Monday, January 09, 2017

The Apolitical FED

The Federal Reserve is an independent body. It is apolitical. The FED does not consider political issues with regards to their management of the economy. Santa Claus and the Easter Bunny are also real, too. The Federal Reserve is as unbiased and apolitical as our media.

The Federal Reserve is a political animal and piece of the system that works for its benefit just as any other piece is suppose to work for the continuation of it. The FED revealed it's firm place in Moldbug's Cathedral or Polygon with some incredibly quick turnaround actions after the election. Just in October, the FED was maintaining the cautious, "let's see" approach that has allowed them to keep rates at 0% for almost a decade (one small hike).

Binyamin Appelbaum is one of those financial order takers that sell you on what elites want to do financially. He was one of the writers that talked up Larry Summers as a potential replacement for Bernanke a few years ago. He sells you on their thinking. He has an interesting passage right at the top of the article.
In a wide-ranging speech, Ms. Yellen said the Fed was struggling to understand the behavior of the labor market and the weakness of inflation. It is reconsidering how changes in monetary policy ripple through the economy, and the impact of international events. In short, as often happens after a crisis, the Fed is sorting through some existential issues.

This is hogwash. To still be sorting through the issues from the last crisis is a lie. A massive FED enabled bubble in all realms popped. FED watchers expected the FED to raise rates four times in 2016, because they did not think the FED was political. This is a delaying, excuse making passage for what the FED really has been doing: reflating the bubble. We still live in a FIRE economy, therefore the FED funds rate matters supreme due to the never-ending need for new marginal borrowers. The moment they raise rates, the bubbles get deflated and economy contracts.

The Obama admin did not reorient the entire American economy because Wall Street owned him. We now know Citigroup practically picked his cabinet, and Citigroup was the sickest of the too big to fail banks that received three bailouts. The Obama stimulus was loaded with loans and spending on education and health care because that is the Left's economic coalition. There was no infrastructure boom because it would help 'the other side'. Look at where money has gone and the same bubbles have inflated: education, housing, financial, etc.

The FED maintained zero interest rates so that the free money would keep flowing and government debt would be bought. Keeping the FED funds rate at 0% dragged down every debt instrument's interest rate. As the bond bubble grew, every single debt instrument came down as its spread between its risk and the 10 year Treasury fund was maintained no matter how much true risk it carried. Portuguese long term bonds at 4%? C'mon, this is all artificial.

The election passes and suddenly rate hikes are okay. In fact, there will be more in 2017. The economy is clearly strengthening. Strengthening enough to justify a hike. This is nonsense. If anything, there are signs it's rolling over. How can one measure the true nature of the economy anyway? Family formation is down, births are down, and there are many social factors that point to the FED just pushing on a string right now as no one feels secure.

The FED is a political animal. President Nixon knew this and appointed a yes man for the FED chair. The FED raising rates now is meant to throw sand in the financial gears for Trump's presidency. "No, no, no, no Donald, this punch bowl is only for our pets." They held off raising rates so not to disturb markets for Clinton's campaign. They want every single debt instrument to rise in rates to cause problems for Trump and state governments. The FED is part of the cathedral and will do what it takes to continue its existence. How Trump handles this rise in rates is key because there is a political opportunity for him to fracture the Left. There is one thing in 2017 that he can do come the fall.

President Donald Trump can replace Janet Yellen.

8 comments: said...

We know that red states tend to be in better fiscal health than blue states. Imagine what a modest rate increase would do to California. This is the other half of the narrative around the union busting stories that you read about around states like Wisconsin and Ohio. Wisconsin wants to avoid turning into Illinois. So even a small rate hike could end up hurting themselves more than trump.

That being said, Trump himself may have a blind spot for wall street. His cabinet picks have sent all parts of the Cathedral into fits of rage, except for the banking interests. It is the one area where he has made conventional republican picks. This is unfortunate because another large financial crisis, especially one precipitated by a fed hike, would present the opportunity to make a lot of fundamental changes to how the banking system works.

Portlander said...

We know that red states tend to be in better fiscal health than blue states. Imagine what a modest rate increase would do to California.

Excellent point. Trump not being beholden to Wall St, imagine how a 7 AM tweet on Puerto Rico could send a rack of dominoes falling. Heck, if people just started thinking that Trump may weigh in on PR, we'd see IL & CA softening.

Anonymous said...

I actually think the FED raising rates would be a BOON for Trump.

His economically nationalist policies will cause money to flow back into America, and put it in more people's pockets, raising the velocity of money.

A low Velocity of money is one reason why Obama's economy sucks but also why he's enjoyed low inflation.

Trump flips that on its head.

So if the FED *really* want to screw Trump over what they'll do is keep interest rates LOW when the economy starts kicking again.

Soaring inflation rates could be something that is a real 2018 or 2020 campaign issue.

peterike said...

Since the (((banksters))) are the essential force behind the (((New World Order))) and have been for hundreds of years, The Donald needs to be very, very careful about them lest they employ their standard strategy for dealing with Presidents that don't get with the program (see: Garfield, James A.; McKinley, William; Kennedy, John F.).

If Trump wants to confront them, he first needs to get control of the NWO apparatus: the Military, the FBI, the CIA, the NSA, State Department. That is easily a task for his first term and likely beyond. So the last thing I'd expect to see change under Trump is the World of the Banksters. I would think Trump will find many allies in military, FBI and NSA. Few if any in CIA and State, which are Prog infested.

The stables are very, very dirty.

Portlander said...

SoBL, a while back I think you mentioned seeing a Bently in Detroit w/ vanity plates that said Pastor, or something similar.

I saw a comment at iSteve's today, and I'd have to say it sounds like it was that guy's, no?

High Arka said...

I actually think you're being unfair to Trump, SterlingFuller. You say he's making "conventional Republican picks," but it seems to me that he's actually choosing an even more prominent role for Jewish bankers (sic) in his administration than before. Reagan, Bush I, and Bush II had plenty of Jewish policy advisers, of course, but were not quite so open about it, and didn't have nearly as much of it in their families.

Anonymous said...

As a general criticism I'd like to see the term non-partisan retired. It's received quite a lot of use lately especially with regard our non-partisan intel community. The term has no meaning on its own and those that use it are trying to hoodwink people into believing it actually means non-ideological, which it emphatically does not.

critnik said...

"There is one thing in 2017 that he can do come the fall.

President Donald Trump can replace Janet Yellen."

Ok, he gets some avengement ------ but can he make the economy truly robust and thriving again? Can he alleviate the debt? Are either of those things really possible anymore? Or is it ALL nowadays only about how to position yourself for bounty off the scam or latest reflating of the bubble?

I do wonder if the debt is so monstrous and depressing a reality that both parties long ago stopped talking about it sincerely or even coherently and that is a scary thought.

This lit and journalism major is genuinely asking: can Trump or whatever combination of forces genuinely revive the US economy? And if not, then what? Despite my relative econ illiteracy, I did ok in the early-to-mid 90s on tech stock and dutiful consultations with the Gilder Report.