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

Price Increases at Retail Level Accelerating, Thanks to Massive Money Supply Increase

This article appeared online at TheNewAmerican.com on Friday, September 11, 2020:

The U.S. Bureau of Labor Statistics (BLS) reported on Friday that prices at the retail level in August increased at an annual rate of nearly five percent in August.

Retail prices dropped when the shutdown began and demand for retail items such as gas and services such as restaurants fell like stones. People nearly stopped buying, preferring to stash their “stimulus” checks from the government in savings or use them to pay off credit card debt.

In response, the government, with the help of the Federal Reserve, dumped massive amounts of newly created digital currency into the economy, hoping that the infusion would quickly revive it once the infection risk had passed.

Now that that perceived risk has abated, citizens are coming out of their homes and basements and spending, making up for lost time. They’re buying

Keep reading…

Producer and Consumer Prices Jumped in July Much More Than Expected

This article appeared online at TheNewAmerican.com on Wednesday, August 12, 2020: 

Prices for goods and services at both the producer and the consumer levels jumped far above forecasts in July. The CPI jumped 0.6 percent (an annual rate of more than seven percent — double the rate economists had predicted and the biggest monthly jump since 1991), while the PPI clocked in at 0.8 percent (an annual rate of nearly 10 percent).

Are these harbingers of the coming tsunami of price increases based on the huge jump in the money supply reported by the Fed? Or are they just a blip on the screen, as Bloomberg’s Conor Sen suggested?

Sen tried to soothe concerns, writing that

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National Debt Projected to Hit $41 Trillion by 2030

This article appeared online at TheNewAmerican.com on Wednesday, August 12, 2020: 

If the Manhattan Institute is correct, the national debt will reach $41 trillion no later than 2030, less than 10 years from now. Their calculations take into account the budget deficits baked into the numbers before the COVID crisis hit, the stimulus packages initiated since, the impact of an aging demographic on Social Security and Medicare, falling tax revenues due to a smaller economy, and rising interest rates.

Said the institute:

Over the full decade, the coronavirus recession is expected to add nearly $8 trillion to the national debt, pushing the debt held by the public to $41 trillion within a decade, or 128% of the economy….

 

This gives lawmakers six years or less to avert a potential debt crisis in which rising debt and interest costs would overwhelm Washington’s ability to tax and borrow.

Two key questions arise:

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Wholesale Prices Drop in June; Economists Confounded

This article appeared online at TheNewAmerican.com on Friday, July 10, 2020: 

The Bureau of Labor Statistics (BLS) announced on Friday that wholesale prices dropped by 0.2 percent in June. Economists were expecting an increase of 0.4 percent.

Confounding those economists further, wholesale prices have dropped by nearly one full percentage point over the last year. Common sense says that when the supply of money and currency increases, price increases are sure to follow.

And the money supply has certainly been increasing.

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Who’s Running the Show: the Fed or the U.S. Treasury?

This article appeared online at TheNewAmerican.com on Thursday, June 18, 2020: 

Scott Minerd, global chief investment officer at Guggenheim Partners, told CNN on Tuesday that the next effort by the Fed to keep the U.S. economy going will be to start buying U.S. stocks. As The New American has reported, the Fed has already expanded its powers so that it can purchase exchange-traded bond funds, junk bonds, and now corporate bonds.

All of this so far exceeds the Fed’s original powers that it has been forced to do a “workaround” by creating a number of intermediaries to accomplish its purposes. Each of these intermediaries needs a “special purpose vehicle” — an SPV — and the help of the U.S. Treasury.

Jim Bianco, president of Bianco Research & Trading, has been producing commentaries on the bond market for 30 years that are faithfully read by hundreds of portfolio managers. His commentary on these SPVs has raised the question, i.e., if the Fed needs the help of the Treasury to accomplish its purposes, who is in charge: the Fed, or the U.S. Treasury? If it’s the latter, and because U.S. Treasury is part of the Executive Branch of the U.S. government, does that mean that the Fed now has a new chairman, namely, President Trump?

Bianco explains:

The Treasury … will make an equity investment in each SPV and be in a “first loss” position.

 

What does this mean? In essence, the Treasury, not the Fed, is buying all these securities and backstopping of loans; the Fed is [merely] acting as banker and providing financing….

 

This scheme essentially merges the Fed and Treasury into one organization. So, meet your new Fed chairman, Donald J. Trump.

Bianco expanded on this thesis:

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Fed Plans to Buy Individual Corporate Bonds to “Support” Market

This article appeared online at TheNewAmerican.com on Tuesday, June 16, 2020:  

The announcement by the Federal Reserve on Monday afternoon that it would expand its efforts to “support” the economy by buying individual corporate bonds cheered Wall Street, which rebounded nearly 1,000 points on the news.

The fact that Fed officials voted unanimously for the extraordinary expansion of Fed powers suggests a degree of panic that the government shutdown of the economy using the COVID-19 virus as an excuse was also likely to shut down the $9.6 trillion corporate debt market as well.

For more than 100 years (the Fed began operations in 1914),

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Fed’s Gloomy Outlook Sinks Stocks

This article appeared online at TheNewAmercan.com on Thursday, June 11, 2020: 

Federal Reserve Chairman Jerome Powell’s assessment that the surprisingly favorable jobs report last week was likely a one-off blip is pushing stock prices lower on Wall Street on Thursday.

Following the meeting of the Federal Open Market Committee (FOMC) on Wednesday, Powell said that last week’s report “was a welcome surprise. We hope we get many more like it, but I think we have to be honest, that it’s a long road.”

This sent futures down more than two percent before the opening.

In its official statement issued by the FOMC, the Fed admitted that

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Stock Market Rallies Despite Negative News

This article appeared online at TheNewAmerican.com on Thursday, June 4, 2020:

The small-cap Nasdaq 100 Index has rallied more than 43 percent since its low set on March 23. The S&P 500 Index has posted its largest 50-day rally in history. The Dow Jones Industrial Average has gained 7,600 points.

With all that is going on in the country and the world, how is that possible? The national riots, the confrontation with China building over Hong Kong, and the deaths continuing to mount as a result of the coronavirus, would all seem to be negatives on the market, driving investors away.

But, no. Investors aren’t looking out the back window, but instead are looking out the front. And they are increasingly seeing what they want to see and hope to see: a recovery that justifies their decision to invest in companies that appear likely to benefit and profit from it.

The president is perhaps the most well-informed individual on the planet. On May 29 he said, “We’re going to have a great third quarter, a great fourth quarter. I think next year is going to be one of our better years.”

There are trillions of dollars just itching to hear such confidence coming from the president. During the lockdown, consumers hunkered down and hoarded many things — toilet paper, canned goods, cleaning supplies, and cash. The savings rate, which is normally around five percent of personal incomes, soared to 12.7 per cent March and then to 33 percent in April. As a result, economists are expecting a virtual tsunami of consumer spending to occur once the economy is fully open.

And the economy is already opening.

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Wall Street’s Monster Rally Unfazed by Record Unemployment Numbers

This article was published by The McAlvany Intelligence Advisor on Monday, April 13, 2020: 

Ned Davis, the head of Ned Davis Research, can’t explain it: Last week’s monster rally in stocks occurred while breathtaking unemployment numbers were reported. Said Davis: “It defies logic. My explanation is that … the market tends to look ahead.”

In the shortened trading week – the markets were closed on Good Friday – the popular averages all hit double digits: the Dow closed up 12.6 percent; the S&P 500 closed up 12.1 percent; and the tech-heavy Nasdaq closed up 10.6 percent.

This rally ignored the numbers from the Labor Department: 6.6 million people filed for unemployment insurance last week, bringing the total to 17 million claims in just the last three weeks. Some are expecting claims to exceed 25 million before the COVID-19 crisis is over.

Another indicator for a healthy and quick economic rebound is

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Stockman: The CARES Act is the Country’s “Greatest Folly”

This article was published by The McAlvany Intelligence Advisor on Good Friday, April 10, 2020:  

Never one to pull his punches, David Stockman, Reagan’s former OMB Director, unloaded at LewRockwell.com:

[CARES] … the greatest folly ever to beset our [country] is now racing full speed ahead.

Instead of belt-tightening, work-arounds, payment deferrals and negotiated price and wage adjustments for a few months … current and future taxpayers are being saddled with trillions of unnecessary obligations, which will prove to be the final straw on the debt-ridden camel’s back….

 

Because the ship-of-fools in the Eccles Building [which houses the Federal Reserve’s Open Market Committee] have led Washington and Wall Street alike to believe in what amounts to the greatest lie in financial history: that we can borrow and print our way back to prosperity!

His article is already out of date. The Fed and the Treasury are doubling down, adding an additional $2.3 trillion to the economy in the belief that such a flood can hasten the end of the economic depression caused by the powers-that-be.

That makes attempts to measure the real amount the Treasury owes by Truth in Lending and Boston University professor Laurence Kotlikoff irrelevant.

On April 7, Truth in Lending, the non-partisan think tank that tries to provide an accurate (read: full accounting of all promises) measure of the government’s true financial condition, released its latest report.

Instead of repeating the canard that the national debt is only around $23 trillion, it reported that the federal government actually owes more than $113 trillion when “off-budget” items like Social Security and Medicare are added back in.

For this, the think tank gave the Federal government a financial grade of “F.”

The report didn’t take into the account the CARES Act.

Professor Laurence Kotlikoff has developed the “intergenerational accounting” protocol that

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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:

Keep reading…

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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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