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2019-04-11 09:55 by Karl Denninger
in Editorial , 144 references Ignore this thread
Look What We Have Here! (Fed)
[Comments enabled]

Oh, so Chris thinks this will help eh?

Last week, President Donald Trump set the economics community aflame by suggesting that he will appoint businessman and presidential aspirant Herman Cain to the Federal Reserve Board. Even more than political economist Stephen Moore, the critics maintain, Cain represents a threat to the cabal that has controlled the central bank for decades.

....

Anybody who cares to read the 1978 Humphrey Hawkins law will know that the Fed is directed by Congress to seek full employment and then zero inflation. Not 2 percent, but zero. Yet going back a decade and more, the Fed, led by luminaries such as Janet Yellen and Ben Bernanke, has advanced a policy of actively embracing inflation. And neither Bernanke nor Yellen bothered to consult Congress when they decided to discard their legal responsibilities.

So what has Kudlow and, presumably, both of Trump's new nominees, taken as a position?

More QE and lower rates -- now.

In other words more bubble, more fraud, more lawlessness under Humphrey Hawkins -- not less.

Bernanke and Yellen, along with Powell, have intentionally broken the law.  Not only have and do they break the law on purpose they announce it in public on a repeated, notorious and loud basis.

Never mind The Federal Reserve Act prohibits The Fed from owning Freddie and Fannie paper; the only mortgage-backed securities that can be owned by the clear language of the statute are Ginnies, which have full faith and credit.  None of the others do and no, an implicit guarantee or post-hoc bailout doesn't change law.

The basic problem with the Fed today is that it has gradually fashioned a new set of rules for itself, particularly since 2008, on which Congress has never been consulted.

That's a ******nable lie.  The Fed chair shows up to give testimony before both House and Senate.  How many questions on the legality of their actions, or threats to impose sanction including revocation of the Federal Reserve Act, have been posed over the last ten years?

Zero!

May I remind Chris (and everyone else) that when I caught Bernanke pulling system liquidity into the maw of the 2008 collapse (by his own public NY Fed data!) and faxed that proof to all 535 members of Congress not one replied back to me about same and not one question was asked the next time Ben was on the Hill related to same.

They know and not only don't care they explicitly permit and want said lawlessness.

The biggest problem facing the financial markets today is that the folks at the Fed have no appreciation for how their policies are affecting the real economy. Ten years of inflation, open market manipulation, and other experiments have left the U.S. burdened with trillions of dollars in new public and private debt. 

Bull****.

They know and don't care. So does Congress.  Congress is well aware that health care, for example, is responsible for the majority of personal bankruptcies and that its cost has risen on a double-digit basis annually for the last 25+ years within the realm of employers.  It was going on in the 1990s which is why, when I ran MCSNet, I started raising Hell about it then -- in 1994!

It's nearly 25 years later and hasn't stopped, nor has the impact of same.  The acceleration of this scam was the hidden story in 2008 that nobody (other than my column) was talking about yet it was why Obamacare was written by the insurance, drug and hospital industry and passed: The entire medical system in the United States was literally on the verge of collapse as the debt levels within it, in a tightening liquidity market, threatened to blow it all to Hell.

The "answer" was to force people to fork up even more of their money into the fraudulent and felonious edifice.

The December "break" in the market was due to the mere threat of not continuing the bubble game.  The mere threat of selling off the balance sheet back to around $1 trillion and putting short term rates back somewhere near "normal" (~3.5-4%) was enough to blow the world to Hell.

Mr. Market can't have 100:1 P/Es in that world.  Buybacks with borrowed money become an instant lodestone around one's neck as the interest costs when the bonds sold come up for refinance cannot be carried and new buybacks can't be instituted when the rate on said money is 5% instead of 2%.

Never mind the state and local borrowing and inflation in housing -- which has completely destroyed economics for middle-class individuals and families.  This entire bubble machine since the 1980s is why women are choosing not to have kids (intelligent onces, anyway), why families are not forming with the 2.1+ children required to replace each generation and why kids are being told they need to take on $100 large worth of debt to get useless sociology degrees.

Chris thinks Trump should "blow up" The Fed, but neither Whalen or Trump intends any such thing.  Both intend to and in fact demand more and bigger bubbles and more and bigger rusty sneks stuffed up the *******s of the American public.  Utterly nobody in Congress has in the past 10+ years nor, it appears, intends in the future to put a stop to this crap and neither will the AG.

The last decade says that the fraud will only stop if and when the people decide to put up a gallows on the National Mall and credibly threaten to use it.  There is no new law required for either Congress or the AG to stop all of this crap either; as Chris points out what The Fed is and has been doing is and has been blatantly illegal.

So exactly what is Chris advocating for?  What Trump intends and has made clear in his public statements is more and bigger bubbles.  Said bubbles make the pension problem worse along with screwing everyone who isn't in the top 1% -- which, of course, Chris and Trump both are.

If you think the 2024 blowup in Medicare is bad may I remind you that this will come right into the maw of the Pension issues in the state and local governments, and that said property tax ramps (along with Illinois threatening a progressive income tax) have already trashed home prices in real terms.  I've seen plenty of it myself -- both my former home in Deerfield IL and my late mother's house, in real terms, lost roughly a third of their value in the last 20 years and neither saw any improvement or depreciation-adjusted change in price of materiality even in nominal -- that is, pure dollar -- terms.  Why?  Property taxes -- they have more than doubled and as a result when adjusted for inflation home values have actually gone down by 30% or more -- and that assumes you believe the published inflation numbers which are flat-out bogus.

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