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The US government has been exposed for its worst scandal of all time by Micheal Burry. Not just that, it has been allegedly accused of creating situations leading to world war 3, insider trading, government manipulation, and a multi-year inflationary crisis. Burry was thought to have gone insane when he warned about the 2008 housing bubble.
Compared to that, Burry predicts much bigger problems coming up next. Today we are going to talk about how the Fed is lying and how Micheal Burry exposed its deceptive practices. If you are looking to take count of some serious international malpractice by government organizations itself then you have come to the right place.
Without any further ado let's get into the video. It has been realized that the federal reserve is lying about pulling tens of billions of dollars out of the economy in the month of June this year but they have failed to do so. It's not coming out of the blue we must tell you, it is backed by indisputable proof.
The websites of the New York Fed provide a list of all the assets that the federal reserve is required by law to report. The Fed stated that it will begin selling $47.5 billion worth of securities each month on June 1st, 2022. Treasury bonds worth $30 billion and mortgage-backed securities worth $17.5 billion are included in this transaction.
When Micheal Burry browsed the Fed's website, he discovered that they are not selling as much as they had advertised. Fed only sold less than $10 billion worth of treasuries in June, compared to the $47.5 billion worth of securities or $30 billion worth of treasury bonds the Fed intended to sell. Furthermore, the Fed actually purchased mortgage-backed securities for $3 billion rather than selling them for $17.5 billion.
Right in front of everyone's eyes, the Fed is misleading them. According to the fed securities statistics issued in July 2022, everything is very well clear. Instead of the anticipated $30 billion decline, Treasury bonds declined by a total of $27 billion. The Federal Reserve blatantly lied when it stated that MBS holdings would decline by $17.5 billion while in reality, they surged by almost 8 billion.
It is obvious that they are not making the cuts they promised. Additionally, the US administration is hiding the reality that the economy is collapsing. The White House altered the definition of a recession as it looked that the US economy was about to enter one. Generally speaking, two consecutive quarters of negative GDP growth constitute a recession.
The US economy has been in a recession for the past two quarters in a row. A recession is defined by the White House as a drop in the labour market, consumer and corporate expenditure, industrial production, and income. Burry figured out the difference in no time and said that the economy is declining.
He conveyed his views through a tweet by saying that “the White House would like you to redefine a recession as one in which consumers are not borrowing on credit cards to pay for inflation and neither is the labour force inadequate for the economy.” Burry said that the White House deliberately misleads the public with its data.
However, the White House asserts that real personal income, which is adjusted for inflation, is a sign of economic stability. Burry is aware that this is untrue since credit card debt has exploded as a result of rising costs. The unemployment rate, which is now still fairly low, was the other number that the White House mentioned.
Michael Burry thinks this is misleading once more since the labour force participation rate is much lower than it was before the epidemic and the unemployment statistic only includes persons who are actively seeking work. The unemployment rate is calculated by taking the number of unemployed people and dividing it by the labour force.
U= unemployed people/labour force x 100 The unemployment rate is being artificially lowered. This is because subtracting a contestant number from a numerator and denominator leads to a lower outcome U = unemployed people - x / labour force - x x 100. If you take the fraction 5/7 and subtract it by 2 you will get ⅗ which is lower than the former.
Consequently, the economy appears to be robust when it isn't. The market has been in a tailspin since the Fed said they would be increasing interest rates and quantitative tightening. Investors that speculate while the economy is still in a downturn are doing foolishly, according to Burry. Hong Kong-based financial services business Magic Empire Global went public on the stock exchange, and its value increased by a factor of 24.
This is an example of the same kind of speculation that took place in 1999 and in 2021. Burry made reference to the gambler's fallacy, often known as the Monte Carlo fallacy. According to the Monte Carol fallacy, there are more prospects for future wins if there have been losses in the past. The Monte Carol fallacy is likely to be believed by gamblers because many of them lost money in 2021.
Burry investigated NASDAQ, compared the S&P's performance from 2001 to 2022 and discovered a comparable price increase. In 2001, the S&P declined by 12% before rebounding by 9%. The S&P is following a similar pricing pattern in 2022 as it did in 2001. Given that the underlying economy is contracting and will continue to do so, such a resurgence is unwarranted.
The bullwhip effect, in which every stage of the supply chain purchases more supply, causes the last one to order far more than the projected demand, is what is driving inventories to pile up and is what will cause the second phase of the market crash in 2022. Part 1 of the market crash involved numerous compressions, such as the price-to-earnings ratio, price-to-sales ratio, and EV-to-EBITDA ratio, to bring values back to reality.
Burry stated that the first-half declines in the S&P 500, the Nasdaq, and bitcoin were all results of multiple compression. The moment has come to talk about earning compression. Michael Burry divided his argument into two pieces to better explain it. He claims that as inventories rise, prices would fall as a result.
The level of inflation won't simply rise or fall. And watch out for deception in the media. It will have cyclical ups and downs, with an increasing tendency over time. Earnings reports, which indicate firm success during the previous quarter, are one short-term indication that the mainstream media pays attention to.
Burry says that although previous earnings reports may have been promising, the upcoming ones will be terrible. This is best shown by Walmart. Walmart's earnings forecast for the upcoming quarter and the whole fiscal year of 2023 was recently revised downward. Price reductions may seem good for inflation in the short run, as Burry said, but there's one factor that's missing: the Federal Reserve.
As prices start to fall, the Fed will probably resume money printing, popularly known as quantitative easing. The bullwhip effect caused the same thing to happen in the 1970s; the market plummeted and prices fell at the same time. As a result, the Fed decided to lower interest rates in order to stimulate the market.
Short-term market gains were aided by this, but long-term inflation also resulted. In such circumstances, quantitative easing will be too early and lead to the onset of long-term inflation. Curry thinks that the current inflationary crisis will surpass all other inflationary periods in US history in severity.
The biggest bubble of them all is 2020. He expressed concern that the United States' most recent two inflationary eras, from 1940 to 1950 and the 1970s, each featured three separate inflationary peaks. The post-flu and World War I nihilism of the 1920s, the post-war spending and baby boom of the 1940s, the poor energy and Fed policies of the 1970s, and the impending inflationary peak of 2020 will all be characteristics of the preceding catastrophe.
The Federal Reserve has printed trillions of dollars and will keep doing so. The United States government is undoubtedly preparing the economy for a catastrophic scenario, and the rise in energy costs is only the tip of the iceberg. Behind the scenes, government officials have engaged in frequent insider trading.
Government funds are being used by politicians to help businesses in which they have stock. Speaker of the House Nancy Pelosi is a prime example of this. Pelosi has a history of buying equities before the government announces them in any way. Prior to the passing of the chips law, Pelosi recently made an illegal purchase of semiconductor stocks.
Another instance is when Joe Biden sold oil to a company that Hunter Biden, the current president's son, had invested in. Burry thinks that more people should be paying attention to government insider trading. The actions of the White House and the Fed are not consistent with the long-term success of the US economy.
But in comparison to a world war, this is nothing. As the conflict in Ukraine rages on and China makes threats to annex Taiwan in order to spark a global conflict, tensions between the west and the east are mounting. The majority of businesses are relocating their production facilities from China. It is being attempted to conceal these activities from everyone.
Burry thinks that the impending world war is to blame for this. A world conflict would make the present supply chain shortfall worse since it takes time to move to manufacture back to the United States. So, do let us know which topic should we cover next, "If you enjoyed content give us a like, and please subscribe to keep up for more, see you at the next one, bye!"
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