Get Ready For The Fourth U.S. Central Bank

We all should be aware that the current Federal Reserve of the United States is not America’s first central bank. In fact, we’ve had a few others before this current disastrous iteration came into existence in 1913. We hope and believe it won’t be long before this latest version goes away for good.

Our first central bank was founded in 1782 and was called The Bank of North America. Soon after, in 1791, The Bank of North America became The First Bank of the United States chartered by Congress.  However, in 1811 its twenty-year charter expired and was not renewed.

Five years later Congress chartered its successor called the Second Bank of the United States that lasted from 1816-1836. This Central Bank collapsed for the same reason the others did before it: they were, for the most part, filled with corruption and became progenitors of speculation and economic instability.

Our founding fathers could never imagine the extent to the current U.S. central bank would eventually go to usurp the power from free markets and destroy the value of the dollar.

Why This Federal Reserve Should Soon Become Extinct

I was asked recently in an interview how sure I was that the stock market would crash. My answer was that it is virtually guaranteed to occur given that valuation of equities is--for the first time ever—over twice the level of GDP. And, this metric is a full 100 percentage points greater than it was just prior to the start of the Great Recession. The only question is whether the crash will just be of the 30% variety, or will it be a total wipeout of around 80%; like we witnessed at the end of the Dot.com era.

The next crisis should start sometime between the second half of '21 through the end of '22. The catalyst will be the same as it always is: a central bank that tightens its monetary policy because of the delusion that an economic crisis has ended and it is time to normalize monetary policy. Alas, normalization is impossible precisely because debt and asset bubbles rely on ultra-low rates to survive—and those asset bubbles which exist today are without precedent. Once the monetary support is removed the stock and credit markets begin to meltdown as the fuel (liquidity) for these bubbles evaporates.

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Michael Pento is the President and Founder of Pento Portfolio Strategies, produces the weekly podcast called,  more

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