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Dear Governments, Spend as Much as You Can

Dear Governments, Spend as Much as You Can

This week we heard further details about more trillions in upcoming spending and even changing monetary issuance laws (for CBDCs) worldwide.

The International Monetary Fund (IMF), what critics might call a supranational leveraged buyout bank, was out this week making calls for governments worldwide to spend as much as they can.

The IMF also noted that monetary issuance laws would need to be changed in 104 nations to directly issue fiat Central Bank Digital Currency or CBDC for fuller global fruition.

Sounder money advocates yet to banned off of Twitter are predicably pissed off.

Global Government Bonds

SDBullion Market Update

Federal Reserve Chairman Jerome Powell had the following statement this week worth highlighting in our market update video.

Federal Reserve Chairman Jerome Powell had the following statement this week worth highlighting in our market update video.

There is nothing in any definition about how fiscal dominance, which considers our still having the dominant fiat currency of the world, utilizes yield curve control, with suppressed real interest rate yield, rigging inflation and unemployment data, while still dominating the world in most price discovery powers. 

Yet on the cusp of losing economic output dominance to over 2.5 billion Chinese and Indian residents, they tend to stack physical gold and silver as they get wealthier increasingly.

Another week of up then down spot price action for silver and gold. As we head into this Monday’s thinly traded Martin Luther King holiday, note that the spot gold price sits just below its 200-day moving average.

During gold bull markets outside of the global financial crisis, that is typically an excellent time to add to bullish and betting long positions.

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

The Hazards of 4 More Years of Jerome Powell

Whether Trump or Biden is elected in November, they will have to decide whether or not to appoint Federal Reserve Chair Jerome Powell to another term.

And if he is appointed again, the way he continues to handle the continuing ripple effects of the COVID-19 “shutdown” economy will be critical.

So let’s examine why the decision to reappoint him is important, then take a quick tour of some of Powell’s recent performance.

piece from Paul R. La Monica provides a take on the importance of Powell’s re-appointment, beginning with the response to the market’s plummet earlier this year:

The Fed quickly lowered rates to zero in March and has since launched trillions of dollars worth of lending programs… Powell’s swift actions have won him praise from many economists and investing experts on Wall Street.

“Powell should get a second term if he wants it. He deserves credit for the speed and magnitude of the Fed’s response to Covid-19,” said Larry Adam, chief investment officer of Raymond James.

Mr. Adam and the article are correct on one point. The Powell-authorized “moon shot” in response to a dramatic market drop was certainly a fast move.

George Calhoun, professor of quantitative finance at the Stevens Institute of Technology, agreed with Powell’s quick decision to print trillions:

When the crisis hit, Powell went all out and opened the spigots. I’m not sure what rationale would be to have someone totally different at the Fed. Monetary policy has been effective.

Any person in Powell’s position could have made the same call, of course. We just have to hope that the long-term ripple effects don’t eventually reveal that his reaction was too much, too fast, or perhaps unnecessary.

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

The Fed Has Given Big Business A Huge Advantage

The Fed Has Given Big Business A Huge Advantage

And Its Gone!

The last few months have been painful for small businesses across America. These businesses often have a difficult time getting a bank loan. Bubbling up to the surface is the recognition the Fed has played a major role in pushing inequality higher. This was highlighted when Federal Reserve chairman Jerome Powell admitted it’s tough for the Fed to boost lending to smaller businesses. “Trying to underwrite the credit of hundreds of thousands of very small businesses would be very difficult,” Powell said. He acknowledged that many of these small loans are really nothing more than the personal promises of people struggling to keep the doors of their business open.As the financial pain from the pandemic and government restrictions placed on businesses continue, much of the money thrown out to ease our pain has rapidly flowed into the hands of Wall Street and big business. The reality that most small businesses close in failure underlines the risk involved in loaning money to such concerns. Still, it is difficult to deny the importance of small business in the overall economy. It plays a major role in communities by both creating jobs and allowing individuals to better their lot in life. 

During a recent exchange between House Financial Services Committee Chairwoman Rep. Maxine Waters of California and Powell, it became evident that Powell was not rushing to implement changes in the way things are done in an effort to aid small businesses and level the playing field. Waters suggested the Fed and Treasury Department lower the minimum size of the loans under the Main Street Lending Program to $100,000 from the current $250,000 to help a larger number of small companies that have been hurt by the pandemic. Powell even went so far as to claim there was little demand for loans below $1 million.

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

Fed Accountability is a Farce

FED ACCOUNTABILITY IS A FARCE

The Fed claims they are “accountable to the public and the U.S. Congress.” But what good is accountability, if the public and Congress have little understanding of what the Fed does? Even worse, if no one has the power to stop the inflationary actions of the Fed, what good are the accountability measures in place?

This week, Chair Powell addressed Congress and provided the June Monetary Policy Report. The process of testifying before Congress is very much farcical because what the Fed says has no bearing on what the Fed does. We can assume few members of Congress actually understand monetary economics. But what if many of them did, as well as the general public, could the Fed really get away with all of this?

Reviewing the Chair’s testimony to Congress reveals how little the Fed and Congress know about economics and illustrates how ineffective testimony before Congress really is.

In his speech, Powell lists many of the lending programs (Paycheck Protection Program, Main Street Lending Program and Term Asset-Backed Securities Loan Program) but when it comes to corporate bond buying program, all he offered was:

To support the employment and spending of investment-grade businesses, we established two corporate credit facilities.

Like a teenager trying to hide purchases made on a parent’s credit card, he did not explicitly list the Primary and Secondary corporate credit facilities by name. He only said the two “corporate credit facilities,” the only two the Fed has. How issuing debt to corporations or trading their bonds on the stock exchange supports employment or spending is anyone’s guess. What does it matter anyway? Even if he said $750 billion may go to buy corporate bonds, who would stop them?

He moved from vagueness to deception quickly with the statement:

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

Goodbye, Free Market

Goodbye, Free Market

Fremdschämen.

Fremdschämen is a noun of the German language. It translates this way:

Embarrassment for those incapable of feeling embarrassment.

Today we suffer embarrassment for Mr. Jerome Powell and his fellows of the Federal Reserve…

For no action they take lowers their heads in shame… or blushes their cheeks with embarrassment.

Mr. Powell is simply in the hands of Wall Street… and on his knees to Wall Street.

Well does he know the taste of shoeblack.

Yesterday Mr. Powell got a fresh coat on his tongue. Details to follow.

But first, let us look in on his masters…

A Banner Day on Wall Street

Wall Street was in full roar today.

The Dow Jones jumped an additional 582 points. The S&P gained 58 points; the Nasdaq, 169 points of its own.

CNBC, by way of explanation:

Stocks rose on Tuesday as a record jump in retail sales — coupled with positive trial results from a potential coronavirus treatment and hopes of more stimulus — sent market sentiment soaring.

Government number-torturers reported this morning that May retail sales jumped a record 17.7%.

The chronically erring Dow Jones survey of economists had projected a 7.7% increase.

Yet we are not surprised by the surge. April’s numbers were true abominations. But certain economic restrictions were waived in May.

A trampolining back was therefore expected.

Meantime, a medicine named dexamethasone — a widely available medicine — is evidently effective in the treatment of deathly ill coronavirus patients.

It reportedly axed hospital deaths by perhaps one-third.

Thus the market had its spree today. But it merely added to yesterday afternoon’s joys…

Powell Licks Wall Street’s Shoes

The Dow Jones had been off 762 points in early trading yesterday, quaking with coronavirus-related fear.

But then Mr. Powell sank to his knees… and tongued Wall Street’s wingtips…

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

Fed Chair Just Made This Inadvertent Case for Gold

Fed Chair Just Made This Inadvertent Case for Gold

jerome powell gold
Photo by Flickr.com CC BY | Photoshopped

This week, Your News to Know rounds up the latest top stories involving gold and the overall economy. Stories include: Powell boosts gold in Fed speech, why gold is the best bet to make now, and gold remains undervalued as an asset.

Fed Chair Powell gives a nudge to gold during speech

A much-awaited speech by Federal Reserve Chair Jerome Powell last week, held at the Peterson Institute for International Economics, dispelled any notion that the central bank is optimistic in regards to an economic recovery. In fact, Powell was very clear in his belief that many could be disappointed by the sluggishness of the recovery and the various uncertainties that might be scattered across its path.

Powell commented on the state of U.S. employment, noting that more than 20 million people have lost their jobs in just two months. The chair added that existing growth problems have been exacerbated and that any job gains posted over the previous decade have been erased.

Looking forward, Powell said that the Fed isn’t open to negative interest rates right now, but did not completely discount the possibility should the need arise. Although it remains historically low-performing, this now makes U.S. Treasuries one of the few sovereign bonds that haven’t dipped into negative territory.

Having just printed trillions of dollars in short order to stimulate the economy, Powell appeared to not be fully content with the extent of the stimulus that the state has issued. Although Congress has already spent $2.9 trillion on coronavirus mitigation, Powell’s words could be interpreted that a bigger debt bubble is on the way, keeping in mind that the federal budget alone went from being $160 billion in the green as of April 2019 to a deficit of $737.9 billion a year later.

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

The Fed’s Visible Hand: Powell Buys $305 Million In ETFs In Two Days

The Fed’s Visible Hand: Powell Buys $305 Million In ETFs In Two Days

On Tuesday, the US officially crossed over into some bizarro version of a crony, centrally-planned mandated pricing model that is anything but a market when the Fed started buying corporate bond ETFs for the first time ever. Then, moments ago in its latest H.4.1 statement, the Fed – which disclosed that its balance sheet is now a record $6.934 trillion and well on its way to $12 or more than half of US GDP…

… also revealed that in the first two days the program was operational, the Fed purchased $305 million under the Corporate Credit Facility, i.e., the corporate bond ETF buying program, as of EOD May 13, or just two days after the Fed officially gave Blackrock the green light to start waving it in.

Of course, since the transactions were organized by the NY Fed which used Blackrock as agent for the buying, all of the ETFs were parked at the New York Fed.

Bloomberg’s ETF expert, Eric Blachunas, was sure he had observed the Fed in action two days ago when he noticed a jump in both LQD and HYG volumes around mid-day, which appears to be the time Blackrock will be active in the market for all those who feel like frontrunning the world’s largest asset manager, which in turn is frontrunning the world’s largest central bank.


Eric Balchunas@EricBalchunas

HISTORY MADE: Looks like Fed made good on word as $LQD & $HYG both saw volume jumps today (via some sizable trades mid-day). No way to know for sure it was them, but given what they said yest & non-corp bond ETFs like $AGG, $TLT didn’t see similar jump, there’s good chance IMO.

View image on Twitter

What is a bit concerning is that even after the Fed bought millions in LQD on the 12th, the ETF closed red. However, Blackrock redeemed itself on the next two days when LQD posted a solid rebound, rising above 128 for the first time since May 5.

Panic Sets In: Fed Promotes More Free Money

Panic Sets In: Fed Promotes More Free Money

Lawmakers need to do more says Minneapolis Fed President Neel Kashkari.

Free Money for 18 Months

The Fed cannot directly give money away so that burden falls on Congress. Kashkari follows Fed Chair Jerome Powell in seeking Congressional Action.

“They are going to need more. If this is a slow recovery, the way I think it is — I think we’re in this for months, a year, 18 months — there are going to be a lot of families that are going to need direct financial assistance,” Kashkari said Thursday during a virtual event with CBS. “I think a V–shaped recovery is off the table.”

“Putting money directly in the hands of laid-off Americans is, I think, the most direct way to get assistance, and then they will spend the money where they need it,” Kashkari said. “I just think money in the pockets of people who have lost their jobs is what we need right now until we can get the health care system to catch up and get control of this virus.”

I case you were wondering what sent the S&P in a huge 70-point S&P 500 U-Turn today, that reason is as good as any.

Powell’s Message

Yesterday, Powell made similar statements, just not as forceful. 

Recall that the Fed has lending powers, not spending powers. A loan from a Fed facility can provide a bridge across temporary interruptions to liquidity, and those loans will help many borrowers get through the current crisis. But the recovery may take some time to gather momentum, and the passage of time can turn liquidity problems into solvency problems. Additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery. This tradeoff is one for our elected representatives, who wield powers of taxation and spending.

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

Powell Needs To Immediately Address Negative Rates Or He Will Lose Control

Powell Needs To Immediately Address Negative Rates Or He Will Lose Control

Today was a historic day, not for the latest algo-driven meltup in stocks, but because for the first time ever, fed fund futures priced in negative rates, first in January 2021 and shortly after,  as recently as November 2020.

In response to the dramatic move which reverberated across asset classes, sending stocks and gold sharply higher, and 2Y yields plunging to record lows as markets suddenly realized that NIRP may be coming in just a few months, Richmond Fed president Thomas Barkin said that it’s not worth trying negative rates in the US:

“I think negative interest rates have been tried in other places, and I haven’t seen anything personally that makes me think they’re worth a try here.” He then added that “if you looked at data as of today, you’d see it about as low as it’s going to go. We’ll be bringing people back to work, and eventually hopefully people back to stores and the like, in the coming weeks and months, and I would expect the data to go up from here.”

But one look at fed funds after Barkin’s comments showed that markets barely noticed, with December implied rates still in negative territory.

Which means that only Powell addressing this issue – immediately – can reverse the market’s test of the Fed’s resolve to go from ZIRP to NIRP, because the longer Powell does nothing, the more negative rates will become widely accepted, and any “unexpectedly” denials by Powell in the coming months would be seen as  hawkish reversal and lead to another market crash, which the Fed will argue nobody could have possibly seen and be forced to cut to negative anyway.

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

Powell: “Now Is Not The Time To Be Concerned About Debt”

Powell: “Now Is Not The Time To Be Concerned About Debt”

In what was perhaps the most illuminating soundbite from the Powell press conference, in response to a question about the sustainability of the US fiscal trajectory in general, and the soaring debt and deficit in particular – both of which the Fed is now directly monetizing thanks to MMT/Helicopter Money, the Fed Chairman was laconic: “this is not the time” to be concerned about debt.


Bitcoin@Bitcoin

Jerome Powell, Chair of the Federal Reserve: “The debt is growing faster than the economy. This is not the time to act upon those concerns”

Time for Plan ₿

Embedded video

Fair enough, in response we will be just as laconic and use the CBO’s latest long-term debt to GDP forecast to ask the Chairman just when will it be the time to be concerned about the Federal debt. For the benefit of the Fed Chair we have conveniently provided several possible answers.

“Project Zimbabwe”

“Project Zimbabwe”

Roughly a month ago on the afternoon of Sunday, March 8th, Fed Chairman Powell had an emergency staff meeting.

Powell: I want the nuttiest money printing plan ever. What action plans do we have that are prepared and ready to initiate?

Admin: Well, we have this one named “GFC 2.0”

Powell: Sounds tame and sedate. Won’t impress anyone.

Admin: What about this one named “Whatever It Takes”

Powell: Lemme look… Meh… I want more shock and awe. This needs at least two more zeros.

Admin: Well, we have this other one named “Project Zimbabwe” but it’s so ridiculous that the Fed would forever lose all credibility…

Powell: hmmm… I like the sound of “Project Zimbabwe.” Just makes you want to turn dollars into toasters and washing machines to preserve wealth. This one will force guys so far out on the risk curve that they’ll think crypto-coins are value investments.

Admin: Yeah, it’s absolutely Wuhan-bat-shit nutty. We’d be criminally insane to unleash this on a population that isn’t prepared for hyperinflation…

Powell: Perfect!! Let’s have a press conference.

A few hours later…

Powell: Mr. President, I finally took rates to zero and launched QE infinity. Can you stop trolling me on twitter already? I can’t take any more of my wife cracking jokes about your tweets.

Trump: Be a man. You got it easy. Wait until you see what I do to Biden. He puts the “Dem in Dementia” haha…

Powell: Please, no more nasty tweets. Even my kids laugh at me.

Trump: Fine, but you’re thinking too small with “Project Zimbabwe.” Figure out how to print more aggressively. Look at what Mnuchin is doing with all his bailout programs. He’s gonna blow $10 trillion by early summer, then try to double that by election time. You better crank up that printing press of yours. I’ll stop tweeting if you keep monetizing the “Mnuchin Money.”

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

Fed Chairman Confirms Fed’s Role As The Great Enabler

Fed Chairman Confirms Fed’s Role As The Great Enabler 

As questions swirl about the Fed’s independence Fed Chair Powell has been busy trying to explain his reason for the  “emergency” 50bps rate cut. Regardless of what he says Fed Chair Powell has confirmed the Fed plans to continue its role as the great enabler. This means central banks across the globe can now lower their rates or do additional stimulus without damaging the delicate balance in the relationship in the value of one major currency to another. This is a delicate balance they have long held in check to stabilize the financial system and add credence to the myth no major currency can fail. 

At Best, The Fed Is Simply A Flawed Institution

Powell said,  “My colleagues and I took this action to help the U.S. economy keep strong in the face of new risks to the economic outlook.”

Whether Powell succumbed to pressure from the highly critical words of the President for not acting immediately or fear the coronavirus would take a toll on the economy is not clear. As Powell tried to explain his actions, many of us who pay attention to such things cried “Bullshit.” Not only is a rate cut uncalled for at this time, but because it will also do little to strengthen the economy. What it will do is continue to prop up asset prices and encourage risk-taking and malinvestment. This is a big deal and may even result in more negative interest rates across the world which could create greater problems.

In the Austrian business cycle theory, malinvestments are badly allocated business investments, due to the artificially low cost of credit and an unsustainable increase in the money supply. 

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

Opinion: The Federal Reserve is stuck in quantitative-easing hell

Opinion: The Federal Reserve is stuck in quantitative-easing hell

The central bank’s short-term buying of securities could morph into long-term easing

Federal Reserve Chairman Jerome Powell

Imagine doing the same thing over and over again, with little progress and no relief. Sounds like most people’s vision of hell — or the Federal Reserve’s current predicament. 

Since September, the central bank, through the Federal Reserve Bank of New York, has been purchasing securities hand over fist to alleviate short-term pressures in the overnight money markets. It has used repurchase (“repo”) and reverse repurchase (“reverse repo”) agreements to provide liquidity and keep overnight borrowing rates from spiking. 

But these complex money market operations already have caused the Fed to buy a net $400 billion worth of securities, after Chairman Jerome Powell shrank the Fed’s balance sheet by $700 billion. That “normalization,” which also included raising the federal funds rate through late 2018, is now effectively dead and the Fed’s balance sheet is growing again.

Powell and the Fed have repeatedly denied this is a new phase of “quantitative easing (QE),” three rounds of which added $3.6 trillion to the Fed’s balance sheet in the years after the financial crisis. And indeed, in the earlier rounds of QE, the central bank bought Treasuries and mortgage-backed securities of various maturities. The current buying has been focused on Treasuries with maturities of 12 months or less. 

On the way: QE4

But that may not continue, says Danielle DiMartino Booth, CEO and chief strategist at Quill Intelligence, a Dallas-based boutique research firm. Booth, who worked on both Wall Street and in the Federal Reserve Bank of Dallas, has been a critic of Fed policies since the central bank pushed fed funds down to near zero and launched its three rounds of QE after the financial crisis. (She also was one of the few people to connect the dots between the housing bust and Wall Street before the crisis hit.)

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

A Major Bank Admits QE4 Has Started, And That Stocks Are Rising Because Of The Fed’s Soaring Balance Sheet

A Major Bank Admits QE4 Has Started, And That Stocks Are Rising Because Of The Fed’s Soaring Balance Sheet

There was a period of about two months when some of the more confused, Fed sycophantic elements, would parrot everything Powell would say regarding the recently launched $60 billion in monthly purchases of T-Bills, and which according to this rather vocal, if always wrong, subsegment of financial experts, did not constitute QE. Perhaps one can’t really blame them: after all, unable to think for themselves, they merely repeated what Powell said, namely that  “growth of our balance sheet for reserve management purposes should in no way be confused with the large-scale asset purchase programs that we deployed after the financial crisis. Neither the recent technical issues nor the purchases of Treasury bills we are contemplating to resolve them should materially affect the stance of monetary policy. In no sense, is this QE.

As it turned out, it was QE from the perspective of the market, which saw the Fed boosting its balance sheet by $60BN per month, and together with another $20BN or so in TSY and MBS maturity reinvestments, as well as tens of billions in overnight and term repos, and soared roughly around the time the Fed announced “not QE.”

And so, as the Fed’s balance sheet exploded by over $400 billion in under four months, a rate of balance sheet expansion that surpassed QE1, QE2 and Qe3…

… stocks blasted off higher roughly at the same time as the Fed’s QE returned, and are now up every single week since the start of the Fed’s QE4 announcement when the Fed’s balance sheet rose, and are down just one week since then: the week when the Fed’s balance sheet shrank.

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

Trump Urges Fed To Cut Rates, Launch QE To Counter “Strong” Dollar

Trump Urges Fed To Cut Rates, Launch QE To Counter “Strong” Dollar 

President Trump took to Twitter this morning to admonish Fed Chair Powell (something he hasn’t done for a little while).

Trump said “Would be sooo great if the Fed would further lower interest rates and quantitative ease.”

Why? The economy is doing great right?

There’s just two things…

First, the dollar is at 5-month lows having tumbled since the Phase One trade deal was “completed”…

Source: Bloomberg

and Second, The Fed is printing money at its fastest pace since the financial crisis…

Source: Bloomberg

Notably Dallas Fed’s Kaplan hinted briefly in his speech this morning that we should not assume the dollar will be the reserve currency forever.

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