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Fed Has Shovel, Digs Bigger Hole

Fed Has Shovel, Digs Bigger Hole

Let’s get to the bottom line on all this “rate cut” nonsense.

The Fed made a fatal mistake in first promoting “fiscal” actions (during the 08 crash) and then continuing to support them well after the bottom in 2009.  This allowed Barack Obama to run trillion dollar deficits for years and, once he did so to push policies that were economically bankrupt (e.g. the ACA) and got them embedded it was faced with the reality of the creature of its own design.

It appears that Yellen thought she could leave her office with a belated “goodbye” of “normalization”, after having been complict herself, and evade the impending blow up — at least until after her chair had cooled off from her ugly ass sitting on same.

She was wrong.

Powell not only ratified Bernanke’s policy he doubled down on his and Yellen’s insanity instead of putting up the middle finger when Donald Trump was elected.  By supporting Trump’s crazy deficit spending ramp he managed to stick ~30% on the stock market at the cost of trapping The Fed, permanently, in financing deficits.

If there was no cost to the real economy or real people in doing this it would defensible.  But there is such a cost, and it falls on 90% of the population — which owns only a tiny percentage of equities.  Worse, that cost falls not only on savers but those who have a fiduciary responsibility toward safety and return, which also typically have as their beneficiaries that same 90% of the population!

Then there’s the impact on state and local governments who can’t earn that return either and thus this ramps property taxes in response.  And while ultra-low rates seem to be good in some other places (e.g. home values) that’s a chimera.

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

No, Rate Cuts Were Not Discussed: ECB Insiders Out Draghi as Fabricator & Schemer, and Talk to Reuters

No, Rate Cuts Were Not Discussed: ECB Insiders Out Draghi as Fabricator & Schemer, and Talk to Reuters

Draghi’s shenanigans get hilarious, months before his term ends.

So here’s ECB President Mario Draghi, whose term ends in October, and he’s at the ECB Forum in Portugal, and in a speech on Tuesday titled innocuously, “Twenty Years of the ECB’s monetary policy” – so this wasn’t a press conference after an ECB policy meeting or anything, but a speech on history at an ECB Forum – he suddenly threw out a whole bunch of stuff…

How, “in the absence of improvement” of inflation, “additional stimulus will be required,” in form of “further cuts in policy interest rates” and additional bond purchases, and how “in the coming weeks, the Governing Council will deliberate how our instruments can be adapted commensurate to the severity of the risk to price stability,” and that “all these options were raised and discussed at our last meeting.”

Whoa! Wait a minute, said the good folks who were part of the ECB’s June meeting. These options were not discussed, they told Reuters on Tuesday.

Draghi had ventured out there on his own – apparently trying to push his colleagues into a corner single-handedly as his last hurrah.

His vision laid out on Tuesday was quite a change from the June 6 post-meeting announcement, which didn’t mention anything about even discussing rate cuts. It said that the ECB expects its policy rates to “remain at their present levels at least through the first half of 2020,” before the ECB would begin to raise them, with the bias still on raising rates, not cutting rates. That was less than two weeks ago, and there had not been another ECB policy meeting since then.

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

Peter Schiff: The Fed Is Going to Stimulate Inflation, Not the Economy (Video)

Peter Schiff: The Fed Is Going to Stimulate Inflation, Not the Economy (Video)

In December, Peter Schiff predicted that the Federal Reserve was about to hike rates for the last time and that the next step would be rate cuts. Yesterday, Jerome Powell made comments widely interpreted to signal the rising likelihood of a rate cut. The Fed chair dropped the word “patient” from his vocabulary, saying the central bank would respond as “as appropriate” to the perceived economic impacts of tariffs and other economic data.

Peter appeared on Fox Business Countdown to the Closing Bell with Liz Claman to talk about what’s next up for the Fed and how it will impact the economy.

I don’t think that Powell would even open the door to the possibility of a rate cut if he wasn’t prepared to walk through it.”

Peter said the reason he knew the Fed would end the hiking cycle in December was because the stock market was tanking and he knew the only way the central bank could stop the carnage was to take the rate hikes off the table.

Well, now it’s falling again, and so now all they’ve got left in their quiver is to actually cut rates.”

Claman pointed out that the stock market was popping at the mere suggestion of a rate cut.

“Exactly!” Peter said. “But I think people are wrong if they think it’s going to work again.”

The Fed was able to inflate an enormous bubble with QE one, two and three, and keeping rates at zero for as long as they did. But the next time, it’s not going to work.”

Peter reiterated a point that he made during his podcast last week, noting that bond traders are anticipating a recession. They are betting that the Fed will cut rates during the downturn.

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

Financial Markets To Federal Reserve: Time To Start Cutting Rates

Financial Markets To Federal Reserve: Time To Start Cutting Rates

In late 2018 the US stock market tanked, in effect holding a gun to its own head and threatening to pull the trigger unless the Fed stopped raising interest rates. The Fed, painfully aware that an equities bull market is an existential threat in today’s hyper-leveraged world, quickly caved, promising no more rate increases if the market would just put down the gun.

This worked for a little while. Stocks jumped to new record highs and unicorn tech IPOs started pouring out of Silicon Valley. Normal, which is to say booming, markets were back. 

But of course it couldn’t last. An overleveraged economy is not just addicted to new credit, but to ever-increasing levels of new credit. So stable interest rates won’t stave off withdrawal. From here on out only steadily (or steeply) falling interest rates will delay the inevitable crisis. 

That’s the signal the financial markets are now sending the Fed, as stocks begin to roll back over …

S&P 500 markets tank Fed caves

… bond yields tank …

10 year Treasury yield markets tank Fed caves

… and demands grow for not just patience but acquiescence. Now the question is not if but when the Fed responds with the required cut. 

At the moment – mostly because the stock market hasn’t fallen very far — there’s still some resistance to lower rates: 

Federal Reserve is reluctant to cut interest rates, latest minutes show

(CBS News) – According to minutes released Wednesday, Fed officials noted that economic prospects for the U.S. and global economy were improving, while inflation had fallen farther below the Fed’s 2% target. 

Some officials “expressed concerns that long-term inflation expectations could be below levels consistent with” the Fed’s target of 2%. However, officials still believed a return of inflation to the Fed’s 2% target was “the most likely outcome,” according to the minutes.

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

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