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Trump’s Fight With The Fed Over Interest Rates Is A Scripted Farce

July 17, 2019

Trump’s Fight With The Fed Over Interest Rates Is A Scripted Farce

There is a very bizarre narrative being circulated in the mainstream economic media and it goes a little something like this:

“The Federal Reserve has capitulated on liquidity tightening yet the US economy is “stronger than ever”, isn’t that weird?”

There are a couple things wrong with this statement. First, the Fed has not yet capitulated on its tightening policy. In fact, we have been hearing since last November from the mainstream media and some alternative media that the Fed was going to lower its Fed Funds Rate and end monthly balance sheet cuts at “any moment”, yet several months later it still has not happened. Just last month the Fed cut another $38 billion in assets from its balance sheet; a move that was barely discussed in the mainstream because it does not fit with the prevailing delusion that the Fed has “already capitulated”. When the Fed cuts rates back significantly and the asset dumps stop, then and only then can anyone say with any authority that the Fed has ended its tightening cycle.

Secondly, the US economy is not “stronger than ever”, it is at its weakest since just before the credit crash of 2008.

And here is where the disconnect begins in Fed policy versus public expectations and the behavior of the Trump Administration. Almost EVERYONE, including the Federal Reserve, Donald Trump and the media are talking about how the US economy is “booming”. So why all the fuss over the Fed’s interest rates? The truth is it’s just more theater for the masses.

 …click on the above link to read the rest of the article…

Like Everything Else, History Repeats (Almost Exactly) Because Power Truly Corrupts

September 23, 2016

Like Everything Else, History Repeats (Almost Exactly) Because Power Truly Corrupts

With both the Bank of Japan and Federal Reserve today undertaking policy considerations at the same time, it is useful to highlight the similarities of conditions if not exactly in time. As I wrote this morning, what the Fed is attempting now is very nearly the same as what the Bank of Japan did ten years ago. In the middle of 2006, after more than six years of ZIRP and five years of several QE’s, the Bank of Japan judged economic conditions sufficiently positive to begin the process of policy “exit” by first undertaking the rate “liftoff.”

If you read through the policy statement from July 2006 it sounds as if it were written by American central bank officials in July 2016. Swap out the year and the country and you really wouldn’t be able to tell the difference.

Japan’s economy continues to expand moderately, with domestic and external demand and also the corporate and household sectors well in balance. The economy is likely to expand for a sustained period…The year-on-year rate of change in consumer prices is projected to continue to follow a positive trend.

With incoming data judged as meeting predetermined criteria (they were somewhat “data dependent”, too), the Bank of Japan voted to raise their benchmark short-term rate but were careful, just like the Fed since December, to assure “markets” that it would be a gradual change only in the level of further “accommodation.”

The Bank has maintained zero interest rates for an extended period, and the stimulus from monetary policy has been gradually amplified against the backdrop of steady improvements in economic activity and prices…

…click on the above link to read the rest of the article…

Olduvai IV: Courage
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Olduvai II: Exodus
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