Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

-Ephesians 5:11-13

Category Archives: Federal Reserve

Don’t Panic: the Fed’s Offer to Stabilize Bond Markets Is not “QE-4”

This article appeared online at TheNewAmerican.com on Friday, March 13, 2020: 

Headlines from major financial sources virtually shouted that the Federal Reserve was suddenly employing “QE4” — quantitative easing — in a massive way to calm the bond markets roiled by the coronavirus. The Wall Street Journal declared: “Fed to Inject $1.5 Trillion” into the bond market while CNN shouted: “NY Fed to pump in $1.5 trillion to fight coronavirus-linked ‘highly unusual disruptions’ on Wall Street.”

London’s Financial Times, usually an island of calm in an ocean of panic, said that virus fears “prompted the US Federal Reserve to announce a sweeping package of measures … including pumping trillions of dollars into the financial system.” CNBC announced that “the new moves pump in up to $1.5 trillion into the system in an effort to combat potential freezes brought on by the coronavirus.” The Fed would do this, said CNBC, by “dramatically ramping up asset purchases amid the turmoil created by the coronavirus.”

The articles behind the headlines reflected the panic felt elsewhere over the coronavirus. Said the Journal,

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National Debt Is $122 Trillion, Not $23 Trillion, Says Non-profit Group

This article appeared online at TheNewAmerican.com on Tuesday, February 25, 2020:  

When Epoch Times’ Mark Tapscott checked the U.S. Treasury’s “Debt to the Penny” website on Monday, he reported that the U.S. national debt just ticked over to $23.3 trillion. That’s four times what it was 20 years ago.

Tapscott then checked in with the Chicago-based nonprofit advocacy group Truth in Accounting (TIA) to get a more accurate reading. Said Bill Bergman, the group’s director of research, the Treasury misses the real national debt by $100 trillion, explaining that “the U.S. Treasury does not include the unfunded obligations for Social Security and Medicare.”

That’s because those obligations can only be counted when they become liabilities. And because Congress can change the law at any time, said Bergman, the Treasury gets to hide the real numbers. Said Bergman, “The reasoning has been that the government controls the law, and can change it any time.”

An actuary from Social Security spelled out the deception at a public hearing in 2007:

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Dow at 32,000 in 2020?

This article appeared online at TheNewAmerican.com on Tuesday, December 31, 2019:  

So says President Trump’s trade advisor Peter Navarro. On Tuesday he told CNBC’s “Squawk Box”: “I’m looking forward to a great 2020. Forecast-wise, I’m seeing closer to 3% real GDP growth than 2%. I’m seeing at least 32,000 on the Dow.”

He added: “It’s going to be the roaring 2020s next year. [Dow] 32,000 is a conservative estimate of where we’ll be at the end of the year.”

Navarro, it will be remembered, told “Squawk Box” the morning after Trump was elected in 2016 that his election would be “a very bullish thing for the markets” and then proceeded to predict 25,000 on the Dow which was then trading at about 18,000.

Navarro, in retrospect, was too conservative. The Dow has gained more than 172 percent since 2010, the fourth-best decade-long performance in the past 100 years. For 2019 the popular averages all notched gains of more than 20 percent (for the record: Dow +22%; S&P 500 +28%; NASDAQ +35%). Even gold, usually considered a “safe haven” during times of economic difficulty, notched a gain of 20 percent.

U.S. citizens are enjoying the ride and predicting that it will continue. A USA Today/Suffolk University poll reported earlier this month that 80 percent of those polled predicted that their lives will be even better in 2020, with just 11 percent disagreeing.

What a turnaround from a year ago! The Federal Reserve had raised interest rates and Trump’s trade war with China was heating up. The stock market dropped in anticipation of a recession when the so-called “yield curve” indicator turned negative.

And then the Fed lowered interest rates in July for the first time in a decade, followed by additional cuts in September and October. This was followed by promises from Chairman Powell that he wouldn’t be intervening in the markets for the foreseeable future.

For the year the Dow gained 5,000 points while gold jumped by $259 from its low in May to close well above $1,500 an ounce to close out the year.

Is Dow 32,000 even possible? That would tack on another 12 percent to 2019’s remarkable gains.

Leave it to the Fed to answer that question. Despite protestations to the contrary the Fed is in fact intervening in the markets, but it is refusing to call it such. It added $500 billion to the money supply to “support” the “repo” market, which was having trouble digesting the enormous flood of new spending by the Treasury. Most of those billions went to help fund “repurchase agreements” between secondary parties handling the tsunami of new debt, with the balance used to purchase Treasury bills outright.

Can gold continue its run? The “wall of worry” that Wall Street has climbed in 2019 remains in place for gold: Will the UK finally end, once and for all, its affiliation with the European Union? Will the Hong Kong protests be resolved peacefully, without China’s Peoples’ Liberation Army clamping down in a replay of the Tiananmen Square massacre? Will there be another drone attack on Saudi oil fields? Will the airstrikes by the United States against Iraq and Syria lead to more intervention by the U.S. military? Will China test Trump’s mettle in the South China Sea?

The U.S. dollar has steadily weakened since early October, falling more than 2.6 percent in response to the flood of new currency entering the bond markets. Bond yields, as measured by the 10-year bond, have dropped from near three percent a year ago to less than two percent currently in response. Experts think those yields could fall further especially as global central banks try to stimulate economic growth abroad.

Fawad Razaqzada, a technical analyst at London’s City Index, thinks the stock market is long overdue for a correction: “If U.S. stocks were to correct themselves in 2020, then this surely could lead to elevated levels of safe-haven demand for gold. As the U.S. equity market bubble finally bursts, safe-haven demand could nudge gold past its 2011 peak of $1,920 [per ounce], before tagging the $2,000 hurdle.”

Lukman Otunuga, senior research analyst at FXTM trading, says that escalating tensions in the Middle East could provide the catalyst for that stock market selloff in 2020: “If geopolitical tensions increase in the Middle East, there will be more reasons for investors to increase their allocation in gold. Otherwise the gold rally makes little sense while equities are making record highs.”

The only thing certain for 2020 is the high degree of uncertainty. However, Warren Buffett provides investors with this reassurance: “It’s never paid to bet against America. We come through things, but it’s not always a smooth ride.”

Former Fed Official: Fed Should Try to Hurt Trump’s 2020 Chances

This article appeared online at TheNewAmerican.com on Wednesday, August 28, 2019: 

When William Dudley, a bona-fide insider and tool of the Deep State, wrote that the Federal Reserve should work against the president’s agenda, even if it cost him next year’s election, the reaction came from all quarters: The Fed’s political bias has finally and permanently been exposed for all to see.

Dudley’s credentials are impeccably Deep State: He is a graduate of UC-Berkeley who worked for Goldman Sachs for more than 20 years, a member of the Council on Foreign Relations, a member of the board of directors of the Bank for International Settlements (BIS) and the Committee on the Global Financial System, and serves as president of the Federal Reserve Bank of New York and vice-chairman of the Fed’s Open Market Committee.

Thanks to Dudley’s forthright op-ed at Bloomberg on Tuesday, that veil has been lifted, and many insiders aren’t happy about it. It seems that he has unwittingly exposed the pervasive and carefully crafted myth that the Fed is “objective,” “unbiased,” “neutral,” and removed from all political considerations in conducting its policies. Those policies have been sold as guiding the U.S. economy on paths of low inflation (even as the bank itself is the engine of inflation) and full employment, and nothing more.

Dudley gave lip service to the myth before exploding it: “Staying above the political fray helps the central bank maintain its independence.” But then comes the bombshell: “[Fed] officials should state explicitly that the central bank won’t bail out an administration that keeps making bad choices on trade policy, making it abundantly clear that Trump will own the consequences of his actions.”

Dudley explains just how the Fed could derail the president’s strategy in dealing with the communists running China:

First, it would discourage further escalation of the trade way, by increasing costs to the Trump Administration.

 

Second, it would reassert the Fed’s independence by distancing itself from the administration’s policies.

 

Third, it would conserve much-needed ammunition [lower interest rates in the future to restimulate an economy in recession], allowing the Fed to avoid further interest-rate cuts at a time when rates are already very low.

It’s clear from Dudley’s op-ed that he’s miffed that the president had the audacity to criticize repeatedly the actions of the Fed. Other presidents have studiously avoided any public appearance of pressuring the Fed, but not The Donald. Wrote Dudley:

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Million-dollar Homes in Aspen Aren’t Selling. Recession Ahead?

This article appeared online at TheNewAmerican.com on Thursday, August 29, 2019: 

On its face, the claim that since million-dollar homes in Aspen are taking up to three years to sell means that a recession is coming is ludicrous. But if it comes from the mouth of an establishment economist, the mainstream media gives such a silly claim credibility.

Mark Zandi fits the mold of an establishment economist perfectly. With economics degrees from the Wharton School at the University of Pennsylvania, he has been steeped in Keynesian economics from infancy.

He has thrived in the culture,

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Trump Wants Fed to Cut One Full Percentage Point; Powell Likely to Give Him One-quarter

This article appeared online at TheNewAmerican.com on Wednesday, July 31, 2019: 

President Donald Trump wants Jerome Powell, the chairman of the Federal Reserve, to cut the Fed Funds rate by a full percentage point Wednesday afternoon. Powell is certain to give him just one-quarter of that, with the possibility of more cuts soon.

The president has expressed regret repeatedly about his appointment of Powell as head of the country’s central bank, blaming him for raising rates four times last year, nine times since 2015, intentionally slowing his economy just as his reelection campaign is heating up.

The last time the Fed cut rates was in

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The Fed’s Impossible Task: Steering the U.S. Economy by Looking Through Its Rear-view Mirror

This article was published by The McAlvany Intelligence Advisor on Monday, July 8, 2019: 

Libertarian scholar Murray Rothbard was notoriously opposed to any sort of government control over the individual, especially by central banks and central bankers. In his book, What Has Government Done to our Money?, published in 1963, he wrote:

Money … is the nerve center of the economic system. If, therefore, the state is able to gain unquestioned control over the unit of all accounts, the state will then be in a position to dominate the entire economic system, and the whole society.

The fatal flaw is this: the hubris inherent in thinking that any gaggle of economists gathered around a table – no matter how well-educated and regarded as experts, and no matter how exotic and sophisticated their formulas and algorithms designed to track and follow the economy – can do better than the economy does all by itself. These economists believe that Adam’s Smith’s “invisible hand” is inferior to their own.

A perfect example just presented itself

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Fed Fears Rising Corporate Debt, Ignores Rising Federal Debt

This article appeared online at TheNewAmerican.com on Tuesday, May 7, 2019: 

For the second time in six months the Federal Reserve has issued a warning about excessive corporate debt. Its Financial Stability Report, released on Monday and issued twice a year, repeated its concerns over rising corporate debt burdens, particularly those being incurred by companies already carrying the most debt.

It said that “leveraged lending” — lending to companies whose debt already exceeds four times their earnings — jumped more than 20 percent last year. And since the first of the year, nearly 40 percent of those loans went to the most highly indebted companies — those with debt levels that exceeded six times their earnings.

Said the report:

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This Is No “Sugar High” for the U.S. Economy

This article was published by The McAlvany Intelligence Advisor on Friday, March 29, 2019: 

Last August the supposedly non-partisan Joint Committee on Taxation expected the benefits of President Trump’s tax cuts to peter out after a year or so. It argued, said Kevin Brady, writing in the Wall Street Journal, that the tax law (the Tax Cuts and Jobs Act, or TCJA), “would stoke inflation and force the Federal Reserve to raise rates, counterbalancing the pro-growth effects of the tax cut.”

The committee got it half right:

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Repatriation of Overseas Profits Surged in 2018, Bodes Well for Strong 2019

This article appeared online at TheNewAmerican.com on Thursday, March 28, 2019:  

Once again, economic forecasters are embarrassed. Last August the highly regarded Penn Wharton School at the University of Pennsylvania predicted that Trump’s tax law, and the resultant repatriation of profits that America’s largest corporations had stashed overseas, would have only a modest impact on the U.S. economy. The authors of the study wrote that “direct economic effects from repatriated income are likely to be very small … that TCJA (Trump’s Tax Cuts and Jobs Act) will raise $254 billion in revenue over the next ten years [and its] indirect impact will be to increase GDP by less than 0.2 percent after ten years.”

Wednesday’s report from the Commerce Department completely obliterated the folks’ forecast at Penn Wharton:

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Yellen’s Chance to Respond to Trump’s Criticism of the Fed

This article was published by The McAlvany Intelligence Advisor on Wednesday, February 27, 2019: 

Following its fifth interest rate hike last June, President Trump exploded, complaining that the Federal Reserve was deliberately interfering not only with his economic recovery but with his trade strategies in reducing tariffs. On Twitter he almost yelled: “China, the European Union, and others have been manipulating their currencies and interest rates lower, while the U.S. [the Federal Reserve] is raising rates … the dollar gets stronger and stronger with each passing day – taking away our big competitive advantage. As usual, not a level playing field.”

His newly minted Fed Chair, Jerome Powell, said only that “We don’t take political considerations into account” when making policy.

On Monday, former Fed chairwoman Janet Yellen (whom Powell replaced) was given the opportunity to respond more completely to Trump’s criticisms. Rather than answering them directly, she took the “ad hominem” approach. In a radio interview on Marketplace with host Kai Ryssdal, she said, “President Trump’s comments about Chair Powell and about the Fed do concern me, because if that [criticism] becomes concerted, I think it … could undermine confidence in the Fed. I think that would be a bad thing.”

Ryssdal asked: “Do you think the president has a grasp of macroeconomic policy?”

Yellen: “No, I do not.”

Ryssdal: “Tell me more.”

Yellen:

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Former Fed Chair Yellen Doesn’t Appreciate Trump’s Criticism of the Nation’s Central Bank

This article appeared online at TheNewAmerican.com on Tuesday, February 26, 2019:

Janet Yellen, likely still miffed at being passed over by President Trump in favor of Jerome Powell as head of the Federal Reserve last February, had a chance to vent about the president’s ignorance on Monday. In a radio interview on Marketplace with host Kai Ryssdal, she said, “President Trump’s comments about Chair Powell and about the Fed do concern me, because if that [criticism] becomes concerted, I think it … could undermine confidence in the Fed. I think that would be a bad thing.”

Ryssdal asked: “Do you think the president has a grasp of macroeconomic policy?”

Yellen: “No, I do not.”

Ryssdal: “Tell me more.”

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Another Small Step Towards Sound Constitutional Mone

This article was published by The McAlvany Intelligence Advisor on Friday, February 8, 2019: 

Doug Casey, writing for his blog International Man, gave his readers a history lesson including the most important one: nearly every currency that blew up through inflation was replaced by sound money, usually gold and silver.

Wrote Casey:

In late 18th-century America, something of minimal value was often described as being “not worth a continental,” which referred to the continental dollar, the American currency at the time of the revolution.

 

The continental was paper money. It had occurred to the colonists that, as their revolution was costing quite a bit to maintain, they could go into “temporary” debt to finance the war.

 

Soon it became clear that the debt could not be repaid. Also, the printing of paper banknotes resulted in inflation. The solution? Print more of them. Further devaluation of the continental motivated the colonists to print more … then more … then still more. The continental became worthless, either for local trade or for repayment of debt.

The Founders learned the lesson:

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Wyoming Bills Would Require State’s Trust Funds to Hold “Monetary Metals”

This article appeared online at TheNewAmerican.com on Tuesday, January 22, 2019:  

Three bills presented by Wyoming legislators last week requiring the state’s treasurer to invest in gold and silver are the logical follow-up to the state’s decision last summer to declare gold and silver as legal tender, just like the Constitution demands in Article I, Section 10: “No State shall … make any Thing but gold and silver Coin a Tender in Payment of Debts.”

If signed into law, the three bills would direct the state’s treasurer to invest 10 percent of the funds held in the state’s pension fund, its reserve fund, and its mineral trust fund in gold and silver. Each bill has 15 or more cosponsors, and they are being sold to other legislators as a necessary counterbalance to those funds’ traditional holdings of government bills, notes, bonds, and other investments. This is especially persuasive, as those funds have suffered paper losses of more than $200 million thanks to investments in foreign securities.

The bills would also reinforce the state’s decision last summer to allow its residents to use gold and silver alongside Federal Reserve Notes (either paper or digital) in daily transactions, and eliminate any taxes on those transfers. That bill received overwhelming support in both the Wyoming House and Senate, and the bills presented last week are expected to get similar support.

Mike Maharrey, communications director for the Tenth Amendment Center, was delighted:

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Fed Head Powell Admits He Has Accomplished His Purpose: Stopping Trump

This article was published by The McAlvany Intelligence Advisor on Friday, January 4, 2019: 

If you stop Trump’s economy, you stop Trump. This is more and more clearly the policy of the Federal Reserve under its temporary head, Jerome Powell. Temporary because the Fed, now more than 100 years old, is the bastard child of the international banking establishment and its authority is granted only temporarily to its chairman.

The Fed’s job is to slow the Trump economy to the point where it becomes a liability for his reelection campaign in 2020 instead of an asset. How do we know this? In Powell’s Q and A following the announcement that the central bank was raising interest rates by another 25 basis points on December 19, he was asked a question about the “runoff” of bonds that it has been engaging in for months now, sucking capital out of the financial markets. Asked Heather Long of the Washington Post: “I’m wondering if the Fed has had any discussion of altering the course of the balance sheet normalization and if you could give us any thoughts on what might lead the FOMC to alter that balance sheet normalization in 2019?”

Responded Powell:

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Following Great Jobs Report, Fed Chair Says He’ll Be “Patient” Before Raising Rates Further

This article appeared online at TheNewAmerican.com on Friday, January 4, 2018: 

The jobs report issued by the Department of Labor on Friday was unequivocally positive. Every sector of the economy, save one, saw robust gains in employment, with 312,000 new jobs created in December beating forecasters’ predictions by 30,000 jobs. In addition, the DOL revised October’s and November’s numbers upward by 58,000 jobs. Even the rise in the unemployment rate from a record low of 3.7 percent to 3.9 percent was explained by the number of new people entering the job market.

The number of unemployed workers dropped by 300,000 over the last 12 months, while the labor participation rate jumped. Wages improved as well

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As Economy Slows, Bond Investors Say Fed Won’t Raise Rates

This article appeared online at TheNewAmerican.com on Thursday, January 3, 2019:  

A month ago, bond investors were predicting that the Fed would be raising interest rates several times in 2019. As the economy is now clearly slowing, those same investors are predicting the Fed has now done its job and won’t be raising rates in the New Year. Said the Wall Street Journal:

Fed-funds futures, which investors use to bet on the direction of Fed policy, on Wednesday showed a 91% probability that the central bank’s policy makers will finish the year [2019] with interest rates at or below their current levels.

 

That is a reversal from early November, when futures prices indicated a 90% probability that rates would end 2019 higher than they are now.

The latest report from the Institute of Supply Management merely confirmed that slowing economy, with its manufacturing survey published on Thursday coming in below forecasters’ expectations (which were below October’s).

The New American has been tracking and noting the slowing of the U.S. economy that has been established policy at the Fed for many months now. In November we noted that

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Who’s to Blame for the Decline on Wall Street?, Part II

This article was published by The McAlvany Intelligence Advisor on Friday, December 28, 2018:  

Less than three weeks ago, this writer opined here [at The McAlvany Intelligence Advisor] that the root cause of the selloff on Wall Street then was the deliberate intentional stalling of the economy by the Federal Reserve:

Who is the real culprit behind this volatility in stocks? The well-informed have been pointing to the actions of the Federal Reserve as the prime driver, focusing on its determination to slow the economy by raising interest rates.

 

For example, the insider bank Goldman Sachs said in late November: “The FOMC [the Fed’s Federal Open Market Committee] will likely be reluctant to stop [raising interest rates] until it is confident that the unemployment rate is no longer on a downward trajectory….”

 

In other words, the Fed is determined to keep on raising interest rates until the economy is so weak that unemployment starts to increase!

If more evidence of the Fed’s deliberate intervention in the markets were needed by skeptics, last week’s volatility on Wall Street ought to suffice. Late last week,

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What Sparked Wall Street’s Massive Turnaround Late Thursday?

This article appeared online at TheNewAmerican.com on Friday, December 28, 2018:

Most Wall Street observers were caught by surprise at the massive upward spike in stock prices that turned a 600-point down day on the Dow into a gain of 230 points. It began less than 90 minutes before the close, and by the time the market closed stocks had gained nearly four percent from the low of the day.

Michael Wursthorn, writing in the Wall Street Journal, called it a “big comeback” from “an unexplained jolt of adrenaline … that morphed into a broad rally.” All 11 sectors of the S&P 500 Index were up for the day, as were 28 of the Dow 30 stocks. Without explaining why, Wursthorn said the sudden move up was “symptomatic of the volatility that has rocked the markets this month.”

John Carey, a portfolio manager at Amundi Pioneer, reflected on what happened:

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While Wall Street Wobbles, Consumers and the Economy Continue Humming

This article appeared online at TheNewAmerican.com on Thursday, December 27, 2018:  

The Wall Street rollercoaster — down huge on Monday, up huge on Wednesday, decline on Thursday — is giving commentators, pundits, and forecasters heartburn. The Dow Jones Industrial Average (DJIA) surged more than 1,000 points on Wednesday, the first time in history, rebounding from a four-day selloff that took 4,000 points out of the Dow and put various blue-chip indexes on the verge of a bear market.

Street commentators searched high and low for the root cause or causes of the volatility. They ranged from concerns over the incipient trade war with China instigated by the president as he seeks to rebalance fair trade with that communist-controlled country, to the firing of his Secretary of State over U.S. troop withdrawals from Syria and Afghanistan. Pundits pointed to Treasury Secretary Steven Mnuchin’s attempt to calm the markets by calling big bank CEOs and reporting that all is well with their reserve ratios. This attempt backfired, especially when it was followed by reports of a gathering of the president’s “plunge protection team” consisting of Mnuchin, Fed Chairman Jerome Powell, the chair of the SEC Jay Clayton, and the head of the Commodity Futures Trading Commission, Christopher Giancarlo at the White House on Monday.

Blame for the volatility fell on

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Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.
Copyright © 2020 Bob Adelmann