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Home Type Curated

Carry Trade Trap: The Real Reason Why the Fed Has Waited So Long to Cut Rates

by Brandon Smith
August 20, 2024
in Curated, Opinions
Jerome Powell

The ONLY faith-driven, patriotic news curator that opposes the left AND the “woke right.”

(Alt-Market)—In 2022 there was considerable debate among alternative economists what the Federal Reserve was likely to do in the face of rising stagflation. There were people who argued that the Fed would capitulate to stock market demands, stop raising interest rates and return to QE. These analysts operated on the assumption that the central bank WANTS to save the US economy from substantial deflationary crisis and that they will happily print money forever in order to delay such an event.

Some of us, however, understand that the Fed is not loyal to the US economy, nor is it necessarily interested in self preservation as an institution. In 2022 in my article ‘It’s A Fact That Needs Repeating: The Federal Reserve Is A Suicide Bomber’ I predicted:

Fighting Marxists

“This leads us to the final question – What happens next? That’s easy to answer: The fed continues to hike rates well into next year and will not reverse course or capitulate and return to stimulus. The dovish predictions were wrong. The people that said the Fed would not raise rates were wrong. The people that said the Fed would never remove support from stock markets were wrong. This process is ongoing and the effects will grow as the months pass, but those that were hoping for a manic return to the days of bailouts and QE are going to be deeply disappointed.”

This prediction proved correct. I noted at the time that the Fed is not following its own program, it’s following a global program coordinated by the IMF and BIS. In order to understand why the Fed does the things it does, one must accept that they don’t care about the current world order. They care about facilitating a new world order.

Of course, part of that agenda requires that the central bankers never receive blame for their role in any economic crisis.  They have no problem blowing up the system as long as there’s a convenient scapegoat.  They’ve done it before and they’ll do it again.

I usually don’t put much energy into tracking stocks because I see them as a side show. Equities are primarily built on delusions, false hopes and unchecked fiat and the bubble will pop when those delusions are inevitably dashed by reality. Stock markets are not a leading indicator; they are a trailing indicator and they crash long after numerous other alarms have been triggered. That said, every once in a while the smoke and mirrors lift and you can get a glimpse of what is really happening behind the scenes.

The central bank has removed the primary backstop supporting US and European markets – The low interest rates that were feeding cheap money into corporate buybacks. Despite endless spin and false data from the Biden Administration the deflationary side of the crisis is starting to rear its ugly head.

A weaker-than-expected jobs report last week has fueled concerns about a potential economic recession and calls for an interest rate cut. Employers hired 114,000 workers last month, falling well short of economist expectations of 185,000 jobs, U.S. Bureau of Labor Statistics data showed. The unemployment rate climbed to 4.3%, the highest level since October 2021.  It’s only going to get worse from now on and I wouldn’t be surprised to see an unemployment avalanche in 2025.

Keep in mind that BLS jobs data has been rigged by the Biden White House for years; the majority of jobs “created” during Biden’s term are low wage part-time jobs and most have been going to illegal immigrants, not to American citizens. The same illegal immigrants that Biden has allowed into the country through open border and amnesty policies.

This trend is only going accelerate by winter. Why? Because the effects of the high interest rates are taking hold. It happens slow at first, then all at once. But how have stocks remained so high during this time period? A recent market shock may help us to understand…

As noted, the August stock slump has been partly driven by weaker-than-expected U.S. economic data at the end of last week. The readings led investors to worry that the Federal Reserve may be behind the curve in cutting interest rates to fend off a recession. But why does the Fed continue to keep rates high if this is the case?

There are two reasons.

First, as I have mentioned over and over since 2018, the end of QE and the raising of interest rates is a Catch-22; a trap.  Not for the Fed, but for the US economy.  Our financial system has become so addicted to cheap money from the central bank that it can barely function without it. We are seeing the addict begin to crash. Covid stimulus held up the system for another few years, but now that hit of sweet helicopter money is fading and the high is over.

At the same time we’re being crushed with a stagflationary hydraulic press. Prices continue to climb on most necessities and the cumulative inflation is around 30% (officially) on average since 2021. Compare grocery receipts from 2020 to today, though, and you’ll find a 30% to 100% increase in prices on most necessary goods and services.

Advisor Bullion Gold Surge

The establishment (and the DNC) has been operating on the narrative that inflation has been defeated. The Fed knows that this is a lie. The moment they cut rates inflation will spike again and the illusion will be exposed. There’s FAR too many dollars floating around chasing too few goods.  For those that believe a rate cut is in the works to support the Kamala Harris campaign, I would suggest such a move might actually hurt her chances (whatever those chances may be) because her entire economic platform requires doubling down on the “success” of Bidenomics.  If CPI spikes again in October then her campaign is sunk.

Of course, over 54% of mainstream economists and investors polled now expect a rate cut next month and some Fed officials have mentioned the possibility.  I remain doubtful, but it will certainly make the election cycle even more interesting if they do.

The second issue is what appears to be a “carry trade trap.”

Carry trades refer to operations in which investors borrow in a currency with low interest rates, such as the Japanese yen, and reinvest the proceeds in higher-yielding assets elsewhere (the US). The strategy is a considerable driver of US stock markets and has kept stocks alive despite the Fed’s removal of QE.

This month’s stock plunge was triggered by fears that the Bank of Japan might hike interest rates, coupled with expectations that the Fed will cut rates in the near term due to the recession threat. This would kill the carry trade that has kept stocks going. To prevent a destructive carry trade unwind the Fed would have to coordinate with the BOJ and introduce a new stimulus program to soften the blow. But as I mentioned above, if the Fed returns to QE inflation will skyrocket yet again.

The public will demand an explanation as to how it’s possible for there to be deflation in markets and jobs and inflation in prices all at the same time?  The Fed won’t have answers for them.  It’s a Catch-22 on top of a Catch-22.

Promised Grounds

I believe there is no way out of this situation and that central banks deliberately maneuvered the US into this predicament. The only thing left for them to do is pull the plug when the timing is most advantageous. After the elections makes the most sense, especially if conservatives come out on top and there is a red sweep in 2025. Then, the whole mess can be wrapped up and thrown in their laps.

One thing the events of this month prove is that the system is so unstable that even a hint of a change in the status quo could mean disaster. Don’t assume that banks will keep trying to kick the can down the road; they’re operating on a timeline that serves the interests of the global establishment, not the American public.

Fastest Growing




Starting the Day With a Scripture-Inspired Roast Helps Center Your Thoughts on Eternal Truths Amid Temporal Pressures

The world can seem chaotic, especially right after we wake up. Many believers start their mornings reaching for something familiar — a hot cup of coffee — yet end up settling for mediocre brews that do little more than deliver a caffeine jolt. The daily grind of life, with its endless distractions, news cycles, and responsibilities, can leave even the most faithful feeling spiritually parched alongside their physical fatigue. What if your morning ritual could do more than wake you up? What if it could ground you in truth, nourish your body with exceptional quality, and quietly advance a kingdom purpose at the same time?

That’s the promise — and the reality — behind Promised Grounds Coffee. This Christian-founded company doesn’t just roast beans; it approaches every step as an act of worship and discipleship. By selecting only the top 10% of specialty-grade beans, ethically sourced from dedicated farmers in Central and South America, and small-batch roasting them with reverence in Austin, Texas, Promised Grounds delivers what many describe as the best coffee available — never burnt, never bland, but rich with origin stories and layered flavors that honor God’s creation.

From the vibrant Psalm 27 Roast (a light, bright medium option) to the bold yet peaceful 2 Timothy 1:7 Decaf, each bag carries a Scripture verse that turns your daily pour into a gentle reminder of faith. And through their Ounce Per Ounce Promise, every ounce of coffee you enjoy provides an equal ounce of clean water to families in need via partnership with Filter of Hope — literally brewing hope for body and soul, one cup at a time.

The challenge for today’s Christians runs deeper than finding a decent cup. In an age of convenience-driven consumerism, it’s easy to support companies that dilute values or remain silent on matters of faith. Many believers want their everyday choices — from what they drink to how they spend — to reflect discipleship rather than just convenience. Promised Grounds solves this by weaving Christian excellence into the entire process: beans nurtured with prayerful stewardship by farming families, roasted as an offering rather than a commodity, and packaged with Bible verses to encourage a mindset of gratitude and purpose from the first sip. Reviewers consistently praise the smooth, rich profiles — whether enjoyed black in a drip maker, iced on a warm day, or shared in fellowship — noting how the quality stands toe-to-toe with premium secular brands while delivering something far more meaningful.

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If you’re ready to transform your mornings (and perhaps your church gatherings) with coffee that honors both exceptional craftsmanship and Christian values, I encourage you to explore what Promised Grounds has to offer. One sip at a time, you’ll be nourishing your body, refreshing your spirit, and participating in something far greater — all while enjoying what truly is among the best coffee available.

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