Tag Archives: Jerome Powell

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

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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David Stockman on What Could Happen If the Fed Loses Control

It looks like the Fed has already lost control. From David Stockman at internationalman.com:

International Man: Recently, Fed Chairman Jerome Powell said the central bank’s money printing is designed to help average Americans, and not Wall Street.

What’s your take on this?

David Stockman: Yes, and if dogs could whistle, the world would be a chorus!

The truth is, in an economy encumbered with nearly $78 trillion of debt already—including $16.2 trillion on households, $16.8 trillion on business, $23 trillion on governments—the last thing we need is even lower interest rates and even bigger incentives to take on debt and leverage.

In fact, in a debt-saturated system, the Fed’s massive bond purchases never transmit anything outside the canyons of Wall Street. This money-printing madness only drives bond prices higher and cap rates lower—meaning relentless and systematic inflation of financial assets’ prices.

As a practical matter, of course, the bottom 90% don’t own enough stock or even inflated government and corporate bonds to shake a stick at. Instead, what meager savings they have accumulated languish in bank deposits, CDs or money market funds earning exactly what the Fed has decreed—nothing!

So, when Powell says he’s only trying to help the average American, you have to wonder whether he is just stupid or the greatest lying fraud yet to occupy the big chair at the Fed.

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Empty Suit, by Sven Heinrich

Federal Reserve chairpersons have often taken the “suggestions” of presidents to heart, but Trump and Powell’s interactions may be the most overt of them all. From Sven Heinrich at northmantrader.com:

After getting a public twitter scolding from President Trump for letting the Dow reverse into red yesterday Jay Powell was not about to let the same mistake happen twice and came fully prepared ready to jawbone today.

Is the presumption ridiculous? What isn’t ridiculous these days?

A president watching every tick on the $DJIA and grading the Fed Chair on it?

Or a Fed Chair whose renewed easy money policies have propelled stocks sky high using the opportunity to jawbone markets higher by promising even more easy money:

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The Fed Is Lying To Us, by Chris Martenson

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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Underestimating Them and Overestimating Us, by Jim Quinn

People, including SLL, have been saying a cataclysmic crisis is coming for years. It hasn’t happened yet, but that doesn’t make them wrong, just early. From Jim Quinn at theburningplatform.com:

“Do not underestimate the ‘power of underestimation’. They can’t stop you, if they don’t see you coming.” ― Izey Victoria Odiase

Image result for bernanke, yellen, powell

During the summer of 2008 I was writing articles a few times per week predicting an economic catastrophe and a banking crisis. When the biggest financial crisis since the Great Depression swept across the world, resulting in double digit unemployment, a 50% stock market crash in a matter of months, millions of home foreclosures, and the virtual insolvency of the criminal Wall Street banks, my predictions were vindicated. I was pretty smug and sure the start of this Fourth Turning would follow the path of the last Crisis, with a Greater Depression, economic disaster and war.

In the summer of 2008, the national debt stood at $9.4 trillion, which amounted to 65% of GDP. Total credit market debt peaked at $54 trillion. Consumer debt peaked at $2.7 trillion. Mortgage debt crested at $14.8 trillion. The Federal Reserve balance sheet had been static at or below $900 billion for years.

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Freaky Friday Foments Furious Fed Fusillade From Trump, by Tom Luongo

President Trump did his best King Lear impression Friday. From Tom Luongo at tomluongo.me:

Friday night used to be the ‘best night on television.’ But today Friday afternoon is becoming the best soap opera we could hope for as President Trump pulls out all the stops to keep us both horrified and entertained.

It’s better than reruns of Dallas, for sure, though the hair is just as ludicrous.

Trump laid into FOMC Chairman Jerome Powell again musing aloud on Twitter as to who the bigger enemy of the U.S. was, The Fed or China.

Now, far be it for me to get upset with anyone criticizing the Federal Reserve. The FOMC, is really just a Politburo of Ivory Tower intellectuals with neither the practical experience nor the specific knowledge needed to ‘run the economy.

But, news tip for you, neither does Donald Trump.

If you listen to Trump carefully, seeing him for what he is not what you think he is, what you want him to be or, most importantly, what he wants you to see, you hear a man who fully believes the Fed controls the economy.

You hear a man that firmly believes in the power of the government to remake the world in whatever image it wants, whenever it wants.

You hear a man so solipsistic he can only see the world in terms he defined more than thirty years ago.

You hear a man who fundamentally doesn’t believe trade results in both sides winning but that everyone either wins a deal or loses. If he didn’t extract maximum pain from the other side he ‘lost.’

It’s the source of Trump’s inherent mercantilism.

And that fault in Donald Trump’s character is leading him to ever more extreme behavior as he refuses to reconcile the world we have versus the world he wants.

So he keeps pressuring, embarrassing and humiliating people he wants to make deals with. And when they refuse to do so, he explodes and, like a child who didn’t get his cookie, uses the power of the Presidency to still try to get what he wants.

Treating his opposition like the Democrats and the Media this way is fine. They treat him far worse than he does them; giving back in kind what he gets.

But his stance on the Fed, who are actually helping him in the long run, is insane. And it proves the point that no matter how smart you are, if you are mis-educated and have spent a life building wealth based on that mis-education, you will not be able to see the other side of the problem.

The strong dollar he is so angry about isn’t a function of the Fed’s raising interest rates. It’s not about policy bifurcation between the Fed and the ECB and the Bank of Japan.

It’s come about because of the continued application of the same mis-education Trump received about the role of interest rates that the Fed consistently (and wrongly) applies.

The world is just short dollars Don. And lowering borrowing costs won’t help the situation. It’s what created it in the first place.

Trump’s not a multi-dimensional analyst. He isn’t a 4-d chess player. He’s actually a very simple creature. He believes the crap spewed by CNBC. He’s hired advisers who worked there for pity’s sake.

The Fed is now in fear for its independence and Trump, again very child-like, wants the world remade in his image yesterday and on his time table not the world’s.

So, all of the radical changes he has pushed to the flow of global capital through his near daily abuse of sanctions and tariffs have created immense uncertainty in dollar funding markets around the world.

And with a $60 trillion synthetic short position against the dollar extent thanks to a decade of zero-bound interest rates courtesy of the Fed, dollar hoarding is a very real thing.

Martin Armstrong blogged the other day remarking that there are more $100 bills in existence today than $1 bills. Why? Overseas mattress stuffing.

More recently, the amount of US currency in circulation outside the United States has now exceeded 70%. The world is hoarding dollars for they fear the cancellation of their own currencies as talk of eliminating cash in Europe has escalated with the prospect of Christine Lagarde replacing Draghi.

As Americans have moved increasingly toward debit and credit cards, the rest of the world has been sucking-up US dollars beyond belief. Anyone who questions whether the US dollar is the reserve currency, well the cash is not being held by governments or central banks. The people are now hoarding US dollars at record levels.

Every day that Trump complains about the Fed or China or Europe or Iran is another day in which he himself helps force more dollars into those mattresses overseas. Some of those hundreds of billions get converted into gold and bitcoin.

Further, the Fed lowering rates will only signal to those people that they have the right idea because the Fed wouldn’t be doing that if the global economy was in such good shape.

They would be raising rates.

And it’s a point Trump refuses to understand. Lowering rates here will not free up capital at home to be lent. Banks are already as loathe to lend as I am to write anything on a Thursday lest I misread the upcoming episode of Trump’s version of Freaky Friday in Fedlandia.

If banks were confident of the returns on their loan prospects they wouldn’t still be hoarding excess reserves at the Fed like everyone else.

They’ve disgorged more than $1 trillion over the past year as the Fed has wound down its balance sheet. This is the Fed, in its own ham-fisted way trying to free up dollars for circulation. Because when you create a backwards market you have to do things backwards to unwind them.

The Fed never intended for the trillions it printed bailing out the world in 2008-09 to circulate. If it did it would have never paid interest on excess reserves (IOER) in the first place.

This is also why the recovery has been a long, slow water-torture affair only kept alive by China blowing a massive credit bubble which Trump wants to prick but without it he would have never gotten the opportunity to MAGA.

The truth is, Powell’s helping with that, Don. Higher rates are what China can’t handle. Part of what’s worked for them is keeping rates above 3% while the Fed was zero-bound.

Raising rates has capital pouring into the U.S. and out of China, searching for yield as the yuan falls. But he, like all children, like the infantilized Baby Boomer he is, wants it all and he wants it now, before re-election.

This is ultimately what all of this whining is about, Trump’s re-election.

What this means, of course, is that we have at least another year of the best soap opera fake money can buy. I’m just waiting for someone to take on the role of Kramer banging open the door to Don’s apartment randomly and saying, “Hello! Deflation is Here…. or is that Inflation?”

Powell’s hair isn’t crazy enough for it.


Feeling the Heat of a Civilization on the Downside, by MN Gordon

The old order is fighting an impossible battle to preserve itself. From MN Gordon at acting-man.com:

An Epic Folly for the Ages

Today we begin with a list.  A partial list.  And in no particular order…

Angela Merkel. Donald Tusk. Mario Draghi. Donald Trump. Jerome Powell.  Shinzo Abe.  Haruhiko Kuroda.  Theresa May. Boris Johnson. Mark Carney. Xi Jinping.  Emmanuel Macron.  Vladimir Putin. Justin Trudeau. Juan Trump.  And many, many more…

Politicians and bureaucrats of the modern age of statism and central planning… fighting a rearguard action doomed to fail. [PT]

These central planners – though they may not know it – are facing a no-win situation. They have extrapolated the past and are attempting to preserve the status quo into the future.  Yet their efforts to perpetuate the upward growth curve of their countries and unions are useless against the relentless turn of history.

The political, financial, economic, and social foundations that have been in place over the last 75 years – and perhaps, over the last 220 years – are breaking down.  And no policy directive, no interest rate adjustment, no trade tariff, no five year plan, no extraordinary measures, no green new deal, and no technocratic prevarication is going to stop it. Big Government doesn’t stand a chance.

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

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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Fire the Fed? by Ron Paul

Central banks are an idea whose time never should have come. From Ron Paul at ronpaulinstitute.org:

President Trump’s frustration with the Federal Reserve’s (minuscule) interest rate increases that he blames for the downturn in the stock market has reportedly led him to inquire if he has the authority to remove Fed Chairman Jerome Powell. Chairman Powell has stated that he would not comply with a presidential request for his resignation, meaning President Trump would have to fire Powell if Trump was serious about removing him.

The law creating the Federal Reserve gives the president power to remove members of the Federal Reserve Board — including the chairman — “for cause.” The law is silent on what does, and does not, constitute a justifiable cause for removal. So, President Trump may be able to fire Powell for not tailoring monetary policy to the president’s liking.

By firing Powell, President Trump would once and for all dispel the myth that the Federal Reserve is free from political interference. All modern presidents have tried to influence the Federal Reserve’s policies. Is Trump’s threatening to fire Powell worse than President Lyndon Johnson shoving a Fed chairman against a wall after the Federal Reserve increased interest rates? Or worse than President Carter “promoting” an uncooperative Fed chairman to Treasury secretary?

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The Fed IS the Ugly Truth, by Raúl Ilargi Meijer

The back and forth and massive publicity given to what the Federal Reserve obscures a central question: should the Fed even exist? From Raúl Ilargi Meijer at theautomaticearth.com:

This Fed thing just keeps going on, and it needs to stop. There is nothing in the discussion about the Federal Reserve these days that has any value other than it provides even more proof that the Fed has killed off the most essential elements of what once made the US economy function. All markets, stocks, bonds, housing markets, all price discovery, all murdered. No heartbeat. Pining for the fjords.

And instead of addressing that, and I’m not even talking about addressing fixing what is wrong, all I see is neverending stuff about Jay Powell using, or not using, terms such as “patient” or “accommodative”. Like any of it means anything coming from him and his ilk. Other than for making ‘investors’ a quick buck. Like a quick buck could ever trump the survival of entire market systems.

People discussing whether Jay Powell is doing a good job all miss the point. Because Powell should not be doing that job in the first place. The Fed should not have the power to manipulate the US economy anywhere near as much as it does. Because that power is perverting America like nothing else, and the US economy will never recover as long as the Fed holds that power. Is that clear enough? Do we understand that at least?

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