Tag Archives: Federal Reserve policy

Clear and Present Danger, by Sven Henrich

Posted on January 9, 2021 | Leave a comment

The Federal Reserve, hell bent on supporting financial markets, will destroy the economy. From Sven Henrich at northmantrader.com:

The Federal Reserve and other central banks represent a clear and present danger to future financial stability.

I’ve been saying for a while central banks are fueling an asset bubble and as global market distortions keep expanding week after week there’s no reason to back to walk away from that assertion but rather to stand up and scream the message from the rooftops especially now that central bankers are casually letting some key truths slip (intended or not).

Following up to the Alternative View and The Ugly Truth we got a stunning admission today from Philly Fed Chief Harker:

“The U.S. central bank may begin paring back its bond-buying program as soon as the end of this year, Federal Reserve Bank of Philadelphia President Patrick Harker said. “I could see, potentially, that occurring at the very end of 2021 or early 2022. But it is all going to depend on the course of the economy, which will depend on the course of the virus,”.“It could cause disruption in the markets if we try to do it too soon,” he said.”

There it is, the crux of it all. Not a disruption in the economy, in markets. For a central bank that claims to target the economy with its policies this statement reveals a keen awareness that markets are greatly influenced by the Fed’s QE liquidity operations, QE and otherwise, indeed are dependent on it and the fear of markets reacting is profoundly on the Fed’s mind.

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Stop the Real Steal! by David Stockman

Posted on January 8, 2021 | Leave a comment

The real steal is the steal of the future, which is already buried in debt and only getting more so. The election outcome makes no difference at all. From David Stockman at davidstockmanscontracorner.com, via lewrockwell.com:

It’s axiomatic that when you suddenly change the election rules and modus operandi, causing 65 million mail-in ballots (out of 159 million total) to flood unprepared local elections systems, you will get beaucoup irregularities, mistakes and fraud. To that extent, the impending Trumpite challenge when the Congress meets on Wednesday to certify the 2020 election results is spot on.

But at the end of the day, the challenge being mounted by Senator Hawley (R-Missouri) and the Cruz Eleven is both futile and mischievous. That’s because, thank heavens, American government is not organized into an all-powerful, centralized, unitary state like France, Red China or countless other authoritarian regimes in-between.

To the contrary, government in America remains decentralized and federalist, even if the founders’ design, culminating in the 10th Amendment’s reservation of unexpressed powers to the states, has been relentlessly chipped away since the New Deal. Indeed, when it comes to many aspects of day-to-day governance, such as on matters of public welfare or commerce, federalism has been drained of substance and the sovereign states have, regrettably, morphed into administrative appendages and fiscal supplicants of Washington.

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Posted in Banking, Business, Collapse, Currencies, Debt, Governments

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Janet Yellen: Too Dumb To Stop, by MN Gordon

Posted on December 9, 2020 | Leave a comment

It always surprises people who don’t have much experience with government how dumb some bureaucrats and politicians are. From MN Gordon at economicprism.com:

The United States Secretary of the Treasury bears a shameful job duty.  They must place their autograph on the face of the Federal Reserve’s legal tender notes.  Here, for the whole world to witness, the Treasury Secretary provides signature endorsement; their personal ratification of unconstitutional money.

If you recall, Article I, Section 8, of the U.S. Constitution empowers Congress to coin money and regulate its value.  What’s more, Article I, Section 10, specifies that money be coined of gold and silver and cannot be bills of credit.

Indeed, paper dollars are illegal money per the U.S. Constitution on two counts.  First, they’re issued by the Federal Reserve.  Second, they’re bills of credit with no ties to gold or silver.

This critical defect does not register even a passing concern for most Americans.  But it should.  Because illegal money – like paper dollars – has its deficiencies.  Mainly, it’s prone to gross over issuance for political means.  Thus, as it funds the unlimited growth of government, its payment quality grows evermore suspect.

Without question, illegal money has a whole host of problems.  And the woman who will soon be autographing the illegal money – Biden’s nominee for Treasury Secretary, Janet Yellen – will further stimulate these problems.

Deceptive and Cruel

Janet Yellen, if you don’t remember, was Chair of the Federal Reserve from 2014 to 2018.  She’ll be only the second bureaucrat to be both Fed Chair and then Secretary of Treasury.  The first was G. William Miller way back when Jimmy Carter was President.  Miller was a poor steward of the dollar.  Inflation went Richter on his watch.

Yellen, like Miller, will have the unique opportunity to authorize the money she previously issued.  The consequences could be equally destructive for the dollar.  They may even be worse.

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Posted in Collapse, Currencies, Debt, Government

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The Fed’s Brilliant Plan? More Inflation and Higher Prices, by Ron Paul

Posted on September 7, 2020 | Leave a comment

The only plan the Fed ever has is to create more fiat debt at low interest rates. From Ron Paul at ronpaulinstitute.org:

Federal Reserve Chairman Jerome Powell recently announced that the Fed is abandoning “inflation targeting” where the Fed aims to maintain a price inflation rate of up to two percent. Instead, the Fed will allow inflation to remain above two percent to balance out periods of lower inflation. Powell’s announcement is not a radical shift in policy. It is an acknowledgment that the Fed is unlikely to reverse course and stop increasing the money supply anytime soon.

Following the 2008 market meltdown, the Fed embarked on an unprecedented money-creation binge. The result was historically low interest rates and an explosion of debt. Today total household debt and business debt are each over 16 trillion dollars. Of course, the biggest debtor is the federal government.

The explosion of debt puts pressure on the Fed to keep increasing the money supply in order to maintain low interest rates. An increase in rates to anything close to what they would be in a free market could make it impossible for consumers, businesses, and (especially) the federal government to manage their debt. This would create a major economic crisis.

The Fed has also dramatically expanded its balance sheet since 2008 via multiple rounds of “quantitative easing.” According to Bloomberg, the Fed is now the world’s largest investor and holds about one-third of all bonds backed by US home mortgages.

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The Fed is Determined to Prove the QTM Right, by Tom Luongo

Posted on August 3, 2020 | 1 comment

Sooner or later we will get inflation commensurate with the quantity of money that has been created. From Tom Luongo at tomluongo.me:

gold-dollar-trap

Milton Friedman famously said, “Inflation was always and everywhere a monetary phenomenon.” But Friedman didn’t live through the QE years here in the U.S. and blatantly ignored the twenty plus years of Japanese deflation despite QE and insane levels of money printing during the latter years of his life.

Because Friedman, like a lot of modern economists, adhered strictly to the Quantity Theory of Money (QTM).

And as an Austrian economics kinda guy I somewhat agree with the QTM. I agree with Ludwig von Mises on this, as you would expect. So, how do we square the QTM with the evidence that QE in all of its guises has resulted in deflation, as expressed by the general price level, where ever it has been tried?

Martin Armstrong ask this question all the time and is openly hostile to the QTM. And his arguments have some merit, because, as he rightly points out the QTM only looks at the supply side of the money equation.

It cares not about the demand side. He’s right about that. What he’s wrong about is that the Austrians, like von Mises, haven’t considered this either.

Demand for money is just as important as the supply of it. And during a crisis, the demand side of the equation for any particular currency may, in fact, be more important.

This is what the Fed has struggled with for the past twelve years. The demand for the U.S. dollar has far outstripped the increase in supply, causing a far lower aggregate price rise than anticipated by the QTM.

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Posted in Banking, Currencies, Debt, Economy, Money

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David Stockman on the Fed’s Death Blow to Private Savings

Posted on July 4, 2020 | 1 comment

Private savings have shrunk to virtually nothing, just when it would have been nice to have a cushion against the exploding federal deficit. From David Stockman at internationalman.com:

Private Savings

International Man: People have been warning of impending fiscal and monetary doom for a long time.

What is different now that will finally usher in the day of reckoning?

David Stockman: It is self-evident that the solution to a state-imposed supply-side shutdown of the economy is not more counterfeit money, erroneous price signals, inducements to rampant speculation and moral hazards, and further zombification of the main street economy.

Once upon a time, even Washington politicians feared large, chronic public debt, and not merely because they were especially intelligent or virtuous. We learned that in real time during 1981, when the deficit hawks among the GOP Senate college of cardinals nearly shut down the Gipper’s supply-side tax cuts out of fear of mushrooming deficits.

To be sure, these dudes didn’t know Maynard Keynes from Emanuel Kant, but they did know that Uncle Sam has exceedingly sharp elbows and that when he becomes too dominant in the contest for funds in the bond pits, private households and business borrowers get bloodied and crowded out.

That is to say, in the days before massive central bank monetization of the debt, there was a natural counter-balancing constituency in the equations of fiscal politics. We heard from them, too, in our congressional days when the car dealers, feed mill operators, tool and die shops, building contractors, restauranteurs and countless more main street businessmen of the Fourth Congressional District of Michigan let it be known loud and clear that Jimmy Carter’s big deficits were doing unwelcome harm to their bottom lines.

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Posted in Banking, Business, Collapse, Debt, Economy, Foreign Policy, Government, History

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The Enslavement of Infinite Money, by Brandon Smith

Posted on May 14, 2020 | 1 comment

What happens when an economy’s only support is central bank and government debt? From Brandon Smith at birchgold.com:

The phrase “don’t fight the Fed” is an unfortunate but popular delusion. It presupposes that the central bank has limitless power to direct the economy because it can print limitless money. I’m not sure where this idea comes from, but consider the fact that anyone today who is under 30 years old was barely old enough in 2008 to understand or care about the credit collapse. These people spent their formative years knowing only stimulus and QE. In their minds, this is the norm, and they think it always works because they haven’t yet witnessed a collapse.

I would say a better phrase for the 2020s is “The Fed is not going to save you”; the Fed is not a superhero and it does not have the power nor the inclination to protect the little people from economic folly. This should be readily apparent today, as the COVID-19 pandemic continues to spread and the central bank can’t seem to cure it with Quantitative Easing.

My position has always been that the Fed has no intention of saving the economy, only making it appear as if they care. This is evident in the fact that they created the Everything Bubble in the first place with years of near zero interest rates, then abruptly hiked interest rates into economic weakness, just like they did during the Great Depression. All it took was a few rate increases to cause stock markets to plunge in December 2018; liquidity was strangled and repo markets became unstable. Jerome Powell knew perfectly well that this would be the result; he openly discussed it in the minutes of the October 2012 Federal Open Market Committee.

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Posted in Business, Civil Liberties, Collapse, Debt, Economy, Government, Medicine

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Can the Fed Save Us from Climate Change? by Ron Paul

Posted on March 2, 2020 | 1 comment

The question in the title begs the question of whether or not anybody needs to save us from climate change. From Ron Paul at ronpaulinstitute.org:

The 1978 Humphrey-Hawkins Act requires the Federal Reserve to “promote” stable prices and full employment. Of course, the Fed’s steady erosion of the dollar’s purchasing power has made prices anything but stable, while the boom-and-bust cycle created by the Fed ensures that periods of low unemployment will not last for long. Despite the difficulties the Fed faces fulfilling its “dual mandate,” Federal Reserve Chairman Jerome Powell recently announced a new Fed mandate: to protect the financial system from being destabilized by climate change.

Powell appears to have bought into the propaganda that “the science is settled” regarding the existence, causes, and effects of climate change. But the statement “the science is settled” is itself unscientific. Science is rarely settled as today’s new discoveries disprove yesterday’s consensus. In the case of climate change, many scientists dispute the claim that absent massive expansion of government power a climate apocalypse will soon be at hand.

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The Fed Is Lying To Us, by Chris Martenson

Posted on October 19, 2019 | 3 comments

Pay no attention to those sudden emergency infusions of liquidity from the Fed; everything is perfect. From Christ Martenson at peakprosperity.com:

“When it becomes serious, you have to lie”

The recent statements from the Federal Reserve and the other major world central banks (the ECB, BoJ, BoE and PBoC) are alarming because their actions are completely out of alignment with what they’re telling us.

Their words seek to soothe us that “everything’s fine” and the global economy is doing quite well. But their behavior reflects a desperate anxiety.

Put more frankly; we’re being lied to.

Case in point: On October 4, Federal Reserve Chairman Jerome Powell publicly claimed the US economy is “in a good place”. Yet somehow, despite the US banking system already having approximately $1.5 trillion in reserves, the Fed is suddenly pumping in an additional $60 billion per month to keep things propped up.

Do drastic, urgent measures like this reflect an economy that’s “in a good place”?

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Federal Reserve Chairman Appears on 60 Minutes – Why Now? by Michael Krieger

Posted on March 12, 2019 | Leave a comment

Michael Krieger pierces the veil of Fed Chairman Powell’s PR. From Krieger at libertyblitzkrieg.com:

One of the most famous, and prescient, financial cartoons in American history is the above depiction of the Federal Reserve Bank as a giant octopus that would come to parasitically suck the life out of all U.S. institutions as well as free markets.

The image is taken from Alfred Owen Crozier’s U.S. Money Vs Corporation Currency, “Aldrich Plan,” Wall Street Confessions! Great Bank Combine, published in 1912, just a year before the creation of the Federal Reserve. 

Last night, the current high priest of money printing, asset bubbles and inequality, Jerome Powell, appeared on 60 Minutes. Interviewer Scott Pelley mentioned the fact that such discussions are rare and noted the last time a Fed head appeared for such a chat was Ben Bernanke back in 2010.

As such, what I find most interesting about this event wasn’t Powell’s boilerplate, bureaucratic propaganda about how the economy’s doing fine and how much central bankers love average Americans, but why he and the institution he heads felt a need to do this now.

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