Tag Archives: Federal Reserve

David Stockman on Fiscal Disaster, Social Unrest, and the Presidential Election

Posted on June 19, 2020 | 1 comment

The fiat debt the Federal Reserve has created has to go somewhere, and it’s going into stocks. From David Stockman at internationalman.com:

Fiscal Disaster
International Man: Recently, massive riots have broken out in many cities across the US.

Despite the unrest—and the economic damage from the shutdowns—the stock market continues to rally.

It seems that markets don’t reflect earnings, economic prosperity, or growth. What is going on here?

David Stockman: It’s quite simple. The Fed has unleashed the greatest torrent of liquidity ever, and it’s finding its way into a relentless, massive bid for risk assets.

Since the eve of the Lockdown Nation disaster on March 11, the Fed’s balance sheet has erupted from $4.3 trillion to nearly $7.2 trillion. That’s $32 billion per day—including weekends, Easter, and nationwide riot days.

Worse still, at their June meeting, the mad money printers domiciled in the Eccles Building promised to keep printing $120 billion per month to buy US Treasuries and other assets for an indefinite period. That should get us to a $10 trillion balance in less than two years’ time.

What this means, of course, is that honest price discovery in the canyons of Wall Street is deader than a doornail. We now have a putative capitalist economy in which the most important prices in all of capitalism—the prices of financial assets—are pegged, rigged, and manipulated by the central banking agents of the state.

The result, of course, is speculation and malinvestment on a biblical scale.

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Posted in Banking, Business, Civil Liberties, Collapse, Crime, Currencies, Debt, Economics, Economy, Financial markets

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On Juneteenth, A Conversation of Reparations, by Bill Bonner

Posted on June 19, 2020 | 1 comment

Reparations is a no less worthy cause for government funny money than many of the other “causes” the government has already rewarded. From Bill Bonner at bonnerandpartners.com:

Week 14 of the Quarantine

In those days they shall say no more, the fathers have eaten a sour grape and the teeth of their children are set on edge…

– Jeremiah 31:29

SAN MARTIN, ARGENTINA – Many years ago, during the anti-war riots of 1970, we attended a student rally at the University of New Mexico. Jane Fonda had come to Albuquerque to support the protestors.

Speaker after speaker got up and railed against the war, and against racism. Each one was careful to include the local victims – “Chicanos” (Hispanics) and “Native Americans” (the American Indians, who were an important minority at the University of New Mexico).

Then, after Ms. Fonda had left the podium, we heard drums… and saw a contingent of Indians headed toward the stage. One, a stout young man, took the microphone:

“Stop using us, man” was all he said.

The crowd was silent. What did he mean? Weren’t they trying to help?

The Indians marched off and the rally went back to its usual windy complaints.

Reparations

And today, here at the Diary, we end this week’s ramble by looking at where bad ideas and bad money come together. That is, we will look at “reparations”… and a group that has been badly used for centuries. In preview: Once you begin handing out free money, it is hard to stop.

For years, “reparations” seemed like just another dumb gripe. But it’s becoming real. Last week, the California Assembly agreed to take the case for “reparations” seriously. Joe Biden says he is not opposed to the idea, as long as American Indians are included.

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Posted in Civil Liberties, Debt, Economy, Government, Politics, race relations

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Deep State to Powell: Stop Goosing Stocks Higher Or You’ll Re-Elect Trump, by Charles Hugh Smith

Posted on June 10, 2020 | Leave a comment

Traditionally there’s been a strong correlation between the stock market and the electoral fortunes of presidents and their challengers. From Charles Hugh Smith at oftwominds.com:

Come on, Jay, you can always goose stocks back to new highs after the election.

Indulge me for a moment in some backroom speculation. It’s absurdly obvious that the unelected, permanent, ever-expanding National Security State, a.k.a the Deep State, and its Democratic Party allies have been attempting to torpedo Donald Trump since the 2016 election took them by surprise. (Imagine doing everything that worked so well in the past and failing at the last minute. Ouch. Revenge is best served cold, n’est pas?)

The comedy-of-errors RussiaGate collapsed in a foul heap, the impeachment backfired, and so what’s left in the Deep State quiver other than its usual bag of, ahem, accidents?

Some might argue that urban riots and civil unrest might be enough to cause Trump to lose the election in November, but this strategy can backfire just as easily as the previous Deep State strategies.

Assuming Americans will ultimately vote their pocketbook as in the past, the only sure way to sink Trump is to crash the stock market, the jewel in Trump’s crown. This is blinding obvious, but the Deep State’s political allies have been wary of shrinking the bloated wealth of their donors, and wary of a backlash from the wealthy who want to see Trump lose but not if it requires the personal sacrifice of surrendering any of the $548 billion they’ve gained in the recent stock market melt-up.

But with the election just months away, the pressure is now so intense that the Deep State is demanding Powell and the Fed stop the money-printing that’s goosing stocks higher. Hints have been elevated to suggestions which are about to become demands.

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How The Federal Reserve Unilaterally, De-Facto Amended the US Constitution, by Chris Hamilton

Posted on May 31, 2020 | Leave a comment

Wisely, the framers of the constitution did not provide the government with the power to establish a central bank. From Chris Hamilton at economica.blogspot.com:

The US Constitution is the spectacular framework upon which our nation is built. The framers even built in a means to right the terrible wrongs that were beyond their capabilities at the time…the amendment has been utilized 27 times in all (most recently in 1992), righting freedoms of religion, equality of all races and sex, among others. But not included anywhere in the Constitution was the Federal Reserve, allowing it the power to guide interest rates ever lower or infinitely purchase assets. The implications of the Federal Reserve policies have been to undermine the Congress’ primary function, that of compromise in an attempt to balance spending versus taxation. The Federal Reserve policies have removed market based discipline, (market based interest payments), encouraging Congress to raise seemingly infinite federal debt. Thus Congress’ role as an institution for compromise is broken. This de-facto Constitutional amendment has spurred ideas of infinite spending like MMT. Flawed as the framers were, this insertion of a de facto, unelected, quasi private/federal branch of government was explicitly never intended because of the cancer it represented.

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A Black Swan With Teeth, by Peter Schiff

Posted on May 28, 2020 | Leave a comment

Printing up trillions in response to the coronavirus shutdown will ultimately make the economic situation worse. From Peter Schiff at schiffgold.com:

For years, I have been warning that during the age of permanent stimulus (which began in earnest with the Federal Reserve’s reaction to the dotcom crash of 2000), each successive economic contraction would have to be met with ever larger, increasingly ineffective, doses of monetary and fiscal stimulus to keep the economy from spiraling into depression. I have also said that the enormity of the asset price gains over the last 10 years had increased the danger because reflating the bloated stock, real estate, and public and private debt markets would bring on doses of stimulus that could prove lethal for the economy. But even though I expected that the next financial crisis would be catastrophic, I thought that it would come into the world in the usual way, as a credit crisis triggered by over-leverage. But the Coronavirus ripped up those stage notes, and instead ushered in a threat that is faster and deeper than I imagined, and I imagined a lot. It’s a perfect storm, a black swan with teeth.

Even in my most pessimistic assessments, I did not expect that so many seemingly distant sectors of the economy would simultaneously evaporate, almost overnight, or that government deficits would expand to nearly $4 trillion in the first wave of the crisis, or that the Federal Reserve would so suddenly launch its largest-ever experiment in quantitative easing, (with almost none of the forward guidance they have used to telegraph lesser moves), which would expand its balance sheet by more than $3 trillion in a matter of just a few months. Nor did I expect that at its outset the Fed’s new buying plan would include, for the first time, corporate bonds and high yield debt ETFs. (I thought those expansions would come eventually, not immediately.)

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Goldman Spots A Huge Problem For The Fed, by Tyler Durden

Posted on May 16, 2020 | 1 comment

Will the Federal Reserve conjure up enough of its debt to buy the government’s upcoming mountain of debt? From Tyler Durden at zerohedge.com:

Last week, the Treasury shocked the world when it announced that in the current quarter (the 3rd of the fiscal year), the US will need to sell a mindblowing, record $3 trillion (pardon, $2.999 trillion) in Treasurys to finance the US money helicopter.

This, after selling $807 billion in the first half of the fiscal year, and another $677 billion in the quarter ending Sept 30.

And since it is just a matter of time before Congress has to pass yet another fiscal package which will be at least another trillion dollars, and up to $3 trillion if the Democrats get their wish, one can say that Guggenheim’s projection of over $5 trillion in debt issuance this calendar year will be wildly conservative.

 

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Infinite money printing: Fed now buying ETFs, by Simon Black

Posted on May 13, 2020 | Leave a comment

The Fed will have to get more printing presses and run them 24/7 to have any chance of bailing out the billions in corporate debt that will otherwise default. From Simon Black at sovereignman.com;

Just when you thought they couldn’t come up with any more crazy ideas, the Federal Reserve announced last night that they will start buying Exchange Traded Funds, effective immediately.

Just to be clear, this means that the Fed is going to conjure money out of thin air, and then use that new money to buy ETFs.

But not just any ETF. The Fed is specifically targeting ETFs that own corporate bonds.

The key idea here is that the Fed is trying to bail out bankrupt companies across the Land of the Free.

Under normal circumstances, most medium and large businesses regularly issue corporate bonds (which is a type of debt) to help fund their companies.

This is pretty normal; even very strong and healthy businesses regularly go into debt by issuing bonds.

For example, Apple has been wildly profitable for years. But the company has about $90 billion in debt according to its most recent financial statements, plus they just issued another $8 billion in bonds last week.

Companies all over the world do this, and the total size of the global corporate bond market is absolutely enormous– tens of trillions of dollars.

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America Is a Technocracy, Not a Democracy, by Ryan McMaken

Posted on May 9, 2020 | 1 comment

American is run by federal government bureaucracies, not elected officials. From Ryan McMaken at ronpaulinstitute.org:

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Perhaps never before in American history have the unelected technocrats played such an enormous role in shaping public policy in America.

In recent weeks, members of Congress have been missing in action. Late last month, the House of Representatives passed the biggest spending bill in history while most members were absent. Member votes were not recorded and the legislation was passed with a voice vote, which required only a tiny handful of members.

Weeks later, the Senate refuses to even meet, and may finally get around to debating some legislative matters in May. As with the House, a handful of members assembled earlier to approve another enormous stimulus bill. Many Senators stayed home. This is “representative government” in modern America.

But if you thought this lack of congressional action means not much is happening in Washington in terms of policymaking, you would be very wrong. It’s just that the democratically elected institutions have now become a largely irrelevant sideshow. The real policymaking takes place among unelected experts, who decide for themselves—with minimal oversight or control from actual elected officials—what will happen in terms of public policy. The people who really run the country are these experts and bureaucrats at the central banks, at public health agencies, spy agencies, and an expanding network of boards and commissions.

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“Sweep the Leg”, by Simon Black

Posted on May 8, 2020 | 1 comment

Unlimited debt and debt monetization will have economic and financial consequences. From Simon Black at sovereignman.com:

It was barely a week ago that the federal government estimated it would borrow $3.7 trillion this fiscal year due to all the Covid bailouts.

Then, only a few days later, the Treasury Department updated the estimate and announced they would in fact be borrowing $4.5 trillion this fiscal year.

That’s an increase of $800 billion in less than a week!

Not to be outdone, the Federal Reserve has printed more than $2.5 trillion in less than 50 days, expanding its own balance sheet by 62% since the start of the pandemic.

I’ve been really hammering this theme lately, but it’s critical to understand: there is no limit to the amount of money they’ll print, or to the amount of debt they’ll take on.

And this has serious implications for the dollar.

It would be foolish to expect that you can create trillions of dollars in a matter of weeks, and take on trillions of dollars in debt, without any consequences whatsoever.

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The Federal Reserve: More Lethal than Coronavirus, by Ron Paul

Posted on May 5, 2020 | 1 comment

The economy was in no great shape before the coronavirus outbreak, but the Fed’s actions since the outbreak will do far more damage to the economy and overall American health than the virus. From Ron Paul at ronpaulinstitute.org:

Last week the Federal Reserve announced it will keep interest rates at or near zero until the economy recovers from the government-imposed shutdown. Following this announcement, Federal Reserve Chairman Jerome Powell urged Congress and the Trump administration to put aside any concerns about the deficit and spend whatever it takes to stimulate the economy and combat coronavirus.

The Federal Reserve previously announced it would make unlimited purchases of Treasury securities, thus encouraging Congress and the president to increase spending and debt. With some members of Congress talking about another multi-trillion-dollar stimulus bill, and with President Trump proposing a two trillion dollars infrastructure plan as a way to get Americans back to work, it is obvious, and not surprising, that Congress and President Trump gleefully agree with Powell’s advice.

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