Greenspan

Musical ‘Fed’ Chairs – Same Old S—*

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MUSICAL ‘FED’ CHAIRS

Eight years ago: “President Trump nominated Jerome H. Powell as the new Chairman of the Federal Reserve Bank. Don’t look for much to change.” (see New Fed Chairman – Same Old Story)

Two weeks ago: “I am pleased to announce that I am nominating Kevin Warsh to be the CHAIRMAN OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM. Congratulations Kevin! PRESIDENT DONALD J. TRUMP (Truth Social)

Before Powell was Janet Yellen…

“…if Ms. Yellen makes it through the current year unscathed, she won’t be hanging around afterwards. She won’t want to extend her risk of being at the helm when the ship sinks. And don’t trouble yourself worrying about who the next Fed chief will be.  It doesn’t matter.”  

WHY DOESN’T IT MATTER? 

Expectations that a “new” Fed chair will make a difference are shortsighted. The Federal Reserve has its own agenda.

The Fed is a private institution; a bankers bank. Banks exist for the purpose of creating money, lending it out, and collecting interest – in perpetuity. Also, the inception of the Fed was authorized by Congress AFTER a promise was made to insure that the U.S. government never ran out of money.

Deficits are funded by the Fed via monetization and placement of Treasury securities with primary dealers (banks). Any treasuries not sold to investors remain on the books of the banks, including the Federal Reserve.

NOTE: The largest single holder of U.S. Treasury debt is the Federal Reserve Bank, at about $6 trillion. This is 16% of the total debt ($38 trillion) and five times the amount of U.S. debt held by Japan.

Japan holds nearly twice as much ($1.2 trillion) U.S. debt as China ($680 billion) which is third on the list behind the United Kingdom ($889 billion).

THE FEDERAL RESERVE CONTROLS THE PURSE STRINGS 

Government spending is dependent on the creation of money by the Federal Reserve. Without the Federal Reserve, government spending would come to a screeching halt due to a lack of funds.

Nominees must be vetted (unofficially, of course) by the Fed before approval by Congress. If you think that is hogwash, then ask Judy Shelton. (see The Federal Reserve vs. Judy Shelton And Gold)

ANYONE who is nominated and approved, and sits on the Federal Reserve board in any capacity MUST/WILL fit right in.

CONCLUSION 

The Federal Reserve System operates independently, and in the interest of the banks and those who own the banks. It has never been about “doing the right thing” or “serving the public” or “correct policy”.

The Fed and its member banks have created the inflation that has destroyed more than 99% of the purchasing power of the U.S. dollar. The effects of that inflation have left the entire world awash in debt and hooked on cheap credit. The U.S. government approves of this because it is a primary beneficiary of the largesse.

Where we are today is the culmination of decades of irresponsible financial/fiscal policies and a complete abdication of fundamental economics.

The Fed now spends most of its time and effort trying to contain the damage stemming from a century of inflation which it created, interest rate manipulation, and market intervention.

Greenspan, Bernanke, Yellen, Powell, (or Warsh) make no difference. It is the same old story, same old song, same old s___. (also see Federal Reserve – Conspiracy Or Not?)

Backtalk From The Bond Market

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BACKTALK FROM THE BOND MARKET

Investors keep looking to the Fed for supposed “forward guidance”. They are looking in the wrong place. Since mid-December, bond prices have declined another 5% and are currently at new 52-week lows. Here is an updated chart of U.S. Treasury Bond ETF (TLT)…

U.S. Treasury bond prices have now declined 16% since the Fed announced a reversal in its interest rate policy and the first rate cut last September. The latest weakness comes in the face of a second rate cut, so it begs a repeat of the question I posed last October…
“Why are bond rates rising at the very time the Fed is trying to move interest rates lower?” (Fed Cuts Rates But Bond Rates Are RISING)
Subsequently, the Fed announced a second rate cut, but the announcement lacked the conviction that inflation is under control and that multiple rate cuts could be expected for 2025.
I don’t so much think the Fed has suddenly had a change of heart. The situation is precarious and the cumulative effects of more than full century of money creation (inflation), mis-management, and manipulation have evolved into a game of playing catch with a ticking time bomb.
Former Fed presidents Greenspan, Bernanke, and Yellen all know this and have kicked the can down the road. Jerome Powell was likely aware of the ongoing threat of a catastrophe from which there is no return. The opportunity to be “numero uno” for a season, however, must have displaced any fear of presiding over a credit collapse and economic depression.
THE FED’S DILEMMA

The Federal Reserve doesn’t know what to do; but it probably doesn’t make much difference anymore.

A dilemma is “a situation in which a difficult choice has to be made between two or more alternatives, especially equally undesirable ones.” (New Oxford American Dictionary)

We are hooked on low interest rates and the drug of cheap and easy credit. Maintaining low interest rates furthers that dependency and heightens the risk of overdose. The result would be a swift and renewed weakening of the U.S. dollar accompanied by the increasing effects of inflation.

On the other hand, raising interest rates more could trigger another credit implosion which could lead to deflation and a full-scale depression.

Doing nothing is an option. The problem is that the Fed is holding that “ticking time bomb” and doesn’t know how long it will be until its world blows apart.

WHAT TO EXPECT NEXT

Don’t trouble yourself worrying about who the next Fed chair will be. It doesn’t matter. It is too late in the game for a change to have any meaningful impact. This includes speculation that Judy Shelton might get nominated again. Yes, she is an excellent choice; and, for all of the right reasons.

Unfortunately, that would expose the game of chess being played by the Federal Reserve and its owners. (see Federal Reserve – Conspiracy Or Not? and Federal Reserve vs. Judy Shelton)

The worst possibilities come after something big happens. The Federal Reserve and the U.S. government will work together to stave off any possibility of loss of control. That means that everyone – investors,  traders, citizens, communities – will be subject to a host of new economic and monetary regulations, restrictions, executive orders, etc.

It will be like nothing we have seen in the past and beyond anything we can currently comprehend. (also see Bond Investors To The Fed – “Not This Time”)

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED