Stocks took off on Friday on several big news items – most significantly President Trump’s announcement that the US and China have worked out phase one of a trade deal. In his podcast, Peter broke down the news. He also made an interesting observation: Trump and the Federal Reserve seem to be reading off the same script.
The consumer sentiment number for September came out Friday higher than expected. As Peter noted, this index is regarded as very important.
It measures whether or not the consumer is confident enough to go deeper into debt and keep buying stuff that he can’t afford. And assuming the consumer is so confident then everything is great because the spending continues and the GDP continues. But of course, if you look back historically, the consumer is never smart enough to be pessimistic when he should. He’s always very optimistic just before a major economic decline.”
Also on Friday, the Federal Reserve Bank of New York came out with its non-quantitative easing quantitative easing plan. The bank said it would buy $60 billion in short-term Treasuries each month.
Of course, don’t confuse this with quantitative easing when the Fed was buying $85 billion a month of Treasuries, because this is no way quantitative easing except, of course, that’s exactly what it is.”
The Fed also reiterated that it plans to use all of the interest it earns off its portfolio to buy more Treasuries. And as the bonds mature, it will take that money and buy more Treasuries, thus pumping up the balance sheet. Peter says this proves that Ben Bernanke was either lying or incompetent when he told Congress back in 2009 that the central bank was not monetizing the debt.
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