The Myth Of The Eternal Market Bubble And Why It Is Dead Wrong, by Brandon Smith

Economic collapse is not an event — it is a process. I’ve been saying this since the initial 2008 crash, and I suppose I will keep saying it until it burns into people’s minds because I don’t think that it is a widely understood concept. When alternative analysts talk about financial collapse, we are not talking about something that suddenly happens out of the blue, we are talking about an ongoing decline that occurs in stages. This decline is happening today in the U.S. and around the world, and it has been accelerating since the chaos of 2008. When we bring up the reality of collapse, we are referring to something that is happening NOW, not something waiting on the distant horizon.

The reason why some analysts can see it and others cannot is most likely due to the delusions surrounding market bubbles. These fiscal fantasy worlds are artificially created by central bank intervention and represent an attempt to mislead the populace on the true health of the system — for a limited time. People with foresight see beyond the false data of the bubble to the core economic reality; other people see only the bubble and nothing else.

When it comes to stock markets, bond markets, forex markets and the general casino economy, much of the public has a terrible inability to look beyond the next month let alone the next year. If the markets appear good now, the assumption is that they will always be good. If the central banks have intervened for the past 10 years, the assumption is they will intervene for the next 10 years.

There is no accounting for why the bubble exists in the first place. That is to say, many people including most economists do not consider that these bubbles serve a particular purpose for the banking elites and that this purpose has an expiration date. All bubbles collapse, and the reasons why they collapse are observable and predictable.

Still, the delusion persists that all this talk of “collapse” is simply “doom and gloom,” an event that might happen many years or decades from now, but it’s certainly not a threat taking place right in front of our faces. I attribute this misconception to several popular fallacies and propaganda arguments, and here they are in no particular order…

Fallacy #1: Central Banks Will Continue To Prop Up Markets Indefinitely

The newest generation of market traders and economists were still in high school and college when the 2008 crash hit equities. For the entirety of their careers, they have experienced nothing but an artificial economy supported by ongoing stimulus from central banks. They know of nothing else and know little of history, and thus they cannot fathom the possibility that central banks will one day pull the plug on their fiat life support.

The problem is that 10 years of stimulus is nothing more than a pause in the process of fiscal collapse of a civilization. In fact, the economic decline of nations could be represented as a series of imploding bubbles; each one lasting perhaps a decade, leading to more power and control for central banks and less prosperity for everyone else.

Recession history

Anyone examining the history of recessions and depressions in the U.S. since the inception of the Federal Reserve in 1913 can easily see a steady pattern of artificially inflated asset values followed by pervasive downturns that siphon wealth from the middle class. This wealth never really returns. Each new downturn cripples the financial independence of the citizenry a little more, while international banks absorb more and more hard assets.

What mainstream economists don’t seem to grasp is that central banks and international banks are ALWAYS positioned to benefit from the crash of the bubbles they create. It is the reason why they inflated the bubbles from the very beginning. Central banks are not afraid to allow markets to plummet, they WANT markets to plummet. The banks simply want to be sure they are set up for optimum benefit when the system does crash.

Fallacy #2: Central Banks Will Never Stop Stimulus Measures

I’m not sure why this fantasy persists despite all evidence to the contrary, but it does. Even today, I still receive letters from people arguing that the Fed will “never” end stimulus, never raise interest rates and never cut their balance sheet. Yet, this is exactly what is happening.

I heard the same arguments years ago in 2013 when I predicted that the Fed would in fact taper QE. I heard them in 2015 when I predicted that the Fed would raise interest rates. And I have heard them for the past year after I predicted the Fed would continue cutting assets from their balance sheet.

There are some people that might claim that there is no way for us to know if the Fed is actually cutting off stimulus to the economy because we have no way to audit their activities. While it is true that we do not have access to their legitimate financial records, only the records they release to the public, we can still see the effects that their policies produce. Meaning, it is obvious that the Fed is in fact cutting support to the markets given the behavior of those markets the past year.

Emerging market stocks are crashing as the Fed announced continuing balance sheet cuts. Treasury yields are spiking at historic speed and interest costs are rising on everything from car loans to mortgage loans as the Fed increases interest rates. Foreign investment in U.S. Treasuries (or lack of investment) has become a major point of concern because QE support for T-bonds is gone. Massive corporate debt loads not seen since 2007/2008 are becoming more expensive as interest rates expand.

This month Fed Chairman Jerome Powell ended all speculation on the matter when he indicated that the Fed would not only continue raising rates up to the neutral rate (where interest meets inflation), but that they could continue raising rates well beyond that. The blind faith based market is truly over.

All evidence suggests that fiscal tightening is indeed happening. Some people refuse to see it because their biases prevent them from doing so. Perhaps they are heavily invested in U.S. stocks and don’t want to believe that the party is over. Perhaps they are incapable of admitting when they are wrong. It is hard to say. They argued for years that the Fed would never take the punch bowl away and they have been proven incorrect, but until they suffer direct consequences to their pocketbooks, they will not accept reality.

Fallacy #3: The Fed Will Return To Stimulus Japanese-Style

This is a very common claim designed to build false hope in markets. Bull rally hucksters and their followers have become so used to the easy life of “BTFD!” (Buy The F#$&ing Dip!) that they will apply any rationalization no matter how absurd in order to keep the fantasy going.

The claim is that because Japan’s stimulus measures have been “successful” in keeping their markets afloat for at least two decades, this is the most likely strategy for the Fed and other central banks as well. What these people have not considered, though, is the speed at which Japan’s central bank bought up assets versus the speed that the Fed has bought up assets.

The Bank of Japan’s balance sheet reached around $4.7 trillion (U.S.) at its peak, and as mentioned, this took decades of accumulation. The Fed’s balance sheet hit $4.5 trillion in the span of only 8-10 years.

There is a point at which asset purchases and stimulus simply do not have the same effect on markets as they did when those purchases began. Debt starts to weigh heavily on further market gains over time. There are multiple reasons why the Fed is choosing to implode the bubble now — one of them is that time is running out and they want a controlled demolition rather than a crash with a mind of its own.

The printing press is not magical; the basic rules of economics and mathematics still apply.

I’ve also heard the argument that because US GDP is so much larger than Japan’s, comparing their central bank balance sheets is “not practical.” Meaning, the U.S. has a larger GDP, therefore the Fed should be able to increase its balance sheet much further than Japan has. This claim obviously relies on the notion that “GDP” as it is calculated today is an accurate measure of how much debt burden a nation can carry.

If you consider Japan’s manufacturing capability alone, the U.S. with all its outsourcing pales in comparison in terms of economic resiliency. If you also consider that every time the government spends tax dollars these programs are often added to GDP as a form of “production” (this includes Obamacare), then the idea of GDP becomes a joke. The point being, it does not matter how healthy a nation’s GDP appears to be, the central bank can only create so much debt before it begins to drag down the core economy. The Fed has reached that limit.

Fallacy #4: The Fed Can Hyperinflate Markets Perpetually

This is the last-ditch delusion used by stock market addicts and disinformation peddlers to assert that the current bubble can and will be propped up for many years to come, even after the rest of the economy is in dire regression. It is based partially on historic examples of fiscal collapses that led to inflation. Sometimes this inflation flows directly into stock markets while the rest of the system sinks due to investors looking for a safe haven, and also due to central banks manipulating asset prices. This occurred in Weimar Germany during the hyperinflationary rout of the 1920s, however, people who make this argument do not know the actual history of that collapse.

Germany did indeed see a considerable stock market rally just at the peak of the hyperinflationary crisis, but this period only lasted from 1924 to 1927. In 1927, the Federal Reserve, France and the German central bank intervened to deliberately crash the bubble. While central bankers today still assert the lie that the cause of this downturn was the gold standard, the truth is that it was central bank tightening of monetary policy into an already unstable economic environment that caused the crash.

An interesting article on this issue for those that would like a better historical reference is ‘With a Bang, Not a Whimper: Pricking Germany’s “Stock Market Bubble” in 1927 and the Slide into Depression‘ by Hans-Joachim Voth.

Does any of this sound familiar? It should. This is exactly what the Fed is doing today.

In the U.S. for the past decade we have already witnessed our period of inflation in stock prices. Now, the central bank is collapsing the bubble, just as they did in Weimar Germany, just as they did here in the U.S. during the Great Depression as Ben Bernanke admitted in 2002, just as they have done in every market bubble for the past century.

I predicted in February of this year in my article ‘Is A Massive Stock Market Reversal Upon Us?’ that the early stock market drop would be followed by a period of mindless exuberance and a market bounce (which is what happened this past summer), followed by a return to an extreme stock plunge in the last quarter of 2018. This seems to be occurring now.

There is no eternal market bubble. There never will be. If not for the reason that economic fundamentals make it impossible, then for the reason that crashing these bubbles benefits globalists and banking elitists.

The goal? I believe the goal is to consolidate total power over production and labor using the deliberate institution of a poverty-based civilization. Beyond that, the goal is to make the populace perpetually desperate to the point that they are socially malleable. In order for the bankers to establish what they call their “New World Order,” they need chaos to tenderize the masses, but they also have to be seen as saviors that deserve to be in a position of authority over the global economy. They need to create disasters so they can then ride in on their white horse and save us from those disasters.

Why would central banks continue to perpetuate market bubbles when the destruction of those bubbles gives them opportunities for greater power?

This guest article first appeared in the excellent Alt-Market blog.


  1. Brandon Smith hails from The American Redoubt. I’ve been following Brandon ever since 2011. It was on cold snowy Montana night in Perkins restaurant when Brandon introduced many Oath Keepers and Patriots to: a plan for a “global economic reset” to replace the U.S. dollar as the world reserve currency, China’s role in a global currency, Yuan, IMF’s Special Drawing Rights (SDR’s), Baltic Dry Index etc. Brandon was probably the youngest guy in the room. But he immediately commanded the respect of the rest of us.

    Any financial analyst can attempt to explain ‘what IS happening’. Brandon Smith PREDICTS ‘what WILL happen’ and supports his predictions with facts. Critical to his success is that Smith takes an all-inclusive view of the world relative to not only the financial realm but also political, societal, global government forces, historical perspectives etc. It is no wonder that he has arguably a track record second to none.

  2. Yes, but what can I do about it? I know I’m going to get hosed but most of my savings is locked into IRAs and 401K accounts and I can’t cash out without paying at least 35%. I still have a mortgage, and that isn’t likely to change without liquidating PMs and my other investment accounts. And I really would prefer not to be another ex-pat in a third-world pseudo-democracy. Instead of banging pots and screaming “the sky is falling”, tell me some concrete things I can do to protect what I have worked a lifetime to achieve.

    1. @BinWY

      The concrete things are there. You just have to make the decision to do them even if the short term is painful. Kind of like ripping a Band-aid off. In your own post, you give enough information that I can tell your situation is similar to what mine was. Why are you holding PM’s if you still have a mortgage? PM’s don’t really make you money, they simply hold value. Every time you pay interest, your money is losing value. I would sell the PM’s and cash out the 401k/IRA and get out of debt first. Get a second job if you have to just to get out of that mortgage. Without debt, start rebuilding your portfolio in investments that make sense for your situation.

    2. @BinWY, if you think the market is going to drop significantly in the near future, you could move funds within your IRA or 401k to cash or assets that you think might perform well, such precious metals mutual fund or ETF. You could also do some research or seek the advice of a professional who can help you pick funds that might outperform in the event of a collapse or a downturn.

      It’s important to keep in mind that the stock market has collapsed and the economy has gone into recession many times, but it has always recovered again — at least so far. So if you have cash, you can buy assets post crash and really make some money during the subsequent recovery. You’ll quickly realize that timing both points is the key to doing this successfully.

      Even in the event of a total economic collapse where the dollar becomes value-less, you could still own assets that retain some value and help preserve some wealth when the new normal is established. Your house is one and farm land a second, but beyond that if you own shares in a gold mining company that owns mines with proven gold reserves, those will probably still have value after the collapse, even if the value is no longer measured in dollar. Study what happened in Russia, Argentina and other countries that saw their economies collapse and learn what you might need to do first to survive physically and second to survive economically.

    3. There is no easy solution but i remember an excellent article right here on the blog about investment in farmland and rental units in which the author slowly divested himself from paper assets and moved to those areas and also precious metals which was direct ownership. Ive always liked the tangible items too.

  3. I don’t understand this recession chart, yet I do understand similar charts of cycles over time. But this one has t-notes on top in blue and sp idx on bottom in maroon according to its legend. Why isn’t the same class across the 0% on both top and bottom? Does it describe a mass behaviour of shuffling from equity to debt instruments?

    I’m not ussually the dumbest guy in the room, but that all depends on who else is in the room.

  4. You’re right – the bank can’t take a house which is mortgage free, BUT your friendly local property tax collector can if you fall behind in your ransom payments. You own nothing – you are merely renting from Big Brother

    1. Thanks Harry, you are right. And it is already going on. The government will drum up “taxes” you owe and the court will agree and not even bother to cite the law when you ask for the applicable law that makes you liable or subject to the taxes. Your property will first have a lien and then they will take it.

  5. Pay off the mortgage. Save up the taxes for 5 years worth. Keep the tax-stash at the 5 year level. With the slow collapse, that should be enough to keep you going until the bottom falls out of everything.

    If there is a complete collapse, the taxes aren’t going to be collected anyway, no one will have the money to pay property taxes. What is your county government going to do, confiscate all the land, throw everyone off and twiddle their thumbs until something magically changes? Nope. How would they pay their employees? Oh wait, there won’t be any employees, because there won’t be any money. But that assumes a total financial collapse.

    Barring that, never, ever vote for a tax increase. Never, ever vote to renew any expiring taxes. Convince your friends and neighbors to do the same. Get them to convince their friends and neighbors not to vote for any new taxes or any tax renewals. Most of the services that your county or local government provide could be provided on the free market, as needed, rather than ongoing payments, forever and ever, for services you rarely use. All this requires knowledge on your part and the ability convey that knowledge, make the case.

  6. Article is pretty heavy on disparagement. The graph had me fooled also til I read the commenter above that it is comparing apples and oranges in differing years. Best I think to follow a scriptural (in my humble opinion) financial plan of dividing your portion in multiple ways — then then wisely dealing with rebalancing. In my case I feared and did not understand the stock market (did you know the Pinta and Santa Maria were owned by stock financed companies?) so I was in BONDS all during the 90’s and missed a huge huge profit….but when stocks tanked in 2001/2002 — and my BONDS went up by an incredible 40% in some cases, I was smart enough to “sell high” and “buy low” — the S&P500 went to 750…and i bought bought bought. it went to 1200 or higher and I sold sold sold. THen it went to 750 again (2007 or so) and I bought bought bought — now it is, what, 2800??? think what that did for me — and that’s of course only a portion — I have land, food, pointy lead things and long steel and short steel things which I’m very good with now, thank you! I also purchased some ability to farm, make my own power and water and yada yada yada. Best advice I can give is to learn from elders, work hard to understand EVERY asset class, then then listen to Solomon’s advice. i can’t eat my lead or the 1’s and 0’s in my accounts… better have some seed! But having multiple figures in the accounts makes it far easier to pay the property taxes and live for the time being.

  7. HJL, Big John, Charles K, Yes! Get out of current debt ASAP, stay out, and save up to pay future debts, especially taxes. Having a government is no guarantee that you will live under proper rule of reasonable laws, but having no government, might guarantee that you won’t. But even the best government can’t operate without some form of income.

    The corrosive effect of dishonest money (“unequal weights and measures”) is slowly dissolving this nation into just another broken-down Socialist “paradise.” The CONgressional trick of farming out to a foreign banking cartel — (creating money out of nothing) a power that they were not granted in the Constitution, might seem “unConstitutional,” but the Just-Us’es, have never explicitly said, thereby speaking volumes.

    Until and unless the Citizens of this nation bother to inform themselves of how they are being gradually enslaved by the Federal Reserve Scam, they will continue to lose their remaining control over their nation, until eventually, their clearest understanding will be no more than a conversational topic behind the barbed wire.

  8. Catherine Austin-Fitts claims there is 21 Trillion missing in the government accounting. How can we have markets or economic advice that mean anything when nothing is solid and real?
    My guess is the world is awash in debt. As emerging markets can no longer pay their debts as interests rise those that have the ability will flee their market and look for a safe haven. I expect the US market to be the last man standing as people with assets liquidate and try to preserve it in the US market. I don’t think anybody knows for sure what is going to happen so I am diversifying. I am also making my health and fitness my number one priority and learning all I can about staying a healthy old geezer and building strong relations with family, friends, and god. I think we will all need help, those who think they can buy their way out may not get as far as they imagined if they are all on their own.

    1. From one “old geezer” to another, thank you Robert. Your post adequately sums up what I wish to make my priorities…..Diversification, health and fitness, strong relations with family, friends, and God. Very well said Robert! I wish you well and thanks for the advice!


    2. The US has some of the worst, most undercapitalized banks. Banks in other jurisdictions are far stronger and better run,money will fly there at the speed of a keystroke at the first sign of collapse.

  9. A fixed rate mortgage is good insurance against inflation, especially if the mortgage rate is locked at a historic low. Another aspect to consider is property taxes. I would not want to own property in a state that does not have strong restrictions against property tax increases. Some states such as Illinois and Texas are already experiencing rapid property tax rate increases and I expect that trend will only worsen. For example, a friend who lives in Austin, TX paid 210K for a house in 2011 and saw his property taxes increase from 5K/year to 9K/year from 2011 to 2018, roughly a 10% increase per year. And other states such as New Jersey and the small states in the northeast have always had very high property tax rates which continue to increase.

    1. @Zac

      How exactly is a fixed rate mortgage “good insurance” against inflation? By my calculations, if you have a 30 yr home mortgage of only $150,000 and are only paying 3% interest, you will have paid over $330,000 by the end of the loan. That’s an effective loss of 50% of your money. An interest rate of 6% brings the value to over $430,000. That means you will pay more in interest than the value of your home. The mortgage is not a hedge against inflation. The mortgage is debt. The home might be a hedge against inflation since it’s an asset (depending on location), but if you have a mortgage on it, you don’t own it, the bank does. A home in Silicon Valley would have been a great investment – a home in Detroit, not so much.
      How much better is it to have the asset without the debt?

      1. Hi Hugh

        Your figures for interest at 3% seem high. I went to the mortgage amortization calculator at For a $150,000 loan at 3% for 360 months (30 years) the interest paid is $77,666.18, so the total paid on the loan at the end of 30 years is $227,666.18.

        At 6.0% the interest is $173,757.28, bringing the total paid on the loan to $323,757.28.

        By way of historical context, the third home I bought was in 1981 in Idaho. The prime rate was 20.50%. My loan rate was 18.5% variable. Yes, it could have gone higher. I had to refinance that loan 4 times before it was paid off.

        1. Don’t forget the mandatory insurance and other things that is rolled into your primary mortgage. When you own it outright you have much choice about your coverage. My own mortgage even had an unemployment insurance on it that was mandatory. Ugh!

          1. -Hugh

            According to my inflation calculator, if I bought a house for 150K in 1988, it would be worth 320K today, assuming it was in good shape and the neighborhood did not deteriorate. In a sense my purchasing power would be preserved. It’s as if the 3% interest that I pay the bank comes back to me. I could be wrong, but that’s how it seems.

Comments are closed.