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.