Tag Archives: Janet Yellen

Powell ain’t Yellen, by the Northman Trader

The timing of the recent stock sell off was propitious from one point. It came as Yellen exited, so she won’t be blamed, and as Jerome Powell became the Chairperson of the Federal Reserve. You can’t blame it on him, he probably hadn’t found the coffee machine when the plunge began. So nobody at the Fed can be blamed! From the Northman Trader at northermantrader.com:

When police try to solve a crime one of the key tasks is to determine who benefits from the crime. The beneficiary of a crime is not necessarily the perpetrator, but motive goes a long way to narrow the circle of potential suspects.

Who benefitted from this sudden aggressive sell-off aside from anyone who was positioned short?

Certainly not hedge funds that capitulated long in January with their highest long exposure in 3 years literally right before the sell-off.

And certainly not retail that went full balls long on the aura of optimism:

This trend continued right into February 1 following the FOMO train. Remember Ray Dalio?

Now this:

Panic selling with record outflows. In record time no less:

From greed to panic in less than 2 weeks.

People got hammered big time as price gave back months of gains in a matter of days:

That’s a lot of trapped supply and will present a challenge for future rallies.

So benefits from all this? One man. One man in particular:

Jerome Powell.

From his vantage point the timing of all this has to be perfect. Absolutely perfect. And from Yellen’s position it’s perfect too actually. But it is Powell I want to hone in on in particular.

To continue reading: Powell ain’t Yellen

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Good Riddance And Look Out Below, by David Stockman

David Stockman wishes Janet Yellen a fond farewell. From Stockman at lewrockwell.com:

There is about to be a changing of the guard in the Eccles Building. That comes straight from the tweeter-in-chief, who actually verbalized his thoughts on the matter during interviews yesterday:

I tell you what, she was in my office three days ago. She was very impressive. I like her a lot. I mean, it’s somebody that I am thinking about……(but) I have to say you’d like to make your own mark….

We’ll take the bolded phrase as gold watch time for Janet Yellen upon expiration of her term in February. And with a full measure of Trumpian gusto, we’d also say: GOOD RIDDANCE!

When the story is finally written about how capitalism was strangled and America impoverished during the first quarter of the 21st century, Janet Yellen will rank high on the list of villains – right along with Ben Bernanke and Alan Greenspan.

Their unforgivable sin was to systematically falsify the most important prices in all of capitalism – the prices of money, debt and other financial assets.

They did so in the arrogant and erroneous belief that 12 mortals on the FOMC can improve upon the work of millions of consumers, producers, workers, entrepreneurs, savers, investors and speculators on the free market; and that it’s possible to centrally plan and manage a $19 trillion economy by fiddling with interest rates, manipulating the yield curve and massively and fraudulently monetizing the public debt.

For want of a better term, we refer to this entire, misbegotten Greenspan-Bernanke-Yellen doctrine as Bubble Finance. That’s because in an open world economy flooded with cheap labor and capital, current Fed policy ultimately generates destructive financial bubbles on Wall Street, not sustainable prosperity on main street.

To continue reading: Good Riddance And Look Out Below

Why Doesn’t Janet Yellen Resign? by Raúl Ilargi Meijer

Janet Yellen won’t resign because then she’d be unimportant and nobody would pay attention to her. From Raúl Ilargi Meijer at theautomaticearth.com:

You would think, certainly if you were as naive and innocent as I am, that when you get offered the job of Chair of the Federal Reserve, you must be sure, before accepting, that you have the credentials and the knowledge required. If you don’t, it looks as if you don’t take the job seriously. Janet Yellen, who’s been Chair since January 2014, doesn’t seem to agree.

In a speech Tuesday for the National Association for Business Economics Yellen ‘honestly’ admitted that she doesn’t understand inflation, control of which is the Fed’s no.1 task (it’s debatable whether that’s a good idea). She doesn’t understand a bunch of other issues either. Those are her own words, not mine. Here are these own words:

“My colleagues and I may have misjudged the strength of the labor market, the degree to which longer-run inflation expectations are consistent with our inflation objective, or even the fundamental forces driving inflation..”

Clear enough, you would think. But she didn’t offer her resignation. And for an important post like Fed chair, that is a major problem. As she undoubtedly does. So why is she keeping her job? Doesn’t she realize that when you don’t understand the issues you deal with, you’re prone to make disastrous mistakes?

Yellen and her colleagues work with models, and the models are wrong. The Fed’s predictions for things like inflation are ridiculously off, all the time. That may be news to her, but it’s old hash for many people in her field. So that she’s surrounded solely by people who don’t understand these things either is not an excuse.

So what does she expect now? That she will start to understand them all of a sudden, after years and years of not being able to? That reality will change to comply with her models? We can discount the option that she will suddenly begin using entirely different models, they’re all she has. But what then?

Under her predecessor Ben Bernanke, who never conceded he had no idea either but still didn’t, the Fed lowered interest rates to near zero Kelvin and bought trillions of dollars in bonds and securities. Now Yellen for some reason thinks it’s time to get rid of the stuff.

To continue reading: Why Doesn’t Janet Yellen Resign?

 

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

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.