Bernie Sanders has been rising fast as a 2020 presidential contender, and recent polls suggest that he’s doubled his lead over Donald Trump and would clobber him in a head-to-head election.
It’s increasingly clear that Sanders has a viable path to the presidency, and he owes it all to the U.S. Federal Reserve.
The U.S. central bank is reportedly considering lending money directly to hedge funds to avert the repo market crisis. The Fed’s aggressive stance suggests that the recent liquidity injections in the repo markets have not been enough.
It also suggests that at least one big hedge fund is in a precarious situation, and the Federal Reserve is just going to give them free money in the form of a preemptive bailout.
The Federal Reserve is setting a morally hazardous precedent. Hedge funds will be encouraged to place high-risk bets as they will have nothing to lose. This safety net provided by the Fed will further increase the gap between the rich and the poor, just like it did during the Great Recession.
Since Bernie Sanders’ presidential campaign is centered on wealth inequality and attacking the ultra-rich, he stands to benefit from the Fed’s actions.
Betting against the stock market when the Federal Reserve is increasing its balance sheet has always been a bad idea. And stocks have surged since the Fed started injecting liquidity into the repo markets.
President Trump has repeatedly boasted about the stock market performance under his presidency, but artificially inflating the asset bubble only helps the wealthy.
According to Goldman Sachs, 50% of the stock market wealth is owned by the wealthiest 1%, up significantly from 39% in the late 1980s. These pumps will only widen the already huge gap.
While American consumers are drowning in trillions of dollars of debt, the Federal Reserve’s money-printing machine has created a massive asset bubble that has helped the rich get richer. With income inequality jumping to the highest level ever recorded, it’s no surprise that young people are embracing socialist rhetoric.
One 2019 poll suggested that 70% of U.S. millennials are leaning far-left and believe that a welfare state is a solution to their problems. They are more likely than ever to vote for a socialist candidate.
The Federal Reserve can’t diverge from its present course, or the entire scheme will collapse. And judging by the recent polls, Bernie Sanders could be the one that reaps the rewards.
Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com.
Last modified: January 22, 2020 11:38 PM UTC