Titanic Parallel to the Federal Reserve - Gary Christenson (17/4/2017)

April 17, 2017

Thinking about the 105^th anniversary of the sinking Titanic, the Titanic-sized debt in the world, and the role of central bankers…

The RMS Titanic departed Southampton, England at noon on April 10, 1912 and struck an iceberg in the North Atlantic just before midnight on April 14. She sunk less than three hours later. Her maiden voyage lasted about 110 hours.

The Federal Reserve, the central bank of the United States, was created by congress late in 1913. Her “maiden voyage” devaluing the dollar has lasted over 103 years.

(All quotes and Titanic facts come from Wikipedia. Opinions are my own. Do your own thinking.)

The Titanic received six warnings about sea ice on April 14, but continued her journey at 22 knots (25 mph, 41 km/hr). Per Wikipedia, “ Titanic’s high speed in waters where ice had been reported was later criticized as reckless, but it reflected standard maritime practice at the time. ”

The Federal Reserve has held interest rates “near the zero bound” for over eight years and has been criticized for this practice, but some think such “accommodation” should be considered standard practice because of the monumental debt in the global financial system.

The Titanic was considered “unsinkable.” Further, icebergs were common in the North Atlantic in April and had previously caused few problems for ships.

The Federal Reserve is viewed by many as necessary, powerful, and likely to survive forever.

The Titanic hit an iceberg when visibility was low, just before midnight on a moonless night. “It was widely believed that ice posed little risk; close calls were not uncommon, and even head-on collisions had not been disastrous.”

The Federal Reserve operates with little visibility, does not see bubbles before they pop, has created many close calls without major damage, and sees minimal risk in the murky financial waters of 2017. “Printing dollars” and “accommodative” policies have always saved the bankers and elite, while the middle and lower classes seem unimportant in Fed policy decisions.

Even after striking the iceberg and ripping open five compartments, “above the waterline, there was little evidence of the collision.”

Even after the financial crisis of 2008, mortgage and derivative disasters, numerous unindicted frauds, billions of dollars in fines paid by banks and financial institutions, the Dow Jones Industrial Average recently reached an all-time high and shows little evidence of a collision with financial reality.

“Within 45 minutes of the collision, at least 13,500 long tons (13,700 t) of water had entered the ship. This was far too much for Titanic’s ballast and bilge pumps to handle.”

Since the financial crisis of 2008 the Federal Reserve has added nearly $4 trillion to its balance sheet by purchasing mortgage backed securities, bonds, and other paper. Some think $4 trillion is too much for the debt market to absorb if the Fed decides to reduce its balance sheet.

“The passengers were not told that the ship was sinking, though a few noticed that she was listing.”

Although mainstream media proclaims “everything is fine,” a few analysts have noticed that U.S. economic growth is weak, statistics are cooked, debt is outrageously large and impossible to pay back except via massively devalued dollars, and the titanic debt market is “listing” after a 35 year bull market that appears to have rolled over, possibly sinking.

“The [Titanic] crew was likewise unprepared for the emergency, as lifeboat training had been minimal.” Why plan or prepare when the Titanic was considered unsinkable?

It has been reported that the Federal Reserve employs 1,000 PhD economists. Are they prepared for an economic emergency? Will their answer be the usual “print more dollars?”

“Some still clung to the hope that the worst would not happen: Lucien Smith told his wife, ‘It is only a matter of form to have women and children first. The ship is thoroughly equipped and everyone on her will be saved.’” He was wrong.

The mainstream media chatters about wise Federal Reserve policy, beneficial Trump plans, a strong economy, unemployment below 5% and more. The mainstream media was also wrong about Brexit, HRC, and the 2016 Presidential election predictions. Any grocery shopper knows they are also wrong about inflation and unemployment statistics.

“Hundreds were in a circle [in the third-class dining saloon] with a preacher in the middle, praying, crying, asking God and Mary to help them. They lay there and yelled, never lifting a hand to help themselves. They had lost their own will power and expected God to do all the work for them.”

Millions of Americans trust the reassuring stories they hear from the Federal Reserve and mainstream media while they earn practically nothing on their savings, fearfully watch their pension plans sink closer toward insolvency, and shudder as their purchasing power declines.

Two bands entertained passengers and played music in the first class lounge and on deck as the Titanic flooded and sank into the icy waters.

Americans are entertained by and addicted to their devices, twitter accounts, Facebook, media stories and sit-coms while dollars are continually devalued and wars rage on in Afghanistan, Iraq, and Syria.

The Titanic sunk 110 hours into her journey, in spite of official pronouncements, prayers, live music, positive thoughts and an experienced captain.

The Federal Reserve is 103 years into its journey … and we shall see how long it and the dollar will survive.

***

The U.S. dollar, euro, pound, yen and other fiat currencies backed by nothing but debt, confidence, faith, and official pronouncements are “living on borrowed time.”

However, gold has been real money for thousands of years.

Both gold and silver will be far more important in coming years as the delusional and declining value of fiat currencies becomes more apparent.

GE Christenson is the owner and writer for the popular and contrarian investment site Deviant Investor and the author of the book, “Gold Value and Gold Prices 1971 - 2021.” He is a retired accountant and business manager with 30 years of experience studying markets, investing, and trading. He writes about investing, gold, silver, the economy, and central banking. His articles are published on Deviant Investor as well as other popular sites.

The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.