year oil has simultaneously plunged to a low of $20 a barrel with low grade Canadian at $8, undercutting the high-powered fossil fuel industry’s global dominance it’s racketeered for well over a century. Again, China is insisting that its enormous export trade for oil import be transacted through its Yuan, not the US petrodollar. India as part of the formidable BRICS alliance is also replacing the petrodollar… same with Russia and Iran and a host of other nations. There is an ongoing worldwide exodus abandoning the US dollar once and for all as the standard international currency.

Financially and geopolitically the Western economy has run out of gas. The current oil surplus glut will likely run its course supplying the global market’s diminishing demand as cleaner renewable energy sources like wind and solar power are finally able to viably compete and begin replacing the biggest single source of earthly pollution. The hand-in-hand destruction between oil and the usury Ponzi schemed, debt-based system of central banksters bleeding the planet and masses dry is now on the verge of total collapse. Every honest appraiser not part of the army of paid propaganda shills still spewing inflated faked optimism would agree that the Western oligarch run economy is hemorrhaging in its death throes.

The Federal Reserve Board as America’s private central bank, its mother Bank of London and its big four – Chase, Bank of America, Wells Fargo and Citigroup – as criminal gamble-holics since their housing bubble debacle have now racked up an unfathomable 2 quadrillion dollars worth of a derivativedebt bubble. But the criminal banksters have secretly prepared for this day of reckoning having already manipulated the passing of draconian laws that this time is bailing them out with so called “bail-ins,”outright stealing your money directly from your private bank accounts. Meanwhile, the Washington crime cabal is bankrupt, unable any longer to kick the proverbial can down the road. The long term consequence of the Federal Reserve pumping fiat money out of thin air has produced an insurmountable debt that’s pushing our nation off a fiscal cliff. The jig is up for US Empire hegemony that protects and enriches only the ruling elite’s continued global theft and destruction.

A week doesn’t go by when the West isn’t caught up in another humiliating defeat that ultimately uncovers its deceitful malaise consistently lined up on the wrong side of history. The latest embarrassment was the two US Navy gunboats armed with mounted .50 caliber machine guns and a crew of 10 that were detected by Iran to be violating its territorial waters in the Persian Gulf. It turns out the Navy boats were on a covert spy mission transporting a top level ISIS commander from Saudi Arabia replacing a recently killed terrorist leader in Syria, proving once again that the US is the world’s largest state sponsor of both terrorists and terrorism. Iran had to fire warning shot missiles at the intervening US aircraft carrier the USS Truman as Tehran authorities were in process of detaining the US crew. With the terrorist and US sailors safely in tow, the Obama regime quickly caved in, giving in to Iran’s demand for a prisoner swap arranging the release of seven Iranian prisoners for four Americans.

With the UN finally lifting the economic sanctions from Iran, Tehran immediately announced its deal to buy airbuses from Europe. These latest developments only demonstrate that Iran refuses to be intimidated by US Empire and much to the chagrin of the real axis of evil – the US-Israel-Saudi Arabia, like it or not Iran is emerging as a formidable regional power in the Middle East. The recent US hijinks also reflects the ongoing power shift moving squarely from a weakened West to an empowered East.

Accepting defeat in Syria with Putin helping Assad destroy the Islamic State terrorists, John Kerry with tail between his legs is no longer doggedly pursuing regime change but now desperately trying to negotiate a peace settlement before his demon child the terrorists are completely wiped out. Like rats jumping from a sinking ship, they will be running for cover to every corner of the globe, like the half-ass attempt at terrorism last week in Jakarta. With its foothold now established in Southeast Asia, this way the US created Islamic State terrorist ally can hype up the mythical fear and paranoia amongst the global masses that its cancerous spread is unstoppable. In reality, if you cut off the head that feeds the beast, as Putin has achieved by drastically reducing ISIS’ pirated oil revenue generated from the likes of Israel and Turkey’s Erdogan and son, both bigtime peddlers of terrorism, you can stop international terrorism. Of course that’s the last thing the US neocons and their crime cabal allies want, without their endless war on terror, the military industrial complex might go broke. Be prepared for more waves of unrelenting MSM propaganda demonizing Russia, China and Iran as the Western elite attempts a last ditch effort to plunge the planet into all-out World War III.

The balance of world power is currently in a state of unstable flux. More citizens of the world are becoming informed and motivated toward activism, or as the feds would describe “radicalized.” The wicked Western psychopaths sense they are losing their power and are desperately attempting to bring down the entire planet before it wakes up, causing as much death, destruction and mayhem as theirwaning power still commands. The globalist designed wars in the Middle East and North Africa have manufactured the migration crisis tearing Europe apart right now. The people of the United States and Europe stand to suffer the most as a new global system amidst all the turmoil is in process of birthing. Meanwhile during this interim crisis, expect some cataclysmic growing pains. But the New World Disorder as both shaped and promised by the likes of such evil men as Bush, Brezhenski, Kissinger and David Rockefeller is already here, it’s what we are now experiencing. The tyranny of a one world government that the ruling elite has been meticulously scheming for centuries may not materialize after all with the present behind-the-scenes restructuring rapidly unfolding. The defeat of TTP and TTIP will be the rallying cry delivering a crushing blow to their sinister agenda.

So instead of buying into the doom and gloom endgame giving us humans little hope or strength to alter or change any outcome, if anything, inadvertently contributing to a negative self-fulfilling prophecy, the promise of free energy discovered more than a century ago by Tesla may literally give power and wisdomback to the people. An era of cooperation and peace may eventually emerge after the transformative changeover is complete. Granted, many cynics might be singing the “same as the old boss” blues. But opportunity for an emerging focus on building life anew from the local ground level up to global and beyond would enrich the surviving human population to unlimited heights and accomplishment. A restored sense of vested interest and creative empowerment to achieve the impossible may yet await humanity on the other side of the dark clouds of chaos and destruction now forming – definitely worth sticking around for if humanly possible. It’s precisely what we citizens of the world do right now to fight for truth, peace and justice that will determine the fate and kind of world we leave our children and grandchildren.

Joachim Hagopian is a West Point graduate and former US Army officer. He has written a manuscript based on his unique military experience entitled “Don’t Let The Bastards Getcha Down.” It examines and focuses on US international relations, leadership and national security issues. After the military, Joachim earned a master’s degree in Clinical Psychology and worked as a licensed therapist in the mental health field with abused youth and adolescents for more than a quarter century. In recent years he has focused on his writing, becoming an alternative media journalist. His blog site is athttp://empireexposed.blogspot.co.id/. 

The original source of this article is Global Research

Copyright © Joachim Hagopian, Global Research, 2016

Impending Financial Collapse? Declining Real Economy

“Peddling fiction” …this is what Mr. Obama said of anyone who believes and says the U.S. has a weak economy.

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How ironic he should say this when he did, the State of the Union address?

I mean the timing could not have been any better! In a week where oil prices hit a 14 year low, freight rates at over 30 year lows, equity, credit and FOREX markets all over the world crashing and derivatives blowing up. How do we know derivatives are blowing up? Simply because the Dallas Fed has given their banks permission not to mark energy debt to market. In essence, the Fed has instructed their banks TO PEDDLE FICTION!

www.zerohedge.com/news

One must ask the question(s), how can the Fed really do this as accounting firms must sign off on any audits or official financial reports?  Do the accounting firms also get “special waivers” to lie or as our fearless leader says “peddle fiction”? Also, how can the Fed really do this with a straight face? Did they really believe the markets would not sniff this out?

www.zerohedege.com/news/2016

Just as I was about to send this post out, the Dallas Fed responded to Zerohedge and said they did not “issue such guidance to banks”, the follow up story is here

www.zerohedge.com/news/2016/implementing

I personally hope this is true as “reality” will be pulled forward, …one can hope! (This is a very important revelation, I plan to write againtomorrow regarding the Dallas Fed’s denial tweet).

Now, we await to hear individual names of “who” is in trouble. We have already seen Glencore and other commodity trading group bonds collapse. The credit markets have already discovered Citi and Wells Fargo have just “non” reserved for almost no losses in their energy portfolio. Is this credible? Somewhere $500 billion and $1 trillion has been lent into the energy industry over the last 30 months …with probably a minimum expected oil price of $70, is ANYONE profitable at $29? The rubber will surely meet the road in this market!

While on the subject of fictional accounting, foreign central banks have off loaded some $1 trillion worth of “reserves”, specifically U.S. Treasury securities. There is only one problem with this, there has been no accounting anywhere publicly on the other side of these trades. Who bought these Treasuries to provide the cash? Where are they accounted for? Most probably the ONLY place where this size transaction could be done in the darkness of night would be the ESF (Exchange Stabilization Fund chartered in the 1930′s). For $1 trillion worth of securities to go unaccounted is not small potatoes, the only other such “misplacement” was back in Sept. 2001 when it turned out the military could not account for $2.3 trillion but that was overshadowed the following day with the “other” news.

As for peddling fiction, if the BLS used the “old fashioned” unemployment numbers (U-6) they used to report, the U.S. would have 9.9% unemployment. If they decided to go entirely non fiction the number according to John Williams is 23%! In a nation of 330 million, we have 94 million “no longer in the work force” and 46 million unable to feed themselves …30% and 15% respectively. Are these 94 million, independently wealthy and do not need work? If we were living in a day of still photographs and radios, the food lines could mostly be hidden. Since we live in a world where everything you do is recorded, these “food lines” are erased by EBT transfer payments …problem solved (at least publicly)!

A little off subject but how about the timing of the Iran deal? They are now allowed to sell oil at what Wall Street has already called “bottom”? Are we now looking for another, future bottom? Also, they now get their hands on somewhere near $150 billion in previously tied up funds. What will happen to the institutions who will need to credit these funds and forward to Eastern institutions? Another question, one many have simply laughed off as not doable …what if Iran took a “small” amount, say $10 billion and bought gold with it? What if they had a “crazy” (and angry) man at the helm and decided to take those funds and bid for every gold ounce for sale on the planet? Might this be a financial nuclear bomb …? I am not saying they will do anything other than tend to their own business with these funds, what I AM saying is, we just handed them a very big and very loaded financial gun!

Folks, it is what it is and the global margin call is being issued with no hope of it being met. The real economy is now contracting with a financial economy more leveraged and in debt than ever before under any measurement. “Less income and less cash flow to service more debt than in all of history” … this is not fiction, it is stark reality. Now, we must watch to see what the responses will be as the markets overwhelm all plunge protection teams, central banks and sovereign treasuries. In plain street language, the markets are now far larger and far more disorderly than the smoke, mirrors, lies and abilities of the financial puppeteers to handle.

We will shortly be hearing individual “names” as we did back in 2008. Names like Fannie and Freddy, Lehman and Merrill, Citi and AIG. Once you begin to hear “names”, we will be very close to the plug being pulled on markets. When you hear individual names it will be like blood in the shark infested waters of the speculators. These names will be attacked to the death. Counterparty risk will be back, first and foremost in decision making, NO ONE will be trusted. Credit markets will begin (they already are) to seize up and the only “policy option” will be to unplug the computers! I wish it were all fiction! 

The original source of this article is Global Research

Copyright © Bill Holter, Global Research, 2016

Fed Official Confesses Federal Reserve has Rigged the Stock Market — Crash Certain

In a dynamite interview, Richard Fisher, former president and CEO of the Federal Reserve Bank of Dallas, gave what may be the biggest confession you’ll ever see and hear from a Federal Reserve insider: the Federal Reserve knowingly “front ran” the US stock market recovery (i.e., manipulated the market) and created a huge asset bubble. Fisher expresses certainty that the “juiced” stock market will come down and is coming down now that the Fed has taken its foot off the accelerator … and that it has a long way yet to go.

While that is no news to readers here whose eyes are wide open, a “market put” has been denied by the Fed and by many market advisors. That the market was an overinflated bubble created by the Fed has been denied, too; but Fisher clearly and gleefully admits the Fed created a bubble that will have to deflate now that the Federal Reserve’s stimulus is off.

As one of the members of the Federal Reserve’s FOMC (the Federal Open Market Committee, which sets US monetary policy), Richard Fisher participated in and voted on all of the Fed’s policies of zero interest and quantitative easing, so he has inside knowledge of all the discussions behind the scenes at the Fed.

Here are the significant quotes from Richard Fisher on CNBC’s video:

What the Fed did — and I was part of that group — is we front-loaded a tremendous market rally, starting in 2009.

It’s sort of what I call the “reverse Whimpy factor” — give me two hamburgers today for one tomorrow.

I’m not surprised that almost every index you can look at … was down significantly. [Referring to the results in the stock market after the Fed raised rates in December.]

Basically, we had a tremendous rally, and I think there’s a great digestive period that is likely to take place now, and it may continue.

We front-loaded at the Federal Reserve an enormous rally in order to accomplish a wealth effect.

I wouldn’t blame [what is happening in the market’s now] on China. We’re always looking for excuses.

I wasn’t surprised at last year. And I wouldn’t be surprised at a rather fallow performance this year as well.

A lot of people are building cash positions…. Those [investors] that are taking a longer term view are being extremely cautious here, are raising their cash levels, are nervous about the valuations that are in the market.

The values are very richly priced here, so I could see significant downside.

Asked if saw a big unwind from the Fed’s 6.5-year policy and what it would look like on the way down, Fisher responded,

I was warning my colleagues, “Don’t go wobbly if we have a 10-20% correction at some point…. Everybody you talk to … has been warning that these markets are heavily priced.

Elsewhere Fisher said:

The Federal Reserve is a giant weapon that has no ammunition left.

You have to be careful here and frank about what drove the markets…. It was, the Fed, the Fed, the Fed, the European Central Bank, the Japanese Central bank … all quantitatively driven by central bank activity. That’s not the way markets should be working…. They were juiced up by central banks, including the Federal Reserve…. So, I think you have to acknowledge reality.

It’s about time for breaking the economic denial. Acknowledging reality is what many in the mainstream media, at the Fed, and among economists and stock analysts refused to do.

Now that the US stock market appears to be crashing, is Richard Fisher’s confession to cover his own hind end, by saying, “I warned the guys about this, and I voted against QE3 because I knew it went too far?” Is he just the first rat to flee the sinking ship, or is he just the most honest of Fed officials who is no longer on the board so feels freer to talk?

Your thoughts? (And please pass the confession along so that it gets lots of play time because you don’t get a confession like this about the inner arguments of the Fed very often. I imagine Yellen is doin’ a little yellin’ right now.)

You can read more from David Haggith at his site The Great Recession Blog.

The original source of this article is Activist Post

Copyright © David Haggith, Activist Post, 2016

The Federal Reserve’s Insidious Role in the Stock Market Slide

When the Dow Jones Industrial Average (DJIA) and S&P peaked in May 2015, investors were still confident that the Fed “had their back” and that any steep or prolonged downturn in stocks would be met with additional liquidity and a firm commitment to maintain zero rates as long as necessary.  But now that the Fed has started its long-awaited rate-hike cycle, investors aren’t sure what to expect.

This growing uncertainty coupled with flagging earnings reports have factored heavily in Wall Street’s recent selloff. Unless the Fed is able to restore confidence by promising to take steps that support the markets,  stocks are going to continue get hammered by economic data that’s bound to deteriorate as 2016 drags on.

For the last few years, investors have relied on the so called “Bernanke Put” to prevent significant stock losses while the real economy continued to sputter and underperform.  The moniker refers to the way the Fed adds liquidity to the markets during periods of stress to put a floor under stocks. Investors have been so confident in this safety-net system that they’ve dumped trillions of dollars into equities even though underlying fundamentals have remained weak and the economy has sputtered along at an anemic 2 percent per year. Investors believed  the Central Bank could move stocks higher, and they were right.

The Dow Jones has more than doubled since it touched bottom on March 9, 2009 while the S&P soared to a new-high (2,130 points) on May 21, 2015, tripling its value at the fastest pace on record. These extraordinary gains are the direct result of the Fed’s not-so-invisible hand in the financial markets. Betting on the Fed’s ability to move markets higher has clearly been a winning strategy.

So why are stocks crashing now?

Because everything has changed.  Up to now, “bad news has been good news and good news has been bad news”. In other words, for the last few years, every time the economic data worsened and the media reported flagging retail sales, bulging business inventories, shrinking industrial production, anemic consumer credit, droopy GDP or even trouble in China–stocks would rally as investors assumed the Fed would intensify its easy money policies.

Conversely, when reports showed the economy was gradually gaining momentum,  stocks would drop in anticipation of an early end to the zero rates and QE.  This is how the Fed reversed traditional investor behavior and turned the market on its head. Stock prices no longer had anything to do with earnings potential or prospects for future growth; they were entirely determined by the availability of cheap money and infinite liquidity. In other words, the market system which, in essence, is a pricing mechanism that adjusts according to normal supply-demand dynamics–ceased to exist.

This topsy-turvy “good is bad, bad is good” system lasted for the better part of six years buoying stocks to new highs while bubbles emerged everywhere across the financial spectrum and while corporate bosses engaged in all manner of risky behavior like stock buybacks which presently exceed $4 trillion.

The Fed’s commitment to begin a cycle of rate hikes (aka–“normalization”) threatens to throw the financial markets into reverse which will slash stock prices to levels that reflect their true market value absent the Fed’s support. The question is: How low will they go?  No one really knows the answer, but given the sharp slide in corporate earnings, the stormy conditions in the emerging markets, the unprecedented decline in oil prices, and the buildup of deflationary pressures in the global economy; the bottom could be a long way off.

One thing is certain, the Fed will do everything in its power to prevent stocks from dropping to their March 2009-lows. Unfortunately,   further meddling could be extremely risky which might explain why the Fed has not yet responded to the recent equities-plunge. As I see it, the greatest risks to the system fall into three main categories:

1) Asset bubbles

2) Danger to the US Dollar

3) Threat to US Treasuries market

It could be that the Fed is afraid that any additional easing will burst the bubble in stocks and bonds triggering a wave of defaults that could lead to another financial crisis. Or it could be that another round of QE (QE4?) could weaken the dollar at the precise moment that foreign rivals are threatening to topple the USD as the world’s reserve currency which would greatly undermine Washington’s global power and prestige.

Or it could be that more easing could constrict the flow of foreign capital into UST’s. With petrodollar recycling at its lowest ebb in three decades and China already selling its cache of Treasuries to prop up its currency, a significant selloff of US debt could raise long-term interest rates sharply pushing the US economy deep into recession and forcing fiscal cutbacks that would leave the economy in the doldrums for years to come.

Whatever danger the Fed sees on the horizon, it’s clear that the road to normalization is going to involve more than a few speed-bumps along the way. As for stocks; the extreme volatility and downward movement can be expected to intensify as the markets shake off seven years of rate-suppression and monetary “pump priming”.

And while its still too early to know whether the recent turbulence signals the onset of another financial crisis, it certainly appears that Wall Street and the Fed are edging ever closer to their inevitable day of reckoning.

The original source of this article is Counterpunch

Copyright © Mike Whitney, Counterpunch, 2016