Sidestepping the Central Banker Booby Prize, by Bill Bonner

Who Knows What Trump Might Do to the Fed?

At the end of last week, the men and women who decide the world’s monetary policy and supervise its banking system gathered at Jackson Hole, Wyoming. And there, the financial press sat on the edge of their chairs to hear what Fed chair Janet Louise Yellen would say. She hadn’t spoken publicly in the last two months.

Unidentifiable avis on the way to Jackson Hole Cartoon by Bob Rich

Ms. Yellen once had such a bright future. She was a spectacular student – at Fort Hamilton High School in Brooklyn, then at Brown, and then at Yale. She always got the highest marks and the greatest accolades. She had such a promising future. Everyone said so. It was such a great opportunity, too.

With over $13 trillion in bonds now yielding less than nothing (thought to be impossible for the last 5,000 years), with the economy struggling to make any headway – despite worldwide stimulus on an epic scale (Friday brought news that U.S. GDP grew at an annualized rate of just 1.1% in the second quarter)…

…with the median household wage down about 20% (when adjusted properly for inflation) since Yellen joined President Clinton’s Council of Economic Advisors and began helping to shape economic policies…

…and with Republican presidential nominee Donald Trump speaking directly to the plain people of the United States of America and telling them that the system is rigged against them!

Ms. Yellen has not said publicly who she will vote for in November, but we’ll bet dollars to donuts it is a certain HRC. The last thing she wants is a loose cannon in the White House. Who knows what Donald Trump might do to the Fed if he were elected?

At a minimum, he may ask what they think they are doing in the Eccles Building… and how they are spending our money.

Who To Blame

Ron Paul famously led an effort in Congress to “Audit the Fed.” But he never even got close. Most members of Congress were sufficiently awed by – or afraid of – the brains at the Fed that they wouldn’t support him. But Trump? Good lord!

Ms. Yellen must have felt the pressure. She must have sensed the opportunity. She had the world’s financial press hanging on her every word. Shouldn’t she say something? Shouldn’t she at least try to explain how things got where they are?

Shouldn’t she blame economist Milton Friedman? After all, it was Friedman – the high priest of monetarism – who advised President Nixon to take the U.S. off the gold standard.

Or Alan Greenspan; he was the one that began backstopping the stock market? Or Ben Bernanke, with his idiotic “Great Moderation” theory just months before the biggest financial crisis in 75 years? And shouldn’t she propose a solution?

Central Banker Booby Prize

She didn’t have a solution. And she didn’t know why things were so out-of-whack.

What could she do? One thing she certainly couldn’t do was announce a return to “normalcy.” That would almost surely trigger a stock market crash and a depression – and earn her the Central Banker Booby Prize. Nope.

All she could do was what she did: more blah-blah. Yellen said the case for raising rates had “strengthened in recent months.” She cited the “continued solid performance of the labor market” as a reason for optimism.

She didn’t mention that the “labor market picture” she’s looking at – based on the government’s own figures – are heavily photo-shopped, screening out the long-term unemployed and adding in fictitious jobs based on various theories and models.

To continue reading: Sidestepping the Central Banker Booby Prize