Former Fed Chair: The Fed is Going to Buy Stocks and Cut Rates to Negative
Former Fed Chair Ben Bernanke just gave us the Fed’s playbook for dealing with the next recession.
For reference, Bernanke oversaw the Fed during the Great Financial Crisis of 2008 – crafting the Fed’s crisis policies of cutting rates to ZERO and holding them for seven years AND $3.5 trillion in quantitative easing (QE).
Put simply, he is one of the single most connected Fed insiders on the planet.
And if you think what the Fed did during the last recession was bad (zero interest rate and $3.5 trillion in QE)… wait until you see what they’re planning for the next one!
In a blog post published Saturday before his speech at the American Economic Association’s annual meeting, Bernanke pushed back on the idea that central banks won’t be able to manage the next recession.
According to Bernanke, the Fed has no shortage of tools available.
Among other things, Bernanke stated that during the next recession, the Fed should consider:
- Cutting rates to NEGATIVE.
- Launching more QE programs.
- Buying private securities (read: stocks) instead of government debt.
- Targeting bond yields through open policies.
Again, one of the single most connected Fed insiders on the planet has said that the Fed will cut rates to NEGATIVE and buy stocks during the next downturn.
This is truly astonishing.
Never before has a Fed insider called for the Fed to buy stocks outright. Sure, you might find a Fed researcher here or there who wrote a paper on this… but a former Fed Chair? Never.
For Bernanke to write this means that these ideas are being discussed behind closed doors at the highest level of the financial system.
However, I believe Bernanke is doing more than this.
I believe he is laying the groundwork for the Fed to reveal one of the most shocking secrets in finance…
The Fed Has Been Buying Stocks in Secret for Years Now
Technically, the Federal Reserve is not supposed to buy stocks or stock futures. And they certainly do not include those assets on their balance sheet listings, which are published every week.
However, we know from Fed meeting minutes that the Fed does indeed own positions in the markets that it does not publish.
Case in point: Back in October 2012, then-Fed Governor Jerome Powell (now-Fed Chair), explained what happens when the Fed decides to sell its investment positions during a discussion:
“So when it is time for us to sell, or even to stop buying, the response could be quite strong; there is every reason to expect a strong response. So there are a couple of ways to look at it. It is about $1.2 trillion in sales; you take 60 months, you get about $20 billion a month. That is a very doable thing, it sounds like, in a market where the norm by the middle of next year is $80 billion a month. Another way to look at it, though, is that it’s not so much the sale, the duration; it’s also unloading our short volatility position.” [Emphasis my own.]
Source: Federal Reserve
Here, Powell is stating that the Fed has a “short volatility” position ― meaning the Fed is either shorting the Volatility Index (VIX) via futures, or options.
However, I believe the Fed is doing more than this. I believe the Fed is OPENLY intervening in the stock market on a regular basis.
Whether it’s a direct intervention or done via a proxy, I don’t know. But I have personally watched the market react in ways that indicate a clear intervention by the Fed.
I’ll explain how and why in tomorrow’s article.
But for now, let me leave you with this…
Massive Profits from Fed Interventions
I’ve been working on this research for over eight months. In fact, I’ve developed a REAL TIME trading strategy that can identify when the Fed is about to intervene in the markets.
Imagine the kind or money you can generate if you can successfully “front run” a Fed intervention.
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I’ll detail this trading strategy in the coming days. But for now, know this…
This is the single most incredible discovery of my career. It has the power to produce literal fortunes in just a few days at a time.
Editor, Money & Crisis