We are in the midst of what some are calling the ‘everything bubble’. This could be seen as an overvaluation of multiple types of assets at the same time, but we may be approaching the limits of the credibility of the Federal Reserve itself as its balance sheet approaches $7 trillion, up from less than $1 trillion at the time of the 2008 financial crisis. By extension, the longevity of the US dollar and other government-issued currencies is being questioned by more and more people.

At the same time, a political scandal is continuing to gather steam potentially implicating a former US president, the current Democratic presidential candidate, and the heads of some of the most powerful US government institutions in a corrupt scheme to undermine the Trump administration. This scandal has the potential to be worse than Watergate because the US government used the full power of the NSA - which has surveillance capabilities unmatched in human history - to spy on political opponents, enabled by, at best inaccurate FISA warrants, at worst deliberately misleading statements.

On the ‘everything bubble’ front, the stakes appear to be rising for the Federal Reserve, which is being boxed in by traders wagering that the Fed will introduce negative interest rates, something the Fed has repeatedly ruled out. While this would seem wise - Investopedia describes negative interest rates as “a counterintuitive, if not downright crazy, strategy” - the Fed has repeatedly backed down in the face of market challenges to its policy decisions. Its rate hike in late 2018 was the precursor to a stock market plunge, which the Fed helped reverse by changing its tone on future rate increases, signaling that it would be more hesitant to raise rates than it had previously forecast. In fact, that was the last federal funds rate increase by the Fed; the rate currently sits at 0 - 0.25%.

If the Fed backs down once again and takes rates negative for the first time in history, there will be unpredictable and potentially negative consequences. The European Central Bank introduced negative interest rates five years ago, and as Bloomberg reports the negative rates are “blamed for weakening banks, expropriating savers, keeping dying companies on life support, and fueling an unsustainable surge in corporate debt and asset prices.” The ramifications for negative US interest rates would seem to be potentially more severe and widely felt due to the US dollar’s status as global reserve currency.

Back to the ‘everything scandal’, Barack Obama seems to be feeling the heat as his longstanding claims of running a ‘scandal free’ administration are cracking under the revelations that he was intimately aware of the details of the FBI’s Michael Flynn investigation. In a rare move, he weighed in on the ongoing Flynn case via leaked audio, and seemed to respond directly to Donald Trump’s hyping of ‘Obamagate’ by tweeting simply, ‘Vote’.

The reason why the Flynn case and NSA surveillance of the Trump campaign could balloon into an ‘everything scandal’ is the unprecedented consolidation of the political, media and intelligence establishment during and after the Obama years. In 2013 the Washington Post documented the dizzying number of family ties between the Obama administration and the media, and the Daily Caller counted 15 former intelligence officials who now work at CNN or MSNBC, including James Clapper (CNN) and John Brennan (MSNBC), who were both present at the Oval Office meeting where Flynn was discussed.

Therefore, if evidence of criminality on the part of Obama or any of the meeting participants is eventually revealed, the ensuing scandal would damage:

  • the symbolic leader of the Democratic party (Obama)
  • the Democratic presidential candidate (Biden)
  • the former heads of the CIA (Brennan), FBI (Comey) and the DNI himself (Clapper)
  • the media which complied with the false narrative of a scandal-free Obama administration
  • MSNBC and CNN specifically, who hired known liars Clapper and Brennan to comment on the Russia investigation

Similarly, a bursting of the ‘everything’ asset bubble or global confidence in the US dollar would potentially cause a fatal blow to the global finance system as we know it. And just as it seems more details about Trump campaign surveillance will be revealed by the Durham probe, the unprecedented job loss due to the coronavirus shutdown may hasten a day of reckoning for financial bubbles.

What happens in the future is anyone’s guess, but the fact is many aspects of our lives are determined by far-reaching, complex institutions that have never had as much power as they do now, and have never seemed so fragile.