Barclays warns of a financial storm as Federal Reserve's credibility crumbles

As the American economy crumbles, the U.S. stock market is attempting to lower itself in line with the real economy. However, nothing upsets people who own stock in companies (capitalists) more than major losses in the stock market. In an attempt to protect the capitalist class, the chairman of the nation’s banking cartel is going to respond to major stock market hits by creating more money to pump the markets, for example by lowering interest rates, by increasing fiat loans to bankrupt fellow cartel members, and by using proxies to buy up troubled companies.

All of these measures are inflationary, meaning that they increase the supply of new paper money in circulation while actually available goods and services are disappearing. While a growing economy can absorb such inflation, in a collapsing economy such inflation risks becoming hyper-inflationary, and threatening the currency itself. There are only enough seats in the inflationary lifeboat for the biggest & best connected capitalists, so we can expect to see many small-time capitalists being wiped out.

Barclays Capital has advised clients to batten down the hatches for a worldwide financial storm, warning that the US Federal Reserve has allowed the inflation genie out of the bottle and let its credibility fall “below zero”.

“We’re in a nasty environment,” said Tim Bond, the bank’s chief equity strategist. “There is an inflation shock underway. This is going to be very negative for financial assets. We are going into tortoise mood and are retreating into our shell. Investors will do well if they can preserve their wealth.”

Barclays Capital said in its closely-watched Global Outlook that US headline inflation would hit 5.5pc by August and the Fed will have to raise interest rates six times by the end of next year to prevent a wage-spiral. If it hesitates, the bond markets will take matters into their own hands. “This is the first test for central banks in 30 years and they have fluffed it. They have zero credibility, and the Fed is negative if that’s possible. It has lost all credibility,” said Mr Bond.

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