Last month's 50 basis point rate cut wasn't to engineer a soft landing. It was to help Janet Yellen.
This year, she needed to refinance 25% of the $35 trillion in national debt, or about $8 trillion, plus fund the current year deficit of $2 trillion. That's $10 trillion. In addition, the largest foreign holder of US debt, Japan, is also in the market selling US Treasuries to raise funds to support the collapsing yen. Further, China is waging economic war on the US. They are selling their portfolio of US Treasuries and buying gold (one of the many reasons for the gold rally).
Thus, too much product and not enough money to absorb it. Powell is coordinating with Yellen in providing the needed liquidity. In other words, coordination.
For the history of the Federal Reserve (and much more) read "the Creature from Jekyll Island" by G. Edward Griffin (5th Ed. 2010).
There is no question that the fedres is always, in the end, going to accommodate the financial requirements of the fedgov. These have now become so massive that suppression of interest rates below the true (e.g., Shadowstats) rate of cost increases (i.e., permanent depreciation of all forms of savings) is the only policy option practically available. As living standards continually decline for all but the "hyper-wealthy" the operation of the credit-based waste is growth landfill economy becomes increasingly erratic and dependent on said suppression, resulting in increasing instability and fragility of the entire economy. Eventually (now?) the financial system reaches the point of Von Mises' "Crackup Boom" - the point where there are no positive outcomes possible - only the choices of hyperinflation or massive deflation.
This article is right on target, the FED had any credibility was Volcker. It has devolved into a political schill for re election of the powers of the beast.
Congress is ultimately responsible for all inflation. They created the Fed (to remove the constraints of sound money) and have the power to end it. The Fed answers to no one else but Congress. Ron Paul broke the mold in DC. Need more politicians like him today to end the Fed.
The bargain between the Federal Reserve and the government has always been, congress will allow the Fed to continue to exist if congress gets what it wants. Congress created the charter that gave birth to the Fed and they can cancel it too, if they choose to do so, but they won't, as they need the Fed as much as the Fed needs them.
As for current events, there exists an interesting anomaly in the M2 money supply chart if you check, it has never gone down until recently. When Volcker raised the rates to almost 20% in 1981, this was supposedly to reign in inflation, but if you check, the M2 money supply increased that year. In fact it has increased every year until 2022. In my opinion, Volcker raised rates to make sure Carter lost the election. But today, that decrease in the M2 money supply is interesting, why now after just a small rate increase? It is interesting that hardly anyone in the government has complained about the rate increase, even with Treasury yields that rose more than 300%. Is that decrease in the M2 money supply causing an alarm to go off inside the Fed and those in government? I think it's something to watch more closely in the future.
Those in Washington DC will continue to do the Fed's bidding as well as the Fed will continue to do the same for them. But something is different today, but what that is, is not clear.
As for the Fed's balance sheet, there is one that exists that neither we nor congress will ever see. The Fed allows us to see what they want us to see. The Fed is the "head" of the regime that runs Washington DC.
I think it's the Fed's school of monetary theory that drives its behavior as much as enabling the Federal Govermint.
Headline inflation is coming down and the Fed has a mandate for max employment with stable prices.
It can argue it's doing that, even now by lowering rates.
All the debt/deficit stuff isn't directly relevant to the dual mandate. And -- so far -- DESPITE DECADES OF DOOMSAYING ABOUT BOTH -- nothing "bad" has happened that's easily measurable in terms of inflation or employment. To the contrary actually. So that's a hard sell, to argue the Fed is recklessly enabling a credit bubble. And I read Doug Noland's "Credit Bubble Bulletin" every week for 15 years! So no lectures on credit bubbles please. hahahaa
and PS, if the USD "crashes" due to loss of faith among global investors in US govt debt then I suspect lots of U.S. businesses will be happy. Like the 1980s that this post relates. Nothing like turning domestic demand inward and reducing export prices to rebase a domestic economy.
Last month's 50 basis point rate cut wasn't to engineer a soft landing. It was to help Janet Yellen.
This year, she needed to refinance 25% of the $35 trillion in national debt, or about $8 trillion, plus fund the current year deficit of $2 trillion. That's $10 trillion. In addition, the largest foreign holder of US debt, Japan, is also in the market selling US Treasuries to raise funds to support the collapsing yen. Further, China is waging economic war on the US. They are selling their portfolio of US Treasuries and buying gold (one of the many reasons for the gold rally).
Thus, too much product and not enough money to absorb it. Powell is coordinating with Yellen in providing the needed liquidity. In other words, coordination.
For the history of the Federal Reserve (and much more) read "the Creature from Jekyll Island" by G. Edward Griffin (5th Ed. 2010).
There is no question that the fedres is always, in the end, going to accommodate the financial requirements of the fedgov. These have now become so massive that suppression of interest rates below the true (e.g., Shadowstats) rate of cost increases (i.e., permanent depreciation of all forms of savings) is the only policy option practically available. As living standards continually decline for all but the "hyper-wealthy" the operation of the credit-based waste is growth landfill economy becomes increasingly erratic and dependent on said suppression, resulting in increasing instability and fragility of the entire economy. Eventually (now?) the financial system reaches the point of Von Mises' "Crackup Boom" - the point where there are no positive outcomes possible - only the choices of hyperinflation or massive deflation.
thanks for introducing us to OKLO!
This article is right on target, the FED had any credibility was Volcker. It has devolved into a political schill for re election of the powers of the beast.
Congress is ultimately responsible for all inflation. They created the Fed (to remove the constraints of sound money) and have the power to end it. The Fed answers to no one else but Congress. Ron Paul broke the mold in DC. Need more politicians like him today to end the Fed.
The bargain between the Federal Reserve and the government has always been, congress will allow the Fed to continue to exist if congress gets what it wants. Congress created the charter that gave birth to the Fed and they can cancel it too, if they choose to do so, but they won't, as they need the Fed as much as the Fed needs them.
As for current events, there exists an interesting anomaly in the M2 money supply chart if you check, it has never gone down until recently. When Volcker raised the rates to almost 20% in 1981, this was supposedly to reign in inflation, but if you check, the M2 money supply increased that year. In fact it has increased every year until 2022. In my opinion, Volcker raised rates to make sure Carter lost the election. But today, that decrease in the M2 money supply is interesting, why now after just a small rate increase? It is interesting that hardly anyone in the government has complained about the rate increase, even with Treasury yields that rose more than 300%. Is that decrease in the M2 money supply causing an alarm to go off inside the Fed and those in government? I think it's something to watch more closely in the future.
Those in Washington DC will continue to do the Fed's bidding as well as the Fed will continue to do the same for them. But something is different today, but what that is, is not clear.
As for the Fed's balance sheet, there is one that exists that neither we nor congress will ever see. The Fed allows us to see what they want us to see. The Fed is the "head" of the regime that runs Washington DC.
End the Fed!
I think it's the Fed's school of monetary theory that drives its behavior as much as enabling the Federal Govermint.
Headline inflation is coming down and the Fed has a mandate for max employment with stable prices.
It can argue it's doing that, even now by lowering rates.
All the debt/deficit stuff isn't directly relevant to the dual mandate. And -- so far -- DESPITE DECADES OF DOOMSAYING ABOUT BOTH -- nothing "bad" has happened that's easily measurable in terms of inflation or employment. To the contrary actually. So that's a hard sell, to argue the Fed is recklessly enabling a credit bubble. And I read Doug Noland's "Credit Bubble Bulletin" every week for 15 years! So no lectures on credit bubbles please. hahahaa
and PS, if the USD "crashes" due to loss of faith among global investors in US govt debt then I suspect lots of U.S. businesses will be happy. Like the 1980s that this post relates. Nothing like turning domestic demand inward and reducing export prices to rebase a domestic economy.