Tag Archives: Janet Yellen

Donald Trump’s Very Own Big, Fat, Ugly Bubble, by David Stockman

Since he’s been in office, Trump has done nothing to challenge Janet Yellen and the Fed’s bubble blowing. From David Stockman at dailyreckoning.com:

The overwhelming source of what ails America economically is found in the Eccles Building. During the past three decades the Federal Reserve has fostered destructive financial mutations on Wall Street and Main Street.

Bubble Finance policies have fueled an egregious financial engineering by the C-suites of corporate America. This bubble has skyrocketed to the tune of $15 trillion of stock buybacks, debt-fueled mergers deals and buyouts of the last decade.

The Fed fostered a borrowing binge in the household sector after the 1980s. It eventually resulted in Peak Debt and $15 trillion in debilitating debts on the homes, cars, incomes and futures of what used to be middle class America.

Liability Level 1

It also led politicians down the path of free lunch fiscal policy. By monetizing $4.2 trillion of Treasury and GSE debt during the last three decades, the Fed numbed the US economy from effects of crowding out and rising interest rates that would have come from soaring government deficits. This left the public sector impaled on Peak Debt.

Ever since Alan Greenspan launched Bubble Finance in the fall of 1987, public debt outstanding has increased by nearly 9 times. Measured against national output, the Federal debt ratio has risen from 47% to 106% of GDP.

Federal Debt Total 2

These actions have stripped-mined balance sheets and cash flow from main street businesses. The Fed has stifled economic growth while delivering multi-trillion windfalls into the hands of a few thousand speculators on Wall Street.

These rippling waves of financial mutation are why the US economy is visibly failing and why vast numbers of citizens in Flyover America voted for Donald Trump for president.

Ironically, even as he stumbled to his victory on November 8, Trump barely recognized that the force behind all the economic failure that he railed against was the nation’s rogue central bank.

To continue reading: Donald Trump’s Very Own Big, Fat, Ugly Bubble

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Janet Yellen: False Prophet of Prosperity, by Ron Paul

Beware central bankers bearing prophesies of perpetual prosperity. From Ron Paul at ronpaulinstitute.org:

Federal Reserve Chair Janet Yellen recently predicted that, thanks to the regulations implemented after the 2008 market meltdown, America would not experience another economic crisis “in our lifetimes.” Yellen’s statement should send shivers down our spines, as there are few more reliable signals of an impending recession, or worse, than when so-called “experts” proclaim that we are in an era of unending prosperity.

For instance, in the years leading up to the 2008 market meltdown, then-Fed Chair Ben Bernanke repeatedly denied the existence of a housing bubble. In February 2007, Bernanke not only denied that “sluggishness” in the housing market would affect the general economy, but predicted that the economy would expand in 2007 and 2008. Of course, instead of years of economic growth, 2007 and 2008 were marked by a market meltdown whose effects are still being felt.

Yellen’s happy talk ignores a number of signs that the economy is on the verge of another crisis. In recent months, the US has experienced a decline in economic growth and the value of the dollar. The only economic statistic showing a positive trend is the unemployment rate — and that is only because the official unemployment rate does not count those who have given up looking for work. The real unemployment rate is at least 50 percent higher than the manipulated “official” rate.

A recent Treasury Department report’s called for rolling back of bank regulations could further destabilize the economy. This seems counterintuitive, as rolling back regulations usually contributes to economic growth. However, rolling back bank regulations without ending subsidies like deposit insurance that create a moral hazard that incentivizes banks to engage in risky business practices could cause banks to resume the unsound lending practices that were a major contributor to the growth, and collapse, of the housing bubble.

The US economy is already faced with several bubbles that could implode at any time. These include bubbles in student loans and automobiles sales, and even another housing bubble. The most dangerous of these bubbles is the government bubble caused by excessive spending. According to a 2016 study by the Mercatus Center, at least four states could soon join Puerto Rico and Illinois in facing bankruptcy.

Of course, the mother of all government bubbles is the federal spending bubble. Despite claims of both defenders and critics of the president’s budget, neither President Trump nor the Republican Congress have any plans for, or interest in, reducing spending in any area. Even the so-called cuts in Medicare and other entitlement programs that have generated such hysterics are not real cuts, but “reductions in the rate of growth.”

To continue reading: Janet Yellen: False Prophet of Prosperity

Yellen Against the Gods, by Bill Bonner

Is it wise to tempt fate? From Bill Bonner at bonnerandpartners.com:

“Even God Himself could not sink this ship.”

– Titanic crewman… The ship sank four days later

“It is our will that this state shall endure for a thousand years.”

– Adolf Hitler… 10 years before the Reich was destroyed

“Long-Term Capital Management”

– Hedge fund headed by Nobel Prize winner, bet against things that “couldn’t happen in a billion years”… Four years later, the fund blew up

“I have returned from Germany with peace for our time.”

– Neville Chamberlain… 11 months before the start of World War II

“Argentina Plans to Offer 100-Year Bond” (priced to yield only 7.9% until 2117)

– Bloomberg, June 19, 2017…

DUBLIN – Ring the bell. Open up the gates. Unleash the hounds of Hell.

Here’s Janet Yellen’s latest contribution to the Famous Last Words club:

Would I say there will never, ever be another financial crisis? You know probably that would be going too far but I do think we’re much safer and I hope that it will not be in our lifetimes and I don’t believe it will be.

This must be what the gods have been waiting for… What bread doth Ms. Yellen eat? What ale doth she drink? What is she thinking?

The weather has been so nice, Ms. Yellen is building a house without a roof!

Stacking Blocks of Wood

We don’t know any more than the Fed chief about when the next crisis will come. But we’re not fool enough to tempt Fate. And not vain enough to think we could do anything to stop it.

Financial crises come around from time to time. Generally, they come when you least expect them… that is, when they can do the most damage.

Our guess is that a crisis will begin before the end of this year. Why?

First, because falling oil prices and bond yields signal a slowing economy. A recession is already overdue.

To continue reading: Yellen Against the Gods

She Said That? 9/22/16

Yesterday, Janet Yellen denied any political influence whatsover on Federal Reserve policy. Donald Trump has suggested otherwise. From Yellen, at a press conference after the Federal Open Market Committee announced its decision not to raise interest rates:

“Well, I think Congress very wisely established the Federal Reserve is an independent agency. In order to insulate monetary policy from short-term political pressures and I can say, emphatically that partisan politics plays no role in our decisions about the appropriate stance of monetary policy. We are trying to decide what the best policy is to foster price stability and maximum employment and to manage the variety of risks that we see is affecting the outlook. We do not discuss politics at our meetings and we do not take politics into account in our decisions.

That should settle it, although a few of SLL’s more stubborn readers may still believe that Trump is right.

Janet Yellen’s Shame, by Bill Bonner

The contrast between honest capitalism and inherently dishonest central banking. From Bill Bonner at acting-man.com:

Playing Politics

In honest capitalism, you do what you can to get other people to voluntarily give you money. This usually involves providing goods or services they think are worth the price. You may get a little wild and crazy from time to time, but you are always called to order by your customers.

In the market economy, consumers reign supreme. There is no such thing as a “lost” vote in the marketplace; every penny spent affects production. Mises noted: “Consumers ultimately determine not only the prices of consumers’ goods, but no less the prices of all factors of production. They determine the income of every member of the market economy. The consumers, not the entrepreneurs, ultimately pay the wages earned by every worker, the glamorous movie star as well as the charwoman. With every penny spent, consumers determine the direction of all production processes and the minutest details of the organization of all business activities.”

That is true of honest banking, too. Back when such a thing existed, the job of an honest banker was to aggregate people’s savings and lend them to worthy borrowers. You make too many mistakes, your customers leave and you go broke.

Politics is a different game altogether. It produces no wealth of any sort. So the only way you can prosper in politics is to connive, cheat, and steal – manipulating your friends… sidelining your enemies… and exploiting the public.

It is a game of taking wealth, not making it. And you have no customers, so there’s not much of a check on how out-of-order you can get. Still, a politician is not always lying, not always stealing – and not always wrong. Occasionally, he blunders into honesty and slips into truth.

On Monday, for example, Republican presidential nominee Donald Trump said Fed chief Janet Yellen should be ashamed of herself for what she was doing to Americans and for creating a “false stock market.

US monetary base vs. the S&P 500 Index. Although base money growth has leveled out since 2014, the money supply has continued to grow since then due to commercial bank credit expansion. Since 2008 the broad true US money supply has increased by 128%, and this chart is a reminder that the money didn’t just “print itself”.  A great deal of it was created directly by the Fed, which the rapid growth in base money demonstrates. Newly created money doesn’t affect all prices simultaneously or to the same extent and for a variety of reasons, asset prices are always likely

US monetary base vs. the S&P 500 Index. Although base money growth has leveled out since 2014, the money supply has continued to grow since then due to commercial bank credit expansion. Since 2008 the broad true US money supply has increased by 128%, and this chart is a reminder that the money didn’t just “print itself”. A great deal of it was created directly by the Fed, which the rapid growth in base money demonstrates. Newly created money doesn’t affect all prices simultaneously or to the same extent and for a variety of reasons, asset prices are always likely to be at the top of the list (in other words, the above correlation is not a coincidence)

The financial press was quick to condemn Mr. Trump for “undermining confidence” in the Fed and the stock market. It was “irresponsible” to question the Fed’s integrity and its non-partisan mission, said the pundits.

Widely dismissed was the idea that Ms. Yellen was “playing politics” with the Fed by supporting the stock market to embellish President Obama’s last months in office and help Democratic nominee Hillary Clinton slide into the White House after him. But Mr. Trump is right: Politics is the Fed’s game.

 

To continue reading: Janet Yellen’s Shame

 

Trump Slams Yellen: The Fed Has Created A “Stock Bubble” And “A False Economy” To Boost Obama, by Tyler Durden

Donald Trump may shoot from the hip when he talks economics, but shot-from-the-hip truth is preferable to most economists’ carefully stated inanities, idiocies, and absurdities. From Tyler Durden at zerohedge.com:

One month ago, Donald Trump urged his followers to sell stocks, warning of “very scary scenarios” for investors, and accused the Fed of setting the stage for the next market crash when he said that “interest rates are artificially low” during a phone interview with Fox Business. “The only reason the stock market is where it is is because you get free money.”

Earlier today, speaking to a reporter traveling on his plane who asked Trump about a potential rate hike by the Fed in September, Trump took his vendetta to the next level, saying that the Fed is “keeping the rates artificially low so the economy doesn’t go down so that Obama can say that he did a good job. They’re keeping the rates artificially low so that Obama can go out and play golf in January and say that he did a good job. It’s a very false economy. We have a bad economy, everybody understands that but it’s a false economy. The only reason the rates are low is so that he can leave office and he can say, ‘See I told you.'”

He then lashed out at Yellen, whom he accused of having a political mandate when conducting monetary policy: “So far, I think she’s done a political job. You understand that.”

On whether we can have a rate hike in September: “Well, the only thing that’s strong is the artificial stock market. That’s only strong because it’s free money because the rates are so low. It’s an artificial market. It’s a bubble. So the only thing that’s strong is the artificial market that they’re created until January. It’s so artificial because they have free money… It’s all free money. When rates are low like this it’s hard not to have a good stock market.”

His conclusion: “At some point the rates are going to have to change.”

Indeed they will, and that’s precisely what almost every bank, from Goldman yesterday to Citi today, and many others inbetween, have been warning about in recent months.

Until recently, Trump’s latest anti-Fed outburst would have been swept under the rug as just another example of the deranged ramblings of an anti-Fed conspiracy theorist (trust us, we’ve been there). However, considering the spike in anti-Fed commentary in recent weeks coming from prominent, and established institutional sellside analysts all the way to the WSJ, it may be that Trump was once again simply saying what everyone else thought but dared not mention.

http://www.zerohedge.com/news/2016-09-05/trump-slams-yellen-fed-has-created-stock-bubble-and-false-economy-boost-obama

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