Tag Archives: Federal Reserve policies

The Fed’s Real Mandate, by Mark Thornton

Posted on October 9, 2022 | 3 comments

The Fed is an arm of the government. It helps fund the debt, bails out connected cronies, and supports politicians. From Mark Thornton at mises.org:

he Federal Reserve has a legal dual mandate to minimize unemployment and price inflation. The current “dual” between the two mandates is to reduce price inflation by increasing interest rates to increase unemployment and kill businesses to choke off aggregate demand. This has been the most important economic and investment issue this year and this dual minimization procedure has dominated Fed policy for at least three-quarters of a century.

This is odd given that the Fed is in the business of creating money, the cause of price inflation, and it is responsible for all the largest surges in unemployment since its founding in 1913. Employing an army of monetary economists, macro theorists, and statisticians, the Fed appears to be pursuing its quixotic quest of the Phillips curve sweet spot of minimizing inflation and unemployment.

The real mandate of the Fed is serving its masters, the political elites, by financing government spending and debt, bailing out cronies, and supporting the political process, including the Fed’s own interests. Everything else, including the inflation and unemployment rates are derivative of the primary mandate. The so-called dual mandate is just subterfuge to protect the Fed’s “confidence game.”

Continue reading→

3 Comments

Posted in Banking, Debt, Economy, Government

Tagged

What the End of the Fed Put Actually Means, by Tom Luongo

Posted on September 18, 2022 | Leave a comment

It means there’s a chance that U.S. finances  and its economy are restored to sanity, although I wouldn’t advise holding your breath waiting for it. From Tom Luongo at tomluongo.me:

gold-dollar-trap

For more than a year I’ve been arguing that the Fed was tightening US dollar supply. When I first put the idea out there it was met with intense skepticism and, for the most part, it still is.

The Fed has long been the punching bag of hard money and alternative finance types because, frankly, it always deserved it. For nearly the past generation, until June of 2021, the Fed acted as the Central Bank of the World.

But we’re rapidly reaching the moment where a lot of people are finally beginning to realize maybe the vaunted “Fed Put,” the belief that the Fed always comes to the market’s rescue isn’t going to show up anytime soon, if at all.

Whenever there was a major crisis on the horizon the Fed was always there to provide the world with the dollars needed to keep things from collapsing completely. This was especially true in the aftermath of Lehman Bros. and the 2008 housing crisis which broke the post-Bretton Woods Dollar Reserve Standard ushered in by Paul Volcker’s extreme monetary policy of the early 1980’s.

Continue reading→

Leave a comment

Posted in Banking, Business, Currencies, Economics, Economy, Governments

Tagged , ,

Have We Entered the New Dark Ages? By MN Gordon

Posted on September 2, 2022 | Leave a comment

Politicians bemoan the “end of abundance,” but they’re the ones who are ending it. From MN Gordon at economicprism.com:

Elizabeth Warren must be a fool.  That, or she thinks the rest of us are fools.

The Senator recently took to CNN to publicly fret over the Federal Reserve’s rate hikes.  She’s worried they will tip the economy into recession.

What’s Warren afraid of?  Her fears have already come true.

The U.S. economy already is in a recession.  GDP data alone shows the economy contracted in both the first and second quarter of 2022.

The technical definition for a recession has long been understood to be two consecutive quarters of declining GDP.  So, by definition, the economy is in a recession.  Everyone knows this, save President Biden and Warren.

Recessions may not be agreeable.  But they are necessary.  In fact, the present recession is precisely what’s needed to clean up the consumer price inflation mess that Warren and her colleagues made.  There are consequences for mass money printing.  And they must be reckoned one way or another.

The fundamental fact is today’s consumer price inflation fiasco is a direct result of Washington’s spending policies.  The coronavirus hysteria provided the perfect excuse to spew printing press money into the economy.  Warren was one of the greatest advocates.

The Fed, for its part, merely obliged the wishes of Congress.  It created credit from thin air and loaned it to the Treasury in the form of Treasury note purchases.

The Treasury then obliged the wishes of Congress.  It used the money that was borrowed from the Fed to fund stimmy checks, PPP, and generous federal unemployment payments.  This was all to meet the legislative demands of Warren and the other knaves in Congress.

Continue reading→

Leave a comment

Posted in Banking, Business, Debt, Economics, Economy, Geopolitics, Politics

Tagged ,

The Fed Isn’t Fighting Inflation, It’s Fueling It, by Mike Whitney

Posted on June 14, 2022 | Leave a comment

The Federal Reserve is taking baby steps to combat the price inflation it has caused. From Mike Whitney at unz.com:

Credit: Jesse’s Cafe American – https://jessescrossroadscafe.blogspot.com/
The media would like to believe the Fed is doing everything in its power to fight inflation, but it’s not true.

Yes, the Fed raised rates by 50 basis points in May and, yes, the Fed is trying to sound as “hawkish” as possible. But these things are designed to dupe the public not to reduce inflation. Let me explain.

The current rate of inflation in the US is 8.6%, a 40-year high.

At its May meeting, the Fed raised its target Fed Funds Rate to 1%. Here’s the scoop:

“The Federal Reserve recently announced that it’s raising interest rates by half a percentage point, bumping the federal funds rate to a target range of 0.75-1.00%.” (The Spokesman-Review)

Got that? So the Fed’s rate is still a measly 1%. That’s what the media is trying to hide from you, and that’s why you might have to read 9 or 10 articles before you find a journalist who provides you with the actual rate.

Continue reading→

Leave a comment

Posted in Banking, Business, Debt, Economics, Economy, Financial markets, Government

Tagged ,

How the Fed Killed Growth and Mugged the Hamburger Instead, by David Stockman

Posted on May 28, 2022 | Leave a comment

The Fed has robbed savers, driven U.S. manufacturing to places like China and Mexico, facilitated the government’s debt binge, and debased the dollar’s purchasing power. Other than that, it’s done a great job. From David Stockman at lewrockwell.com:

Recently, it was reported that US industrial production rose in April for a fourth consecutive month, and owing to a jump in auto assemblies was up 1.1% from March and 6.4% versus prior year. So the usual suspects were out beating the Wall Street tom-toms about economic strength and no recession on the horizon.

But as demonstrated in the chart below, what we are mainly getting once more is born-again production, not net growth. That is, remove the April 2020 Lockdown swoon and scroll back to the interim high in December 2014 and what do you get?

Well, what you get is a piddling 0.26% per annum growth rate over the past 7.5 years. And for want of doubt, dial back to the pre-crisis peak in November 2007 and you get a per annum growth rate of just 0.21% over the past 14.5 years.

US Industrial Production Index, November 2007-April 2022

So, no, the US industrial economy is not strong—it’s been flatlining for the better part of the current century. And that’s something new under the sun, not in a good way.

Continue reading→

Leave a comment

Posted in Banking, Business, Debt, Economics, Economy, Energy, Financial markets, Governments, History, Investing, Labor

Tagged , , ,

Settling Wreckage from the Past, by MN Gordon

Posted on May 6, 2022 | Leave a comment

Cascading government debt, suppressed interest rates, and wholesale debt monetization have completely boxed in the Federal Reserve, leaving it with nothing but unpalatable options. From MN Gordon at economicprism.com:

Settling wreckage from the past with realities of the present can be difficult and painful. If you do the crime. You must do the time.

When it comes to financial markets and the economy, this can take many forms. Some of the most common include bankruptcy, shuttered businesses, and collapsing share prices.

This week Federal Reserve Chair Jay Powell and his cohorts at the Federal Open Market Committee Meeting (FOMC) raised the federal funds rate 50 basis points. This marked the first 50 basis point rate hike since 2000. It is part of the Fed’s initial efforts to settle up on wreckage from the past.

The world has changed markedly over the last 22 years. Certainly, the economy and financial markets have become twisted and warped. Without the proper perspective everything from the price of a gallon of gas to the price of a house is muddled and confused.

Continue reading→

Leave a comment

Posted in Banking, Business, Currencies, Debt, Economics, Economy, Financial markets, Government, Politics

Tagged , ,

Busting The Myth That The Fed Can Control Or Predict The Economy, by Jon Wolfenbarger

Posted on April 4, 2022 | Leave a comment

Nobody how many times this myth is punctured, it keeps coming back. There’s not a shred of evidence to support the widespread notion that the economy is a puppet dancing on strings controlled by the Federal Reserve. From Jon Wolfenbarger at Bull and Bear Profits via zerohedge.com:

The Federal Reserve states that it “conducts the nation’s monetary policy to promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy.”

Let’s look at how well the Fed has done that job since its founding in 1913.

Economy And Long-Term Interest Rates

Since 1913, the US unemployment rate has ranged from 2.5% in the early 1950s to 25% during the Great Depression. Inflation has ranged from positive 24% to negative 16%. Inflation is currently 7.9%, well above the Fed’s 2% target. While the Fed has some influence over money supply, they have no control over money demand or how money is spent, which has a significant impact on employment and inflation.

Continue reading→

Leave a comment

Posted in Banking, Business, Currencies, Debt, Economics, Economy, Government

Tagged

What is the Strike Price of the Powell Put? by MN Gordon

Posted on March 18, 2022 | Leave a comment

The level of the stock indexes may be far below where there are now for the Federal Reserve floods the system with liquidity, because past such infusions are already fueling raging price increases. From MN Gordon at economicprism.com:

The Federal Reserve, through a multi-decade series of shady practices, finds itself in a very disagreeable place.  Policies of extreme market intervention have positioned the economy and financial markets for an epic bust.

Price inflation.  Unemployment.  Interest rates.  Stock market valuations.

These metrics are presently situated in such a way that the “Powell put” will be impossible to successfully execute for the foreseeable future.

Price inflation is at a 40 year high.  The unemployment rate is 3.8 percent, which is near its low.  The 10-Year Treasury note is yielding 2.15 percent.  While this key interest rate is certainly trending higher, it’s still near a historical low.

And for all the wild price swings and gnashing of teeth over the last two months, the S&P 500 has hardly slipped.  In fact, as of market close on Thursday March 17 of 4,411, the S&P 500 is down only 7.83 percent from its all-time record close of 4,786 reached on January 3.  It still has another 12.17 percent to fall before reaching official bear market territory.

Continue reading→

Leave a comment

Posted in Banking, Business, Currencies, Debt, Economy, Financial markets, Investing

Tagged , ,

Why This is the Most Reckless Fed Ever, and What I Think the Fed Should Do to Reverse and Mitigate the Effects of its Policy Errors, by Wolf Richter

Posted on March 13, 2022 | Leave a comment

It’s far easier to document the Federal Reserve’s depredations than it is to get the Fed to admit or rectify them. From Wolf Richter at wolfstreet.com:

The Fed’s credibility shifted from Inflation Fighter under Volcker to Wealth Disparity Creator and Inflation Arsonist under Powell. And everyone knows it.

As stunningly and mindbogglingly bizarre as this sounds, it’s reality: Inflation has been spiking for over a year, getting worse and worse and worse, while the Fed denied it by saying, well, the economy is recovering, and then it denied it by saying, well, it’s just the “base effect.” And when inflation blew out after the base effect was over, the Fed said it was a “transitory” blip due to some supply chain snags. And when even the Fed acknowledged last fall that inflation had spread into services and rents, which don’t have supply chains all over China, it conceded that in fact there was an inflation problem – the infamous pivot.

By which time it was too late. The “inflationary mindset,” as I called it since early 2021, had been solidly established.

I’ve been screaming about it for over a year. By January 2021, I screamed that inflation was spreading broadly into the economy. By February 2021, I screamed that inflation was spreading into the service sector. And I screamed about inflation in the transportation sector. By March 2021, it was obvious, even to me, that “something big has changed,” based on the fact that consumers were suddenly willing to pay totally crazy prices for used cars, when many of them could have just driven what they already had for a while longer, which would have brought the market down, and with it prices.

Continue reading→

Leave a comment

Posted in Banking, Currencies, Debt, Economics, Economy, Government

Tagged

Oops…Is the Crack-Up Boom Here, by Ron Paul

Posted on December 28, 2021 | Leave a comment

The primary beneficiaries of inflation are those who are first in line for the newly created money, at the top rather than the bottom of the financial ladder. From Ron Paul at ronpaulinstitute.org:

Bloomberg News recently solicited advice from Argentinians who lived through that country’s high inflation on how Americans should cope with rising inflation. The Argentinians suggested Americans spend their paychecks as fast as possible to avoid future price increases. They also suggested taking out loans that can be paid back later in devalued currency.

These strategies may make sense for individuals. However, encouraging debt and discouraging savings is disastrous for the country. Relying on debt and spending one’s paycheck immediately encourages people to seek instant gratification instead of planning for the future. This depletes both economic and moral capital.

November’s 9.6 percent increase in the producer price index, combined with the consumer price index’s increase to levels not seen since the early 1980s, shows why fears of inflation have become the public’s number one concern. Even the Federal Reserve has acknowledged that inflation is not just “transitory.”

The Fed recently announced it is accelerating the timetable to reduce its monthly purchases of Treasury and mortgage-backed securities. The Fed also announced it is planning three interest rate increases next year. However, the Fed plans to increase rates by no more than one percent. So even if the Fed does follow through on its promise to hike rates, it will do little if anything to combat rising prices. If the Fed allowed interest rates to rise to anything approaching market levels, it would make the federal government’s debt servicing costs unsustainable. This puts tremendous pressure on the Fed to maintain low rates.

Continue reading→

Leave a comment

Posted in Banking, Business, Collapse, Debt, Economics, Economy, Government, Politics

Tagged , ,