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A Free Market on the Verge of a Free Fall Thumbnail

A Free Market on the Verge of a Free Fall

by J. Jay Astor of Boston Packets 

The fix has been in on free-market capitalism for decades now, but certainly since the 2008 financial crisis struck and Black Rock, the world’s largest asset management company, was given the reigns by the Federal Reserve to handle the mortgage crisis. The arrangement proved to be an economic windfall for the hedge fund giant and essentially ushered in an ever-increasing intersection of the Federal Reserve, the U.S. Government, and Wall Street.

Today, three hedge funds are the largest shareholders in virtually every major company listed on the U.S. stock exchange and in each other (Black Rock, Vanguard, State Street); that alone eliminates any notion of a free market. How can capitalism work when the largest shareholders of every major publicly listed company are the three largest hedge funds in the world who are in-turn the largest shareholders in each other? As a result, they are almost guaranteed a seat in every boardroom of every major corporation in the United States and therefore can control voting power in virtually every major economic industry (which they are doing on a global scale as well). Is it any wonder why new and obscure investment and corporate strategies such as ESG (Environmental, Social, and Governance) have suddenly become so pervasive in the western world?  

While the globalists are busy transforming western society, Main Street will continue to get crushed with small and medium sized businesses going out of business. Large corporations will keep their stock price artificially inflated in the interim with corporate buy-backs which primarily benefit the wealthy. The middle class will continue to reel in the face of rising inflation and a recession (it’s a recession by historical definition, no matter what any talking-head or government official says). Small business cannot compete in such an environment, and many will soon shutter their doors permanently. This will further increase the income and class divide in the United States and western Europe.

I’m not an economist, but you don’t have to be one to understand that replacing Austrian Economics with Keynesian Economics in the 20th century has been an unfortunate choice for the western world. A free market must have an even playing field and under Austrian Economics, the saver thrives and creates business based on hard assets and commodity backed wealth. Keynesian Economics is solely based on debt. A fundamental problem with this system is that the creation of debt lends itself to a biased monetary system where the Federal Reserve down to Wall Street choose who the winners and losers are and therefore who receives this low- to no-interest cash. The wealthy are overwhelmingly the winners in this system while the rest of society (savers) is left behind. Debt equals wealth in our current system, and it’s based purely on speculation with little actual production anymore; hence, U.S. manufacturing being shipped overseas long ago. There is no sound money in this system and when institutions make bad investments and over-extend such as in the lead-up to 2008, they are not held accountable and are deemed “too big to fail”. It’s not a favorable system for the general population but a powerful tool for the chosen few who are in charge. 

The whole system seems severely broken, from Japan to Europe to the United States. In the United States, any additional quantitative easing by the Federal Reserve will increase inflation. Conversely, any continuing rate hikes will ultimately cause economic contraction and are likely to lead into a deep recession. This scenario, combined with Europe’s fast growing energy crisis, might as well lead to a depression. 

At this point, western monetary policy has been irresponsible for nearly 50 years and central banks are now over-extended in bonds and equities to prop everything up, in a way that yields are picking-up fast and raising rates to get everything “back in-line” has been causing equities to tumble. 

There is nothing more the central banks can do, and the European Central Bank seems to be in even worse shape than the Fed as it has been so heavily engaged in the repo market to raise zero-interest cash, doling out to member banks on their balance sheet, that there is hardly any recourse left. Add into the mix the manufactured energy crisis, poor harvests, and the increasing threat of regional wars on a global scale, this winter is shaping up to be one of the most challenging times in investing we may see since after 2008.

Yours sincerely,

J. Jay Astor, Legacy Writer